Now that you have an idea where you can invest P100,000, how do you decide then which is the right one for you? After you consider your investment objective and time frame, you can start evaluating your options. Here’s a useful checklist.
By Heinz Bulos

Rate of return. What rate should you look for? The general rule: Beat inflation. If your money grows less than the rate of inflation, then you’re actually worse off, since it eats up the value of your money, letting you purchase lesser goods in the future. So, if inflation averages 5% a year, the return on your investment should grow more than that.

Guarantee of return. When evaluating an investment instrument, check if the rate of return is guaranteed, in which case, expect a relatively conservative rate. If it’s not, then you want to earn a higher rate because you deserve a higher return for the extra risk you take. If you’re promised returns of 4% a month, then start wondering. That’s equivalent to 48% a year. Here’s another rule of thumb: If it’s too good to be true, it probably is.

Safety. Are you willing to risk everything, including the original amount of your investment? Or do you want to make sure you keep your principal intact? If you’re a bit conservative, placing your money in T-bills, RTBs, or time deposits will give you some peace of mind.

Liquidity. Once you place your money, how soon can you take it out? Bank deposits and investment funds are relatively liquid. Real estate investments are not liquid because they take a longer time to sell them. If you’ll need the money quickly, you want to place it in liquid instruments.

Affordability. This is another factor to consider when investing: the initial minimum investment required. There are a good number of investments that regular folks can afford. For instance, you only need P5,000 to buy RTBs and P10,000 to invest in bond funds.

Diversification. You know this rule of thumb: Don’t put all your eggs in one basket. That means spreading your money across different investment instruments and different institutions. Ideally, you should have money in stocks, bonds, government securities, money market instruments, etc. How much you allocate across different investments depends on your age and your objectives.

Fees. They come in the form of commissions, management fees, sales loads, etc. Fees eat up your returns. So with all things being equal, go for the company that charges less.

Taxes. The government taxes bank deposits, stock transactions, even government securities. Mutual funds are tax-free and so are investments that are long-term (at least 5 years). So, when comparing investments, compare the returns net of tax.

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Okay, let’s say you have a hundred grand to spare. You have no financial obligations like credit card debt or immediate financial needs like travel. Where do you invest P100,000? Here are some options.
By Heinz Bulos

Special savings deposits. You can place the money in a special savings account that earns a much higher interest than a regular savings account.

Time deposits. “P100,000 can be invested in a variety of ways. If you can’t tolerate any risk and would like your money to be near cash, or very liquid, stick with time deposits,” says J. Randell Tiongson, a Registered Financial Planner (RFP).

T-bills. If you want relative safety, place your money in short-term government securities like Treasury bills (T-bills).

RTBs. You can also invest in longer-term government securities like Fixed Rate Treasury Notes (FXTNs). Alternately, you can invest in Retail Treasury Bonds (RTBs), which require much smaller amounts.

UITFs. Unit Investment Trust Funds (UITFs) are pooled funds that trust departments of commercial banks invest in various securities.

Mutual funds. Similar to UITFs but more regulated, mutual funds pool money from thousands of investors. There are different types depending on your investment objectives. Randell explains, “Mutual funds and UITFs may be good options as they show good capital appreciation especially if you hold on to them for a long time.”

Stocks. You can buy shares of publicly-listed stocks and ride the current bull run. “There’s always the stock market if you can take the risk,” says Randell, adding, “Another option is an equity-based mutual fund or UITF that can take care of managing the stock investments for you.”

Foreign currency. You can exchange your P100,000 into foreign currency like the euro. Banks and forex brokers let you do this.

Insurance plans. Whole life insurance plans have a savings component. A variation is the variable (also called unit-linked) insurance plan, which gives you greater control on how your premiums are invested.

Endowment plans. These are insurance products that don’t provide lifetime coverage. They are often positioned as investment products because the emphasis is on the returns. Randell says, “You can also opt to purchase a single pay life insurance with an investment portion or an endowment. You can grow your money and get some insurance coverage while waiting.”

Pension plans. You can buy a pre-need pension plan, that is, if you’re undeterred by the negative news on certain pre-need companies.

Now, which is best? Well, it depends on your objective, risk appetite, and time frame. Randell concludes, “Just remember the general rule: the higher the yields are, the higher the risk.”

