Wake Up, Philippines!

When Mom and Dad are in “Debt” Trouble

Posted in Credit Card, Personal Finance by Erineus on February 24, 2009

My friend called me last week in apparent distress about his retired mom and dad. He said his family had a little meeting over the weekend and they found out that their parents have four credit cards with overdue payments amounting to P450,000. With his permission, let me share his story with you.

They owned an old house in the province and another one that was being constructed courtesy of my friend and his two siblings. Two of them work here in the country while one is working as an expat Filipino. The one working overseas left his child in the care of the parents. Together, all three siblings send home P30,000 monthly for the retired parents’ living expenses.

An allowance of P30,000 monthly for two adults and one child in the province living in their own home is not something to sneeze at. So how could they have charged so much money to their credit cards?

I know you know how. Refurnishing the new home, splurging on the apo (grandchild), the many road trips they took as they enjoy their “newly retired” status all added up to P450,000—and who knows how much more if they didn’t talk about the situation openly. They didn’t want to let the children know at first, hoping they could fix things by themselves. But now, they had to come clean. The banks are knocking.

They are good people who made bad decisions,” my friend told me.

Bailing out parents, for some, is like going through a backyard full of land mines. You think you’re familiar with the territory, but a sudden misstep could cause a lot of damage. After all, they used to call the shots.

First things first, remember that it’s not all about the money. That’s, in fact, the easier part of the equation. It’s the psychology, the needed changes in lifestyle and the communication strategy that many people in this situation first have to worry about. Why? Because no matter how brilliant your strategies are to pay down the debt, if they don’t like it, sorry kid.

So you need them to agree and to agree with you wholeheartedly. Once that’s done, you can try the following strategies:

1. Cut the cards. First order of the day is to stop the wanton swiping. If that means having them agree to cut the cards, then that’s the best strategy.
2. Debt substitution. Find other sources of funds that don’t charge 42% per annum in interest. This may include a personal loan from the children (with interest but lower than 42%), loans from the Social Security System (I will not recommend borrowing from the Government Service Insurance System) or salary and personal loan from a thrift bank. Whatever you do, do NOT borrow from a loan shark in desperation!
3. Sell stuff to pay off debt. This will be tough, but it’s important for everybody to feel the pain so that the lesson is learned. If it means going without hot water or sacrificing the car, then so be it.
4. Pay down the debt as aggressively as you can in the next six months. It is important that all accounts are made current, so divide any cash between all four credit cards. The objective is to fix your parents’ credit record so that the bank can see that they are doing your best to settle the debt.
5. Visit a credit officer and let them know about the situation. We know that this may be a long shot—appealing to a credit officer for restructuring–but there’s no harm in trying.

Any more tips you can share?


When banks, preneed firms fold

Posted in Banking, Investment, Personal Finance, Pre-need Plans by Erineus on February 3, 2009

THE LOW-GRADE fear of bank and other corporate failures that spread slowly last year has turned to reality for many who have been victimized recently by the record closure of rural banks last year and worries that the preneed industry is on the brink of disaster.

The Bangko Sentral ng Pilipinas has said P21.6 billion worth of deposits are virtually frozen inside the 25 rural banks padlocked last year.

That’s a big amount of money at a time people are losing their jobs.

Real fear

“There’s real fear among the people right now,” says Alvin Tabañag, a registered financial planner and author of “Kaya Mo Pinoy! 12 Steps To Build Wealth On Any Income.”

The timing couldn’t be tougher. If you’re fighting to keep your job or have already lost it, losing your savings is the equivalent of getting whacked in the head by someone you trust and being asked to pay for your hospital bill. These financial disasters rewrite for Filipinos what “safe” means.

Fortunately, all is not lost. When a bank is closed by the central bank, it is normally turned over to the Philippine Deposit Insurance Corp., which then examines the bank’s records to determine which deposits are insured. You can still get your money back—or at least some of it—if you know what to do.

Practical guide

Here’s a guide on how to get your life back after bank or preneed failures:

1. Bring proper identification. Both the PDIC and the Securities and Exchange Commission, the state regulator of preneed companies, say most delays are caused by lack of proper identification documents.

Some depositors bring ATM cards, credit cards, or membership cards in clubs to prove their identity. Cut the processing time by bringing any two of the following: Social Security System or Government Service Insurance System cards, Professional Regulation Commission license, driver’s license, senior citizen’s card, passport, company or school identification card, Taxpayer’s Identification Number card, a Philhealth card, and a voter’s identification card or affidavit.

