Where to put your money

Posted on February 3, 2013 by Randell Tiongson

Question: Where should I put my money? In a bank, property, business or stocks? Miccael Ibarra Naig via Facebook Answer: I always believe that investing is a great idea and I pray that all Filipinos think and act the way you do. Before I answer your question, I encourage you to first consider three things: your investment objective (the reason why you are investing), time frame (how long you will keep the investment) and risk tolerance. It is critical that you know these three things before even selecting an investment option. There is no such thing as a best investment. The investment instruments you mentioned have their advantages and disadvantages, their own merits and flaws. Let me discuss those choices that you are considering. Banks are the most popular choice of many.

Banks are everywhere and this makes depositing your money in banks a convenient option. When you say bank, Im assuming that you are referring to traditional bank products like savings accounts and time deposits. These bank products are among the most liquid investments you can make and the risks are also among the lowest. The downside, however, are the yields. They may be the safest options but they give the lowest returns. As they say, low risk, low returns. Having low returns, especially if below inflation rates, will erode the value of your money in the long run. Banks today offer other products other than the usual deposit products. You can invest in the instruments they offer like Unit Investment Trust Funds, mutual funds, bonds and insurance. Take time to know what your bank offers other than traditional deposit products.

Property is the investment every Filipino wants. Your parents and grandparents had probably told you that the best investment was land. However, saying that land is the best investment may be too ambivalent. Real estates greatest attraction is its being a tangible investmentyou can see and use it unlike paper investments. Land usually appreciates in value giving you capital growth, or it can generate a steady flow of income through rentals and capital gains, when you decide to sell it. There are times, however, when real estate investments do not appreciate or, in some cases, their appreciation does not meet your expectations. Also, there are recurring costs in property investments such as real estate tax, administrative or association dues and common area charges. When you sell a property, you will be slapped a hefty capital gains tax on top of the brokers fees. When you sum up all the money you need to spend during the time you are holding your real estate investment, you will realize that your gains are not as substantial as you thought it would be. Another downside in real estate investment is its costyou need to spend a huge sum to buy land. If you decide to borrow money to finance your real estate investment, the interest that you have to pay may just eat up the gains you will make. Buying real estate because you need to live in it is another story as it is not an investment.

Businessanother Filipino dream. Everyone wants to be an entrepreneur and why not? Businesses can potentially give you the highest returns. A business that succeeds can make one a millionaire, even a billionaire. There are many success stories of people who started with little but are now very wealthy because of their businesses. However, business endeavors are the riskiest among all these investment options, as they are speculative in nature. There are more businesses that fail rather than succeed, which is

not encouraging for a newbie in the business world. Further, putting up a business requires more than just capitalcompetence, passion, timing, market and a lot of studying are needed when you are considering to do business. Stockstodays rising star. There is so much attention to the stock market today as more and more Filipinos are being enticed into investing in equities because of its stellar performance in the last two to three years. Many investors are very optimistic with our local stock market and you will find many experts predicting that our stock market will further go up this year. Investing in equities today is also more convenient. Even with only a small amount, you can buy stocks through brokers (and also online) or through pooled funds such as mutual funds or UITFs. Let me reiterate the risk-return relationship herehigh returns, high risks, and vice-versa. While it is true that the stock market has been giving extremely good returns lately, there were also times when investors lost a lot of money. The stock market is not as predictable as people think it is and all the gains over the last three years can also be wiped out in a short period of time. More so, investing in the stock market, especially when you plan to trade, requires a lot of competency and time. If you dont have the competency and the time to trade in the bourse, you should keep your day job. My advice is for you to consider all the pros and cons of all the investment options you mentioned and choose those that will suit your objectives the most. I also recommend that you diversify your investments. All these options have their advantages (and disadvantages), but if you have a diversified portfolio, you are spreading your risks. A common but very wise saying we often hear with regard to investing is this: Do not put all your eggs in one basket. Heres an even wiser advice for you: But divide your investments among many places, for you do not know what risks might lie ahead.
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5 Finance things to do before you hit 30

