Time-deposits and Money-market are only one of the 3 main asset classes that you , as an investor, can invest in. I should stress that these are just paper assets, a subset of many different kinds of assets.
A. Cash and Cash Equivalents / Money Market
These are highly-liquid, low-risk, low-return investments that are usually under 3 months in duration. Highly-liquid means readily available to be en-cashed.
These are subject to 20% withholding tax and documentary stamp tax. Documentary stamp tax is P1 for every P200, and is usually shouldered by the bank unless the deposit is withdrawn prematurely. The interest is subject to 20% withholding tax.
Examples: Bank Time-Deposits (Certificates of Deposit), Treasury Notes, Treasury Bills, Money-Market funds and Short-term commercial papers.
The investor in these instruments should take into account inflation rates, and should canvas rates from different banks to get the highest return.
Time-deposits and other deposit products are guaranteed by the Philippine Deposit Insurance Corporation of up to P500,000 in the Philippines.
For time-deposit products or other deposit products, you may be given the option of crediting interest payments monthly, quarterly or at the end of the term. It is wiser to choose to obtain the interest ASAP because money now is worth more than money in the future.
Compound interest should also be taken advantage.
Investments with terms of 5 years or longer are TAX-EXEMPT (from withholding and documentary stamp taxes).
Capital/Financial Markets: (For a discussion on Debt and Equity Asset Classes, click HERE)
B. Debt
C. Equity
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