If you are filing a claim on insured deposit in behalf of someone else, you need to bring the same documents, plus a special power of attorney (SPA). If the owner of the account is abroad, the Philippine consul where he lives must authenticate the SPA.

2. Bring evidence of your deposits or preneed policy. These include savings passbooks, certificates of time deposit, ATM cards, unused checks and bank statement, and other relevant documents. The PDIC will be double-checking the consistency of your signatures.

When claiming against preneed companies, bring a copy of the plan contract, the certificate of full payment, or official receipts of your payments so far, if the plan is not yet fully paid. In the case of plan holders of Legacy Consolidated Plans Inc., Scholarship Plan Phils. Inc., and All Asia Plans Corp., which have recently closed, you need to file a sworn complaint on or before March 31.


Sources who asked not to be identified say many of the documents issued by these firms did not have signatures and appear to be spurious. Take a look at your documents and show them to a lawyer who specializes in financial transactions, if you think their legitimacy will be questioned.

“Asking is actually free compared with the money you stand to lose,” says Atty. Carlo Cariño, senior partner at the Cariño and Mabalot Law Offices. You also need to provide the SEC with your complete and updated mailing address and contact numbers. Go to the Non-traditional Securities and Instruments Department of the SEC. In the Ortigas head office, their landline is 584-6058 and the department head is Jose Aquino.

3. Continue paying your loan when PDIC sends you a letter of collection. You are not off the hook even if the bank you borrowed from closes. You may be slapped fees and finance charges if you don’t maintain your good credit standing even in a closed bank.

4. Collect issued post-dated checks and assume automatic debt arrangements are out. These checks are no longer valid, so replace them or arrange to pay some other way.

Processing claims

5. Fill up three copies of a claim form from the PDIC and sign the “Signature of Depositor/Claimant over Printed Name” under the “To be accomplished by the Depositor/Claimant” portion in the claim form. Again, what the PDIC will be putting under the microscope is the integrity of the signature, making sure none are forged.

6. If you are filing in person, go to either the branch of the closed bank where you deposited your money or another site designated by the PDIC, or the PDIC claims counter located at PDIC Ayala Extension office, SSS Building, corner V.A. Rufino Street, (formerly Herrera Street), Makati City.

7. You can also process your claim via mail through this address:

The Assistant Vice President,
Claims Processing Deparment
Philippine Deposit Insurance Corp.
2228 Chino Roces Avenue
1231 Makati City, Philippines

Some depositors get their insured deposits within an hour if the documents are pristine and the account is “clean.” That means any loans payable to the bank and taxes that need to be paid have already been deducted, and interests earned were already added.

A “clean” account also means there are no questions about the legitimacy of the deposit. It is not unheard of for bank employees to be in collusion with depositors in “splitting” accounts when they realize the bank is about to be closed. This hurts bona fide depositors because the presence of split and fictitious accounts makes everyone jump through hoops to get their money.

Auramar Calbario, head of corporate communications at the PDIC, says claimants are normally classified into three: “clean,” “document-deficient” and “for further verification.” Only claimants with clean documentation will be paid within an hour or at least the same day.

If you belong to the second category, you may be asked to present more documents to prove you are the real owner of the account. If you belong to the third, claim agents will interview you and this is where the actual depositor needs to appear personally.
A depositor’s relationship with a bank can get complicated. Aside from the usual savings, checking, and time deposit accounts, now there are unit investment trust funds and investment accounts. There are joint accounts, accounts held in trust, institutional accounts and joint accounts. Which of these are safe? And what if your account exceeds the insured amount of P250,000?

Depositors sometimes commit the common mistake of opening accounts in different branches in the same bank, perhaps one as a time deposit, one as a checking account, and another as a savings account, and expecting that each would be insured up to P250,000. This is a grave mistake because the PDIC will add up all your single accounts in a particular bank and apply the P250,000 limit to the total.

But if one of your accounts is a single depositor account, and another is a joint account with your husband, for example, your deposit will be insured separately from the joint account. The PDIC website shows exactly how this is computed. Unit Investment Trust Funds and investment accounts are not insured by the PDIC.

If your deposits exceed P250,000, you may still claim for the excess but you have to wait until the PDIC has filed with the liquidation court, has already disposed of the bank’s assets, is ready to distribute these assets, and there is enough to go around starting with preferred creditors like the government to ordinary depositors—yes, that’s you.

