Thursday, December 27, 2012

how would Batman invest?

My favorite superhero would have to be Batman. Not only because he is amazingly wealthy as Bruce Wayne, he seems to be always 2 steps ahead of his opponents. I write this post because the year is about to end and we are about to enter a new year. A fresh start to evaluate your investments, to re-balance, to prune out and plant new ones too. Central to all of this would be a Batman - like ability to plan ahead, to be 2 steps ahead of potential problems even before they become obvious. For stock investments, this would mean reading their financial reports and looking for threats that may undermine the company's future performance. For real estate, this would mean looking for signs of a price bubble or simply checking your property's vicinity for potential problems. And for double your money schemes disguised as legitimate investments, well you know what to do - run away from them as fast as you can. Have a plan when your investments perform well and more importantly, have a plan when they lose. There is no investor that gets it right all the time. What separates those who become rich from those who don't is the degree of preparation the investor has for events that are largely out of his control. So have a plan A, plan B and even plan C for your investments. In  that way, just like the Batman, you are always prepared for whatever 2013 throws at you. Happy investing!

Wednesday, October 24, 2012

Investing in agribusiness

Renowned investor Jim Rogers was quoted saying that farmers will soon be driving Lamborghinis and that high school students now should seriously consider a career in agriculture. I don't know about the Lamborghini part but he does have a point. With the global population tipped to grow a another 2 billion and rising Asian middle class wanting more meat in their diet, there seems to be a lot of upside to investing in agriculture. For an overseas Filipino such as myself, the easiest exposure to agriculture would be to invest in agribusiness stocks. This would include Agrinurture Inc., Universal Robina Corp. and Roxas Holdings. Second would be to buy an existing farm and be a passive owner of an agribusiness venture. As with all other investments, a careful study is required to manage risks. Agriculture in the Philippines is still largely underdeveloped and would require a massive injection of capital. For those who do it right, the returns may be worth it. Happy investing!

Friday, October 12, 2012

How wealthy are you compared to the rest of the world?

Ever wondered how you compare to the rest of the world in terms of wealth? Here it is in terms of net worth (that is total assets minus total liabilities):

1% have a net worth of US$710,000
10% have a net worth of US$71,000
50% have a  net worth of US$3,700

There you have it, if you have a net worth of US$71,000 you are wealthier than 90% of the seven billion people on this planet. If you ever have days where you feel like not having enough, think of the legions who have far less than you. Count your blessings and happy investing!

Friday, October 5, 2012

If MVP divests from the country, I will do the same

  Last month, there was an interesting news article about MVP or Manuel V. Pangilinan venting his frustration on being dragged into certain controversies being played out by our "honourable" politicians. He must have been really pissed off to the point of saying that if this goes on, he may move his business operations to Hong Kong. I don't know if that would mean simply moving operations or a complete divestment of his Philippine holdings. Either way, it would be a very bad sign for the country. In many ways, I do understand his disappointment. If you don't, try opening a business in the country and you'll know what I mean. If one of the country's top investors moves his money elsewhere, we should take notice.

Wednesday, August 8, 2012

Interesting results from the Consumer finance Survey

Here are some interesting results from the recent Consumer Finance Survey by the Bangko Sentral (Philippine Central Bank):

The Philippines has a young population. The age distribution of household members showed that 21.5 percent were 5-14 years old, these figures also indicated that a significant increase in the country’s labor force could be expected over the next decade

 Only a very small percentage of households owned securities and investment accounts such as stocks, bonds, mutual funds and unit investment trust funds (0.4 percent).

 Most households that owned their house/house and lot acquired the property through cash payment  and inheritance/gift. Only 6.7 percent borrowed money for their housing.

 About 16.2 percent of households owned at least one other real property aside from their residence.

 Eight in ten households (78.5 percent) did not have a deposit account. Among those with no deposit accounts, the main reason cited by 92.8 percent of households for the absence of a deposit account was that they did not have enough money for bank deposits.

 About 40.6 percent of households owned a farm or business. Businesses of households were mainly in wholesale and retail trade, and agriculture, hunting, forestry and fishing

 Food and beverages consumed at home accounted for 38.5 percent of the annual household expenditures.

