Disclaimer: This post aims to educate, and not to give financial advice. Investments have different risks and it is up to the investor to do due diligence to make their own decisions.
What is Invest Money (GInvest)?
GInvest is a way for GCash users to invest their GCash wallet balance to investment funds from partner providers.
It enables the ordinary Filipino access to a way of investing in funds, which normally is out of reach. It’s free, and the only thing you need is a GCash account. But first, since this is a beginner’s guide, we should start with…
Introduction to Investing
Investing is basically setting aside some cash to make it grow. This is different from saving. We are not just storing the money, we are making money work for us.
Before, when you needed to invest, you also needed to pay for middlemen or for services that act like middlemen before you can invest.
But now, as the Internet makes things interconnected, it also makes investments available quickly 24/7. Investing has never been as accessible as it is currently.
However, this speed has never translated easily with our fellow Filipinos. Many of our countrymen are not Internet savvy and don’t even have a credit card or a savings account to start with. What more when it comes to investment vehicles like mutual funds, stocks, real estate, or time deposits?
What is interest?
Interest is the amount charged by anyone giving a loan or doing work with money. It is usually expressed in terms of percentage or rate.
For example, there are deposit products with a 4% APR or annual percentage rate. This means that the deposits will gain 4% yearly if not touched.
However, it can be expressed differently to give a false impression, i.e., 4% APR for a certain month actually means a smaller rate because you need to divide the 4% by 12 because there are 12 months in a year.
In a nutshell,
4% = 0.04 per year / 12 months in a year = 0.0033 per month (or 0.33% per month)
So, a Php 1000 investment will only earn Php 3.30 on that particular month.
What is simple interest?
Simple interest is a one-time compounding of your principal with a certain rate. Usually, we can see this with credit cards or other simple loans.
Here is a more in-depth explanation:
The formula of total amount due to simple interest is: A = P (1 + rt) where: A is the total amount gained P is the principal amount (or the original amount you've invested) r is the interest rate (or the total percentage / 100) t is the time your money is in the investment, it can be any unit of time (years, months, days, etc) An example is the interest in GCredit. If you used GCredit to pay 500 pesos to a merchant, and you plan to pay it off the week after. How much interest in total do you have to pay? Given: Principal = 500 r = 5% = 0.05 t = 7 / 30 days So the total amount due after 7 days is: 500 x (1 + (0.05) x 7/30) = 505.83
What is compound interest?
Compound interest is the backbone of investing. This means that once you’ve provided the principal, once interest sets in, this total amount is reinvested and in turn, this makes the interest bigger. Once this goes on for a while, this can be big enough that you can even live off the interest as a type of recurring income.
Here is an in-depth explanation:
The actual formula of compound interest is: A = P (1+(r/n))^nt where: A is the total amount gained P is the principal amount (or the original amount you've invested) r is the interest rate (or the total percentage / 100) n is the no of times the principal is compounded per unit t t is the time your money is in the investment, it can be any unit of time (years, months, days, etc) As a real world example, given the annual interest rates of a certain fund is fixed at 8% and you've put in Php 1000 at the start, what's the total amount after 3 years? t = 3 years n = 1 as interest is compounded after every year A = P (1+r/n)^3(n) A = 1000 (1+(0.08/1))^3(1) A = 1000 * 1.256 A = 1256 So after 3 years, your investment is worth Php 1256 with a gain of Php 256
What are some terms used in investing?