In the case of the Rural Bank of Parañaque and other banks under the bankrupt Legacy group that were recently closed, the verification of documents and claim time is much longer. PDIC has started payouts for small depositors first (those who have P120,000 and below) last Dec. 22. Those who have more than that will have to wait until mid-February. Claim forms are not yet available, as of this writing. Go to the PDIC website, one of the most helpful government websites, on how to follow up your requests.

Rebuilding savings

Tabañag says too many Filipino savers are still lured by easy money, which is why many are caught by bank failures and scams with their pants down. “Typical Pinoy. We want high returns quickly. We just want to sit back and wait. We find that it’s easy at first, but enjoy the rewards only for a short time,” he says.

The Legacy case is another big Ponzi scheme, he says. “Banks don’t have agents. The reason why Legacy’s agents were very confident especially in converting preneed plans into time deposits is they are expecting the PDIC to bail them out. Their practices were really not sound,” he adds.

Tabañag advised depositors and plan holders of Legacy to file a class suit against the company. Cariño says that “the more the voices, the more pressure” plan holders can exert on government and the owner. If the plan holders win their case, the owners may be personally liable to the people they defrauded.

Tabañag, a personal money management coach, also said that apart from waiting and praying, it is crucial now for depositors and plan holders to start rebuilding their educational and retirement plans and investing again—this time, in a smarter way.

“There is no other way but to start to save more again. You can do this by increasing your income, spending less or doing both. There are many ways Filipinos can do this,” Tabañag says.

“Forget the LV (Louis Vuitton) bags for the moment. You can go for UCB in the meantime. That means United Colors of Baclaran,” he says.

(For more personal finance articles, visit MoneySmarts at http://blogs.inquirer.net/moneysmarts.)

By Ma. Salve Duplito INQUIRER.net First Posted 21:13:00 01/25/2009

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Protect education funds from the crisis

Posted in Congress, Education, Investment, Legislation, Personal Finance, Pre-need Plans, SEC by Erineus on February 3, 2009

WHEN PRE-NEED COMPANIES selling educational funds started dying a slow death more than 10 years ago, many Filipino families turned to do-it-yourself investing to grow savings for their children’s education needs.

Now it appears that these alternative investments–mutual funds, unit investment trust funds (UITFs), stocks and bonds–are not living up to the hype. Last year, pooled funds were down around 40 percent and experts say investments in the stock market might take two or three years to recover.


These depressing events have shaken Filipinos’ confidence in this most basic principle in personal finance: Saving. Imagine this, just when you have conquered spending urges and socked away money regularly, the market turns and eats up most of your money pot. This has not been easy for one mother, who shared she lost most of her educational fund for her daughter to the closure of one rural bank.

“The Rural Bank of Paranaque is now closed. This makes me sick to my stomach. So, how should I prepare for my daughter’s college education? I have to invest in a better mattress to put my money under,” she says.

It’s truly a cosmic moment for many couples faced with the triple whammy of skyrocketing tuition fees, lower pay hikes if not job loss and shrinking savings.

But Micheas P. Dumlao, 45, who has two sons to put through high school and college, says it is still better to start saving early.

“It has been at the back of my mind for the longest time, but my wife Joyce and I realized just last year that it is time to prepare for my sons’ college education. If we don’t start now, it will be harder later on,” he says.

Micheas’ and Joyce’s son Michael Reuben is a first year high school student at the Philippine Science High School, the state’s premier school for intelligent children and tuition is minimal. If he gets into the University of the Philippines in three years, also another state college, tuition expenses could be at P1,500 per unit, or at least P22,500 to P31,000 per semester.

Micheas expects books, transportation, clothes, laptop and other expenses to add 80 percent of this cost. That means he needs more than P300,000 to finance his eldest son’s college education.


Bankrolling their second son’s intellectual development will be much more challenging.

Jason Matthew is 9, now studying in a private school and wants to study at the Ateneo de Manila University. Historically, tuition fees outrun inflation at around 8-10 percent a year, especially for preschool, elementary and high school.

Micheas estimates that he needs to save at least P1.5 million to put his youngest son through college alone.

Fortunately, Micheas is also a life insurance agent in a multinational company and he knows his numbers. He plans to move his education money pot when it reaches P200,000 to a higher-yielding account, and supplement this with his investments in a single-pay variable life product sold by his company. Then he will look for more investment outlets.

