You can build your wealth through compounding. That is doubling your money every x years using the rule of 72. (72 /9 = 8 years to double your money). That is why higher yields (less risk) make you double your money faster.
Compounding is one of the greatest feature (others say invention) of modern finance. Others say returns on stock investment is marvelous but there could be bad days/months. Psei again returned to 6,000+ level. How many were slaughtered at Phil stock market My daughter stopped talking about her stock portfolion several years ago
Rule in investing - DONT LOSE. Is paramount.
However taxes can take a bite of your returns, Lower the returns and the compounding slows down and takes longer At todays rate at banks, if in savings this will take 144 years. At 3% on time deposit (gross) 2.4% net, this will take 30 years.
This video outlines several tips on how to beat the tax bite on returns so that your PHP can compound:
1. Tax free investments - There used to be CBCIs I wonder whether there are still available There seems to be none
2. Borrow still die strategy - Borrow against your stock sleep on it, pay off interest with your dividends. Dont sell or liquidate.
3. Hold off selling and pay capital gains when you do. Those who sell and who are on salary basis pay cgt year after year.
However for RE in PHL it seems to be a losing battle for real estate flippers. Its because of the regular increase in Zonal Valuation and having the real property classified as capital goods subject to 12% vat. No wonder, leases are popular, and flipping is slow, as seen in the 3 years worth of inventory of condos. No wonder a fmr senator Sec of DOF gets so much hated Mr. Tax Man. Mr VAT
There was this condo offered in Cubao for mere P7 m (market was 12) But after computing for cgt, interest, and CUSA, the margin for the flip in case was merely P500,000 or just a little over 10%
which was minimal. We could get that return elsewhere.
4. Depreciation in commercial property.
Though there is capital appreciation commercial properties can charge depreciation for 10 20 years And thus, tax due is lesser and ROI becomes bigger.
5. Tax free employee plan for retiremen;
Tax free income for retirement fund, stock options and the like
6. Index fund - several transactions gathered togehter as fund, lesser CGT or transaction tax.
7. Wrappper, corporate veil by placing your investment under a corporation, holding company, or trust, you shiled our personal risk via a corporate veil. Only the corporation, trust or holding company gets the hit.
8. Geographicala arbitrage - Lesser tax bureden abroad, lesser cost of living, lesser cost of investing in the Bahamas, Switzerland, Cayman islands, lesser cost of livng in Thailand, the PHL,
Vietnam
