Money 101  >  Money Myths

"All investments earn through interest."

POSTED ON October 17, 2019

The myth

For most, you start investing through a savings account. Earning from a savings account is fairly simple: You open a bank account, deposit money and you get a bit of money every month. That bit of money is called interest, and is your reward for putting your money in a bank. The same happens when you open a savings account and invest in time deposits, treasury notes, and bonds.

But there’s another way you can grow your money.

Most investments are money you lend to an institution like a bank. With other investments, however, you can trade your money for something that could increase in value. When your money’s value increases, you trade it back. This is how you make money through what is called an appreciation.

Investments like stocks, unit investment trust funds (UITFs), and mutual funds earn people money because the value of their money increases. How does this happen? When you invest in stocks, you become part-owner of a company. When that company is doing well, you get rewarded. Same goes for investments like UITFs or mutual funds, which are also invested in companies and stocks. When these funds are doing well, you can sell them back for more money.

Why people believe it

UITFs or at least the concept of UITFs are fairly new to Filipinos UITFs only came about in 2004, according to the Bangko Sentral ng Pilipinas.

While stocks have been around for a while, many find investing in stocks intimidating. This is because of all the research and monitoring involved to understand the performance of stocks and their movements in the market, as you would often hear in the news.  

Risks of believing this myth

Earning through interest is not a poor investment decision. However, it's not the only way to earn from an investment. If you only choose investments based on interest potential, you may miss out on opportunities to grow your money further through other options.  

Verdict: False

You can still earn through some investments that offer interests or through appreciation. Understanding both can help you go further in your investment journey.