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  • The Truth About Your Financial Choices: Debt, Insurance, Savings, Payments and More

    Confused over money matters and can’t decide what to do? We’ve got expert advice for your toughest financial questions.
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    Read on to learn more about investing in time deposit, stocks, borrowing money and bank loans.

     

    Should you put your money in a time deposit (TD) or invest it in stocks?
    Sison-Pascual advises that you check what you’re using the investment for. “If your money is allotted for emergencies, then a time deposit would be appropriate for accessibility and liquidity. However, your money really wouldn’t work hard for you in such a tool.”

    Gan explains that time deposits and stocks actually represent the two ends of a spectrum, the most conservative versus the most aggressive. These are not the only options in the market. He says time deposits are slowly giving way to mutual funds since time deposits  have been giving very low returns in the past years. Time deposits and savings accounts only provide you with marginal interest rates. He agrees with Sison-Pascual that their benefit is really in providing you with liquidity. Mutual funds also have degrees of risk with bond funds:
    •    Conservative—bond funds
    •    Moderate—balanced funds
    •    Aggressive—equity funds

    Stock market investing, though, if done with control over one’s emotions can also be very rewarding.

    Gan gives the following rule of thumb in terms of diversifying your investment portfolio:
    •    A chunk should go to TDs or cash equivalent for liquidity and cash flow.
    •    Some should go to mutual funds for stable medium term growth.
    •    Some should go to insurance or endowment plans for stability and protection.
    •    Lastly, if you still have money for investment, some can go to stocks or other aggressive investments for more high risk but high return growth.


    Should you borrow from family or take out a bank loan?
    Sison-Pascual lists down the following advantages for both:

    Borrowing from family
    •    Convenient—no hassles with paperwork and shorter waiting time
    •    Cost of money is lower, there’s no interest on the loan
    •    May not require collateral and is based on trust and integrity
    •    No penalties or surcharges when payments are late
    •    Payment scheme can be flexible
    •    Possibility of the loan being condoned or restructured (written off or reduced over time)

    Borrowing from the bank
    •    Convenient—transaction payments can be made online or through post-dated checks
    •    A system is in place to remind you to pay on time
    •    Borrowed sum can be huge
    •    Incentives may be given to borrowers (like appliances, free travel, etc.)
    •    Possible condonation or amnesty program—removal of interest or other charges
    •    Restructuring of the loan

    Sison-Pascual recommends that you only borrow from family if it’s a short term loan or a bridge loan. Big ticket items such as housing loans or car loans are better served by lending institutions. “With family, when a debt is not paid on time or defaulted, relationships become estranged as the borrower is expected to be understood while the lender is expected to be more compassionate, thus resentment and anger ensue; it can become complicated.” Gan agrees, “Borrowing from banks would typically give you lower rates than lending companies. By being a good payer, you also build good credit records which can help your overall credit standing.”

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    Click here to learn more about  health insurance plans, payment through credit cards and emergency funds.

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