 Majority of respondents would not risk their income to undertake risk-taking activities that could increase their current level of income.  About  7 in  10 respondents chose to stick to their current level of sure income of P1,500 per week rather than take the risk of investing  in  a new product with a 50-50 chance of either getting  P4,500 (three times their current income) or suffer a loss of P1,500 (equal to their current income).

Tuesday, August 7, 2012

Is there such a thing as overdiversification?

Most personal financial advice recommend that investors diversify. I agree; but come to think of it, is there a point where your investments become too diverse without any real benefits? For instance, there was a study that showed owning more than 20 shares in your stock market portfolio would provide very little risk reduction. Owning just one share is risky, when you own 2 shares, you have reduced the risk significantly. When you own 3 shares, the risk is reduced even further. But owning your 21st or 101st share only reduces your risk by a tiny amount. Limiting the number of shares you own would also force you to think hard on which companies to buy and get to know them better.

This would also apply to mutual funds and UITFs. There are plenty to choose from but there is no need to divide your money into all of them. Perhaps choosing 3-4 would offer enough diversification. Real estate can also become overdiversified. Why not sell some of your less expensive properties and buy a few really good ones. There is really no need to own 10 currencies even if banks like HSBC and Citibank offer multi-currency accounts. Maybe having 2-3 currencies aside from the peso would be enough to reduce risk.

Diversification is essential to protect your investments. As they say, don't put all your eggs into one basket. But carrying too many baskets would be quite cumbersome as well. Happy investing!

Tuesday, July 31, 2012

do not invest in Philippine pre-selling condos

I would rather shoot myself in the head than invest in pre-selling condos in the Philippines. My brother and I were interested on getting a condo unit not really as an investment but as a vacation home. However, when I read a contract to sell from one of the Philippines' top developers, I was shocked at how skewed it is on the developer's favor. There is very little protection, if any, on the buyer's side. I think you would have to be either really stupid or overly trusting to sign one of those contracts. The first issue I had was that they require the full post dated checks even before providing the contract to sell. What the hell? They should give the CTS when the buyer has paid 10% downpayment. Next, if they failed to deliver the unit as scheduled, there is no compensation to the buyer. They can practically construct the condo as slow as they can. Then they are also free to alter the floorplan as they please. So if you expect 10 units per floor, you might be surprised that they have increased it to 20 units per floor upon turnover. These are just a few of my concerns and when I brought this up to their agent, they said they are a reputable developer. Hmmmmm...... I think the contract speaks a lot more than any developers' reputation, regardless of how well deserved it is.
Buyers, beware! Happy investing.

Monday, July 30, 2012

from little things, big things grow

Most of us know this is true with investing but it takes discipline and a lot of patience to see this through. From little things, big things grow.  As investors, we need to realize that small amounts do matter and nothing should go to waste. We see pocket change, but the real value of those coins is many times over if it were invested and given time to grow.Yes, a few coins would not buy you much now but if invested well, it can grow to such that it can actually buy more in the future than what it can today. So if you see a coin, pick it up. It may only buy a piece of candy now but if invested well, it could pay for a decent meal 30 years later. Happy investing!

Sunday, June 17, 2012

sovereign bonds

An investor can earn some interest by lending money to individuals, corporations and even countries. The question would be, what is the probability of getting your money back. That is where ratings agencies come in who grade bonds from triple A all the way to junk status. Those with a high credit rating pay less interest but would have greater certainty of repaying the whole borrowed amount. The opposite is true for those that are considered more risky, they pay more interest. From an investors point of view, earning 30% from bonds may sound good but attached to that would be a very real possibility of default and thus losing all the investment.  Now here's an interesting exercise, the following shows two groups of countries by their public debt as percentage of GDP:

Group 1:
A. 103% 
B. 208%
C. 108%

Group 2:
D. 49%
E. 40%
F. 24%

If you can lend to one group without looking at their bond ratings, to whom would you lend? To group 1 whose debt is already greater than their GDP, or to group 2. By the way, group 1 is made up of the USA, Japan and Ireland while group 2 is made up of the Philippines, Thailand and Indonesia. It is true for countries as it is to individuals: the path to financial ruin is paved with too much debt.
Happy investing!