This article first appeared on the March-April 2007 issue of MoneySense magazine] photo credit: wonderwebby via photopin cc

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Looking at mutual funds or unit investment trust funds? Here are five things you absolutely have to check before you invest
By Heinz Bulos

1. Fund’s objective

Each fund has its own investment objective, such as capital preservation or growth. The prospectus will also detail the corresponding investment strategy. See if your financial goal matches the fund’s objective. Check if the investment strategy matches how much risk you’re willing to take. “The investor should not also forget the matching of time frames of both the objective and the investment outlet,” explains Ricky So, Assistant Vice President and Head of Training and Marketing of Philam Asset Management, Inc.

2. Past performance

Sure, past performance is no guarantee of future results, but that’s indicative of a track record. Always evaluate a fund against its peers of similar stature or class. If it’s a bond fund, compare its annual returns against similar bond funds. But don’t just look at one-year returns. You do want to see consistency, so compare funds using at least a three-year period.

3. Fund manager

Consider the reputation of the company behind the fund. And check the credentials of the fund manager. New funds are popping up all the time. If you’re investing for the first time, you may want to go with a more established company.

4. Fund’s portfolio

Compare what the fund is actually invested in to what the investment objectives and policies stated in its prospectus to see if they are consistent. If the fund is supposed to be aggressive in its strategy but its actual portfolio shows otherwise, there’s an obvious mismatch that could be misleading.

5. Fee structure

How and how much the fund charges for management fee, sales load, and redemption fee affect your returns. All things being equal, of course you want to go for the fund that charges the least.

Want to learn more about how to invest in pooled funds? Attend Money Summit & Wealth Expo – the biggest investing conference and expo in the Philippines!

You’ve finally worked the numbers. And they fall short. What to do when a comfortable retirement seems beyond your reach? Here are five ways.
By Heinz Bulos

1. Delay your retirement date
If your savings have not caught up with your plans, you just have to bump up your retirement date. The HSBC report called “The Future of Retirement” indicated that the average retirement age is 62 for Filipino men and 57 for women. If you’re thinking of quitting work when you’re 60, push it back a few more years. If you’re employed, the mandatory retirement age is 65, but you can try to arrange a consulting gig with your employer.

2. Work at least part-time
Retirement doesn’t have to be no-work and all-play. It should be financial independence, not an end to your productive years. The HSBC study also showed that most Filipino respondents plan to work at least part-time during retirement. That’s because, according to the study, “in transitional economies, people cannot usually afford to retire when they would like to.” But it also noted that Filipinos planned to work as long as they can not just to remain self-sufficient but to keep themselves physically and mentally fit.

3. Rebalance your investment portfolio 

You may be too conservative an investor. In case most of your money is invested in traditional time deposits or money market placements, BDO Private Bank Wealth Advisor Joby Lizares says you should consider “allocating to longer and higher yielding securities like bonds, structured products, UITFs, mutual funds, and equities—depending on market timing and conditions—and other products that your private banker or relationship manager can advise and offer.”

4. Make money from your home

You’re facing an empty nest, so consider selling your house and move to a smaller and cheaper one. You can use the cash left to augment your retirement savings. Another option is to take out a home equity loan.

5. Cut back on your expenses

If you have to, lower your expectations and cut down on your retirement dreams. Forego the planned annual trips abroad or forget about the beach house you’re eyeing. Consider moving to another city or province where property values, food, and recreational activities are much cheaper without sacrificing your quality of life.

Need to catch up on your retirement funds? Attend Money Summit & Wealth Expo – the biggest investing conference and expo in the Philippines!

by Heinz Bulos

It’s not surprising at all: Filipinos are not planning for their retirement. A global survey by HSBC called “The Future of Retirement” showed that over 80 percent of Filipinos surveyed have no sense of urgency when it comes to retirement planning and have not sought professional advice. Many are just not ready for it. Are you one of them? Here are three reasons that can hold you back.

1. Poor planning

For the more affluent, it’s not so much a lack of planning that’s a problem but not planning right. Joby Lizares, Senior Assistant Vice President and Wealth Advisor of BDO Private Bank, explains that while their clients do save for retirement, there are cases where they may have overlooked certain aspects: “There are those who believe that what they have accumulated over time will be sufficient to finance their retirement. However, when someone retires, he will have more time to do more things. These unexpected expenses may not have been taken into account in the first place.”

