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Showing posts from 2009

my favorite warren buffett quotes

As an investor, I look up to Warren Buffett and value his insights. For those who don't know him, he is an american investor and businessman, the CEO of Berkshire Hathaway. He is also the 2nd richest person in the world, with a net worth of $37 billion. Here are my favorite quotes from the Oracle of Omaha:

1. I always knew I was going to be rich. I don’t think I ever doubted it for a minute.
2. I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
3. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.
4. It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.
5. Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
6. Of the billionaires I have known, money just brings out the basic traits in them. If they were jerk…

The 5 investment pillars

A good investor limits his exposure to risk by diversifying in investments. It is like placing you money on a table with 5 legs. If in case a leg gets damaged, the table won't fall because it stands on the remaining four legs. You can even diversify further from each main investment pillar. Its like having pegs on each of the 5 legs making your investment portfolio truly dependable to whether any financial storm. You need not invest in all 5 immediately, work through each of them slowly using a determined savings plan (10% or more if you are comfortable)and before you know it, you have an enviable investment house resting on the 5 pillars.

1. Paper investments
This would include investments in mutual funds, unit investment trust funds, stocks, bonds, money market funds, treasury bills, certificates of deposit and more. These are called paper investments because well, you have a piece of paper or document as proof of your investment. These are offered by banks, asset management co…

a financial mistake most business owners make

What could offer the biggest potential returns of your investment? A profitable business. It can turn P1000 into millions but it can also turn into 000. Putting some money into a business is a must for any investor. Aside from the possibility of raking in profits, having a business actually helps you understand investments better. To quote Warren Buffett, "I am a better investor because I am a businessman and a better businessman because I am an investor". When it comes to learning about finance, running a business is the best teacher. We also need to apply investing principles in our business and what I would like to emphasize is the concept of diversification. A financial mistake most business owners make is the lack of diversification. This is especially true to small business owners. Let us illustrate with the typical lechon manok business. A young entrepreneur decides to start a lechon manok stall. He has great tasting chicken, has good location and people buy it. Needl…

Investing in your own home

Having a place you can call your own is one of life's great accomplishments. It is also one of the best investments you could have and for most people, their largest investment. Whether its a condo, townhouse or a single family house, possessing our own shelter should be an investor's primary investment goal. There are so many reasons why we need to aim for this. First, rent money is dead money. You pay the landlord and poof, money is gone. Whereas mortgage payments increase the equity in your property, thereby increasing the value of your investment. Next, there is a powerful psychological boost that comes with being a homeowner and this will radiate in your workplace, in your business and your life in general. Real estate prices go up in value over time. My parents invested P200,000 for a 3 bedroom house 20 years ago. A family friend recently offered 3 million pesos for it. Doubling your money every 5 years is not a bad investment, isn't it? What is very good about inves…

5 stocks I would own for life

I always advocate investing in the stock market indirectly through mutual funds and UITFs. However I would not advice against investing in the stock market directly also. It is easy to do this, just contact any of the licensed brokers of the Philippine Stock Exchange. You might prefer the online brokers like BPI Trade or Citiseconline or go with the traditional ones. As a reminder, investing in stocks means that you are buying a part of the ownership of the company, thereby receiving part of its profit and partaking in its future growth. This goes both ways too as you also suffer its losses and the decline of its value. Be sure you understand how it works before putting your money in it. Don't forget to diversify, never put all your money in stocks, even if it will post amazing returns.

I consider myself a value investor, not a stock trader. This means that I do not really care much of the stock prices on a day to day basis. I believe in the fundamentals of the companies whose sto…

10 reasons I will keep investing in the Philippines

I will keep investing in the Philippines. Here's why:

1. The Philippines has a strong potential for growth. We have a young population and a dynamic democracy. I still see a bright future ahead and decent returns on my investment.

2. I plan to retire here, so it makes sense to have half of my investments here also.

3. Risk, what risk? Investors who placed their money on the US stock mark lost 50%. Risk is always present even in developed countries. I believe in diversification and what could be better than diversifying globally.