Friday, June 15, 2012

foresight or luck?

   Sometimes its hard to tell whether an investor is just lucky or had good foresight. A very good thing just happened to one of our family's real estate property. We bought that farm land many years ago and its not even titled. Just recently, a department store was opened two km away and a subdivision development is ongoing just across the property. Its value has multiplied many times over, far more than our actively managed investments. When pondering this, it could have also dived in value if a landfill was built near it. In short, the return or loss from that real estate investment was entirely due to the actions of the surrounding landowners. Luck or foresight? Maybe a little bit of both.

Tuesday, May 1, 2012

CNN interview with Ayala brothers

CNN is currently airing feature programmes on the Philippines. What got my attention was Andrew Stevens' interview with brothers Jaime Augusto and Fernando Zobel de Ayala, the CEO and COO of Ayala Corporation respectively. I'm actually a great admirer of their company's projects and truly believe in the value that the company brings to the table. So much so that my stock investment in AC outweighs all other positions I have in the Philippine Stock Exchange. When I saw the 30 minute interview, I became even more convinced that this investment is definitely for the long run. Small share investors like us rarely have the privilege of picking the minds of the people who run the companies we own and this interview provided a good opportunity to do so. Yes, I may own a miniscule, insignificant portion of a giant corporation but I do put in the effort of knowing MY company. The thing I admire most about the brothers was captured in the last part of the interview. To quote:

STEVENS: What's the secret of mixing family and business successfully?

F AYALA: I guess it's in the way that they handle their children - with an enormous amount of fairness, giving everyone their appropriate amount of time and giving everyone equal opportunities. And so, that's what we've had in our family, and we just get along extremely well. We're a family of seven. It's Jaime and I and five sisters. And we're very, very close. And I think that'll serve us very well in this generation.

STEVENS: Would you like to see your children be the ninth generation leaders of Ayala?

JA AYALA: Of course, it would be wonderful to see that family tradition continue, but the whole issue of governance on one hand and professional executive leadership on the other are two separate issues. And we just want to make sure that it's our duty - and Fernando and I feel it's our duty - to make sure that Ayala remains a progressive company with progressive leadership.

STEVENS: Do you think that this conservative side of the business - or your business management - comes down to the fact that you see yourself more as a custodian of the family brand?

F AYALA: Very much so. We are stewards for the next generation and, again, this is something that has been mentioned again and again to the family members. So your focus is always on the legacy, on the history, and really looking forward to the next generation and making sure that you pass the baton in the same way that it's been passed on to you.

So to present and future shareholders of Ayala Corp., I think our company is in good hands. 

Tuesday, April 24, 2012

Of Europe, Scarborough and whatever else is on the news

Sometimes, its better to switch off the news. We have 24-hour news on the television and the internet and it can easily sway investors to act accordingly. Bad news - investors flock to gold and cash. Good news - stocks become favorable. Don't get me wrong, we need to be aware of what's happening in the world we live in. Such as governments cutting spending in Europe or that China is claiming the Scarborough shoal off the Philippines. But for investors, worrying about these events affecting our investments is useless. Worrying about anything and everything is unproductive, as the good book says so. Not to mention that worrying is bad for your mental health! Look at the bright side. Jitters in Europe cause money to flow to emerging economies like the Philippines, no wonder stocks are at all time highs. This standoff with China over some rocks in the middle of the sea may finally push the Philippines to modernize its armed forces. There is always a silver lining in seemingly grim news. It reminds me of someone who bought huge tracts of ash covered land in Pampanga after Mt. Pinatubo erupted. He bough it cheaply then and is enjoying the returns now. Always be cautiously optimistic. Happy investing!

Monday, April 16, 2012

Much ado about an IPO

GT Capital is having an initial public offering and what happened is, I wasn't invited. Just to be clear, I am not writing this post because of sour grapes. In fairness to my broker, COL, they did ask me to participate in Megawide and Puregold's IPO. I declined both occasions. It is my opinion that an investor is better off avoiding initial public offerings. There is just not enough information in the prospectus to make a decision. For example, you do not know a company's dividend history, which is a substantial factor in choosing which stocks to buy. Since a private company is not subject to the same level of scrutiny as publicly listed ones, there might be some issues that is not factored into its valuation. The share price of an IPO is set by the company and only when it starts trading on the exchange will its stock price be determined by the market, the collective decision of thousands of investors. So I would take comfort that the price I will pay has been set by the market. Lastly, there is no way of being able to identify how well a company communicates with its shareholders. When you read a listed company's past disclosures to the public, you can tell if it is honest and if it really puts the interest of its shareholders. I would prefer to invest in companies that have been trading on the stock exchange for at least seven years or so to have enough data to make an investment decision. Happy investing!

