Re: Investing in Mutual Funds

Oct 19, 2007

First, I envy you for your age. Having to start investing at such a young age will take you to great distance. Ironically, it's only now, (when I reached this age), that I realized what the adage "Time is gold" really means. Akala sinasabi lang yun ng mga walang maisip na motto (lol). You are lucky to be in the right company at this early point of your life.

Now, I'm not a professional investor (yet) nor a successful one (yet). But I know some things about it (at least theoretically) that may help you in your dilemma. I always compare investing to a card game. Part luck, part diskarte. But again, you are fortunate as you have one of the aces of the game-which is TIME.

You are young, and because of that you can attempt to make risks. Because even if you lose money-which is unavoidable (but as much as possible must be prevented)-you can still earn it through your job, other ventures or still through investments-because any investment, in time, will profit.

Again we know that in investment, no pain no gain, and that the riskier the investment, the higher the return. Now, stocks, stock mutual funds (aka, equities), balanced fund (mixed equitiy and bond), bond and money market differ in risk and yield, the first one carrying the greatest risk and profit, and the last one, much like putting your money into time deposit.

For a young investor like you, financial growth is the name of the game. Because again, you can gamble to be aggressive, most financial gurus would agree that stocks and stock mutual fund (aka equity) are the ones more appropriate. However between buying individual stocks or stock mutual fund, the latter is better as playing stocks requires experience. Stock mutual fund, on the other hand, is handled by a fund manager, who pools money from different individuals , then use that into buying different stocks. In effect, this is much safer because it is handled by an experienced person.

Compared to bonds and money market, stock mutual fund will give you a higher yield as this is stock investment. In fact, in terms of revenue and capital preservation, it can even be better than buying individual stocks. Because in a stock mutual fund, there is already diversification (the money is into a variety of stock products that give different yields)-one which you may not be able to do with just your money to invest. The risk of losing money is lesser as lost of one stock may be offset by the gain of another.

So, take your pick.

Gaano Kaimportant ang Diploma?

Oct 12, 2007

As cliché as it may sound, it is as true as it can get. KNOWLEDGE IS POWER. I don’t think anybody will argue on that. In our ancestors effort to prevent chaos, they tried organizing everything, from governance to the body of knowledge. Thus they came up with education. And the diploma is the proof that somebody gets it formally.

Now, let’s analyze the question, “Gaano kaimportante ang diploma?” If this is going to be taken figuratively (that is what the diploma represents), then inarguably IT IS IMPORTANT. Again, it’s because education is simply a system of knowledge. Although it’s perseverance and hardwork that are more important in achieving success, education will make it easier and possible the impossible. In fact, it is the latter that enabled us to make it this far. (Otherwise, baka nasa kweba pa rin tayo).hihi

For those who were able to make it without a diploma, let us not forget the component of luck. Besides they are only a few compared to those who succeeded because of education.

I, too came to think that getting a diploma doesn’t guarantee success. Sabi ko pa nga, iyan ang ituturo ko sa anak ko. But I realized soon (thank god!), that the role of education can’t be downplayed, something that we can’t do without, something VERY NECESSARY. It’s just that some people (including me) blames it on education in general the mistake they make in choosing the wrong carreer. Watchuthink?

Taken literally, you need that piece of paper as proof. Again to prevent chaos.I remember asking my mother why I have to go to school when I can study on my own at home. I remember her telling, “Kasi sa school mo lang makukuha ang diploma, at yun ang pruweba na you have learned what you are supposed to know and know how much you are supposed to learn”:D

Will a US Recession Affect Philippine Mutual Fund/UITFS/Bond Fund?

Sept 23, 2007

In my previous post, I compared the market to a card game. That is the market is way way far more unpredictable unlike a deck of 52 cards.

In my effort to find what lies ahead, I read the opinions of some financial analysts. Though, I had a tough time grasping economic concepts, I came up with a few points.

