Reach the Beach
With the limitations of these uncertain times, how can you experience the island vacation you want? The answer is simpler than you think.
I was listening to the Fixx’s “One Thing Leads to Another” (yes, I am old) and the album’s title hit me: “Reach the Beach.” Damn. I haven’t had mountain air or salt water in nearly two years!
Twenty months since the pandemic-induced travel ban was imposed, many also find themselves itching to pack their bags and head out to their favorite getaways. For those accustomed to taking their Peking duck lunch meetings in Hong Kong, or skipping to Como to test their newly-serviced boats, the itch to ditch the briefcase, work from home arrangements notwithstanding, has been throbbing more than ever. Unfortunately, the type of vaccine administered continues to dictate which international destination is accessible at this point. So while many foreign tourist capitals have opened up, local travelers remain strapped due to selective and vaccine-related bans on outbound Filipinos.
The good news is, you don’t have to go far to get your feet wet. For the more adventurous tourists who can shed their creature of comfort persona, there are a lot of places off the beaten path that are worth your wait. Whether you’re into photography, diving, surfing, trekking or just beach combing, we’ve culled a shortlist1 that goes beyond Balesin, Bohol and Busuanga; and we’re not even talking about Boracay. These top five under-the-radar gems, arranged from North to South, should help ease your wanderlust.
1. Kaparkan Falls. The local version of Vietnam’s Pongour waterfall, getting there isn’t a stroll. The falls sit in the town of Caganayan, Tineg up north in Abra, which is about an hour’s flight (or a 10 hour drive) from Manila. You may need to trade your Tumis for trek poles to get there, but it’s all worth it. Get those muscles moving; the reward is priceless.
2. The Caramoan Islands. Popularized by the Amazing Race, this cluster of islands is known for powdery beaches, rich marine life and raw rock formations. They sit on the edge of Camarines Sur in the Bicol Region. Visitors take an hour’s flight from Manila to Legazpi, followed by a two-hour drive to Sabang Port and another two-hour speed boat ride. Getting there may be an ordeal, but the trade-off is a tranquil, clean, unpopulated patch of paradise.
3. Apo Island. Divers, snorkelers, marine biologists and underwater videographers swear by its waters’ biodiversity. If you’re into swimming with sharks and turtles, giant corals and countless species of fish, drive for an hour from Dumaguete to the sleepy town of Malapatay, and then hop into a banca until you reach the island. It’s a spartan’s haven, given humble accommodations, rationed electricity, and food supplies that are dictated by sea currents. It’s a turn from the pampered dive spots up north, and it may be worthwhile experience.
4. Sohoton Natural Bridge Park. Sitting in Samar Island in the Eastern Visayas, this is your alternative to the more popular Saint Paul subterranean river national park. A boat ride along the Sohoton river takes you across lush greenery and limestone structures. There is Panhulugan Cave that houses weather-made sculptures that resemble Bohol’s Chocolate Hills and Banawa’s rice terraces. Further down the river, the canoe glides towards the Natural Bridge. Visitors then slide through the rock wall and into a water hole for a refreshing dip. The park is accessible by habal-habal from the village of Basey, after taking a bus or jeepney ride from the city.
5. Siquijor. Aswangs aside, the much maligned image of an otherwise pristine patch of sand and sun sits between Bohol and Cebu and is relatively accessible. Two local ferries depart from Cebu’s Santander port, while one ship kicks off from Bohol’s Tagbilaran port. On top of beautiful beaches, the island hosts several waterfalls, old churches and convents. Visitors usually hop on mopeds and take their time exploring its hidden nooks and crannies.
Why go local?
For one, Ibiza, Machu Picchu, Morocco can wait. The creperies along Champs Elysees won’t close anytime soon, and the Paris-Roubaix race will return. And of course, there are the 2024 Olympics. All akin to a jet-setter’s normal travel tastes.
More importantly, the pandemic and consequent ban on foreign travel unintendedly shifted the spotlight to sustainable domestic eco-tourism. Visiting any of these spots not only supports livelihood activities for our communities, but opens our eyes to the natural beauty of the homeland.
