Skip to main content

Investment Basics: The Investment Triangle

Last year, I attended a free stock investing seminar. This is part of the Philippine Stock Exchange's (PSE) campaign to promote stock investing in the country. One of the many things that I learned (and I think one of the best among them) is all about the basic rule of investment. It was illustrated in a diagram called the Investment Triangle.

The triangle's three vertex (corners) are labeled with investment characteristics:

  • Liquidity - the ease of converting your investment to cash
  • Safety - low risk; or the chance of losing money/value is low
  • Returns - the profit that results from the increase of value of the investment
The Investment Triangle goes like this (see picture below).

The opposite of vertex means the opposite of the characteristic. For example, the opposite of Safety is Risky.

The investment triangle goes to show the following rules.

1. There's no such thing as a perfect investment. Investment is all about trade-offs of the three characteristics mentioned above. You just have to choose which one fits your situation better.

2. To have a high yielding and liquid investment, you have to face high risk. A good example of investments like this are building your own business, investing in stocks, and other speculative investments.

3. To have a safe and profitable investment, you have to sacrifice liquidity. A good example of investments like this is real estate. Land properties are generally appreciating but are hard to sell.

4. To have a liquid and high yielding investment, you have to sacrifice the yield  A good example of investments like this are bonds or certificate of indebtedness by government and businesses.

Personal Risk Assessment

"No pain, no gain". Heard of that saying? Well it's somewhat true with regards to investing. Before you choose a particular investment and decide how much to invest on it, you need to analyze your situation.

- Do I need the investment to be readily convertible to cash?
- How much risk can I tolerate?

These are just some of the examining questions you could ask yourself. With regards to investing, I read a good rule when it comes to risk tolerance: The younger you are, the more risk you can tolerate. The reason is that in case of failure you still have more time and opportunities to recover. That is why, it is highly recommended to start investing while you are still young.

Of course each person has his/her own unique circumstances. That is why investing is a personal decision.


Popular posts from this blog

SCAM: My First Scam Text This Year; 850000 Pesos from GMA Kapuso Foundation

It's a brand new year for everyone, including local scammers. And despite all the efforts by PLDT and Globe Telecom to curb text message scammers, from time to time, they still creep out and show up in our inboxes. And as hard to believe as the messages of winning some great amounts of money is the fact that there are still people who believe them. I personally know someone and that scam text message triggered events that turn her life upside down. So my point is, we still need to be careful regarding these scam messages. The danger is real! So without further ado, here's the scam message I received a few days ago. On Sunday, January 7, 2018 at exactly 3:33PM (PH time), I received this message from a certain Atty. Jhon Acosta with phone number 09552962911 Congratulations! Ursim# Hadwon PHP850,000 From(GMA KAPUSO FOUNDATION) To Claim Send Ur (NAME/ADD/AGE) &Call Me Now Im Atty;JHON ACOSTA DTI#0391s2018 Thankyou,  Do Not Ever Reply Obviously, this is a

4 Steps to Replace Stolen or Lost Passbook

My passbook (inside my bag) was recently stolen inside a local grocery store, and I would like to share the steps I took to secure my account and get a new passbook.      By User:Aerous ", CC BY-SA 3.0 , Link The steps outlined here are for a BPI savings account, but generally, the procedure will be very similar to other banks in the Philippines. 1. Call the Bank to Secure Your Account The first and most crucial step you need to do immediately is to contact your bank by phone or personally report it to the branch where you opened the account. This action will ensure that funds will stay put. The bank will lock the account immediately. The big banks have 24/7 hotlines. For BPI, it's 889-100. You have to do this step ASAP after discovering the loss. 2. Go to the Branch to Ask for a Replacement of the Passbook It can mean a simple replacement of the lost passbook, but it can also mean closing the entire account and opening a new one for security purposes. 3. Get an Affidav

How Much Does a MRI Scan Costs in the Philippines?

My dad needs a Magnetic Resonance Imaging (MRI) scan for his prostate problem. I did a little research on how much does it cost to have one. Well, it depends on many factors, such as which body part is to be scanned. There's also this technique called "MRI with contrast," wherein the patient will be injected with a chemical to make the scan clearer. For your information, this technique of adding contrast is known as  Gadolinium Contrast Medium . It adds cost to the procedure, but with more clarity, the more you can trust the diagnosis. MRI Machine KasugaHuang , CC BY-SA 3.0 , Link So, in my father's case, we had a  Prostate MRI,  and I assume it was without contrast since he was never injected with the "contrast" chemicals. We got it in  i-Scan Healthcare Inc.  here in Quezon City. The cost is  13000 Pesos . Please take note that the amount was just for the scan, and a separate professional will read the result. Some laboratories offer this service (i.e