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Be The Master Of Your Financial Fate

"Time is our greatest ally in investing", that has always been the advice that we always get from finance professionals and experts. Though there is some significant truth in it, time alone is not efficient enough for us to get the most out from our investments. Market timing is important as time itself. Both time and right timing, if done and made right, can give us maximum results from our investments. 

But why do we often hear about "time" and rarely hear about "market timing" from these professionals and experts?

The answer is relatively simple. These professionals and experts know how to time the market and they are using our money to earn profit as well. Here are the reasons why these people give "time" as an advice for investments.

1.) These professionals and experts handle our money differently. While we let it "sleep and grow", these people are actively trading, buying low and selling high, and earning profit on a consistent basis. The end result? They earn more than us and even without letting any penny out of their pockets. Thus, it makes sense why some financial institutions have this so called "lock in" period because it can give them an ample amount of time to earn significantly and at the same time minimizing their risk because of the longer duration of having our money on their hands.

2.) Because of the market volatility and unpredictability, we may hand your money over to them when the market is not doing good. By heeding to the advice that "time" is our greatest ally in investment, such professionals and experts get more room to patiently wait for the right entry in the market to buy low. Buying low means more upside or growth potential.

3.) Time has not just been associated but has been exclusively linked to investments. Let's take a look at how an investor and how a trader is defined. An investor is defined as somebody who looks long term while a trader is somebody who buys and sells in a short period of time. Worse, traders are often associated as gamblers because of the unpredictability of the market. Investors are traders. Anybody who buys and/or sells trades irregardless of time. This erroneous definition of an investor and a trader gives the negative notion to our minds that an investor is way better and less risky than a trader.

This is not to put down the reputation of finance professionals and experts and even agents and brokers but the point of this one is just for us to further enhance our financial IQ and correct our distorted mindset about being a trader and an investor. These people know how to handle money in a much more effective way than we do. If we want to be more efficient with our money, it makes some real sense for us to learn the things that they do.

Its quite ironic that most of us went to school, have a career, and earn money yet we weren't taught of how to handle and value money. We may never know everything that these people do (its their profession and career in the first place) but at least improving our financial knowledge will make us more efficient in handling our finances. The worst thing that we can do with our money is to hand it over to other people without even knowing how they are handling it.

Mathematically, individual traders outdo mutual fund firms (individual traders handle mutual funds in the first place). An average good and logical trader could earn a conservative 20% in a month to as high as 50% or even more. Some stocks even go more than 100% in just a matter of days or weeks so we see the potential that these people have. Mutual funds conservatively grow by 12% in a year or as high as 40%-50% in a year. What individual traders earn in months is earned by mutual fund firms in a year. See the difference if we handle our investments correctly or at least know where to put our money and how they are managed?

Invest in knowledge before putting money on the table. Knowledge reduces risk significantly and increases the potential of growth. Its just like earning a degree. If you do well in school, you will acquire the necessary knowledge and skills which will give you a good pay later on. Increasing your financial knowledge will make money work for you.

Financial Literacy Articles

Writing has become a passion lately. Other than writing my interpretation of the chart analysis of several companies listed in the Philippine Stock Exchange, I've written a number of articles in line to financial planning.

Here are some of my articles:

How To Be Smarter in Spending Your Money

Top 10 Financial Planning Tips

Is it a Good Idea for You and Your Spouse to Try Marriage Financial Planning?

Mutual Funds: Good Days Around The Corner

During the last quarter of 2010, we have seen some very significant gains in the stock market, mutual funds, and probably in all financial channels. In the stock exchange for example, SMC went up from around 80 to as high as 180 in just 2 months, around 125% growth in just 2 months. The NAVPS (net asset value per share) in mutual funds also went up as well.

However, as soon as the market started to go bearish early in 2011, the NAVPS in mutual funds also went down as well. I firmly believe that a bulk of investments made by professional fund managers in mutual funds are placed in stocks (and FOREX as well) so the performance of mutual fund companies are strongly affected by the performance of the market thus if the PHISIX signifies something bearish, NAVPS goes down with it.