This is not glamping. It’s a paradigm shift from moonlit, ocean-view balconies, canapes and wine.
It’s a call to re-experience that downing a cold one on an isolated, sandy beach as the sun sets could be just as calming.
Have you switched those Salvatorres for Scarpas yet?
Money Talks: Know yourself, know your path
Maximizing investments starts with you. Find out what to consider as you move forward, no matter where you are in your investment journey.
Local investors are propping up the Philippine investment market as according to the Philippine Stock Exchange, local retail investors accounted for 74.3% of the stock market transactions in the first quarter of 2021. Moreover, Finance Secretary and Capital Market Development Council (CMDC) chair Carlos G. Dominguez III said the increase in retail investor participation is a symbol of the trust and confidence of the public in the country’s investment landscape.
Yet many Filipinos are left out of this equation. In this B-Side episode, Sharon W. Zulueta, vice president and head of the trust retail products division at Metrobank, discusses with BusinessWorld why only a fraction of Filipinos put their trust in the financial market, and why more should.
Financial exclusion is still the norm for many Filipinos.
“To put it in context, out of the total adult population in the Philippines only 29% have a formal account—meaning an account with a bank, a microfinance non-government organization, has an e-money account, cooperative, etc. Of these, only 10% actually use it to invest. So only a tiny fraction of Filipinos invests in the market.,” Ms. Zulueta said.
Things will get better with the country’s growth.
Economic growth can naturally increase financial inclusion, as more Filipinos gain income and access to the financial system.
“The number of Filipinos that have opened formal accounts are those that have the capacity to stash away money in that account, or those people who have jobs who use that account to receive their salaries every month. So the ability of Filipinos to open a formal account is tied to the progress of the country,” Ms. Zulueta said.
“When the country progresses, more Filipinos will be more included in the financial system.
Take a step back.
Before investing, neophytes should first know why they’re getting into it. “You have to take a step back before you dive into the investing world,” said Ms. Zulueta. “You have to know yourself and know what type of investor you are.”
First-time investors should consider their purpose, their appetite for risk, their time horizon, and their hurdles.
There’s more to investing than time deposits.
“When we talk about assets, typically for Filipinos we think about cash, time deposits, money that is placed in savings or checking accounts. Why is it not necessarily a good thing even though you’re technically setting aside money?” Ms. Zulueta asked. “There’s the problem of inflation, or the rate by which prices of goods go up every year. Right now, inflation is at 4-5%. Let’s say you bought chicken last year for P100 a kilo, right now it’s going to be P104 a kilo. The value of your money actually goes down over time, unless you invest it.”
Look beyond the local market for opportunities.
Those who are already investing can stand to benefit from diversifying where they invest.
“One advice I would give in order to have a more diversified portfolio regardless of where you are in your investment life is looking beyond local. Diversifying your portfolio does not just mean diversifying your asset classes, it’s really diversifying in terms of geography. Look at investing in more developed countries like the US or Europe or even in other Asian countries,” Ms. Zulueta said.
“The Philippine stock market has been challenged in the past five to ten years for many reasons. But we’ve seen that the US market has done phenomenally well the past five to ten years, mainly driven by the technology industry. If you were just invested in the Philippine local market, you would have had dismal returns. But if your portfolio was a little more diversified in terms of geography, and you put a bit more money in markets outside the Philippines, you would have done better.”
It’s also a matter of trust.
For many people, banks or investing are unfamiliar concepts and that can have the effect of turning them away from the market altogether. But it doesn’t have to be that way.
“Banks have a fiduciary relationship with their clients. What does that mean? It means that banks have the responsibility to do what’s best for their clients. Especially for Filipinos who have limited experience with banks, trust is built over time,” Ms. Zulueta said.
“If you’re really not interested in investing, hire somebody whom you trust to do it for you. A bank can guide you and make it easy for you to have that exposure to different markets and for you to have sound asset management that would allow you to grow your assets over time.”