Posted on May 6, 2013 by Randell Tiongson

Theres something about hitting 30. Somehow, you are still considered young at 30 and yet not that young anymore. Many things happen when you cross the 30 mark in the many aspects of your life. Your career should be taking off at this age, you may have started a family or contemplating on starting one, you may have started accumulating wealth and you may have also started accumulating debt. I have crossed the big 30 many, many, many years ago, I felt there were many things I should have done before I hit 30. I was listening to my friend and colleague Marvin Germo (of Stock Smarts) on the things he has been doing for financial readiness and he is not even 30. Marvin mentioned many things he has done which I only started on much later. If ever I get to do things over again, here are the finance things I will definitely be serious about before hitting 30. 1) Ensure you have a very healthy cash flow Folks in their 20s have started to earn and have begun to appreciate enjoying their income. The problem is, they enjoy their income too well that there is a tendency to spend every peso of it. This is a fun season to many as they now have freedom to do what they want and have the means to finance what they want. This is also a time of exploration to many especially for those who had parents who were a bit restrictive (like me as a parent), however, these explorations costs a lot of money. Accumulation of stuff also begins at this season and lifestyle upgrades becomes a social pressure. Way before hitting 30, make sure you have a good grip on your money management. Working on a written budget is the best place to start. Learn how to allocate your income between needs and wants and make sure that at the end of the month, there is savings left. For those in their 20s, its best to have 30% to 40% savings left from income which is very possible if you have the discipline to stick to a budget. The money behavior you will have during this period will a have a lasting impact on your financial future so better start doing things right. 2) Minimize or resist from borrowing Credit card companies and financial institutions are always targeting this age group because they understand that people in their 20s loves to accumulate stuff, see the world and enjoy life in general the perfect setting to lure people into debt! Not all debt is bad but you need learn how to discern a good debt from a bad one.

Generally speaking, a good debt is one that will allow you to grow your assets and/or add income like a loan to finance a business or to purchase a real estate property. Any other debt that will not grow your asset base or add on to your income would be considered a bad debt like using your credit card to finance your new Samsung or iPhone smart phone, a Michael Kors bag, or your dream vacation to Bali. People in their 20s begin to accumulate credit debt and other consumer loans which are grossly disproportional to their incomes. The bad credit decisions you will make during your 20s will have severe ramifications up to your 40s and 50s. Your credit standing will also be made or broken during this time so learn how to use credit responsibly. 3) Start investing The best time to begin investing is whey you are young! When you have a lot of time, you can have more options on how to grow your wealth and even take in more risks. Taking in more risks will mean that there is a better chance of growing your wealth faster and you can ride the ups and downs of the economic cycles. If you lose money and you are young, you still have a lot of time to recover. The good investments for long term would be investments in the stock market or Mutual Funds or UITFs that are invested in equities. While they are volatile, they are bound to generate the best returns over a long stretch of time. My friend and investment trainer Ricky So said take risks when you are young, if you lose your money, you still have your parents to run to funny guy! Start learning how to invest and act on it. There are a lot of seminars and training for the public on how to invest but dont linger with making that first investment. A good way to start would be putting some money in a mutual fund or the UITF of your bank. Equity laced funds like stock funds or even balanced funds are ideal for young investors. You may also consider some on-line trading if you want to have a say over your stock market investments. Just a note, if you will not have the time and the competence to trade your own stocks, stick to mutual funds or UITFs. Make your investing automatic by regularly adding to your funds or buying more shares. In your 20s, you probably dont have sizeable investment funds yet but small amounts done regularly will also produce great results. If you started investing only P2,000 every month at the age of 21, you would have accumulated over P1 Million by the time you hit 41 (assuming a yield of 8% p.a.). Have an auto-debit arrangement for your investing; making things automatic does the trick. Remember, invest early, invest wisely and invest regularly. 4) Buy life insurance This is not a pitch for life insurance agents but I encourage you to listen to one. If there are people already depending on your income, do not delay in buying a life

insurance policy. Premiums are much cheaper if you buy it before you hot 30 and I also notice that premiums rise sharply when you hit your 30s and 40s. Just remember to buy a policy you can afford. There are many kinds of life insurance policies but I would probably stick to either a term insurance or a Variable Universal Life insurance or VUL. Term insurance if you want to maximize your coverage and keep your premiums low the downside is that you do not earn from this kind of policy. I suggest that you buy term and also invest in mutual funds or you can buy a VUL which is a term with a mutual fund. Just make sure you chose a reputable provider and one who has a good record on after sales service. For your peace of mind, you may want to limit your choices among the top 10 life insurance companies. 5) Learn from your mistakes and the mistakes of others For sure, you will make a lot of mistakes in your 20s and your 30s, 40s, 50s, 60s and 70s. Along with many other mistakes you are bound to make, some of them are financial mistakes bad investment decisions, wrong borrowings, wrong purchases, etc. But thats life and the best way to respond to our mistakes is for us to learn from it and not repeat it anymore. As you make those mistakes, always look for the lesson behind those mistakes and learn to avoid them in the future. Experience is your best teacher but we dont always have to learn from our own experience. You can also learn much from other peoples experiences and in this case, other peoples mistakes. Look for mentors who can help you and learn from their experiences and their mistakes as well. Hitting 30 is a big thing and somehow, its a passage rite to many of us. It is a time to learn from the past but be hopeful for what the future will bring.

