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When deciding on an MP2 investment strategy, consider these two factors:
- How much you can afford to invest regularly
- Which method will maximize your returns over time
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How much can you invest regularly?
Before you figure out which investment strategy is the most profitable, it’s practical to consider your income and whether it can afford you to invest monthly, yearly, or in a lump-sum amount.
Each MP2 strategy suits certain types of investors:
- Monthly savings – Ideal for employees who receive regular income and anyone who can set aside at least Php 500 per month for their MP2 investment. For some people, paying a fixed amount every month is easier in terms of managing their budget compared to making an annual or lump-sum payment.
- Annual savings – Ideal for people with irregular income (entrepreneurs, freelancers, etc.), as well as those who are too busy to make monthly payments and would rather remit their MP2 savings less frequently (making only five annual payments vs. 60 monthly payments in an entire five-year period). It’s also a good option for employees who receive a large 13th-month pay—they can allot a portion of this amount to their MP2 investment every year.
- One-time savings – Ideal for people who have accumulated or received a large amount such as lottery winning, cash prize, commission, bonus, or inheritance.
You may afford to save using one, two, or all of these strategies. If you still have to choose between two or three options, then proceed with the next consideration: the strategy that will give you the best return.
Which investment method has the highest return?
To determine which strategy will maximize your return on investment, let’s compute and compare the cumulative savings, dividends, and total accumulated value (cumulative savings + dividend) of each option.
For an apple-to-apple comparison, let’s use the compounded savings option (no withdrawal before the five-year maturity period) and the 7.5% dividend rate in the computations.
Scenario 1: Php 1,000 monthly savings (total MP2 contribution of Php 60,000).
Scenario 2: Php 12,000 annual savings (total MP2 contribution of Php 60,000).
Scenario 3: One-time (lump sum) Php 60,000 savings.
Based on the MP2 dividend computations above, you’ll notice the following:
- The one-time savings strategy yields the highest dividend, which is more than twice the dividend of monthly savings.
- A lump-sum MP2 contribution also accumulates savings faster than monthly and annual savings.
- Among the three options, the monthly savings method pays the lowest dividend.
If you can afford to make a lump-sum MP2 contribution, go for it! The higher the amount you can save, the better you can maximize your return.
Go back to the main article: How to Invest in Pag-IBIG MP2 Program: An Ultimate Guide