Saturday, March 31, 2012

a framework for investing in the stock market

Warren Buffett famously said: "To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights or inside information. What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding the framework."

A big reason why I blog is to preserve the framework I use. Reading past entries allow me to revisit the ideas from various sources that have influenced my investing style. When it comes to putting money in the stock market, here are some guidelines:

1. assess the management - If you manage your own business, you know for a fact that no one could possibly do it better than you. But when it comes to companies whose stock you would like to buy, how do you know that management is doing their best. Check if they have achieved previously stated objectives, check measurements like earnings per share growth and revenue growth, check surveys that publish the most admired and well managed Philippine companies.

2. assess its financial health - one word: cash flow. A company with good cash flow will survive even if its management is incompetent. This is especially true for companies with a firm grip on its market.

3. understand its principal activities - when you buy a company's stock, you own that company. You should therefore understand how it makes money, how can it expand and what are the threats facing its business model.

4. assess its outlook - the stock market is forward looking. the record levels we currently see in the Philippine Stock Exchange means that investors have a rosy outlook for the companies in the exchange. The opposite can also happen, investors can also leave in droves if current events turn sour. This, however can present opportunities to buy stocks at a cheap price if you think that a company's outlook will remain strong despite general economic uncertainty.

5. stick to the framework and don't let your emotions rule - Here's a thought exercise: Let's say you have 500,000 invested in the stock market. The next day a military coup takes over Malacanang and assumes power. Foreign investors withdraw their money and as a result the stock price falls. Your investment is now worth 250,000. If you stick to the framework, you will leave it as it is. But if you panic and follow your emotion of fear and uncertainty, you will also withdraw your investments with a 250,000 loss. Let's say after 1 month the coup is quashed and civilian rule returns. Foreign investors move their money out of Europe because of Greece and Spain defaulting. They then see that the Philippines is still a good place to invest and stock price slowly move up. After 8 months, the value of your stock investments is now worth 510,000. In a span of 9 months, you could either have earned 10,000 or lost 250,000. It all depends on whether you can keep your emotions in check.

Happy investing!

Saturday, March 17, 2012

living rich vs being wealthy

They may sound similar at first, but there is a big difference between living rich and being wealthy. Living rich is what most people aspire to. Live in a big house, drive a fancy car, go on expensive holidays and have all the trappings of life money can buy. Unfortunately, however, someone has to pay for it. Most likely by slaving away in the corporate world and sacrificing a big portion of your time to earn cash which you spend freely. Therefore you need to exert more effort as years go by since money flows out as fast as it comes in. You live in fear of losing your source of income because you are so used to living the high life.

Being wealthy means living below your means. This means driving a used car, living in a mid size home, staying at a 3 star hotel, buying things when they are on sale. This allows you to save your excess earnings and invest them in assets that appreciate in value. Over time, these assets will grow and eventually provide you with income. You then don't have to exert a lot of effort into maintaining your lifestyle. This is made easier since you don't need a lot of money to live the life you are accustomed to anyway. This means you have more time for leisure instead of time devoted to earning money. Having such assets allow you to feel secure that you can rely on something during difficult times.

Being wealthy is what investors strive to achieve. Being wealthy is a habit, it is a lifestyle worth emulating. Being wealthy allows you to have something that money cannot buy: peace of mind and quality time. Happy investing!

