Wednesday, June 19, 2013

a forgotten savings account with Pag-Ibig

I've always thought of myself as a diligent record keeper, particularly investment records. It turns out that I have totally forgotten about one particular investment account, that is with the Home Development Mutual Fund or also known as the Pag-Ibig Fund. I remember that the contribution to this fund was a mandatory deduction when I was working in the Philippines. A rough estimate would mean  that I probably have 10k pesos with them. It turns out that it's a pretty good place to invest as well. For starters, all contributions are guaranteed by the Government of the Philippines. They have also paid dividends of 4.13% and 4.17%, tax free, in the past two years. Their housing loan program looks interesting as well, perhaps for future real estate investments. I quickly registered with their online services. However, it is still in the process of being fully implemented, hence there isn't a way of checking my existing account balance with them. They have also started accepting online contributions through Visa and Mastercard. I will be keeping an eye on the developments with Pag-Ibig Fund and whether it will be worthwhile to continue investing with them. As of now, I'm just happy to be 10k richer as the fund will continue to keep your account even if you've stopped making contributions. Happy investing!

Saturday, June 15, 2013

find your balance

Do you remember learning to ride a bicycle as a kid and people will say, "Oh it's easy, just find your balance". Do you also recall that feeling of serenity and accomplishment when you finally did? It turns out that investors need to do the same as well. If riding a bike is about balancing your body between left and right, then investing is  seeking to find the balance between risk and return. Being too aggressive and taking on excessive risk could cause your portfolio to go down the drain. On the other hand, being too conservative and taking minimal risk could cause inflation to beat your portfolio and you end up not reaching your investment goal. Finding this balance is a journey all investors undertake. Some may find it earlier than others. As for me, I still haven't found my balance, although I feel close to it.  Happy investing!

Friday, June 14, 2013

Investment Style Series: 5) bringing it all together

Investing is a skill. Something that you get better at with knowledge and experience. It is also dynamic as markets change. We as investors also continue to adjust and fine tune our own particular investment style to reflect our goals, attitudes and again, experience. Each time we come accross disposable, ahem! I mean investable income, we need to decide on what to make of it. Do you buy an asset and just sit on it? Should you be contrarian or do you position for a promising growth area? What about investing for income? I find it somewhat amusing when opening an investment account and then being asked to fill out an assessment form and end up being classified into an aggressive or a conservative investor. Financial advisors will also only see what their clients want them to see. A few pages of forms and several minutes of interview is inadequate to determine how you should invest. The point I'm trying to make is that your investment style is your own and no one else's. You cannot assign blame on mistakes you make as well. Instead, admit them and learn and modify your investment style. To repeat the most famous of Greek aphorisms: know thyself. I truly believe that spending time on self reflection will do more for your investments than analyzing the investment itself. Happy investing!

Wednesday, June 12, 2013

Investment Style Series: 4) investing for income

An acquaintance of mine has a very simple asset allocation, that is 80% rental apartments and 20% cash. He is clearly investing for income. To recall one of our conversations, he said that he knows the construction industry well being a civil engineer by profession. He is also quite suspicious of paper investments so he has no exposure to stocks and bonds. Most importantly, he says that his goal as an investor is to earn an income without him working all the time. We may have different views but I totally respect his investment style. If you prefer investing for income, it doesn't have to be limited to rental properties. Interest from bonds were made for this, so are blue chip companies who regularly pay dividends. Be warned though of seeking the highest yields. The investor I described earlier lost a significant amount in the scam that was Legacy Group banks. Bonds that pay higher interest would also mean higher risk of default. For most investors, its a matter of preference but for retirees, its a necessity to have most of your assets in conservative, income producing investments. This group, which includes my dear parents, simply do not have the time to recover from a bad investment  decision, nor need to worry unnecessarily. They also need to live off the income from their investments. Happy investing!