For more than a month (January to mid-February 2011), PHISIX went down from around 4200 points to as low as 3700, even threatening to go down and challenge the 3600 support level. PHISIX has found support at 3700 and was considered to be in the consolidation stage.

Consolidation normally signifies a change in trend thus after a bearish (values declining) start, PHISIX will pick up some bullish (values increasing) momentum real soon. Personally, I think that the consolidation stage is already long overdue and an uptrend is just waiting around the corner. So knowing where the market will most probably head next, this is a great opportunity to buy shares in either stocks or mutual funds.

For the last 2 years, the performance of mutual funds were superb coming off from the so called economic meltdown. First Metro Asset gained 53% in 2009 and 62.51% in 2010, PhilEquity gained 65.05% in 2009 and 54.18% in 2010 and both are continuing to do well.

Aside from the fact that the value of NAVPS will start to go back up again, here are some reasons why today is the right time to invest in mutual funds.

1.) Bargain prices of NAVPS. First Metro Asset Management's (FAMI) NAVPS is currently only at P3.33 per share while PhilEquity's NAVPS is at 19.18. The good thing about cheap NAVPS is that they've got a bigger room to grow considering their past performances. Also take note that PHISIX is projected to reach a high of 4600 before 2011 ends so expect mutual funds NAVPS to follow suit as well. My bold prediction of FAMI is that it will break the P4 and probably even reach P4.50. PhilEquity will make it past 25.

2.) Cheap means more. Since the NAVPS are cheap, we could buy more shares and more shares means bigger gains. To further explain the point, here's an example. Assuming you invested P5000 at P5 per share, you get 1000 shares. On the other hand, assuming that you invested the same amount but at NAVPS of only P4.50, you get 1111 shares. After a year, the NAVPS went up to P7 thus at NAVPS of P5 you only gain P2,000 while at NAVPS of P4.5 you gain P2,777. What if you invested P100,000 at the same NAVPS prices? After a year, you'll gain P40,000 at NAVPS of P5 while you gain P55,554 at NAVPS of P4.50. Cheaper NAVPS doesn't really matter much for small investments but for bigger investments or bigger gains, the difference really shows. Timing is crucial.

3.) Economic recovery still hasn't peaked. Economists are saying that the Philippine economy still has a long way to go so that means that PHISIX also has a very long way to go. Knowing that mutual funds are strongly affected by PHISIX, that also means that there is a very big room for growth in mutual funds. Since mutual funds are highly advised for long term, right now is the right time because values are cheap and indicators are telling that it is heading in the right direction.

Financial experts are saying that March is the right time to buy shares either in stocks and mutual funds. Their forecast held true as the downtrend stopped and the market consolidated. However, the consolidation seems to take so long (probably because of the problems in Libya and Japan) and the uptrend is already impatiently waiting at the corner.

IMG: The Total Financial Solution

IMG is one of the most unique companies in the industry today. It is a company that is dedicated to serve the financial needs of the people particularly those in the middle and lower range earning population.

The company recognizes the need of financial literacy and firmly believes that financial literacy is one of the keys in nation building. IMG is driven by it's mission to help and educate Filipinos financially both here in the Philippines and abroad and sees a very financially literate Filipino society in the near future.

What does IMG offer?

1.) Financial literacy. IMG associates get access to regular and several training presentations. Some of the topics tackled are how to build the right and a solid financial foundation, debt elimination, introduction to different investment channels, personal assessment of one's finances through the help of professional financial planners and experienced individuals in the money market.

Just think of it as going back to school. In school we were taught of the skills necessary to earn a living. Unfortunately, we weren't taught much about money management and IMG recognizes such deficit and fills it. The good part? As an IMG associate, you can get such trainings for free and at your own time.

2.) Access to different financial institutions. IMG is a marketing arm of several leading financial institutions in the Philippines such as health care, life and non-life insurance, mutual funds, and real estate. The company aims to provide all the financial needs of its associates and clients.

Because these financial sectors recognize and applaud IMG's mission, IMG's associates and clients get several privileges from these companies such as lower minimum investment rates and special training programs exclusive for IMG associates.