4. Reports show that Philippine real estate is undervalued. Would love to buy properties here and sell it later when it reaches its full value. Besides, I would not let the privilege of owning land pass me by (foreigners aren't allowed to own land under the present Constitution).

5. I sincerely want to help improve the Philippine economy. There is $30 billion stashed abroad, mostly by wealthy Filipinos. That would be a great boost to the economy if they pou…

investing in bonds

Lending money and charging interest is a sure way of growing your money. But if you feel guilty about doing this to people you personally know, then investing in bonds might be the right thing for you. Basically, bonds are debt instruments where you, the investor, will receive interest on the money you lend at a specified time. Bonds are issued by large corporations and governments to raise much needed capital. They issue bonds that are worth billions of pesos and these are snapped up by investors looking for ways to grow their money. Well, you don't just go the the CEOs and tell them, "Hey, I'm willing to lend you 10000 pesos at 5% interest." A better way would be to invest in bonds through mutual funds or UITFs. These companies pool the investments of many investors and then purchase the bonds worth millions. They then distribute the interest earned back to their investors. Investing in bonds through mutual funds or UITFs would offer diversification since they inve…

Investing in UITFs

UITFs or Unit Investment Trust Funds are offered by banks and work very much like mutual funds. The bank's trust department pool the investments and place it in stocks, bonds, money markets or a combination of these. They also provide diversification of investments, exemption from the witholding tax upon redemption and some have a low investment requirement of 10000 pesos. In choosing the right UITF, consider the stability of the bank offering it and the returns it has achieved. I have done some research on UITFs and am leaning towards BDO. It is currently the country's largest bank and their funds have performed well compared to other banks. They also have low investment requirements.

Please remember that UITFs are not deposit products, hence they are not guaranteed by PDIC. As with most investments, they also move up, down and sideways. As I always say, spreading our investments will offer the best protection. You can visit to compare the various funds availab…

investing in jewelry

Jewelry is an important part of an investor's basket. Its value increases with time, just like other investments. Gold, in particular, rises in value especially in times where investors become concerned with paper assets and prefer to invest in real assets. Jewelry could also be a very good "pamana" or heirloom that will be treasured by your descendants. It is a tangible investment; you can see it, hold it, wear it (try wearing a stock certificate around your neck) and appreciate its beauty over and over again. Jewelry can be pawned in times of fiscal emergencies. It is readily convertible to anything and it has inherent value in itself. I have read somewhere that during the war, when paper money became nearly worthless, you can still exchange bits of gold for bread, fish or meat. It is good for the investor's psyche that should banks collapse, stock market plunges and all hell breaks loose, he still has this type of investment to rely on

Just remember to purchase jew…

how to avoid falling into investment schemes

People sell anything these days but what catches our attention are opportunities to make money. But we must be careful in placing our hard earned money. They might be offering incredible returns but at what cost. Such high returns at regular intervals could probably be what is called a Ponzi scheme. According to the wikipedia: A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. This is also called pyramid scheme, since what is paid to the top investors of the pyramid are the investments of those at the bottom and so on until the pyramid becomes too large and without new investors, it collapses. The title of this post is quite misleading because it is very difficult to spot these schemes. These are perpetuated by professionals, they have beautiful offices and your friends are also investing their money with them. It only becomes clear if we look…

bank deposit accounts as investments?

For majority of Filipinos, bank deposit accounts are the only form of investment that they have. This could be because of the fact that these are insured with PDIC, thus offering safety. It could also be that this is the only form of investment that they know of. But bank deposit accounts offer very minimal returns on your money. If you factor inflation, you are actually losing money the longer it stays with the bank. Plus, it is the banks that garner the most from your money, not the depositor (that is why they have very nice offices). It is not that banks are useless, I use them for my everyday needs like ATM, credit cards, personal loans and many more. But I would not even consider 1% per annum as a decent return on investment. The rule that I follow is: IF YOU WILL USE THE MONEY WITHIN A YEAR, PLACE IT IN A DEPOSIT ACCOUNT. Otherwise, there are many forms of investment available that give more than 5% returns. Banks themselves offer these through UITF or unit investment trust fu…

