To those of us who worked hard and managed to save a reasonable nest egg to retire on, it is quite disappointing that the yields on fixed income instruments are so low that it is next to impossible to live off on interest alone!  Current yields on time deposits, money market placements, corporate bonds and treasury bills, even with longer tenors are no more than 1% to 5% at most on a gross basis.  The sad reality is that the current yields are not even enough to keep up with the inflation rate.

Do we have any alternatives that provide us a better yield and perhaps with a capital appreciation upside?  There are certainly a few alternatives available that are worth considering and these are the three that are on the top of my list; equities, real estate and entrepreneurship.  However, they are not without risk and requires a certain degree of attention and skill. 

Equities are normally referred to as the stock market.  We all know that there is a certain degree of volatility in the stock market but over the long term, the upside potential is more than fixed income investments, particularly if you know which listed stocks to invest in.  Not only do they provide better opportunities for a capital appreciation but some stocks also give periodic cash dividends.  The skill set required here is knowing which stocks to pick, the timing of when to buy and to sell and having the right portfolio mix.

Real estate investments are no longer an investment that goes only one way, up.  Given the somewhat inflated property prices in certain locations and the changing demand demographics due to COVID-19, certain real estate investments have stagnated or even lost value.  However, property prices in certain locations have held up well and in some cases even appreciated.  In real estate, there is both the long term potential of a capital appreciation and they can also be leased out to generate monthly revenues.  The downside of real estate investments are the high friction costs of acquisition and sale, the payment of real estate taxes and the administrative costs of making sure your property is secured, insured and properly taken care of. 

Entrepreneurship is engaging in a business using your own money and resources.  Some people do better than others in running a business depending on their education, background, experience, character and sometimes sheer luck.  It is interesting to note that the richest people in the Philippines, and I believe, the world, are all entrepreneurs, which says a lot.  However, entrepreneurship is not for everyone, especially if you lack the passion, risk appetite, leadership, organizational and management skills and if you don’t know how to comply with all the business permits, licensing requirements and other numerous government regulations.  You also have to remember that certain businesses are really a 24/7 affair that may require a lifestyle change. 

Only you can determine if you need to go beyond fixed income instruments to generate more cash flow in exchange for more risk and volatility as well as your additional time and effort. 

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Source: Manila Bulletin (