Most of the time, there are a lot of terms used in investing that are out of the reach of any beginner. Here are some terms encountered, and I will try to explain each as simple as I can each term:
- Stocks – part ownership of a company; the stock market allows you to buy stocks of different publicly traded companies and the value of each share of stock usually also represents the value of the company as a whole
- Shares – can be summarized as the smallest “part”, so shares of a stock are the smallest unit of ownership
- Bonds – company-owned debt, some debts are more valuable than others; for example, big companies more often than not take responsibility to pay their debts than others
- Treasuries – government-owned debt; these are considered safe investments as they are backed by the government which will likely not disappear soon
- Some treasuries include:
- Treasury bills – short-term debt (less than a year)
- Treasury notes – medium-term debt (more than a year, less than 10 years)
- Treasury bonds – long-term debt (more than 10 years, may stretch to 30 years or more)
- Some treasuries include:
- Equities – part ownership of a company; the main difference is stocks are publicly traded and the value would most likely fluctuate day-per-day, while equities are privately owned and the value is not easily computed
- Securities – is an umbrella of any type of ownership or debt; it may include shares, bonds, equities, treasuries, and others
- Dividends – distribution of profits shared to investors in the company, usually divided by the number of shares that investor owns; some companies invest their profits to themselves, others share dividends
- Fixed-income – it means it provides a fixed amount of income per period
What are investment funds?
Investment funds are funds that are pooled (or bunched together) from different investors and professionally managed by a manager or company. Each investor gets a share of the pool (or bunch), and each value of this share is usually called a NAVPU (Net Asset Value Per Unit), which represents his part of the investment. These funds come in many forms:
- Mutual Funds – funds that consist of stocks and bonds, usually managed by a company
- Unit Investment Trust Funds (UITFs) – funds that contain stocks and bonds and securities (similar to mutual funds) but these are often provided by banks
- Index Funds – funds that represent a certain segment of a market, usually the stock market
- Feeder Funds – funds that manage other types of investments; usually these investments are hard to get into (for example, overseas stock markets or hedge funds)
- Hedge Funds – funds that employ alternative strategies to earn high returns, usually exclusive for high net worth investors
So when a fund appreciates in value, the NAVPU also goes up. When an investor sells his share, then the difference between the NAVPU price he bought and when he sold consolidates to become a profit for him. On the downside, if an investor sells his share when the NAVPU is below the price he bought it, then it becomes a loss.
What are the different types of investments in mutual funds?
Mutual funds are managed by a company. How they make different types of mutual funds depends on the mixture of different investments:
- Bonds – basically a loan of a large known company; pays out a fixed income over time
- Stocks – units of ownership of a public company; you can buy and sell these in the stock market
- Government Securities – loans owed by the government
How safe are government securities?
Government securities are some of the safest, most conservative investments because these are backed by the government, and governments don’t just disappear overnight. They also do their best to pay off their dues even if it means they’ll print cash to do it.
How safe are bonds?
Bonds are also conservative investments because these are often loans by large, stable (“blue chip”) companies – they need cash to fund their expansions and projects so this is where they source their funds. These are usually also backed by big banks, so it is in their best interest to pay these loans.
How safe are stocks?
Stocks are considered aggressive investments because the price of the stock is based on the market. And the market represents people buying or selling, often based on their feelings and short-sighted information. Unfortunately, feelings are not logical and information can also originate from hearsay and rumor. This fuels its unpredictability with really high gains, but also very high losses. This also makes it profitable with the right mindset at the right timeframe (like 7 years or more).
One big difference between stocks and bonds is the ownership factor – if things go bad financially, the lenders are the first to be paid, as obligated by law. Last are the shareholders.
How do these investments factor into different types of mutual funds?
Since different investments have different risks, mutual fund companies combine one or more of these to form a mutual fund that leverages different mixtures of these different types of risks.
For example, there are mutual funds that are low risk, and these usually consist of bonds and government securities. There are funds that are balanced, and these are usually stocks mixed with some bonds. There are also funds that are high risk and usually these mainly consist of stocks.
GInvest Fund Details
What are the current mutual funds supported by GInvest?