The best investment

By Randell Tiongson Philippine Daily Inquirer 2:17 am | Wednesday, October 10th, 2012

Question: Ive been reading your articles and blogs for sometime now, which have been of great help to me. I think I am ready to make some investments now and I would like to know what investment would be best for me. Answer: Thanks for reading my work, I am honored that what I write helps you. Your question is one that has been asked of me over and over again. If I had a hundred pesos every time I am asked that question, I would probably have enough to retire today. The answer to this question depends on the person being asked. If you ask a real estate agent, he will say real estate; a stock broker will say blue-chip stocks; a banker will offer the latest bank products like time deposit or special savings accounts; a mutual fund representative will say mutual funds; an insurance agent will probably recommend a variable life insurance. The best investment for me? Well, I cant really give an answer. I must admit that many people give me a dumb-founded look whenever I answer them, I dont know, it depends. For someone who claims to be a personal finance guy who has been in the financial services industry for more than two decades and a trainer in financial planning, I am pretty clueless aint I? I simply cant tell anyone what the best investment is because theres no such thing. My answer will always be it depends. I have a simple four-rule guide that I recommend to people whenever they are perplexed as to where they want to place their hard-earned money. Investment objectiveWhat is the investment for in the first place? Where do you plan to use it? Is it for retirement, education, purchase of a house? Or is it just to park your money while you are scouting for other investments? Time frameWhen do you intend to use the money you are investing? Is it short (less than a year), medium (up to 7 years) or long term (more than 7 years)? It is unwise to put money in long-term investments when you will need it in the short termyou might end up realizing capital reduction or you may be levied with steep penalties should you liquidate your investment. It is also unwise to invest in short-term instruments when the purpose of investment is for the long term like education or retirementyou will not realize a good appreciation of your investments as short-term instruments give lower yields. In other words, your investment would be drastically reduced by inflation and youll find yourself with not much funds when you need it the most. Risk toleranceInvestors can be conservative, moderate or aggressive. Determine your risk tolerance. Is liquidity and capital preservation an absolute must for you? Or are you willing to risk some potential capital loss in favor of potential capital hike? Remember the golden rule in investingthe higher the yield, the higher the risks and vice-versa. AcumenThere are simple products and there are complicated products. If you are investing in the stock market and you are not familiar with some form of fundamentals, you might regret ever putting money there. If you cant distinguish a structured note from a time deposit, you might

want to reconsider your decision. I have a simple advice with regard to thisnever ever invest in something you dont understand. Before parting with your money, you should go through the four-step rule first. Matching the right instruments with your needs will be the best investment for you.

Wondering where to invest money? Investors can make big profits by investing in Philippine stocks. Of the world's stock markets, buying and selling stock securities from the Philippines is a particularly promising business. Here are the top 5 reasons why.

1 Best Performing Market

You can see from the behavior of stock traders around the world that the Philippine Stock Exchange is an extremely promising market to invest in. The PSE is the best performing stock market in Asia in 2011, having grown by 4.1%, and went on to grow manifoldly the next year, settling at 33% growth by the end of 2012. It is quite evident that foreign investors are jostling to buy Philippine stocks.

2 Fastest Growing Economy

The economic growth of the Philippines is one of the worlds fastest. The Philippine economy grew by 6.4% in the first quarter of 2012, 5.9% in the second quarter, and in the third quarter Philippine GDP grew by a stunning 7.1%, followed by a surprising 6.8% fourth quarter GDP, rounding the 2012 GDP growth of the Philippines at 6.6%. This growth in the Philippine economy is tremendous, especially when you take into consideration the faltering US economy, the festering crisis in Europe, and the natural calamities that hit the country.

