Investment Planning
What the domain tests
Investment planning tests asset allocation, risk-return, diversification, liquidity, and product selection in the Philippine market.
Core rules
- Risk and return are linked; higher expected return requires accepting more volatility or illiquidity.
- Asset allocation drives most return variability; diversify across asset classes and issuers.
- Match maturity to goals: short-term money in deposits and T-bills; long-term growth in equities and funds.
- Philippine products include RTBs, T-bills, corporate bonds, PSE stocks, UITFs, mutual funds, VULs, and PERA.
- PDIC insures deposits up to P500,000 per depositor per bank; it does not cover UITFs or stocks.
- PERA allows up to P200,000 annual contribution for residents and P400,000 for OFWs, with a 5% tax credit and tax-exempt income if held to age 55 with five years of contributions.
Worked example
A fund quotes 6% nominal return; inflation is 3%. Real return = (1.06 / 1.03) − 1 = 2.91%, not 3%. Reasoning: compounding means subtracting inflation overstates real growth.
Traps
Chasing last year's best fund; ignoring fees and sales loads; confusing PDIC coverage with investment protection; over-concentrating in employer stock; using short-term money for equities.