Aside from under-estimating retirement costs, Joby adds that another mistake is under-estimating the inflation rate, which includes a basket of only basic goods. But you don’t plan to retire on a subsistence income, do you? If you have dreams of being a jetsetter, driving that sports car, or buying a vacation home, jack up your inflation rate assumption.

2. Inadequate savings

Even if you have a solid retirement plan but you’re not socking away enough to fund your future, it’s just not going to happen. Unfortunately, saving for retirement is not a priority when you’re in your 20s or 30s, when getting married, raising children, renting a townhouse or condo unit, financing a car, and paying bills are your main concerns. By the time you hit middle age, you’ll be paying for college costs, buying cars for your kids, and spending for family vacations. It becomes harder if you continue to borrow to finance your spending habits. Joby advises that you have to make lifestyle changes to reduce your expenses.

3. Relying on others

The HSBC study revealed that, compared to the global average, there was greater dependency among Filipinos on the government, their employers, and their families for support in their retirement years. Only 36 percent of all Filipino respondents expect to fund their retirement themselves, in contrast to 44 percent globally. The fact is, however, social security and even your retirement pay are not enough. Putting the burden on your children, while culturally expected, is actually unfair, especially at a stage when they are supporting their own kids. It may be fine to expect some financial support from them, but the bulk of your retirement savings should come from you.

Don’t depend on others for your retirement. Invest for your future. Attend Money Summit & Wealth Expo – the biggest investing conference and expo in the Philippines!

Are you in the market for a condo? Here are a few things to consider before taking the leap.
By Lynda C. Corpuz

Buying a house and lot seems like the ideal scenario. But with prohibitive prices or distant locations, it’s not for everyone. And to be sure, some people would rather live in a condominium. For a growing number of Filipinos—whether by force or by choice—their condo has now become their home sweet home.

If you’re looking for a condominium, you have to decide if you should buy a unit or just rent. Buying of course gives you a sense of ownership, as you own not just your condominium unit but your part of the common areas in the building. You’re in fact a co-owner of the condominium corporation itself.

Your condo unit can also appreciate in value, making it an investment especially if you sell it later on. It also gives you permanency of address, compared to a renter. It also reflects well on you when you apply for loans. Plus, there are no hassles and headaches in dealing with a landlord (or landlady for that matter) since you’re not a tenant but an owner.

Renting is okay also, especially if you plan to move in a few years. But if you rent for the rest for the rest of your life, you don’t build any equity in something you can call your own. In fact, the amount you pay for rent for, say, five years may already be equivalent to buying a condo outright. “Renting or buying, either way, it all depends on the person’s needs,” concludes Daniel dela Cruz, president of online condominium supermarket www.condo.com.ph.

Whether you buy or rent, you have to keep in mind some important factors before you sign that contract. Don’t get easily sold by what you see in brochures, model units, and 3D walk-throughs. Here are the seven top things you need to check:

1. Location, location, location. Nothing beats the right location, as it dictates both your lifestyle and your condo’s market value. It should be near your place of work and accessible to schools, hospitals, shopping malls, and major roads. Felipe and Cristina Salvosa share that their condo is very easy to get to and from work—a must factor for young professionals these days. JM Martinez, who lives and works in Makati, says, “As long as you live in a place accessible to your work that would be the best benefit from this investment.”

2. The developer. Who’s behind the condominium project? Those who were burned in the late 90s know how painful an experience buying a condo during the pre-selling stage only to find out later the developer has run out of funds to complete the project! JM says the developer should be dependable and reputable, even if it means paying a price premium. “But more than the reputation of the company, we want to be assured that the company is an expert in the business and the structure was built with good materials,” he adds. So check the track record of the property developer.

3. Infrastructure and amenities. Ask about the infrastructure, utilities, power generators, security, soundproofing, even garbage disposal. What are the amenities and recreational facilities available? Is there a swimming pool, gym, playroom, function rooms, and garden? You don’t want to go down and get out every time you want to do something. You want to make the most out of your investment. If it’s a mixed-used development, scrutinize the entire master plan. Will there be offices, schools, cafés, restaurants, and shops in the community?

