Sunday, April 28, 2013

a quick guide to the various asset class

Where to invest? Here's a quick guide:

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

STOCKS
-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

BONDS
-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)

PRECIOUS METALS
-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

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

REAL ESTATE
-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 handelarchitects.com). 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!