Top 10 Best Investments for Beginners

Since I started my investing journey, I am always left with the question “What is the best investment out there?” The first investments I engaged myself into were cryptocurrencies and stocks. As the years go by, I came to know other types which are compiled in this article. If you are still starting on your investing journey, here are ten of the best investments for beginners that you can choose from:

1. Time deposit

A time deposit is probably the most common type of investment. You can start investing in it as long as you have a bank account.

Just think of it like a polar bear hibernating on a winter. It is like letting your money sleep in the bank for a specific period of time. In return, you will get a slightly higher interest rate than the typical savings account.

The money that you have set for time deposit will be locked-in. You cannot withdraw it until the specified maturity date. Otherwise, your investment will be subjected to premature withdrawal charges or a lower rate of return.

Minimum starting capital: Php 1,000 or 20 USD

Average returns: 1.2% per 6 months

2. Bonds

Huge institutions such as governments and companies open bonds to pool money from the public. A bond is basically a form of borrowing. Instead of directly borrowing from a single lender such as the bank, bonds are specially opened for public investing.

In return, a fixed amount of interest will be given to the money lenders. This will be given after the agreed maturity date of the bond. You can open a bond investment in any banks.

Minimum starting capital: Php 1,000 or 20 USD

Average returns: 5% – 10% per year

3. Government Savings Programs

Governments now have voluntary savings programs available to everyone. Such government schemes are perfect for individuals who have not much time to save on their own. These are also perfect for people who want to invest their money for the long-term.

Since these government programs are voluntary, you are not obliged to put consistent amounts regularly. You have the complete control of how much and how often you contribute into your account.

If you are from the Philippines, you should check MP2 and PESO savings programs. Philippine government agencies such as Pag-ibig and SSS respectively offer these voluntary savings programs.

Minimum starting capital: Php 500 or 10 USD per transaction

Average returns: 1.85% – 8.11% per year

4. Stock Market

Unlike time deposits and bonds, investing in stocks offers no guaranteed returns. This makes stock market investing one form of a high-risk investment.

You will be buying a part of a company being offered publicly in the form of market shares. The prices of stock market shares go up and down. This greatly depends on the company’s performance. Hence, your returns are based on how well the company behaved financially.

The very basic idea of investing in stocks is buying shares at lower prices and selling them at a significantly higher price.

Aside from price appreciation, you can also earn dividends from established companies. Companies issue dividends as shares of profits to their shareholders. Dividends are mostly given on a quarterly basis.

Minimum starting capital: Php 10,000 or 200 USD (advisable)

Average returns: 10% per year (greatly depends on market behavior)

If you are from the Philippines, you can already open a stock market account for as low as Php 1,000. This can be done through COL Financial. Col Financial is a Philippine-based online stock market broker.

You can read more of it here: How to Open a Stock Market Account for 1,000 Pesos

You have to take note though that a thousand pesos would barely give you a significant amount of stock market shares. This holds true especially if the price per share of the stock that you are eyeing is quite expensive.

You also have to take note of the taxes and other transaction fees. The advisable amount to start with is Php 8,000 – Php 10,000.

If you happen to open an account with Php 1,000, just top it up consistently until you reach enough amount to buy your desired shares of stock.

5. Mutual Funds & UITF

If you are not confident enough to buy your own shares of stocks, it is advisable to invest in Mutual Funds or UITF (Unit Investment Trust Fund).
Mutual Funds and UITF are both pooled investments from the public. The major difference is mutual fund is managed by investment companies while UITF is managed by banks.

Professional fund managers handle the combined money from investors. They use it to buy the securities or stock market shares of the leading and established corporations.

In a simple note, fund managers are the ones to manage your money. You will just have to pay for the management fee in return for their service. Your broker will automatically deduct all the charges to your account portfolio. This includes transaction and management fees.

Just like trading the stocks, investing in mutual fund and UITF does not give guaranteed returns. The returns will still greatly depend on the market’s behavior.

The management skills of your fund manager is a great factor to consider as well. Yet compared to trading the stocks yourself, investing in these pool funds will minimize the risks of losing your capital in one swift especially if you still lack the technical and fundamental skills to trade on your own.

Minimum starting capital: Php 10,000 or 200 USD (advisable)

Average returns: 4% per year (greatly depends on market behavior)

6. VUL

VUL or Variable Life Insurance is an investment feature that offers both life insurance and investment. VUL is rooted in the word “variable” for its flexible features.

The investment side can be invested in bonds, securities or stocks. This will greatly depend on your risk appetite.

If you are a conservative type of investor, the investment allocation in your VUL premium will be invested in conservative investments such as bonds.

On the other hand, if you are a conservative type, you can opt to have your investment allocation be invested in more aggressive investments such as stock market investing.

If you are a mid-type investor, you can also have the discretion to have your investment allocation be put in both bonds and stock market. That is how flexible the investment side of VUL is.

Unlike other insurance plans, VUL is more liquid for you can always withdraw the investment side. This will serve as your living benefits.