4. Density. Remember, you’re living in a high-rise building, sharing with hundreds or even thousands of other occupants a limited number of elevators, parking space, and amenities. Ask how many floors and how many units per floor there are. Consider the master plan of the developer for the entire vicinity, particularly for mixed-used developments. How many buildings will be put up and how many people are expected to live, work, shop, and dine in the entire complex? Where will these buildings be constructed? Your great view of the city skyline just might turn up later on as a view of a future adjacent building.

5. Dues and other costs. Condos can be notorious with exorbitant association dues, as you share the cost of repairs, maintenance, and improvements of the building with other dwellers. JM notes association fees are expensive but a tenant should maximize what he or she is paying for by using the facilities and coordinating with the administrator for any need, from repairs to what not. If you’re fortunate like the Salvosas, your association fees can also be very reasonable, in their case, about the same as with the dues for homeowners in private subdivisions. There are also related expenses like parking space, which you have to buy or rent separately. You’d be shocked at the cost, so plug this in your budget. And bet you overlooked the fact you have to pay value added tax (VAT) on top of the sale price, plus closing fees and property tax.

6. Stage of development and completion date. You can of course buy a unit at an existing condo building and move in immediately. But like a brand new car, it always feels better to be the first owner of a condo unit. So if you decide to buy, do so at the pre-selling stage, not when it’s already complete. “Once the building is completed, the price can be double the original amount,” Cris says. JM shares they bought their unit at The Residences during the pre-selling stage at around P6 million, including interest and the cost of minor changes in the interiors. Consider also when the project will be completed, as you need to project your own plans against the target date.

7. Investment potential. JM shares they also considered if they could resell the condo in the future or rent it at good price. If you’re thinking of buying a condo as an investment, it is best to buy during the pre-selling stage and sell or rent out the condo when it is completed.

There are indeed advantages to condo living. Cris says it works for a newlywed and an expectant mother like her since she does not have to worry abut water or electricity. “And when the garbage collector will come – little things like that that you usually have to do yourself if you live in a house,” she says. JM is just all set to settle in his new place. “I’m excited to move there as soon as Ayala starts delivering the units,” he says.

Want to learn more about how to invest in condos? Attend Money Summit & Wealth Expo – the biggest investing conference and expo in the Philippines!

1. Maximize exemptions
The great news for taxpayers, especially for the hapless employees who have very limited ways to cut down on income taxes, is that the government has raised personal exemptions, which were implemented in 2008. The basic personal exemption for individual taxpayers increased from P20,000 for single, P25,000 for head of the family, and P32,000 for married individual to P50,000 regardless of the civil status; while the additional exemption for qualified dependents went up from P8,000 to P25,000.

2. Maximize deductions
Now, if you’re self-employed or run your own company, your business can lower its taxes by opting for either itemized deductions or the revised optional standard deductions (OSD). A new law increased the rate of the OSD for self-employed individuals from 10% of gross income to 40% of gross sales or receipts; and for corporations 40% of gross income, both in lieu of the itemized deductions. That means less paperwork and hassle of substantiating allowable deductions. However, if your itemized expenses are higher, then opt for that.

3. Lower your gross income
Minimum wage earners are now exempt from income tax. You’re not a minimum wage earner, so it wouldn’t be apply to you. But there are other ways of lowering your gross income, short of under-declaring it. You can defer income, such as your business income or your employee commission, in the last couple of months of the year to the following year. You can check with your accounting department if the benefits given you can be considered de minimis benefits, i.e. which aren’t subject to withholding tax, if you’re in a managerial position.

4. Invest in tax-exempt or tax-deferred instruments
Investments for more than five years are tax-exempt, so increase your long-term savings and gain an automatic 20% on your investment income, which otherwise would have been remitted to the government.

5. Spend less
It probably didn’t occur to you but the more you spend, the more taxes you pay, no thanks to the 12% value added tax (VAT) imposed on practically everything you purchase or spend for. Or buy some items from mom-and-pop stores that are non-VAT entities.

Never in my life have I seen anything like the plethora of methods which are coming on stream for the use in forecasting commodity prices. There are literally hundreds of techniques and approaches. This chapter will present rather briefly, but a few.