There are currently two fund providers for GCash. BPI has provided 2 funds, while ATRAM has provided 5 funds. To summarize, here are the different funds we have available:
- Peso Money Market Fund – a conservative fund that is mainly involved with time deposit placements in different banks
- Global Consumer Trends Feeder Fund – an aggressive fund that comprises shares of international consumer companies like Amazon, Alibaba, Shopee, Sony
- Global Technology Feeder Fund – an aggressive fund that delves into overseas tech stocks like Microsoft, Apple, Alphabet (Google), and Samsung
- Return Peso Bond Fund – a moderate fund that is a mix of government treasuries and corporate bonds
- Philippine Equity Smart Index Fund – an aggressive fund that tracks 30 companies (blue-chip ones) on the Philippine Stock Exchange Index (PSEi)
- Philippine Stock Index Fund – an aggressive fund that tracks the stocks comprising the PSEi, similar to ATRAM’s Philippine Equity Smart Index Fund
- ALFM Global Multi-Asset Income Fund – an aggressive fund that is a mix of global equities and fixed income securities; this fund actually provides regular vesting of dividends
One good thing about this is that compared to the very first offering, GInvest now provides a variety of funds depending on the risk appetite of the investor. And the incredible thing about it is you only need to be Fully Verified to opt in — you just need one ID. Anyone can now invest easily which just a few clicks inside the GCash app.
Another benefit is GInvest providing access to feeder funds, as most feeder funds out there require a large investment. Additionally, you only need Php 50 as an initial investment for most of the available funds. You can do the peso cost averaging strategy and put in funds regularly.
There isn’t any reason why you can’t start your own financial investment journey now. The low price removes the barrier for even the poorest Filipinos to invest if they really want it.
How risky is GInvest?
GInvest is as risky as what you can endure. No investment is totally risk-free, and as a result, no investment is totally safe. This is why you should invest in a fund that fits your risk appetite and age. This is also why before opting into GInvest, there is a survey to determine your risk appetite before you can proceed.
Generally, as we age, we need lesser risky investments because liquidity (the ability of an investment to become cash) becomes more important as we grow older.
In contrast, while we are young, we should invest more in high-risk investments to make use of the abundance of time we have. Even if it is risky, when you look at it from a very long reference of time, you can ride out the lows and take higher gains.
How do I create a GInvest account?
The first thing is you should click on the Invest Money button not on the main page, but under Show More. Then scroll down until you see “Financial Services”.
You will need to first confirm your email, and take a questionnaire to be able to know your risk appetite.
After knowing your risk appetite, we then can proceed to the GInvest main page.
How do I opt into a fund?
This is simple enough, you just need to pick a fund and click Subscribe. You do not need to follow the risk appetite findings to be able to subscribe to the other funds. You just need to read the agreements and sign off them. Once signed off, you can now subscribe to a fund.
How do I subscribe to the fund?
You need to click on subscribe to be able to go to the next page. You can then input your amount to invest, and confirm it. You will be receiving an OTP as an additional confirmation. The transaction will complete in around 3 days. You will be receiving an email and an SMS as proof of subscription.
How do I redeem the fund?
You need to click redeem from the fund page, after which a confirmation page appears. When you click on the “I agree” button, a pop-up with the redemption disclaimer document appears.
It basically says that the amount redeemed may not be equal to the amount inputted in the redemption form. After finally clicking your approval, the confirmation page comes up and you will get an SMS notification. The transaction will complete in around 3 days. Similar to subscribing, you will be receiving notifications when the transaction is complete.
How much are the minimum subscription and redemption amounts for GInvest?
Here is a table that describes such:
|Investment Fund||Minimum Subscription||Minimum Redemption|
|Peso Money Market Fund||Php 50||Php 50|
|Global Consumer Trends Feeder Fund||Php 1000||–|
|Global Technology Feeder Fund||Php 1000||–|
|Total Return Peso Bond Fund||Php 50||Php 50|
|Phil Equity Smart Index Fund||Php 50||Php 50|
|Global Multi-Asset Income Fund||Php 1000||–|
|Philippine Stock Index Fund||Php 50||Php 50|
As mentioned above, once you subscribe or redeem, these aren’t instant transactions. Sometimes it takes a few days to subscribe and redeem.