All these financial maneuverings will not be successful if the entire family is not pushing together as a team, he says. To set aside P8,000 monthly, an amount that can already buy grocery items for one month for an average family of six, Micheas says the Dumlao family members had to change their lifestyle.

“Instead of Yellow Cab, we eat at Shakey’s and we don’t order drinks anymore. A P60 bottomless iced tea can already buy one siopao. You know, when I have to eat lunch in a mall, I buy my drinks inside the grocery,” he says.

When he has appointments in business centers in Metro Manila, Micheas says he has begun to plan carefully where to park his car. “You need to splash on a little bit of cologne before you go to your appointment, that’s true, but careful planning can save you quite a bit of money,” he says with a chuckle.

In the Filipino psyche, education is sacred. Parents will often singe their eyebrows to send their children to the best schools, and the Dumlao couple is no exemption. Micheas says they are also working on increasing their income, writing down their goals and making sure both couples are protected from sudden death or illnesses.

Investment tools used wisely

Marvin Fausto, senior vice president and chief investment officer at the Banco De Oro, says on top of more careful spending and saving regularly, Filipinos also need to learn how to use the right investment tools for the right purposes. You can’t expect to crack open coconut shells with a slender knife.

If you need the money for tuition in the next two to five years, the right approach would have been to move the money pot to money market funds and other conservative placements as the date for the need approached.

“Last year, I’ve seen a lot of people lose money in the market. They were lured by the historical high returns in the market from 2002 to 2007 that they forgot why they were in the market in the first place,” Marvin says.

Because too many investors were lulled into thinking the high returns would last forever, they gambled the money they would soon need, says Marvin.

“It is still true that mutual funds and UITFs are good long-term investments. But the right strategy would be to review your investment objectives and plans regularly. When the need is near, you move it to more appropriate investments. That’s the value of constant review,” he says.

Banco De Oro’s bond funds, for example, yielded 33 percent until 2008 since inception in April 2005. That’s still 11 percent per year, much higher than any time deposit return. Balanced funds gave 45-percent return since 2003.

“Equity funds are the ones that were really hit by the crisis at 4.5 percent since May 2005. You would have really lost money if you sold last year, but it also went as high as 100 percent in 2006 and if you took your money out that year, you would have doubled your investments,” he explains.

That’s the wisdom that comes from hindsight. Now, if you are already pinned down by the market turmoil, Marvin’s advice is to exhaust all other means to pay for tuition and other educational expenses, like getting subsidized student loans from schools, selling other assets like properties and earn additional income, paying monthly rather than annual installments.

“The worst time to sell is when the market is down. And that is now. If you have other means to get money for college education, do not sell your losing investments. Wait for them to recover,” he says.

Marvin expects the market to recover in two to three years. By then, he believes investments in equities, bonds and pooled funds to redeem their reputation.

“Attack your goals depending on the time frame when you need your money. If it’s a short-term need, put it in a money market fund in the biggest banks, so that even if the bank closes, the fund will still be there,” Marvin says.

(For more personal finance articles, visit MoneySmarts at http://blogs.inquirer.net/moneysmarts.)

By Ma. Salve Duplito
First Posted 23:15:00 01/18/2009

VULs versus UITFs and mutual funds

Posted in Investment, Personal Finance, Tips by Erineus on February 3, 2009

Pooled funds such as unit investment trust funds (UITFs) and mutual funds have become popular investing vehicles for Filipinos. Insurance companies have jumped on the bandwagon with variable unit-linked life insurance products, or VULs, which have been driving the growth of their industry, thanks to potentially higher returns than traditional policies. Unit-linked insurance (also called variable universal life insurance) offers the security of insurance protection via term coverage, together with the opportunity to participate in potentially unlimited growth via mutual fund investments.

Suddenly, life insurance has been given a face-lift of sorts, becoming more attractive to more and more consumers. But with mutual fund companies and trust departments vying for your savings, which one should you choose? The main selling point for variable life insurance is that “you get the best of both worlds.” That is, you get protection coverage and capital appreciation through the convenience of just one product. Ironically, this can be a double-edge sword – the advantage can be a disadvantage. There are two arguments to consider:

Argument against VULs: You get the best of both worlds … but your money doesn’t work as hard. If your premiums pay for insurance and investment, this then begs the question of whether you should even bother with the protection element instead of simply putting your money in standalone investment funds.