Sunday, June 9, 2013

Investment Style Series: 3) chasing growth

Human beings love to go after something. Whether it is modern day hunters out in the forest, or young boys chasing girls or investors chasing the next growth area, we thrive in the thrill and rewards of actively pursuing something. To succeed in this investing style, one needs the ability to foresee the future based on the data available today. Real estate would be a good example for this one. An old family friend of my father once told us that Makati, the Philippines' financial capital, was once a swampland. Over the years, the price of land in this city has grown many times over and he has always expressed regret on not buying a piece of it way back when the price was cheap. We all have the benefit of hindsight but the majority of us will not invest in a swampland if we were in his place then. As an investor, you invest in the next growth area; before the majority of people get into the bandwagon and drive up the price. Identifying the "next big thing" requires one to be a keen observer and have an optimist's heart. Another example I would like to share is the mobile phone and the internet. Back in the 90's, they were exciting and new but few would have anticipated their explosion and even fewer would have invested in Globe Telecom or PLDT stocks that stood to profit from this. As always, I would like to caution investors not to get carried away with their predictions. For one, the future is always uncertain. There are also plenty of promising investments that turn out to be duds in the end. So let us be on the lookout for growth opportunities and if you see one, do let me know :)  Happy investing!

Wednesday, June 5, 2013

Investment Style Series: 2) being contrarian

Another investment style one may use is to be contrarian, it means doing the exact opposite of what the mainstream fad currently is. One needs a lot of chutzpah to pull this off since it's not easy to be standing against the prevailing wisdom and doubts about your decision would surface from time to time. Would you have invested in real estate during the asian financial crisis of 1997 when there were plenty of unfinished buildings in the city? Would you be buying stocks during the global financial crisis of 2008 when the price was dropping of a cliff? Consequently, would you be selling Philippine stocks today when they are making record highs? If the answer is yes then you may be a contrarian investor. The rationale is pretty simple but the psychological and emotional  toll can be overwhelming for most investors. Buying when everyone else is selling would ensure that you get a lot more for your investment money, whatever the asset class. The opposite is also true, selling when everyone is into a particular asset would ensure that you get the highest returns. The catch is that you need to be invested long term since it takes a lot of time for an asset's price to recover. Patience is essential as some recovery may even take decades to be realized. The good news is that the returns are exceptionally high. So if you've got nerves of steel with the patience of a saint, contrarian investing may just be your ticket to wealth.

Saturday, June 1, 2013

Investment Style Series: 1) set, forget, and do nothing

Let me kick off this series on various investment styles with the easiest of them all. That is to set, forget, and do nothing. We will use a twenty year old urban professional named Ben as our example. Let's say that Ben is absolutely convinced that the company he works for, Ayala Corp., has a bright future. He does his research, reads the annual reports, talks to people who have been with the company for a long time. He believes that it is an excellent company to own so he buys its stock. Recessions came and went, the 2nd and 3rd global financial crises passed, management and ownership of the company has moved on to the next generation, the stock price has moved to new lows and new highs. All these time, Ben did not sell his AC stock. Only when he retired at 65 years of age did he finally decide to sell. Holding on to a stock for 45 years would epitomize this investment style of set, forget and do nothing. We can also use other asset classes to illustrate this. Buying  a gold bar and locking it in a safe; a bank term deposit that rolls over automatically; that piece of real estate left by your grandmother. A do nothing else approach is simple, you believe in the long term  prospect of your investment and therefore feel comfortable with holding it forever. But bear in mind that this level of trust must stem from reason and not from emotions. Only by thoroughly analyzing a particular investment and having a good grasp of your own personality as an investor will this technique work. As Ben has shown above, he held unto his AC stocks for 45 years because he knows the company very well and is comfortable doing so even during a stock market crash. A warning though that this investment style is not to be equated with being lazy. Lazy people don't succeed. To sum it up: know thyself as an investor, thoroughly research and analyze a particular investment, put your money where your conviction is and stick with it come hell or high water. Happy investing!