3.) A very lucrative and convenient earning opportunity. In line to its mission to help Filipinos earn a good income, IMG offers several business and investment opportunities through their partner companies. With IMG, you can become your own financial adviser and assess your financial needs and become your own financial broker to provide yourself what you need.

IMG shares the secrets of the wealthy and financially secure people to the common ones. With a huge number of very experienced individuals in the financial industry, rest assured that you can get the help that you need through IMG.

Reasons to Invest in 2011: Pot of Gold at the End of the 2011 Rainbow

PHISIX seemed to have started the wrong way for 2011. Instead of following where it left off in 2010, it started to go down and is threatening to hit a low support of 3600 (in reference to its high in 2010 at 4200ish). PHISIX's drop brought with it other financial institutions, after all, PHISIX has one of the greater influences in the Philippine economy.

Despite the sluggish start, 2011 is still a very optimistic year. In fact, 2011 is said to be a great year for investments. Many people get scared (some even panic) seeing the values go down and as soon as the market starts to go up they miss a great opportunity by staying in the sidelines thinking that the market will go down once again. The fluctuations are inevitable in the stock market, it cannot be avoided. Money is also in fluctuations.

Here are some reasons why 2011 is a great year to invest:

1.) Sell off is temporary. As I have mentioned, PHISIX strongly influences the Philippine economy and the financial institutions within it. The bearish behavior of PHISIX is a result of firms and individuals cashing out their gains after the steep 2010 climb. The sell offs are projected to end as early as late February or maybe the month of March. PHISIX is in a consolidation state as of the moment and a reversal might happen real soon (from going down to going up).

As soon as PHISIX starts to pick up the pace, expect other financial institutions to do as well. The sell off is an opportunity to buy cheap.

2.) Strong fundamentals of the Philippines. Statistics show that Philippines has a lesser Debt to GDP and Deficit to GDP than United States and the European area. In 2009, Philippines has 56.0% Debt to GDP while United States has 83.0% and the Euro area have 74.0%.

Philippines also has the higher growth forecasts in 2011 up to 2015 compared to United States and the Euro area. Philippines is projected to grow by 5.4% in 2011 in comparison to USA's 2.3% and Europe's 1.5%. In 2015, Philippines is expected to grow by 6.0% (in reference to 2010) while USA and Europe will have 2.6% and 1.7% growths respectively.

3.) Philippines is in the midst of an investment boom. Well developed countries have an investments in GDP rate of at least 30% to as high as 50%. Since 1991, the highest that the Philippines have gone was approximately 26% and went on a downtrend since then.

Right now, Philippines is resting on a 16% investment in GDP rate, almost half than the minimum number in well developed countries. What this rate tells us is that there is still a lot of room for growth.

From 2011-2016, (US) $17 Billion worth of public-private partnerships (PPP) are projected. In 2011 alone, 11 PPP projects are scheduled namely NAIA Expressway ($235 Million), LRT Line 1 Expansion ($170 Million), MRT-3 Expansion (P140 Million), LRT-1 South Extension ($700 Million), LRT Line 2 East Extension ($120 Million), Laguindingan Airport Construction ($28 Million), Cavite-Laguna Expressway ($262 Million), NLEX-SLEX Link ($467 Million), Panglao Airport ($120 Million), Puerto Princesa Airport ($97 Million), and Daraga Airport ($71 Million) all worth $2.41 Billion.

The economic recovery is not yet over in fact it said that it still hasn't reached its midpoint.

4.) Valuations are not expensive. Because the prices of stocks in the Philippine Stock Exchange are falling, people could invest in bargain price. The current price values of stocks doesn't reflect the real value of the company or the stocks themselves and most of them are undervalued right now. They are cheap and they've got a lot of room to grow.

Investments carry risk with it but risk could be minimized. The greatest risk in investing is not doing anything at all and playing safe thinking that you might lose your money. The financial industry is projected to do very well as soon as PHISIX resumes an uptrend so shop around for mutual funds, UITFs, bonds, and stocks because they will definitely do good in the next few months. Though other sectors are expected to do good as well, these investment opportunities in the financial industry are way simpler and convenient compared to other investment opportunities. Quite ideal for a typical Juan.