With mutual funds and UITFs, the entire sum, save for the sales load in front-end transactions, is invested in the fund of choice. With variable universal life insurance, your money is allocated towards paying for the insurance coverage and purchasing shares of the investment fund you wish to participate in. Under this setup, it would appear that investing purely in pure investment funds has an edge, as everything is put in the pot for growth and appreciation.

Argument for VULs: You get the best of both worlds … and can actually produce higher returns. However, there’s another way of looking at this. While VULs may split your resources in two, resulting in a smaller amount being diverted to the investment portion, if for some unforeseen event, you suffer from a disability or accident or – heaven forbid – you lose your life, your insurance benefits will kick in. It may sound morbid and insensitive, but the return on your investment can’t be matched by any other pooled investment.

If you avail of a host of benefits known as riders, such as critical illness or accidental dismemberment, you get sums over and above the basic life insurance coverage for the treatment of dreaded diseases or compensation for a disability resulting from an accident.

In the long run, a dedicated fund for such contingencies may be one of the most economical hedges against unforeseen health-related expenses. Such need-specific riders are only available as add-ons to unit-linked products – something that cannot be done with pure mutual funds. That said, what you stand to earn in a mutual fund placement may only wind up depleted by the very same contingencies the above riders can help provide for.

The bottom line is that there is a place for both unit-linked products and standalone investment funds. We need only to remember one of the basic principles of investing, and that is diversification. Whether you are single, married, with or without dependents, there is merit in investing in life insurance products that offer both protection against various contingencies as well as competitive returns. Beyond that, there is also an argument for investing in pure growth instruments such as mutual funds. One does not necessarily take the place of the other. Instead, both are sound alternatives to take advantage of in the constant fight against uncertainties, inflation, and catastrophic events.

(This article is from MoneySense, the country’s first and only personal finance magazine. Visit www.moneysense.com.ph for more.)

By Rosario Santiago
First Posted 13:01:00 01/15/2009

Investment guide for 2009

Posted in Investment, Personal Finance, Tips by Erineus on February 3, 2009

IF INVESTING HAD YOU FLUMMOXED IN 2008 like most individuals who put money in stocks, bonds, mutual funds and other forms of investments, you might be looking for a big rock to hide under this year hoping that when you wake up, the markets have finally turned.

Since Wall Street has begun to seriously doubt widely held beliefs about investing in the face of the worst financial crisis after the Great Depression, how can a small market like the Philippines escape such a bearish outlook?

It appears, however, that the old saying about optimism and Filipinos still holds true–even in personal investing.

An online survey at Inquirer.net shows that Filipinos are not about to throw in the towel when it comes to growing their personal investments. In fact, they plan to invest more by spending less, keep contributing to retirement plans, and continue paying for real estate purchases.

Cautious optimism

Granted, an online weblog is hardly a scientific way of measuring investor sentiment and the learnings are anecdotal at best. Still, they provide information that are not readily available.

“I am in my late 20s and when I saw the stock market go down more than 40 percent, I aggressively invested a significant amount of my portfolio in depressed stocks. I believe in two years’ time, earnings will bounce back and stocks will rebound. Who knows, we may have the same boom as year 2006,” says JM.

Most of those who responded echoed his outlook. Of course, some were more cautious.

“If your timeframe is 20 to 30 years ahead, then I don’t see a need to enter now. Better wait for a clear trend to emerge. Currently it is down, so stay out. Once an uptrend resumes, then enter. Bull markets take five to seven years to unfold, so no harm done if you miss a year or two,” says Melvin.

Chase Yap, vice president at 2TradeAsia.com, says in the fourth quarter of 2008, some investors have started to come back to the market albeit very cautiously.

He says the roller coaster ride in equities last year has made investors look hard at their trading behavior and it also gave them a chance to fine-tune their strategies for the future.

Experts also believe that 2009 will be a tough year for personal investing because it’s at the tail-end of years of unnatural market movements.

“In my thinking, the natural movement of a market is two steps forward and one step backward. This comes from observation, not theory. It’s not unusual for a market to pause every now and then. If a market does not rest, it will get sick just like a person who works five days without sleeping,” says Alexander Gilles, a chartered financial analyst.

World markets Japan, Europe, the United States, and the rest of the world including the Philippines were all on the way up for five or four years starting in 2004.

