Three writ­ers an­swer Face­book’s ques­tion: What’s on your mind?

Red Magazine - - Contents - WORDS DORIS DUM­LAO- ABADILLA

As soon as we were old enough to han­dle cash, we’ve all been told by our el­ders to save up. The cash ni­nong gave last Christ­mas? Put it in the bank. The sav­ings you gen­er­ate be­cause you’ve be­gun to work and yet still live with your par­ents? Keep it in the bank.

It’s not a bad thing, re­ally, when the only al­ter­na­tive is to splurge on new clothes, gad­gets, and fre­quent club­bing with friends. But nei­ther is it good if all we do is save up and be con­tent with the low in­ter­est rates of­fered by the bank.

At some point in our lives, we grad­u­ate from be­ing savers to in­vestors. It’s a nat­u­ral pro­gres­sion in our FQ or fi­nan­cial quo­tient to learn how we could make money work for us in­stead of the other way around. Ex­perts agree that putting all your money in a sav­ings ac­count isn’t go­ing to do the trick. A long time ago, liv­ing on in­ter­est was fine, but with in­ter­est rates now at record lows, it’s al­most a sin to just rely on de­posits alone be­cause the in­ter­est could only be eroded by in­fla­tion rate.

Di­ver­si­fi­ca­tion is the new mantra. Es­pe­cially for young peo­ple look­ing to build wealth and who have five or 10 years—even longer—to maybe buy a car or a house in the fu­ture and plan their re­tire­ment, con­ven­tional wis­dom dic­tates that stocks should be part of the port­fo­lio.

Fund man­ager Marvin Fausto and his wife Mary Rose, also fi­nan­cial lit­er­acy ad­vo­cate, have raised their three boys Martin, En­rique, and An­ton to be high-FQ kids who reg­u­larly save and in­vest. It all started with stocks given to the kids as gifts 15 to 20 years ago. Th­ese stocks have since ap­pre­ci­ated in value and earned cash div­i­dends, which were then like­wise rein­vested. The kids made it a habit to in­vest all cash gifts they get from their ni­nongs, ni­nangs, aun­ties, and un­cles, as well as the sav­ings they get out of their al­lowance. As young adults now, the Fausto kids have enough seed money to set up a busi­ness or start their own fam­ily.

Buy­ing stocks is sim­ply buy­ing into a com­pany for a chance to par­tic­i­pate in its fu­ture growth. Think of a prop­erty com­pany like Ayala Land Inc., de­vel­oper of the Makati cen­tral busi­ness district and Boni­fa­cio Global City, or SM Prime Hold­ings Inc., the com­pany be­hind the house­hold brand SM Malls. Then there’s Jol­libee Foods Corp., a fa­mil­iar brand to ev­ery Filipino child and now one of the world’s largest fast­food chains. There are util­ity stocks the likes of Manila Elec­tric Co., the com­pany that pro­vides elec­tric­ity to the me­trop­o­lis. Look at ABS-CBN or GMA7, which are thriv­ing on political ad­ver­tise­ments dur­ing the run-up to the May pres­i­den­tial elec­tions.

There are over 300 com­pa­nies listed on the Philip­pine Stock Ex­change but the 30 largest in mar­ket cap­i­tal­iza­tion, the most liq­uid, and the most closely watched—ergo the best rep­re­sen­ta­tives of this mar­ket—are part of the lo­cal stock barom­e­ter called PSE in­dex or PSEi.

Buy­ing shares in th­ese com­pa­nies is like be­ing busi­ness part­ners with the ty­coons who built them, even if they do not know you per­son­ally. Even if you just have a few shares in th­ese com­pa­nies, you have the right to scru­ti­nize them and voice any con­cern dur­ing the an­nual stock­hold­ers meet­ings. The shares of th­ese pub­licly listed com­pa­nies are traded in a stock ex­change where in­vestors can buy or sell shares through their bro­kers at any time dur­ing trad­ing hours (9:30 am to 3:30 pm, with mar­ket re­cess from 12 pm to 1:30 pm).

But as risk is inherent in any busi­ness, the in­vestor also par­tic­i­pates in the risk-tak­ing. He must thus know more about the com­pany he is in­vest­ing in. Many in­vestors pick stocks based on un­der­ly­ing fun­da­men­tals, but to de­ter­mine the best tim­ing for trades, they study the charts or tech­ni­cal anal­y­sis.

The more risk an in­vestor is will­ing to take, the higher the prospec­tive re­turns. This means the more ag­gres­sive in­vestor will have more stocks than cash in his port­fo­lio. But pru­dence dic­tates that one should in­vest in stocks only the money he won’t need for quite some­time, that money meant for your car loan amor­ti­za­tion or for your child’s tu­ition fee next se­mes­ter is bet­ter kept in cash or in a sav­ings ac­count. In­vest­ing in stocks works best for those who are will­ing to take a long-term view.

To date, less than one per­cent of Filipinos in­vest in stocks, which means a small por­tion of the do­mes­tic pop­u­la­tion had reaped the re­wards of the bull run seen since 2009.

For new­bies try­ing out stock in­vest­ing, the com­mon strat­egy rec­om­mended by ex­perts is peso cost av­er­ag­ing. This means choos­ing one solid stock that you like best—PLDT or Ayala Land, for ex­am­ple—then buy­ing the same stocks

reg­u­larly over a pe­riod of time. The logic is, since it’s dif­fi­cult to catch mar­ket peaks and bot­toms, one can even out risks and gen­er­ate good re­turns over time.

For in­vestors with nei­ther time nor con­fi­dence to pick their own stocks, a good al­ter­na­tive is to in­vest in funds that in­vest in a bas­ket of stocks, then let the pro­fes­sion­als man­age them. Mu­tual funds were in­vented by fi­nan­cial wizards to pool in­vest­ment and al­low in­vestors to gen­er­ate the same re­turn in pro­por­tion to their in­vest­ment. It can be as sim­ple as a fund track­ing the PSEi or a fund that in­vests in a mix of eq­ui­ties and bonds.

Re­cently, the lo­cal stock mar­ket took a heavy beat­ing due to a num­ber of global un­cer­tain­ties like the eco­nomic slow­down in China and the start of in­ter­est rate hikes in the United States. As the coun­try has done ex­tremely well in the last six years, achiev­ing a sov­er­eign in­vest­ment grade rat­ing for the first time in his­tory, the up­com­ing pres­i­den­tial elec­tion is mak­ing in­vestors jit­tery.

From a record high clos­ing of 8,127 in April last year, the PSEi is now trad­ing at the 6,600 lev­els, mark­ing a re­treat by nearly 19 per­cent. The coun­try’s lead­ing on­line stock bro­ker­age COL Fi­nan­cial calls this the “buyer’s mar­ket,” a chance for in­vestors to pick up qual­ity stocks at cheaper val­u­a­tions. As leg­endary Amer­i­can in­vestor War­ren Buf­fet has said, “Be fear­ful when oth­ers are greedy, and be greedy when oth­ers are fear­ful.”

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