Recorded remotely on Oct. 15, 2021. Interview by Santiago J. Arnaiz, BusinessWorld contributor and chief operating officer of health startup Day3 Innovations. Research by BusinessWorld special features writer Bjorn Biel “JB” M. Beltran. Produced by Paolo L. Lopez and Sam L. Marcelo.
Things to ponder on before your retirement
How financially prepared are you for retirement? Here is a list of things you may want to consider to ensure a smooth transition into retirement.
There are people who retire, only to come out of retirement in a few months or years. When asked for the reason, some will say they got bored or they miss the challenge. Unfortunately, a good number will say the reason is financial in nature. Yet, not all will have the luxury of having access to a job anytime he or she wants — that is why we really need to prepare for our retirement.
Preparing for retirement is no easy task, and I would say it is more of an art rather than a science. What will work for one person might not necessarily be true for another.
I have observed that individuals normally procrastinate on this matter, saying “I’m too young to be planning for retirement” and preferring to enjoy life as it goes on. There’s nothing wrong with enjoying our careers, but we must bear in mind that retirement is not always our choice, especially under the situation we are currently in. I myself will be retiring in eight years, and I have been spending a good amount of my free time asking myself if I will be ready by then.
How prepared are you?
Being prepared for retirement largely involves financial preparedness. A big part of financial preparedness will be a function of your chosen lifestyle, the timing of your retirement, and your health condition when you retire. Your chosen lifestyle and time of retirement are both within your control, while health conditions can potentially alter your preparedness. For instance, there are cases where the retirement money was completely wiped out because of medical expenses.
How, then, will you assess your preparedness for retirement? Asking yourself the following questions can help you gauge if you are almost ready: Will I have an outstanding mortgage that I will need to amortize after my retirement? Will my kids be done with their education by then, or will they take up further studies? What is the minimum amount I will need to cover my day-to-day expenses? (You have to factor in inflation for that).
Moreover, ask yourself how much retirement money you will get and what will be the interest rate at that time. Gone are the days when we can live on interest. You should also figure out if you have enough insurance coverage, and whether you have passive income other than your SSS pension.
In addition, check on your health and determine whether you have medical coverage after retirement. Determine as well your estimated life expectancy.
To further assess your financial preparedness, imagine how your life will be if you retire. If your concern will be what to do with your idle time rather than how you will deal with the basic necessities (e.g., paying bills), then you are likely prepared. The ‘idle time’ concern can be easily addressed as long as you have financial security, while the latter concern will be a bigger problem because it will cause you anxiety.
While financial preparedness will be a more pressing concern for those nearing their retirement, those who are still far from retirement should also consider this. Regardless of how long you’ve been in your career, you should realize that you would retire at some point. You will not be working forever. The sooner you realize this, the earlier you can prepare for your eventual retirement.
Preparation for starters
Retirement can be either a personal or a mandatory choice. Ideally, we prepare for it as early as we can. But, in reality, there are a good number of us who are very close to retirement age who have not given it much thought.
If this is your situation, you have to start somewhere. For starters, you should have a clear idea of your estimated years of work before retirement. Then, you have to determine if you will be eligible for retirement pay.
If you have been switching jobs, there is a high chance that you will not be getting substantial retirement pay. So, you’ll just have to rely on whatever savings you have through the years.
Once you have determined your remaining work years and eligibility for retirement pay, you have to consult financial experts. Set up a meeting with your trusted banker or financial advisor, and have an honest-to-goodness conversation on how they can help you manage and grow your existing savings and retirement pay.
In addition, you can consider setting up your own business, as this is another alternative source of passive income; but you need to ensure you have a solid business model. It is also advisable not to put your entire retirement money at risk.
Financial tools will always be there to help you plan your retirement, but it will all boil down to how much you can set aside on a monthly basis. Depending on the amount you have saved and your risk appetite, you can choose to invest in time deposit/unit investment trust fund, equities, property, and insurance with medical coverage, to name a few.
Of course, to begin with, you should make sure you have funds to invest. Then, you have to ensure you have a good understanding of the financial products out there.