“That’s not normal. That’s like a guy walking with left foot, left foot, left foot and then right foot. Normally, markets go zigzag and if they go up nonstop, there’s going to be a difficult fall after that,” he says.


Difficult fall notwithstanding, gains in personal investing are not impossible for the long-term especially if certain guideposts are heeded. Yap says there are still things that remain true even in this very bearish market, and these include the following guideposts:

1. Examine your investment objectives. Most individual investors, whether in the Philippines or in more advanced markets, are obsessed with the Holy Grail of high returns without first understanding their investment objectives. Gilles recommends finding out first if you prefer rising share prices or a steady stream of dividends or both. In the case of bonds, bond principal plus the coupon account for total return.

“Either you want your money to compound year after year through interest or capital gains, or you want to draw down on income or cash dividends. Or you want both,” he said.

For 2TradeAsia.comís Yap, the bear market in 2008 made dividend-paying stocks shine.

“Dividends are particularly useful in a down market when it’s not easy to sell your shares for cash. Dividends give you a cash flow on your stocks and give you an option not to sell at low prices,” he says.

Brokerage analysts have often identified Manila Water, Philippine Long Distance Telephone Co., Bank of the Philippine Islands and Globe Telecommunications to pay good dividends even in market downturns. In 2007, PLDT gave its shareholders up to 70 percent of the previous year’s income as dividends while BPI gave out 90 percent inclusive of special dividends.

Carefully thinking through investment objectives requires a careful look at unique, individual needs. If Junior is going to college in four years’ time, for example, you would need cash on the fourth year but still need to grow the remaining amount of the college pot for the following years he would have to burn his eyebrows studying. Instead of merely looking for an investment with the best returns, crunch the numbers for a clearer idea what investments to choose.

“It’s like looking at a car. You don’t just look at the tires and the paint. You have to look at the engine,” says Gilles.

Time horizon

2. Determine your time horizon. When stock investments are tanking, it’s not easy to keep a recovery image glued in your mind’s eye, but over 75 years in US market history and 25 years in the Philippines show that they do recover.

“Think in terms of 10 years, not 20 days,” says Gilles. Although that’s conventional wisdom that US investors are beginning to doubt now because of the current crisis, Gilles and Yap insist that stocks do recover in the long term.

“For a 20-year or 40-year time horizon, you would not hesitate to get into an equity investment even in this depressed market. Stocks go up 15 percent to 25 percent a year in a horizon of 20-40 years,” Gilles says.

Yap explains that those in their 20s to 30s who still have many working years ahead of them can assume more risks and lean more toward equities and less toward bonds. The opposite is true for those in the home stretch, say in their 50s to 60s, who should be looking more toward secure fixed-income investments.

“If I am in my 60s, I would have a good 70 percent of my investment in fixed income to have that peace of mind,” he says.

Those in their 40s who have a good 20 or 30 years to work can still take some risk and should put half in stocks and half in bonds.

3. Examine your ability to take risks. Ask yourself if you can take the tension and the stress of market volatility. If you can’t, stay out of the market and prepare to get by with a return of 2 percent a year from bank deposits.

“Only people who can take the stress will win. You can stick to time deposits but you will never achieve your investment objectives. You go in there with a fearful attitude, nothing will work,” says Gilles.

Knowing yourself, however, is not as easy as it sounds. Sometimes, investors who think they are risk takers find themselves shaking when the market is under severe volatility. But here are some clues: Gilles says that some indications of ability to take risks include being entrepreneurial, a liking for adventure sports, meeting different kinds of people and the ability to driving fast but safe.

4. Take a view, justify it and make a bet. Part of investing is the capability to process what is going on in the economy, taking a view and making a bet. Blaming other people for investment mistakes, especially in a bear market, may be what most people resort to but it is never helpful, says Gilles.

“The people who sell during a slump, like now, are afraid that prices will go lower,” Gilles says.

But he explains that for the market to go lower, this would imply that the Philippines has a growing budget deficit, a growing current account deficit and capital account deficit, which it doesn’t have. It would imply that the country is 80 percent dependent on foreign oil like in 1980, which it is not. It would imply that interest rates and inflation are worsening–all trends that are quite the opposite of what is happening.

“(Fear that the market will go down in the long-term) is totally nonsense because it implies a whole set of assumptions which are false,” Gilles adds. “If you are gloomy, ask yourself whether you have justification or whether you are gloomy just because everyone else is gloomy,” he says.