Investing in stocks through mutual funds

Imagine being the owner of PLDT, BPI, Globe, SM, ABS-CBN and other top corporations. Well you need not imagine anymore because it is possible to own a small part in these corporations by buying their shares of stock. As owner, you will also receive part of their earnings and as the company grows, the value of your shares also increases. However, for simple investors like me, I would not recommend buying their stocks directly. You will not be able to diversify your investments because of limited capital. If you have 5000 pesos, you could buy shares of a single company but should the value of that company's stock decrease, your investment will also decrease. I would prefer buying shares of a mutual fund company that invests in Philippine stocks. For the same 5000 pesos, you will then indirectly own shares of more than 30 corporations offering instant diversification, thus protecting your investment. Another advantage with using mutual funds is the availability of professional manag…

richest man in babylon

One of the best investments is to increase our knowledge. Let me share an excerpt from the book "The Richest Man in Babylon" by George Samuel Clason. A very good book on finance.

He stated the five laws of gold:
1. Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.
2. Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.
3. Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.
4. Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.
5. Gold flees the man who would force it to impossible earning or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic…

investment risks

With the financial crisis, most people's investments have decreased in value and a good number will get discouraged because of this. In the Philippines, we also have the collapse of several rural banks and pre-need firms. Some might decide to forego investing after all of this. Let us clarify RISK - IT IS ALWAYS PRESENT. If you keep your money as it is by hiding it under your pillow, there is the risk of theft, of your house burning or termites destroying the crisp P1000 bills. If you keep the money in a bank deposit account earning less than 4%, inflation will lessen its value year after year. Inflation is not just risk, it is a certainty. Thus, a prudent investor will not strive to avoid risk at the expense of losing to inflation, rather, he will strive to beat inflation while MINIMIZING risks. Here are some tips to protect your investment while making it grow:

1. Stay away from firms that offer unbelievable returns.
Be very wary of companies that offer unbelievably high retur…

why invest?

There are many reasons why people invest. It could be to buy a house or car or other big ticket items. It could be for the college education of your child. But my favorite reason for investing is to someday, stop working yet live the same lifestyle I have through my investment earnings. And I intend this to happen before the age of 60. Overseas filipino workers would want to do this even earlier. No one likes to be away from their families for 30 years or more. Investing allows you to earn more without working more. It's like having a slave that gives you money and you don't have to give anything back . Investments will allow you to retire comfortably. it will shield you and your family from financial emergencies like medical bills or the loss of a job. It will help our country since you are contributing your money to be circulated in the economy instead of hoarding it under the pillow. It allows you to beat inflation. Remember that 100 pesos today will only buy 96 pesos wort…

my investment in mutual funds

Let me start with one investment I have, a mutual fund account. I have always associated investing with people who have tons of money but as you will know, people can invest as little as 5000 pesos. Think about it, if you earn 15000 pesos a month and follow the 10% rule on saving, you will have 6000 pesos in 4 months for your initial investment. In the Philippines, we now have several options. I would recommend you visit the link on the right for a list of mutual funds. Basically, mutual funds pool the investments of small investors like us, hire a professional manager and have access to investments that used to be for corporations or high net worth individuals only. So for as little as 5000 pesos, we now have the option of investing in stocks, bonds or the money markets through mutual funds. I first purchased mutual fund shares last 2004 for 1.12 pesos per share and today it is worth 1.78 pesos per share or a return of 12% a year and to think we are in a global financial crisis!. I c…

The 10% rule to attaining wealth

One must have money to invest but where do you get it if you are living paycheck to paycheck. The answer is to pay yourself first. When you receive your salary, get 10% right away and set it aside. Do this before paying the bills, before paying your loans, before doing the groceries, before spending it. This is the only way to ensure that you will have the funds to invest. It is difficult at first but it can be done with practice and determination. You work everyday but come 5, 10 years you may have nothing to show for all your hard work. Who is more important, you? the credit card companies? the utilities? the telcos?. You should be paid first before any of them. It is said that if you do things repeatedly then it becomes a habit and becomes easy to do. I hope all of us will have this habit of saving 10% of our income. This should be done first, then spend the rest.