Personally, I consider my VUL as an income protection asset rather than an investment. The investment side of it is just a bonus for me. What I am after really is the life insurance it offers. This helps me protect myself and my dependents financially from huge financial setbacks.

Minimum starting capital: Php 1,000 or 20 USD monthly

Average returns: 4% per year on the investment side (greatly depends on market behavior)

7. Real Estate

You could never go wrong investing in real estates. This is what Robert Kiyosaki, the author of the famous Rich Dad Poor Dad series, highlighted in his finance books. Land and properties are getting scarce as the year advances. For this reason, real estates appreciate in value in the long run.

One of the cheapest ways to acquire a real estate is buying foreclosed properties. Foreclosed properties are mostly offered by banks, lending institutions, and government institutions.

You should, however, take into account the illiquidity of assets when buying properties. Real estate appreciates in value over time but it will be hard to find a buyer just in case you badly needed the money. On top of that, you still have to pay estate and property taxes aside from the underlying fees and monthly property dues.

Minimum starting capital: $5,0000 – $50,0000

Average returns: 10% per year (greatly depends on property demand)

8. Crowdfunding

Crowdfunding, as what its name suggests, is an investment that is funded by the crowd. It is an initiative by an individual or a group to raise funds from the public in order to realize a certain project or idea.

Such a venture is perceived to yield a considerable amount of profit to be shared by the people who funded the project.

At the moment, I am investing in farmon.ph. FarmOn is an online community-based crowdfunding in the Philippines. The pooled money from the investors helps the Filipino farmers being affiliated to Farmon acquire capital for growing crops and livestock. In return, investors will get a considerable amount of return on investment based on market profits.

I personally find crowdfunding investment as one of the best investments for beginners because the process of investing in such can be done in the comforts of our home. You will have your own dashboard to track the progress of your investment.

Aside from that, you will be able to help a group of individuals sustain their livelihoods with the help of the pooled capital from your fellow investors.

Minimum starting capital: Php 1,500

Average returns: 10% per year

9. Forex

Forex Exchange or Forex is a global marketplace wherein different currencies and commodities are being traded. But just like any other investments which involve trading, Forex trading is a risky one.

In Forex trading, you have the option to go shorting or short-selling. This means that you have the power to borrow currencies at a higher price and buy them back at lower prices. This is simply the opposite of the idea of “buy low, sell high”.

Aside from shorting, you can also use the power of leverage. Leverage simply amplifies your buying power. It can multiply your profits a hundred folds. On the downside, it can divide your capital in one swift if you traded against the market trend.

Leverage in Forex can be considered a two-edged sword. It can either bring you huge profits or wipe your account in a short period of time.

Minimum starting capital: $200

Average returns: infinite returns (greatly depends on trading skills)

10. Cryptocurrency

A cryptocurrency is a form of virtual currency that has real value in the real world. Cryptocurrencies are created in order to transfer money in the cyberspace without the need of centralized entities’ participation such as banks and government. This makes virtual financial transactions easier.

The security and legitimacy of cryptocurrency transactions are wired in a technology called blockchain technology. Understanding cryptocurrencies may take a lot of effort at first but to put it simply, cryptocurrencies are just like money on the internet.

Their values with respect to base currencies such as US dollar greatly fluctuates depending on their demand. Thus, you can trade cryptocurrencies (like bitcoin) just like how you trade stocks in stock market or currencies in Forex.

Cryptocurrencies are perceived to rise in value as the time advances as people gets more interested in exchanging their real money into such virtual coins.

Bitcoin is the most famous type of cryptocurrency as it is the first virtual coin ever created. The value of one Bitcoin way back 2010 when it was first created was less than a dollar. At this time of writing, the value per bitcoin already costs more or less $8,000.

Many people consider cryptocurrencies as the currency of the future. However, the challenge lies on which cryptocurrency can give you great potential gains as what Bitcoin did.

Minimum starting capital: $200

Average returns: infinite returns (greatly depends on cryptocurrency’s potential value)

If you wish to learn more about the basics of Cryptocurrency, consider reading my previously-posted article: Basic Understanding Of Bitcoin And Cryptocurrency.

Investing in Knowledge and Skills are two of the best investments for beginners

The above-mentioned investment options are just a few of the available investments that you can choose from. But you have to note that every investment comes with different levels of risk.

The risks of these investments are directly proportional to their rewards. Simply, the higher the risk, the higher the reward, and vice versa.

There are many investment selections widely available to us, yet the first two best investments for beginners you should first capitalize are your knowledge and your skills. Always do your own research and study the best options you have in hand because risk always comes from not knowing what you’re doing.

It is also worth noting that investing takes time. You can plant the seeds now and don’t expect for it to come into fruition tomorrow, do you?

We all want to invest in order to create a passive income for ourselves. But you have to bear in mind that just because you have the right amount to start investing, doesn’t mean you are ready for it.

You should choose an investment that would align with your goals and risk appetite. If you are still in doubt whether you are already prepared to invest or not, consider reading my previous article: Are you really prepared to invest?

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