3 More Stocks to Invest in

Businesses in the Philippines are multiplying. Companies eyeing oil profits are sprouting off the oilrich coasts of the Philippines. Growth in tourism, and therefore aviation, is cajoling foreign airlines, as well as hotels- and resorts-owners, to come do business in the Philippines. BPO companies have mushroomed all over the Philippines as the country becomes the world leader in business process outsourcing, toppling India off the top spot. What all these mean is, there would be more stocks to invest in, and more profits to derive from Philippine equity securities issued by new companies. Net income of the Philippine Stock Exchange, Inc. alone surged by 85.6% in the first half of 2012 due to new listings as well as robust trading activities

4 Low Interest Rates

The effects of low borrowing and lending rates apply, not just in the Philippines, but to all investors around the world. In view of the slowing US economy and the European crisis, countries have been lowering their interest rates to stimulate economic growth. As a result, the interest income that investors get out of depositing money in the bank would be quite low. Returns are low as well in bond investments and other debt securities. What gives higher rate of return?

Stocks. Shares of stock. When interest rates are low, investors troop to stock investments, because equity securities are where the money is. It is even profitable to borrow money from the bank to invest in stocks.

5 Protection of Stock Traders

The Philippine Stock Exchange, Inc., the corporation administering the Philippine stock market, has recently rolled out a new stock trading surveillance system. Similar to that of South Korea, the new state-of-the-art surveillance system provides added protection to stock traders by most stringently guarding against stock price manipulation and insider trading. This is in line with the Philippine governments effort for transparency and accountability. Thus, stock traders can have confidence that trading in the Philippine Stock Exchange will be quite transparent and reliable, and that stock investors would not be swindled of their money.

Habits That Lead To Success

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Financial freedom does not happen overnight. Its a personal journey that will test your strengths and capabilities. By employing these skills and habits, you will be better equipped to reach your goals.

Paying Yourself First Paying yourself first is the simplest way to save money. Ive learned about this concept a long time ago but never really did it until a couple of years back. Its actually very simple but quite often difficult to apply. If you like reading books on personal finance, Im sure youve encountered this advise and I surely hope that youre able to follow it. If this idea is new to you, then read on and see how you could start investing in yourself. Tracking Your Expenses A few years back, Ive always wondered why I was never able to grow any money in my savings account. It wasnt until I started to account for my expenses that I realized how much I am actually spending on a daily basis. As we go about our lives, we often only remember the expensive things we bought or the bills we regularly pay. We tend to overlook the small expenses which usually sums up to a significant amount at end of the month. Delaying Gratification In the late 1960s, a psychologist named Walter Mischel conducted an experiment on a group of four-year olds. He gave each child a marshmallow and told them that if they dont eat it and wait for him to return in the room after 20 minutes, he would give them another one as a reward for being patient. Some children ate the marshmallow right away while a number of them were able to resist the temptation and waited. Believing In Abundance Many people dream of financial freedom but is often discouraged by the lack of opportunities around them. I frequently hear this sentiment from friends who say to me that it is not easy for them to achieve wealth because we are living in a country of limited possibilities. Having A Budget Do you have the habit of spending more than you earn? Are you finding it hard to get out of bad debt? Is it difficult to live within your means? If so, then maybe you should start a personal budget system to account for

your monthly expenses. There are many ways to do this but one of the most effective and often talked about methods is the Envelope System. Its easy, practical and very effective. Managing Your Time To keep my sanity and avoid feeling overwhelmed with my numerous activities, I learned how to manage my time and properly organize and prioritize my ToDo list. One of the most effective ways Ive found is applying the four-quadrant chart about urgency and importance which Stephen Covey devised and taught in his early works. The concept is simple, almost automatic and motivational. Committing To Your Goals Success requires clarity around whats at stake and what it is that you are committed to doing. Then, whether you feel like it or not, do it anyway. As you develop the habit of honoring commitments, life will take on new direction. Deliberate, focused action toward goals will replace sitting around hoping that your wishes will come true. Successful people are those willing to do what unsuccessful people are not. Keeping Your Motivation If you want to succeed in life, I believe that a person needs to be able to learn continuous self motivation. This is what drives us internally and externally to succeed in our endeavors. Self motivation is not only about work and business, it can be about anything that we want to attain in life you need self motivation to lose weight, break a bad habit and to learn a new skill. Being Frugal Whats the difference between being frugal and being cheap? Surprisingly, when I asked my friends about this, most of them have various definitions and only a handful knows the correct boundary which separates the two. Furthermore, when I presented them with several situations and asked their opinion if the example was frugal or cheap. Many of them argued in different points. Writing Your Goals On Paper By writing out your goals, they become embedded on your subconscious mind and crystallized in your consciousness Never lose sight of your goals. Never let the business of the everyday allow you to forget about your life goals. By thinking about them constantly and acting on them daily, you will steadily create the brilliant life you know in your heart you deserve. More articles will be added soon to this list. Stay updated and subscribe to Ready To Be Rich.