Tuesday, March 6, 2012

defensive investing advice from Dr. Doom

I would like to share a reading from one financial newspaper who interviewed Dr. Marc Faber a.k.a Dr. Doom. He often appears in the media with a very bearish outlook, hence the nickname. But I for one liked what he had to say about investing during these volatile times. Basically, his advice is very similar to Browne's permanent portfolio, which I have shared previously. Dr. Faber is advising investors to spread their investments into:

25% stocks
25% cash and bonds
25% precious metals
25% real estate

Not a bad asset allocation strategy. Its simple to follow and you only need to rebalance your investments from time to time to compensate for those that have increased or decreased in value. Particularly this time when Philippine stocks are at a record high and gold is still above $1600 an ounce. Perhaps the next several investments you can make would go to cash or real estate. Happy investing!

Monday, March 5, 2012

angel in the marble

Many speakers often use this story and it can be applied to different situations. I for one find it very relevant to investing. The story is about how Michelangelo created the statue of an angel in the Basilica of San Domenico in Bologna. He said, "I saw the angel in the marble and carved until I set him free." While everyone else sees a block of marble, Michelangelo has the vision of a beautiful artwork and he made it a reality. This mindset is what separates great artists such as him from mediocre ones. I believe this is what separates successful investors from those who lose as well.

Good investors "see the angel in the marble". They see the future potential of their investments, even if most people don't and they have the patience to wait for that potential to be realized. It could be a stock whose price is driven down by temporary setbacks, or a block of land in the middle of nowhere with tourism prospects, or a business idea that others dismiss as ridiculous. When the time comes for the stock's price to rise, or for the land value to increase or for that business to turn out a profit, the investor will have realized excellent returns from his investment.

Happy investing!

Thursday, February 16, 2012

things to consider before investing in a condo

A search on google regarding real estate is flooded with results pointing to condominiums. They are being built left, right and centre in the major urban areas of the Philippines. From an investor's point of view, one should consider the merits and disadvantages of investing in a condo unit. I guess the first consideration would have to be the most obvious, why do you want one? Do you plan to live in it? or rent it out and derive income from it, or just use it as a store of value.

Planning to earn from it requires careful research on the prospect of rental income. It would be ideal if the tenant ends up paying for most of the mortgage plus maintenance cost. But again, this scenario requires careful planning and not many condo projects can offer this. As a store of value, I am biased against condos because of two things. First is that buildings depreciate as years go by and secondly, the supply of condo units can increase anytime thereby decreasing its price. Land would be a better store of value.

Another consideration to be made before investing in a condo is the quality of the project. Not all developers are the same; it is best to stick with those who have completed projects previously. Did they deliver on their promises? was it completed on time? are previous clients happy with their units?

Lastly, can you afford it? It is equally important that you do not overstretch your budget. Beware of salespeople telling you to dive in and sign the contract. It is not a limited opportunity. Condo units will always be available so if you aren't entirely comfortable about parting with your money, then don't. Be patient and continue to study the options available. When you find the right deal for you, then that's the time to pounce.

Friday, January 27, 2012

the Philippines is on its way to be the 16th largest economy

In 40 years that is, according to HSBC's "The World in 2050" report. When I wrote in 2009 my reasons for keeping invested in the country, I was never as optimistic as this report. Who would have thought that the Philippines would be attending the G20 meetings. The report says:

"The country is projected to be the 16th largest economy by 2050, a striking rise of 27 places from its current ranking."

“There are some truly remarkable hot spots in Asia... The star performer, however, is the Philippines where the combination of strong fundamentals and powerful demographics gives rise to an average growth rate of 7% for the coming 40 years.”

That should give some encouragement to those who maintain a positive outlook for the country. If we are on the way to becoming a large, developed economy, then it should take the value of our investments along for the ride. Again, the Philippines has so much potential and we are only beginning to make use of it. If we are to fully develop our agricultural, mining, tourism and service sectors, I think the country can accelerate its growth even faster. Perhaps the government plays a big role in this but I would like to play my part too, as a citizen, by being invested in its future. Happy investing!

Wednesday, January 25, 2012

investing with the water dragon

Well, there's really nothing that will change with my investment decisions now that we've entered a new lunar year, and you should not either. Its funny how some people associate the arrival of a new animal sign with predictions of where or how we should invest. Rational thinking should prevail my fellow investors. For instance, would Manila Water (PSE: MWC) be a good stock to buy because it is involved with water or would a beachside property be excellent because it also has to do with water? Not that either of these two are bad, MWC has solid earnings and people would always pay their bills, it also has the backing of Ayala Corp., a large conglomerate with good management record. And who wouldn't want to relax in your own private beach house. The fact is that these two would be good investments whether it be the year of the pig, dog or dragon as long as you do your research before investing.