5. Seek investment counseling. Following hot investment tips is a sure sign of amateur investing, and will burn anyone. Serious investors go for investment counseling from qualified professionals instead of looking for hot tips.

“You cannot generalize. Some people can take the tension, some cannot. You need a deeper, customized, individualized portfolio consultancy,” Gilles says.

Investors who develop ulcers watching market volatility may either make do with the comforting staidness of time deposits or get a professional to do the driving of their investments for them.

Whether considering investments in stocks, bonds, mutual funds, bank instruments, properties and other tangible assets, own business, venture capital or private equity, experts still think following sound guidelines will give good long-term returns–even in a bear market largely expected for 2009.

(For more personal finance articles, go to MoneySmarts at http://blogs.inquirer.net/moneysmarts .)

By Ma. Salve Duplito
First Posted 21:37:00 01/11/2009

TAKE CHARGE OF YOUR MONEY: The perfect time to invest

Posted in Investment, Personal Finance by Erineus on February 3, 2009

(This is part of Take Charge of Your Money , a partnership between INQUIRER.net and Citibank to help readers handle their personal finances well.)

Question:I’d like to start investing my money this year, rather than just letting it sit at the bank. However, with the way the world financial crisis is unfolding, I am a bit apprehensive. Some people said wait first before investing in the stock market. Others say take advantage of the low prices now. When is the right time to invest given our situation globally? I want to make sure my money will earn. – Eric

Answer: The world is indeed experiencing a financial crisis which some say is similar to the Great Depression in the late 1920s. Times are hard, and no one is immune to the crisis’ effects. But that doesn’t mean that it isn’t a good time to invest.

The truth is, there is no perfect time when it comes to investing. Some might say that when the market is down, you should buy and invest, and sell when the market is up. While this may be true, the fact is we can never tell how the market will behave. Also, there is unlikely to be an extended period of time without some trouble brewing on the political or economic or even environmental front – there simply is no perfect time when everything is going well and you’re sure to earn from your money investments.

For instance, in a 20-year period, there will always be price increases (inflation), political scandals, oil price fears, business slowdown, and more. But this should not stop the savvy investor in going into the market. Business tycoon Henry Sy, for instance, started his mall business via the SM North EDSA mall in 1983 when the Philippines was in turmoil politically and economically. But look where SM is today.

The present financial crisis is still not over, and we don’t know for sure until when it will last. Those who can should take steps to position themselves in the market so they will be able to take part in the market’s recovery. And stay invested.

Over the long term, markets tend to trend up. Also, in the long run, equities have outperformed all other asset classes in terms of returns.

So is this the best time to invest? There is no best time. But it would be good to be invested in the market at any time. The returns, for instance, may be more than what you may get if you just stay with bank deposits. There is a risk involved, as equities and bonds are not entirely safe investments. You may lose your capital. But you may also earn more in the long run.

To maximize your market investments, heed these tips:

1. Get into investments you know and understand. Study all investment options carefully before plunking down your money.

2. Deal only with reputable agents/banks/financial institutions.

3. Determine your investment persona, which is based on your appetite for risk. If you are conservative, make the bulk of your investment pot in more conservative instruments. If you are willing to take on more risks, you can put more money in riskier investments.

4. Make sure you have an emergency fund first. This should be at least 6 months’ worth of your expenses. This will be your safety net. Over this amount, invest.

5. Diversify your investments. Don’t put all your money in one type of asset class (stocks alone, for instance) or one type of currency. With this, if one asset class is down, the others can still earn for you.

If you are serious about investing, take time to talk to an investment specialist. Citibank clients can avail of its wealth management services. Non-clients are also welcome to schedule financial check-ups at no cost. Or talk to your bank manager and explore all investment options open to you.

We wish you the best this year!

(INQUIRER.net and Citibank invite readers to ask questions regarding financial matters. Send your questions to personal_finance@inquirer.net or comment through our personal finance blog called MoneySmarts )

*Disclaimer: Readers are solely responsible for their own investment decisions and should thus conduct their own research and due diligence and obtain professional advice. INQUIRER.net will not be liable for any loss or damage caused by a reader’s reliance on information obtained from our web site. INQUIRER.net receives no compensation of any kind from companies or industries or funds that are mentioned here.