1. Definitely there will be a US economic slowdown. --Nobody could commit as to whether a US recession is coming or not, but the odds are more on the grim side which is a recession. Some would even say, that the best case scenario for US, if not a recession, is a subpar economic growth.

2. Whether global expansion continues despite US economic slowdown depends on whether China's growth engine continues to move ahead --Clearly, the effect of US economic depression will be global as markets are interrelated. But the fate of global economy (especially Asia) which used to rely on US (contribution to global economy they say is down to 30%) is actually now dependent on yet another economic superpower--China. But since the US is the major importer of Chinese products and raw materials, when US economy weakens, so is China, so is the world. An implication here, the full effect, we have yet to know.

3. The best part -- if ever recession can not be prevented (despite efforts) is that most agree that we will outlive this problem. Now this one is based on past market trends and faith on man's abilities. In fact, according to Alan Greenspan (dubbed as the best economist), it is in man's ability to adapt that leads him to be optimistic about the future. Still, according to him, it is not by accident that we persevere and advance in time of adversity. Instability is needed for growth, since it's when, that man works for the better.

Now this isn't in any way telling us to be completely complacent about investing. You see, one analyst views this turbulence as one that is brought about by prosperity itself (for which I totally agree). Paradoxical growth of the US economy (despite obstacles such as 9/11, corporate scandals, and high oil prices) has given false confidence to businessmen, investors and consumers alike to embark on risky acts. In a way, they were blinded by the seeming guaranteed economic growth that they completely shrugged off the risk and acted in ways that raised it, like the subprime housing mortgage.

The morale of this all,

If there is one certain thing about the market - it's uncertainty

So:

Acknowledge the risk
Take calculated ones

Most importantly, accept the consequence of your decisions.

Bakit Mahirap ang Pinoy?

Sept 21, 2007

For the longest time, I blamed it on illiteracy because my mother brought me up to think that we were poor because my father had only a high school diploma. And so I strived hard (very ) and got myself even a postgrad degree.

When I started working, I realized, how come I still find it hard to achieve financial success? I thought, maybe, I’m not working as hard, not saving as much. So I worked 72 hrs, saved most of my money. But what I have couldn’t compare with what my peers get abroad (who work less hrs). This is when I realized, the problem is a poor economy. Which tured out to be one that was long shaped by corruption.

Then a few month ago, I came across an article in newsweek which tried to explain why some Asian countries especially, the Southeast Asian region has remained poor while contemporary countries like Taiwan and South Korea have gone past them. I was surprised actually that the author referred to these countries as our contemporaries when their economies are way above in comparison. We couldn’t have started on the same ground, I thought. But I was mistaken.

I couldn’t find the magazine anymore, but I’ll relate it as far as I could remember, the way I understood it.

According to her, after the World War II, the economy of most Asian countries used to be the same. After the war, we were left by out foreign allies to rule on our own. This is when we first had our government ruled by true Pinoys. However, this is when it all started.

After assuming power, officials from barangay captain to the highest authorities, gained control over resources which later on, they would claim as their own. Little by little, they started to build business, since they were the only ones who have capital, they soon gained control over most of the country’s businesses (kasi kanila iyon). This would soon tip the balance of wealth distribution on their favor.

In order to elude query eyes, they would have their wealth, businesses hidden under names of relatives and friends. Soon, they found a better way. These officials would run in politics as many times as our constitution permits, not for good governance, but to protect their interests. They then would pass the positions to their sons and daughters after their term expire in their desire for power and control. Again, to protect their ill-gotten wealth.

This scenario, holds true for other Asian countries as well. The reason why Taiwan have gone this far is because of a person who had the political will to change the system which made possible, economic growth.

This is how far I could remember it.

Poverty is a vicious cycle. We can’t know for sure when exactly it all started. But how and why, it’s so easy to tell. Because it has remained the same. At least in this country.

In fact, it’s so transparent that even outsiders, like the author could see right through it.

CORRUPTION.