Some of them are rather conventional and this author will place an asterisk beside the ones which he personally uses. Listed in this chapter there are approximately thirty-six ways and means of forecasting prices. This does not take into consideration all the wonderful glorious little tidbits that come through the revelation of P&L charting technical analysis course.

(This author is very happy with P&L charting, for it enables this trader to quantify price action on a daily and intra-day basis. I know of no other system wherein each day’s specific activity means more than the trend or congestion in which prices are trading. Each day’s activity through the use of P&L charting portrays the evolution of a trend or congestion, sometimes within one day.)

However, this author is most irritated by those traders who are convinced that their moving average, point and figure, resistance index, volume oscillator, balance volume, weighted moving averages, God knows what else – basis, cash – are the only system which is effective. And, that the system that they are using is the only one that will ever be effective and that they have no use for volume, open interest, seasonals, fundamentals, contrarian opinion, wave theories, point and figure, moving averages, oscillators, chart patterns, momentum indices, whatever, and are blindfolded to the evolution of anyone else’s approach. (There. I got that off my chest.)

Often these traders do not even use their own systems and seem to me, at least, to be continually fighting the market. Assuming a trader has studied a technical analysis course and has a trading plan incorporating several methods of forecasting prices and combines them in a way which he can continually trade profits from the market, then this trader is worth listening to. In the section on planning, this author will succinctly portray his approaches to the market place and you will be surprised how flexible he is.

There are three basic methods to analyze the market behavior of commodity prices.

• fundamental
• mechanical
• technical

FUNDAMENTAL

Often the market goes completely contrary to fundamental considerations due to technical and other factors. The fundamental trader is interested in long range price movements and must be prepared to wait it out. Fundamentalists may deny it, but there are just too many external factors to be taken into account, such as the natural response to fundamental influences, reflected in the day by day fluctuations. So there’s no need to seek them out for analysis. However, fundamentals underpin trend direction.

MECHANICAL

Mechanical methods use price and price alone to determine what action to take and this action does not require any decision on the part of the trader. There are three mechanical methods.

• chart
• computer summaries
• moving averages

Taking a technical analysis course will teach these rigid trading rules to be followed faithfully and it is usually based on some mathematical formula to predict the right time to trade. The computer tells you what a mathematical formula thinks you should do. One of the beauties of the mechanical method is they can be back checked. Computer oriented methods usually bias themselves towards mathematical trend analysis, using moving averages and other trading systems. The computer can be used as a chart reader and it can formulate and test any and all decision rules.

TECHNICAL

In the last several decades, a vast amount of work has been done to erect a means of technical tools, – all with the aim of anticipating futures prices from trading statistics, e.g. price, volume, O.I.

The technical approach from the simplest to the most complex and esoteric falls into four broad areas.

1)      patterns on price charts

2)      trend following methods

3)      character of market analysis

4)      structural theories

There are many different methods for charting. The most popular are:

1. daily high/low/close bar charts
2. point and figure method
3. moving average of closing prices

The lists of approaches taken to technical analysis can be cataloged by the following technical approaches.

1)      tape or board reading

2)      price chart analysis – which consists of

a)      price trends

b)      support and resistance

c)      consolidation (continuation and reversal)

d)      price formations and patterns

e)      measurement rules

f)       wave theory

3) volume and open interest analysis

4) other technical indicators

In the last several decades, a vast amount of work has been done to erect a means of technical tools, all with the aim of anticipating futures prices from trading statistics, e.g. price, volume, O.I.

The technical approach from the simplest to the most complex and esoteric falls into four broad areas.

1)      patterns on price charts

2)      trend following methods

3)      character of market analysis

4)      structural theories

There are many different methods for charting. The most popular are:

1.  daily high/low/close bar charts
2.  point and figure method
3.  moving average of closing prices

The lists of approaches taken to technical analysis can be cataloged by the following technical approaches.

1)      tape or board reading

2)      price chart analysis – which consists of

a)      price trends

b)      support and resistance

c)      consolidation ( continuation and reversal )

d)      price formations and patterns

e)      measurement rules

f)       wave theory

3)      volume and open interest analysis

4)      other technical indicators which are:

a)      measures of relative performance

b)      study of periodic price performance

c)      opinion survey and contrary opinion

The above material is excerpted from the book “How to Make Money in the Futures Market… And lots of it.” By Charles Drummond (Copyright © 1970 by Charles Drummond. All rights reserved).