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TAKE CHARGE OF YOUR MONEY: Money mistakes seniors make

Posted in Personal Finance, Retirement by Erineus on February 3, 2009

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Money mistakes seniors make

First Posted 09:28:00 01/20/2009

Filed Under: Personal Finance, Retirement

(This is part of Take Charge of Your Money , a partnership between INQUIRER.net and Citibank to help readers handle their personal finances well.)

Question: My aunt is in her early 70s. She used to work as a nurse in the US but has retired here in the Philippines. We assumed she had built up some savings for retirement because she worked hard abroad for more than 30 years. So we are puzzled that today she has difficulty paying for all her medical expenses and other bills. She bought a car in cash a couple of years ago and hired a driver, but other than that we are not aware of other high-ticket items she purchased. What could have gone wrong? How can I avoid ending up like that? – Paula

Answer: Many people think that retirement would be a breeze; after all, they have earned it after working for so long. But as your aunt may have found out, retirement is not really a bed of roses if one hasn’t prepared for it.

It may be possible that your aunt has indeed saved up, but it may not have been enough or the fund was not taken care of for it to last long. This is a common mistake seniors make in managing their finances.

Below are common mistakes seniors make when it comes to managing their finances. Think about what you can do to prevent committing them.

1. Not having a retirement fund. It’s in the Filipino culture to take care of our aging parents. That is why nursing homes for the elderly are very few in the country. Most Filipinos expect their adult children to take care of them when they are old, thus they have not saved up for funding their own retirement.

The reality, though, is not all adult children have the means to support their aging parents since they may also be having a hard time supporting their own families. This is why everyone should save up for his own retirement. This may be in the form of a pension fund or a do-it-yourself investment portfolio.

2. Not maximizing the potential gains of a retirement fund. Put simply, this means not investing your retirement fund well before you retire such that you miss out on potentially higher gains.

For instance, putting all of one’s savings in a savings account will yield only about 0.75 percent interest per annum. Contrast that with a special time deposit which could earn you about 6 percent per annum in five years. Even a retail treasury bond may yield 8 percent in three years’ time. Bonds and stocks and pooled funds (unit investment funds and mutual funds) may even earn you more depending on the market.

3. Not adjusting investments as retirement looms. Ideally, when you are nearing retirement, you should shift your investments from risky assets (such as equities) to less risky ones. As high risk investments may earn you more but may also make you lose, you can’t afford to put your entire retirement fund in peril so close to retirement age.

When you are young, you can take on more risks in investing by exploring investments that may give you a higher yield. You will have enough time to ride out the market volatility and recover any losses. Then be more conservative and protect your capital as you see retirement in the horizon.

4. Being asset-rich but cash-poor. Your aunt, for instance, has a car, but has difficulty paying her regular bills. Would it not make better sense to let go of the car so she can buy her medicines and pay for her living expenses monthly?

For some seniors, liquidating assets may be a good move to fund living expenses. Put cash in more easily accessible investments such as bank deposits.

5. Overspending. Living it up sounds so wonderful at retirement, but seniors must recognize that money will dry up with no income coming in. This is why one must live within his means. Live simply and make your retirement fund last longer.

6. Having inadequate insurance. It is during one’s sunset years that health care and medical bills rise. So it is just right that one should avail of health insurance while still young. In that way, you will be protected and new chronic illnesses (such as hypertension) cropping up afterward will still be covered in old age. Make sure you have health insurance, disability insurance, and accident insurance.

7. Not having guaranteed income. To ensure a worry-free retirement, one should consider having a steady guaranteed income stream even during retirement age. And it would be best if this income stream can beat inflation, meaning, it would earn at a rate higher than the inflation rate. Examples of such income sources would be money market investments and real estate rentals. With these, money would still come in even if you’re not working and toiling in an office eight hours a day.

Or if you still can, consider working even part-time. Aside from keeping your mind sharp, a job at retirement age will give you income that could help you with your day-to-day expenses.

(INQUIRER.net and Citibank invite readers to ask questions regarding financial matters. Send your questions to personal_finance@inquirer.net or comment through our personal finance blog called MoneySmarts )

*Disclaimer: Readers are solely responsible for their own investment decisions and should thus conduct their own research and due diligence and obtain professional advice. INQUIRER.net will not be liable for any loss or damage caused by a reader’s reliance on information obtained from our web site. INQUIRER.net receives no compensation of any kind from companies or industries or funds that are mentioned here.

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First Posted 09:28:00 01/20/2009