Banks vs Mutual Funds

The money market isn't as complicated as we think it is. Unfortunately, our very limited knowledge results to pessimism towards finances and investments making it complicated and blocks us from great opportunities that would make our money grow. Among the very common reasons that keeps a person from investing are the effort and knowledge required, the capital needed, and simply the fact that trust is very hard to give these days.

Banks are the most popular financial institutions. Talk about money and most people would think about banks. Why is it popular? Because it directly answers all concerns. Banks are easy, somebody who doesn't know how the financial industry works could put up an account, the amount needed to open an account is minimal, and banks have very good credibility.

However, banks isn't what we think it really is. Don't get me wrong, I'm not saying that banks are bad but in this generation, banks are no longer the best places to put money in. Money doesn't technically grow in banks because inflation rates are higher than bank rates and the rates of loans are higher than interest rates. Isn't it ironic that if you deposit to a bank you earn just a max of 1% and when you loan you'll pay at least 4% interest rate? You're borrowing your own money and pay even more. Banks are smart, they know how to make money. (I said smart, not evil)

A lot of people failed to see this picture thus they think that by putting money in the bank they are saving, and tragically, some even think that they are investing (yeah, tragic).

In order to save and invest efficiently, there are some things to consider but everything boils to just one thing: make the value of your money grow. Be aware that increasing the value of your investment is not letting your money merely earn any interest. Here's an illustration:

Let's say you have a hundred pesos right now and you deposit it to a bank earning an interest rate of 1% annually and the inflation rate is 4%. After depositing money in the bank, you ate at a restaurant a meal worth P100. A year after, your money earned 1% interest and becomes P101. You withdrew it and you went to the same restaurant to eat the same meal. To your surprise, the meal now costs P104!

How did such meal become P104? Because of the inflation rate your money lost roughly 3% of it's value. See? Your money earned an interest but it's value never went up, in fact, it lost some of it's value because of inflation.

In order to increase the value of your money or in order for it to earn a real growing interest, it should beat inflation and other liabilities that could pull it's value down.

One of the best ways to invest is through mutual funds. Mutual funds are pool of money coming for different investors/savers that are invested in different securities such as stocks and bonds and are handled by professional fund managers.

Just like banks, mutual funds answers the same concerns. It is easy, it doesn't require much to open an account, and it is credible as well. Opening a mutual fund account is basically just the same as opening a bank account. You fill up the necessary forms, provide the requirements and amount required to open an account, and you can let your money/investment sleep for 10 years.

Mutual funds could give annual returns of at least 12% (conservative estimation) annually, leading bank interest rates by tenfold. Actually in reality, mutual funds could give returns like 30% or as high as 50% annually which is more than enough to outdo inflation and banks.

But what's the catch in mutual funds? Mutual funds are considered as investments and not savings and they aren't insured by PDIC. The risks are higher in mutual funds in comparison to banks but the potential gains are far greater. Another thing is that mutual funds doesn't have a fixed interest rate or gain. Mutual funds depend on the market behavior thus if the market is down, mutual funds goes down as well and vice versa.

How good could mutual funds really be? PhilEquity, recognized as the oldest mutual fund company in the Philippines, started in 1995 with a net asset value per share (NAVPS) or price per share of P1. By the end of 2010, PhilEquity's NAVPS rose above P20. In 15 years, PhilEquity's value went up by 2000%. No bank could give a gain like that in less than 2 decades.

Mutual funds are starting to gain popularity among the people. Experts suggest that mutual funds are an ideal replacement for retirement plans, educational plans, and savings. Some of the companies that are offering mutual funds in the Philippines are PhilEquity, First Metro Asset Management (subsidiary of Metrobank), United Fund (Cocolife), PhilAm Asset Management, and SunLife Financial.

Both still serve different purposes. Banks are best for emergency funds because they are very accessible. But should you go for some serious gains, take mutual funds into consideration.

The financial industry is a very vast topic to consider. There are other investment vehicles that could also really give great gains (in fact, even more than mutual funds) but considering it's simplicity, mutual funds is definitely worth the nod. It is basically an effort free investment. That's "easy" money so to speak.