A second point I would like to highlight is the propensity of the Chinese to succeed in business. I am 100% certain that it has nothing to do with their practice of lighting firecrackers to welcome the year, nor the use of lucky charms. It has everything to do with their amazing drive to grow their business, their thrift and hard work. No amount of luck can compensate for such attributes. If you ask Henry Sy, Lucio Tan or John Gokongwei what their secret to financial success is, they would pretty much give the same answer and that its not really a big secret after all.

Wishing you all the best in the year of the dragon. Happy investing!

Friday, January 20, 2012

cash maybe king but it doesn't reign forever

I was going through my coin and banknote collection the other day and realized something: Cash maybe king but it doesn't reign forever. Proof of that was the collection itself. It had 2-peso, 5-peso and 10-peso banknotes. So at some point in the past, these denominations actually had sufficient value for them to be printed as banknotes instead of being minted as coins, which is what we have now. So what happened? Since governments or central banks are able to print currencies out of nothing, hence the term fiat currencies, the ever increasing supply of it causes its value to diminish. That is why our grandmothers always complain about how expensive things are these days because they were able to buy so much more with the same money in their younger days.

What does this mean for investors like us. If you have a bundle of cash now and would not need it in a year or two, please don't hide it under your bed. In three years, inflation would have reduced its purchasing power by 9-12%. Think about it, you basically have the same money but it is as if someone stole a tenth of it. This is a fact that investors, especially those who will stay invested for many years, must remember. We may think that the 1000-peso bill is of value now but, as history shows, that value will diminish over time. So if you want to make sure that you preserve the value of that money in 20 or 30 years, better invest it.

Thursday, January 12, 2012

ASEAN trading link

The Association of Southeast Asian Nations (ASEAN) is promoting more cross-border collaboration by promoting the ASEAN Exchanges, made up of seven stock exchanges from Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam(2). I am particularly excited with the upcoming ASEAN trading link connecting the bourses and offering Filipino investors easier access to opportunities in our neighboring countries.

An excerpt from a press release from says:

The CEOs also announced the awaited roll-out plan of the ASEAN Trading Link which will see the participation of member exchanges taking place progressively in stages. The first stage will see the connectivity of Singapore Exchange and Bursa Malaysia in June 2012 and the Stock Exchange of Thailand added in August 2012 after its new trading engine goes live. The participation dates of the other ASEAN Exchanges collaboration members, namely, Hanoi Stock Exchange, HoChiMinh Stock Exchange, Indonesia Stock Exchange and The Philippines Stock Exchange will be announced at a future date.

Over the years, I have seen firsthand the transformation of these countries into bustling economies and there is so much potential here for investors to grow their wealth. A good start would be to read up on the ASEAN Stars, the 210 stocks representing the 30 blue chips from each of the seven exchanges. More information can be found at
Happy investing!

Wednesday, January 11, 2012

Philippine stocks at record high, time to stay away

If you adhere to an investment allocation principle, then its time to evaluate your portfolio. Because stock prices have gone up, you maybe overexposed to stocks. Let's say you follow an allocation of 40% stocks, 40% cash and 20% bonds. Two years ago, you invested 50,000 accordingly: 20k in stocks, 20k in cash and 10k in bonds. Now that Philippine stocks are near record highs, the value of your stock investment is taking up more than 40% of your portfolio. If you have additional funds to invest this year, its time to stay away from stocks. Otherwise you will miss your allocation target.

This is easier said than done since the tendency for investors is to buy high and sell low, very much the opposite of what a prudent investor does. In good times like what we have now, when we see the value of our stock investments go up substantially, it is very tempting to pour more money into such investments thinking it would go up even more. Restrain your emotions, fellow investor. Stick to your asset allocation and impose diversification. Remember that stock prices are subject to the whims of the market and could fall just as quickly as it has risen.

Where do you invest then? Place it according to your allocation strategy. If your cash is now only 30% of your portfolio, then bring it back to 40%. Always monitor, evaluate and re-balance your investments. Happy investing!