Tuesday, May 21, 2013

investing in an asian fund

Over the course of several years and having traveled to China, Vietnam, Malaysia, Thailand, Singapore and Indonesia, I think I'm now comfortable at investing in a mutual fund or ETF with a regional focus on this part of the world. The cities of these countries are buzzing with activity and you can just feel the momentum going forward. Many have written about the Asian century and the impressive GDP growth in this region, including the Philippines. However, as an investor, I seek to fully understand what I'm investing in and it is only by seeing for yourself what is happening on the ground and talking to its people would you get an understanding of its economic growth. I will not invest in one country's stock market index because my knowledge of one specific country is sorely deficient. Instead, I would want to put money in an asian equity fund with exposure to the all of the countries mentioned above. I was looking forward for the PSE to join the ASEAN trading link but come to think of it, I really would not be comfortable in investing in a particular Thai or Singaporean company since I do not know them that well. A good compromise would thus be to invest in a fund that invests broadly in  the equities of these exciting countries. The timing may be a bit off since stock prices are expensive but this is irrelevant since I strive for an equal asset allocation to stocks, bonds, gold, cash and real estate. Time to research and read fund prospectuses. Happy investing!

Thursday, May 16, 2013

starting small

Most people have the next big business idea in their head but very few actually act on them. Maybe because a business enterprise is the most risky of all investments. However, it also offers the highest returns. One way of reducing the risk is to start small and who knows, it may grow big enough to become a multinational in the future One can come up with many reasons not to invest in his own or another person's business enterprise but these three  might just inspire you to do so:

1. Harley Davidson - its first bike was made in a small wooden shed

2. Nike - initially sold sports shoes from the trunk of Phil Knight's car

3. Apple - started in a garage in Cupertino, California

Don't forget to allocate some of your capital towards a small business enterprise. It may just be your best investment yet. Happy investing!

Tuesday, May 14, 2013

investing or trading

Some may confuse the terms investing and trading. From wikipedia, investing is putting money into something with the expectation of gain, usually over a longer term. But hey, that sounds like trading except for the time qualifier, that is, "over the long term". I guess that is where the difference lies. Which is better? I go for investing, that's what this blog is all about. I must admit though that I have tried trading stocks and currencies before. Did I make money? Yes. Did I lose money? Yes as well. In fact, that would pretty much summarize why I prefer investing. The 2 steps forward, one step back approach does not fit with my personality. Even the best traders in the world will experience a loss. What makes them better is not that they make the correct trade all the time, its simply that their winning trades outweigh their losing ones so overall, they make money.  If you enjoy analyzing charts and data, and have the attitude of a trader, then go for it. But before you dive in, educate yourself first and try demo accounts. Also, put only money you can afford to lose. A special warning goes out to those who may be getting too confident with their trading abilities in the Philippine stock market, do not confuse your "exemplary" trading abilities with a general rise of the market. I see an increase in the number of blogs and forum touting stock and currency trading as an easy way to be rich. If you are not prepared to put in the hard work, then you will certainly lose money in trading and may just as well gamble your money in a casino. Remember that a trader's goal is to make money in the short term, whether in a rising or falling market. An investor, on the other hand, expects to make money in the long term and his goal is to buy investments when they are cheap and sell them when the price is right after several years. Happy investing!

Wednesday, May 1, 2013

I have 100 trillion dollars

You read the title correctly, I have just received 100 trillion dollars. Here's a photo to prove it:
If only it weren't Zimbabwe dollars. Its hard to believe that the currency went way downhill from having a 1:1 exchange rate with the US dollar in the early 1980s to having a 100 trillion : 1 rate thirty years later. This is wealth destruction on a massive scale and you can't help but feel sorry for the citizens of that country. The prudent Zimbabwean investors probably moved on to hard assets and foreign currency way before hyperinflation really took off and there is a lesson in this for all of us: be vigilant with what the government is doing and re-balance your portfolio accordingly.

This note is a reminder that some governments cannot be trusted with the economy; that they can print as many zeroes on a banknote as they would see fit; that it is up to us to educate ourselves on how best to preserve and grow wealth to provide for our family's future. Fortunately, foreign currency is now being used to transact in Zimbabwe such as the US dollar or the euro and no longer this joke of a currency. Happy investing!

