How to start investing on just P5,000

Investing money is one way of earning extra income. However, it can be intimidating for some people who do not have a financial background to understand how investments work.

Wealth expert Vince Rapisura discussed some tips on financial instruments which potential investors can consider for their money.

1. Stock market investments are risky

The stock market is a popular choice for investing money, but Rapisura said that investors should beware of it when they have no prior experience.

"Para sa mga nag-uumpisa pa lang sa investing, hindi ko ipinapayo na stock investing 'yung unang gagawin," Rapisura told Atom Araullo.

He recommended a stock market quiz which potential investors can take in order to assess whether their current financial situation is ideal for investing in the stock market. Among the questions asked are the status of their insurances, savings, and debts.

2. Invest P5,000 on a mutual fund

One option that Rapisura suggested is a mutual fund, a professionally managed fund which does not require a huge amount of money and stock market knowledge from the investor.

"'Yung mutual fund ay katulad din yan ng UITF [Unit Investment Trust Fund]. Isa din itong pooled fund," he said. The UITF is offered by banks, while mutual funds are offered by financial companies.

According to Rapisura, an initial investment of P5,000 is enough to open a mutual fund account which can be used to earn dividends from stocks and interests.

3. Choose cooperatives 'scientifically'

An interesting alternative to investing in the stock market is membership on a cooperative. However, Rapisura warned that potential investors should manage the risk by selecting a cooperative carefully.

"Ako, may mga exposures ako sa kooperatiba pero ginagawa ko ito scientifically kasi merong tinatawag na COOP-PESOS," he said.

COOP-PESOS is the performance standard for Philippine Credit Cooperatives which an investor can use to evaluate a cooperative. According to Rapisura, this stands for the following indicators: compliance with administrative and legal requirements, organizational structure and linkages, operation and management, plans and programs, portfolio quality, efficiency, stability, operations, and structure of assets.

—Marisse Panaligan/JST, GMA News