Tuesday, January 10, 2012

Chinabank's investment products

Chinabank offers several investment products to its clients, aside from the usual deposit and loans. For peso-denominated investments, they have treasury bills, retail treasury bonds, fixed-rate treasury notes and prime corporate (peso) bonds. For dollar investments, they offer Republic of the Philippines (ROP) dollar bonds, Banko Sentral ng Pilipinas (BSP) dollar bonds and prime corporate (dollar) bonds. For euros, they have ROP euro bonds.

These bonds are, to put it simply, a promise to pay the bond holder the full amount after a certain period of time and also paying an agreed interest for allowing them to borrow your money. This interest is usually paid quarterly and subject to 20% witholding tax. Also note that these products are not insured with PDIC. Like all debt, its security its relative to the financial stability of the borrower, so if you think the government will honor its promise to pay, then its pretty safe. These investments are also liquid and you can sell them to the bank even before they mature. Chinabank has been around for decades and is one of the country's largest banks.

Minimum investment is quite high, at 200,000 pesos and you do need an account with them to be able to invest in such products. Please go to Chinabank's website at to learn more. Moreover, go to a branch and ask questions before investing. I am not an employee of the bank and I'm simply sharing another investment vehicle for you to grow your money. Happy investing!

Monday, January 9, 2012

I owe, I owe, so off to work I go...

Sounds like the song of the modern city worker. Mortgage, car loans, credit card bills, the list is long but the message is clear: we need to manage our debt. Managing your debt is an important part of investing. In fact, do not even bother to invest your money if you have bad debts floating around. There is no sense in earning 7% from an investment if you are paying 20% interest on a loan. Start paying those with the highest interest and work towards keeping your debt at a comfortable level relative to your income; and stop taking on new ones.

Remember the saying:

Gold is the money of kings,
silver is the money of noblemen,
barter is the money of peasants,
debt is the money of slaves.

Saturday, January 7, 2012

This is the best investment ever created

Let us examine this investment: it is 100% safe, risk free, offers infinite returns and you don't even need money, only your time, to invest. What is it? It's investing in yourself. It is investing in your knowledge, your skills, your personal development. No other investment can come close to this one. First, it is safe and risk free. Even if financial armageddon comes with banks closing, stock markets crashing and entire nations defaulting on their obligations, you will survive.

It offers infinite returns and you can never tell how it would help you. I love the story of how the late Steve Jobs took a calligraphy course in college and ten years later, it helped him design the typography in Mac and basically influenced the typography in computers we have today. All the neat space in between letters, the fonts, the subtle art form that we seldom appreciate when we read words on the screen wouldn't have been here without that calligraphy course. Investing in your knowledge can start by finishing school but it goes way beyond that. You can read books and other publications. If you have an internet connection, much of the world's knowledge is basically at your fingertips, all you have to do is look for the right information. Whatever interests you, read more about it. Invest in your skills, not only in mastering your present skills but in acquiring new ones. If you have mastered the art of marketing or teaching or nursing, why don't you develop other skills like carpentry, cooking, or playing an instrument. There are no limits to what you can become.

You also need to invest in personal development like building self confidence, public speaking and whatever aspect you think could use some upgrading in yourself. Money and time spent in improving your knowledge, skills and self offers infinite returns financially and in the overall quality of your life. Happy investing!

Friday, January 6, 2012

My bold predictions for 2012

The title is misleading, of course, as I have zero ability to see the future. If I can, then I'd buy tomorrow's winning lottery ticket. For investors, you don't base your decisions on predicting the future. You don't buy stocks because of an insider tip that it will go up. Remember Lehman Bros., the first casualty of the 2008 financial crisis, they were given triple AAA credit rating. So I guess the ratings agencies cannot see the future either. No one can predict the future and anyone who claims so is daydreaming, and if you follow that person, you're being stupid. Yes, Europe may trigger a second round of global financial crisis, stocks may lose 50% of its value, real estate prices could go down, oil prices could go through the roof if Iran continues causing trouble. On the other hand, clean energy technology could usher a new wave of investments, Asia would continue its growth and the Philippines could leapfrog into the ranks of the industrialized countries.

