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All desire to increase their wealth. But not all have time to sit down and study the products that can help them do that. This post intends to demystify and simplify the approach of various wealth management products.
Wealth management products are financial products offered by banks or asset management institutions that help you accumulate wealth. The selection can start from a regular savings account to a more advanced investments account. Choosing which product to use requires careful study as they involve certain risks.
As an investor and a business owner, I say you will miss many opportunities if you do not use any of these wealth management products today. I suggest you make time and see how they can help you. If you want to know what products I use, continue reading below.
Disclaimer: The content is for information purposes only. It does not intend to give professional financial advice.
Wealth Management Products I Am Using
I like to keep things simple. Especially when it comes to my finances. So please don’t expect anything flamboyant with what I am about to share with you. All the products mentioned below are the ones I believe are enough to help any person build wealth.
Regular Savings Account
I suppose this wealth management product needs no introduction. A regular savings account is fundamental for anyone who wants to accumulate and protect their funds. But believe it or not, I know many friends who would rather keep their cash in a safety vault or cabinet at home. The problem with that setup is it will expose your money to risks like loss, theft, or damage. Taking “cash on hand” literally will put you at a disadvantage.
Money deposited in a regular savings account will give it better protection and accessibility. They are covered by insurance and get the capability to be transferred electronically. Furthermore, you can also track the movements of your funds via an app. The only con I observe with a regular savings account is the amount of interest your money earns. Typically you only make 0.125% per year.
This is why I only maintain an ample amount in my savings accounts. Most of my cash is saved somewhere it can incur higher interest rates. I use my savings account primarily for sending and receiving payments. It is where I pay our bills and tell our customers to settle their purchases.
High-Interest Savings Account
A high-interest savings account acts like a regular savings account but gives way better interest rates. It could range from 2 to 4 percent per year. Why don’t all banks offer a high-interest savings account? Well, not all banks can afford it. Digital banks are the only predominant financial institution that can offer such generous interest rates thus far. It is because they have a much lower overhead cost than others. But besides the point, they also use it as marketing leverage. Many people are uncomfortable entrusting their money to banks with no physical establishment. They hope to attract them by offering 30x more interest than their brick-and-mortar competitors.
I generally use a high-interest savings account to park extra cash. Instead of letting them sit in regular savings for a month, I will transfer them here to capitalize on the opportunity to earn more interest.
My wife and I had a furious battle against credit card debts. It took us a couple of years before we finally killed them all. Follow this article if you like to know how we killed eight credit cards. Now why ally with the enemy? For anyone who lacks self-control and does not fully understand how credit cards work, I strongly recommend you avoid using them at all costs. But there are critical advantages if you know how to manage it.
One of the biggest reasons I still use a credit card today is its faster refund process for bad online transactions. There was a time when I bought a computer from an online store using a debit card. The machine wasn’t delivered. When I complained about it, the customer service said she would process the refund, but it would take a while before I’d receive my money back. She said it is more complicated to return actual cash than credit. Thus, advised me that it is better to use a credit card when making online purchases. True enough, I got my refund 60 days after the call.
Money Market Fund
The money market fund is a low-risk type of mutual fund. Money here is generally invested in highly liquid instruments such as cash, corporate bonds, government securities, and fixed deposits. This is where I usually put funds that have no definite use yet, like an emergency fund and nest egg. They are money that is kind of caught in the middle. They are not part of your day-to-day operation, yet they are also the sum you do not like to risk.
An Index fund is a high-risk, high-return type of mutual fund. The money here is commonly invested in equities of different businesses. This is one of my favorite instruments to invest in because of its simplicity and low management fee. But I know many are not elated to put their money here because of the time horizon and lack of excitement. Investing in index funds is a long-term game. At least ten to fifteen years. Commitment is the key if you want to maximize the potential of this fund.
As for me, I discipline myself to put in 10 to 15 percent of my income each month. I have been doing this for the past five years, and it is fun to look back at how much my index fund has grown.
So there. These summarize all the wealth management products I regularly use. I hope it didn’t underwhelm you too much. But if you want something a little more exciting, I’ll share some of the products I am currently testing below.
Wealth Management Products I Am Testing Out
I always find ways to improve the ways I accumulate wealth. That is why I regularly test various wealth management products and see how they can enhance my portfolio. Here are some I am currently experimenting with:
The bond fund is another low-risk mutual fund. Similar to the money market fund, this instrument consists of corporate bonds, government securities, and cash. The difference between them can be traced to their allocation.
The reason I am considering the bond fund is:
- It has a higher interest projection than the money market fund.
- Bonds generally perform opposite the economy. Thus, it is an ideal way to balance my portfolio.
The reason I am not entirely sold yet is:
- Redundancy with the money market fund since the difference in interest rate isn’t too far from each other.
- It has a higher risk than the money market fund.
I will be honest. After reading much about the feeder fund, I still couldn’t grasp it fully. My vague understanding tells me this is a fund investing in another larger fund. In any case, my motivation for trying this instrument is because it allows me to invest in foreign companies. A Global Technology Feeder Fund offers investment opportunities with tech companies such as Microsoft, Apple, and Samsung. While the Global Consumer Trends Feeder Fund offers Amazon, Sony, Electronic Arts, and General Motors.
80% of my income from 2017 to 2020 came from leasing out our condominium units. Some I host directly, some via Airbnb. But due to COVID-19, we have to let go of the properties. I never thought I’ll be able to get back into the rental business again until I read about REITs.
REIT is short for Real Estate Investment Trusts. It is a company that owns and operates income-producing real estate. Investing in REITs is similar to investing in mutual funds, but the profits you will receive will come from their rental income. Because of this, I generally do not need to buy my own property and rent it out myself. I can simply invest and let the REIT take care of everything.