P.S. A big thanks to my good friend Patrick, it's not often that you know someone who just gives away a hundred trillion dollars :)

Sunday, April 28, 2013

a quick guide to the various asset class

Where to invest? Here's a quick guide:

-immediately available and value is universally recognized
-very low returns
-very low risk and insured up to a certain amount in banks

-earns dividends, a real passive income
-reduction of 50% is possible
-returns of 1000% is possible
-requires time for research
-you can hand over management to professionals in mutual funds or UITFs but in hindsight, my personally managed stock portfolio beats my equity mutual funds' returns two out of three times

-earns interest
-low risk; governments and corporations have a better track record of paying debts than most people
-requires a high initial investment (unless you invest indirectly through mutual funds or UITFs)

-gold is the "last man standing" during crises like the recent GFC
-if central banks hold gold and silver as reserves, it is prudent that you should hold them as well
-volatile, price goes up and down frequently and in a wide range
-does not earn income; exposed to theft

-offers the greatest possible returns on investment if the business succeeds
-be prepared to lose 100% of the investment if the business fails

-earns rental income
-not easily liquidated if you need the money
-it is a real, tangible asset one can enjoy; which is better? a stock certificate or this:
   (BTW, we do not own this island in Palawan but I wish we did!)

Happy investing!

Saturday, April 27, 2013

Philippine Stock Exchange Tower

Above is the future PSE Tower in Taguig (photo from Not a bad marketplace for those who participate in the stock and bond exchanges in 2016. Although all trades are conducted electronically, it is still nice to have some physical reminder of the simple fact that WE ARE THE MARKET, that the rise and fall of our investments is the result of the decisions of millions of people around the world who buy and sell. Happy investing!

Tuesday, April 23, 2013

readers' email - part 1

1. The first email is from Lance, he is weighing where to invest among three funds namely:

PhilEquity Philippine Index Fund, ALFM Philippine Stock Index Fund and BPI ABF Bond Index Fund. One important factor in choosing a fund would be its annual management fee, lower is better. Secondly, which asset class are you investing in? two of the above invest in stocks and the other one invests in bonds. Currently I am not investing in Philippine stocks because it has performed exceptionally well over the past 2 years and starting to cause imbalance in my portfolio. I strive for an equal asset allocation to stocks, bonds, cash, real estate and precious metals for optimum diversification. How easy is it for you to make subsequent investments in those funds and how easy is it to monitor them? You mentioned living outside the Philippines so this is an important factor too. There really is no such thing as "the best fund" but there is a right fund for the right investor at the right time. Also, investing is not a race. Read the prospectus of the funds you are considering 2-3 times and consider each one's strong and weak points. If you really can't decide, keep your cash and continue to research on the myriad of investments available to us until you find the one that suits you. Let me know when you have made the decision.

2. The second email is from Donna and she is intrigued that I plan to retire in the Philippines. Retirement is many years away but yes, I do plan to spend majority of the time in the motherland. I hope my investments will be able to provide a descent retirement income in the future. If so, that would free up time that was previously used to earn a living. I do not intend to spend such free time sitting around. Perhaps I can volunteer or run a foundation or teach finance in public schools or mentor microentrepreneurs.  The Philippines would be the best place to do these things because it is where the returns are greatest. 

To Lance and Donna, thank you for the mail and happy investing! 

Tuesday, April 16, 2013

investing in precious metal coins

Above is my gold-gilded koala silver coin collection from the Perth mint. Coin collecting has been around for a long time. In fact, it used to be the hobby of kings! Fortunately for us, you don't have to be one to start your own collection. For those who also view their collection as an investment, start with coins made of precious metals like gold, platinum and silver as they will hold their value per ounce over the long term. Note however, that the price of precious metals is volatile and may go down in the short term - perfect opportunity to buy more. Coins also have a numismatic value. Very rare and in-demand coins can fetch thousands, even millions of dollars. Lastly, build a coin collection that you will enjoy. Happy investing!

Wednesday, March 27, 2013

It's March, and the Philippines also graduates

Did you ever ask why graduation programs are also called commencement exercises. I guess it reflects the dual nature of the event. On one side it is the end of something while at the same time the beginning or the commencement of a new chapter in a student's life. Today would also mark the graduation of the Philippines' credit rating into investment grade. This was affirmed by Fitch Ratings. I guess more foreign money would find its way into the country and  contribute to economic growth. Hopefully, for investors like us, this would also translate into good returns from our investments in the country. Happy investing!

Thursday, January 3, 2013

Welcome 2013

To kick off 2013 on a positive note, I would like to share a video from Francisco Reyes entitled, "The Philippines Moves Forward". Enjoy watching and happy investing!