As an investor, one should always be cautiously optimistic, expecting the best returns but prepared for economic recessions. Don't waste your energies trying to identify which investments would perform best and putting all your money there. Instead, study each investment available and allocate your funds according to what suits you. Whether it be cash, bonds, stocks, mutual funds, real estate, precious metals, or your own business; it's best to have multiple legs on a chair so if one leg breaks, you don't tumble over. Happy investing!

Thursday, January 5, 2012

What happened to Philippine REITs?

I was anticipating the offering of real estate investment trusts (REIT) but leave it to the government to ruin its growth. Why would SM, Ayala or any major developer give up a huge 67% ownership (the public float demanded by this government) of its income generating properties. Comparatively, most of our neighboring countries only require a float of 10-25%. I don't know what the "bright minds" of Pres. Aquino's economic team are thinking but if the major developers are not availing of the investment vehicle, then something is wrong with the rules you have laid out.

They should revise the guidelines for it to be palatable for Philippine developers to make use of REIT. It helps them by offering a cheaper avenue to raise capital and it offers Filipinos the chance to own a share in income generating properties.

This is discouraging, and quite frankly, I sometimes ask myself why bother investing in the Philippines when I have access to first world investment products here. Well, I still believe that the country has massive potential and thus offer investors good returns, and that is in spite of the government. I am only one of countless investors, both Filipino and foreign willing to pour more into the country, only if we can find credible channels of doing so. Sorry for ranting. Happy investing!

returns on stock investments

I would like to share the 12-month returns on my stock investments with citiseconline:

Percentage of portfolio STOCK 12-month return

25% AC 9.81%

4% AEV 3.47%

4% CHIB 3.95%

2.7% GMA7 -2.15%

3.7% JFC 11.25%

0.2% LPZ -23.96%

2.1% PNX -3.93%

4% PX -14.4%

2.7% SM 13.6%

12.4% SMC 2.95%

19.8% TEL 15.69%

10.1% URC 17.63%

8.61% VLL -9.44%

100% Total 6.36%

A 6.36% return (excluding dividends) is quite good compared to the PSEi which yielded 4.07%. The returns on Sunlife's Equity fund perfromed slightly better than the index, returning 4.1%.
Wouldn't it be nice if I had just invested everything with URC and got 17.63% in a year, but then again, that is in hindsight. Going forward I could have just easily invested everything with LPZ and lost (-23.96%) a fourth of my money. Another point I would like to share is that in stock investing, it is possible that you can beat the index and actively managed funds. But I still invest in mutual funds, particularly Sunlife, since I do not always trust myself to make rational decisions. I may have exceeded their returns for this time period but that will not always be the case. Diversification and risk management is very important. Happy investing!

Wednesday, January 4, 2012

A new year, a good time to examine your wealth

As a new year begins, it is a good time to reflect on where we are on our journey to wealth. Let us start with what I consider the most important indicator of wealth, your health. That's right, health is indeed wealth. How's your blood pressure? your cholesterol levels? your liver, kidneys, bones? Whether you are a young adult or a senior citizen, being healthy is of utmost importance and investing towards it is truly worthwhile. The good news is that it is not expensive to make sure your healthy, but it requires discipline to exercise regularly, eat a balanced meal and learn to manage stress properly.

The second component we can examine is the quality of your relationships. How is your relationship with your other half, your children, your parents, friends, co-workers, customers, business contacts, facebook buddies. It is said that your network determines your net worth. This is true since it is impossible to become rich by oneself, we need the right people to grow with us.

Next to examine is our income stream. Where do you derive your income from. Do you get it from a paycheck, are you dependent on someone else? Can you cope if such a source where to suddenly stop, for example if you get laid off from your job. Can you think of other sources of income. How do you plan on increasing your present income to cover for the rising cost of living.
Then the last aspect of wealth is your investments. Do have enough savings in case of emergencies so as not to liquidate your investments at the wrong time. How are your investments, are they growing , do they keep you awake at night. Do you know and understand where your money is, the returns they give and the risk that accompany them.

There you have it, if you are healthy, have a good network of people who support you, if you have stable, multiple sources of income and if your investments offer good returns, then you are a wealthy man. Happy new year and happy investing!