For the ALFM Global Multi-Asset Income Fund, how often do the dividends pay out?
Dividends come monthly and go straight to your GCash balance. You will be notified by SMS and will be receiving an email.
Is GInvest safe?
No investment is truly safe. But remember that you should only invest according to your risk appetite.
Is GInvest worth it?
In my opinion and this is not investment advice, if you invest in GInvest, you should practice peso cost averaging — meaning you should always put in a set amount regularly, and keep your investment for at least 7 years.
When do I sell in GInvest?
You should have a plan when selling, and not sell when you feel like it. Investment should be governed by a set of rules you personally follow, and not based on your emotion.
What’s the lock-in price for NAVPU when you buy or sell?
When you buy or sell at a certain price, your order is pegged to that price until it gets fulfilled.
Are there transaction fees for subscribing/redeeming?
No fees, you can freely switch funds if you want to, without any fees.
What’s the difference between GInvest with Save Money (GSave)?
GSave is a savings account, while GInvest is a way to invest in investment funds. GSave provides a fixed interest (around 2-4% per year), while GInvest’s interest rate is variable, depending on the mutual fund you choose. If you choose a relatively safe fund, then the interest should be relatively low as well.
Currently, for GInvest, a recent update offers different yields depending on the investment funds which reflects the investor’s risk appetite.
Another difference is the speed at which you can withdraw your money. GSave withdrawal speed should be instant because you are technically taking our funds from your savings account.
However, for GInvest, this isn’t instant. When we redeem funds we are actually selling our investment, so this means that we need to wait for someone to buy our shares before we can get our money. This also applies to subscribing as well — we need to wait for someone to sell their shares. It typically takes around 3 days to complete the transaction.
Take note that sometimes it can take a few days to redeem your investment, depending on the amount you are trying to pull out. Probably this is the biggest difference when compared to GSave.
What gives better interest – GSave or GInvest?
Currently, GSave gives interest at 2-4% annually. Before, since GInvest had only a money market fund to invest in, it had a year-to-date annual interest rate of around 0.63%. However, since ATRAM now provides other riskier funds to invest in and higher yields, then it’s definitely worth a second look.
For example, in the Global Consumer Trends fund, the year-on-year return was 102.21%. For Global Tech fund, it was 98.44%. For the Phil Equity Index Fund, it was 33.02%, and for Peso Bond fund, it was 10.96%. Again, these are historical data, do not think that it would hold the same for the future.
If you want relatively steady but low returns, then go for GSave. If you want higher returns commensurate with higher risk, then pick a more aggressive fund in GInvest.
Does using GInvest contribute to GScore? How about GForest?
GInvest affects GScore positively because investing more and more means you become more creditworthy. So as long as you invest regularly, and make your investment grow, this will contribute to a positive GScore (and higher GCredit as well).
Unfortunately, GInvest does not give energy points to GCash Forest. There is no particularly green activity attributed to investing in mutual funds. Perhaps in the future, they can find a way to make investing in mutual funds greener.
As part of an update, GSave can give energy points to GCash Forest.
We talked in length about the different basic types of investments and mainly about mutual funds. We talked about how mutual funds have different risks depending on the risk appetite of the investor. However, the best investment you can ever have is on yourself. With the knowledge you’ve gained, it pays a lot more since your earning power also scales.
We also talked about the difference between Send Money (GSave) and Invest Money (GInvest) and that GInvest is now a proper venue for everyone to invest in mutual funds
Lastly, we also talked about how to opt into GInvest. We talked about how to subscribe and redeem funds from and into GInvest.
For similar topics, you can also check out my other posts:
If you’d like to learn more about GCash, I created a how-to on the basics of GCash.
Here is a list of links if you’re interested in the main GCash features: