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 www.aseanexchanges.org 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 www.aseanexchanges.org
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 www.chinabank.ph 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!