Charles Drummond is a Canadian trader who has written nine books about trading and has created a method of technical analysis called “Drummond Geometry.” His biography and further information about his work can be found at the technical analysis course website. His complete body of work is contained on the technical analysis course site. Article Source: http://EzineArticles.com/3500255

My work as a personal finance coach, management consultant, writer, trainer, and whatever it is that I can get my hands on, requires me to do a lot of research. When I took the Strength’s Finder test (from Gallup) sometime ago, I was not surprised to find Input as one of my top five strengths. I am one of those guys who thrive on information, a lot of information.

While I don’t read as many books as some people I know, I get my fair share of reading and I do dig up a lot of information on the Web, particularly information on things that I like to teach and write about – money. With a plethora of books, sites, videos, and all that, one can find himself lost with too much information and many of those are contradicting each other.

Without the proper training and experience, one can be easily swayed with the load of information one can get. Not everything you read and watch tells you the truth, or at least gives you the complete picture.

When I need wisdom, I go to the source of all the wisdom we can ever need – the Bible. When I need financial wisdom, I still go the same source. Many are bewildered as to why I often quote from the Bible when I deal with money and finances. Many of them think that the Bible is outdated and irrelevant when it comes to money and business. Here are some important tidbits when it comes to the Bible and money:

• Jesus talked a great deal about money.
• 16 of the 38 parables were concerned with how to handle money and possessions.
• In the Gospels, an amazing one out of 10 verses (288 in all) deals directly with the subject of money.
• The Bible offers 500 verses on prayer, less than 500 verses on faith, but more than 2,000 verses on money and possessions.

Here are more verses that affect our daily lives:

On work: “Lazy hands make a man poor, but diligent hands bring wealth.” (Proverbs 10:4, NIV); “Go to the ant, you sluggard; consider its ways and be wise!” (Provebs 6:6, NIV)

On handling money & integrity – “Whoever can be trusted with very little can be trusted with much, and whoever is dishonest with very little will also be dishonest with much.” (Luke 16:10, NIV)

On debt: “Owe nothing to anyone – except for your obligations to love one another. If you love your neighbor, you will fulfill the requirements of God’s law.” (Romans 13:8, NLT)

On lifestyle: “Some who are poor pretend to be rich; Others who are rich pretend to be poor.” (Proverbs 13:7, NLT)

On productivity: “Plant your seed in the morning and keep busy all afternoon, for you don’t know if profit will come from one activity or another – or maybe both.” (Ecclesiastes 11:6, NLT)

On investing: “But divide your investments among many places, for you do not know what risks might lie ahead.”  (Ecclesiastes 11:2, NLT).

On generosity: “Give freely and become more wealthy; be stingy and lose everything. The generous will prosper; those who refresh others will themselves be refreshed. (Proverbs 11:24-25, NLT)”

I encourage you to pick up and read your Bible every day and you’ll be surprised at the amount of wisdom you can pick up, financial or otherwise. The Bible, after all, is not dated – it is beyond timely, it is timeless. The book helps me discern financial information, gets me grounded, reminds me of stewardship and more importantly, it convinces me that the Lord is after our welfare, not just in the afterlife but in our present life.

Whenever we go through challenges, it is comforting to know that we do not live by situation, we live by promise : “For I know the plans I have for you, declares the LORD, plans to prosper you and not to harm you, plans to give you hope and a future” (Jeremiah 29:11,NIV).

Oh, the secret to real prosperity can also be found in the Bible. Look it up at Matthew 6:33.

Catch me at my whole day seminar “Steps to Financial Peace” on August 12, 2011 at Teatrino in Promenade Green Hills. I will be joined by my dear friends Francis Kong (the country’s leading inspirational guru), Paulo Tibig (the Entrep Champ) and Jayson Lo (Business & Motivational Trainer). Details at www.randelltiongson.com

Randell Tiongson is an advocate of Life & Personal Finance. He is a Director of the Registered Financial Planner Institute (Phils.) and has over 20 years experience in the financial services industry. For questions, write to randell@randelltiongson.com. To read his personal finance blogs, visit www.randelltiongson.com/.