In case you are not yet fully aware of these tools, it is never too late to reach out to your banker or financial advisor who will be more than willing to share their knowledge with you. Financial advisors can help tailor-fit solutions to cater to your specific requirement. Make sure you give time for open conversation with them on where you are in your retirement plan.
Metrobank can help you with these specific needs. We have highly trained investment specialists who can recommend products based on your need. You can also be referred to our Trust Banking services or our partner AXA Insurance for insurance-related solutions.
ROMMEL ENRICO C. DIONISIO The author has more than 20 years of banking experience particularly in Corporate Banking and Treasury/Markets. He is a B.S. Management Graduate from Ateneo De Manila University and earned his Post Graduate Degree from Asian Institute of Management.
This opinion article is part of Metrobank’s Financial Education campaign series.
Building financial confidence in times of crisis
The public debt ratio is reaching the 60% threshold that is considered to be high-risk, but should you be worried?
THE COVID-19 pandemic has been a painful experience for many people. We lost a lot of good people in this pandemic, and many more lost their livelihoods as a result of the lockdowns. For many Filipinos, the idea of investing their money during this crisis, when they could use it for more immediate gains, is nothing but wishful thinking.
But as they say, when there is crisis, there is opportunity. The new world that will emerge from this crisis will be very different from the world that we had when we came into it. The skill sets that will be needed will also be different.
Investment is a process and not a single act. Before you convince yourself to invest during a crisis, you must convince yourself to invest. Investment is a mindset. It is a process of committing your assets now for growth so that you will have bigger assets in the future.
Investment can take many forms: placing in time deposits, buying stocks, investing in bonds. But it can also mean starting a business, buying a house, protecting yourself with insurance, or getting an education. Every time you forego consuming and put your resources to work for future gain, you are investing.
It is never too early or too late to invest. It is also never the wrong time to invest. Once you have the investors’ mindset, your eyes will be opened, and you will see opportunities all around you during a crisis as well as during normal times.
The most precious resource of all is time. If you do not have money to invest right now, use your time to learn and improve yourself. Learn about the stock market, the bond markets, the real estate market, or even the retail market. Learn how to program computers, learn how to sell, learn how to talk in front of large audiences, learn how to run a food business, learn a new language. Just like money, you can either consume time by using it in something that gives you present satisfaction, or you can invest it by using it to learn something new and better yourself. This is part of the investor’s mind.
You do not want to start learning about investments only when you do have money to invest. This is a sure way to wipe out your money. Prepare yourself now so that when you do have the money, you know what to do.
There are a few books I would recommend to get you started in your investment journey. The most influential books for Warren Buffet were the Intelligent Investor by Benjamin Graham and How to Win Friends and Influence People by Dale Carnegie. For a quick understanding about the market, I would recommend watching “How the Economic Machine Works” by Ray Dalio in YouTube and reading his book Principles.
Once you have acquired all the necessary knowledge, it’s time to diversify your investments. Divide your investment portfolio into two parts, a safe part and the aggressive part. Most people should invest at least part of your portfolio in some aggressive investments. Otherwise, you will never accumulate wealth. Putting all your money in the safest investment is the most certain way to wipe out your wealth. Remember that every year, inflation is eating away our money. Did you know that soft drinks used to cost 25 centavos and the dollar was worth seven pesos?
In general, the younger you are and the more time you have left to invest, the more of your assets you can allocate to the aggressive part of your portfolio. Of course, this is over-simplified and factors such as investment knowledge, personal circumstances, and life goals can change what is safe and what is aggressive. For example, for some people, time deposits are the safe part of their portfolio and stocks are the aggressive part of their investments. For others, stocks are the safe part of their investments while cryptocurrencies are their aggressive part. It really all depends.
Also, try to resist following the herd or unattributed sayings. I was once told that a person should invest 100 minus your age in the aggressive part of his portfolio. In general, following rules of thumb are not the best way to structure your investment portfolio. Do not follow “hot tips” unless you carefully study the investment. When in doubt, don’t! If it sounds too good to be true, it is.
It is best to consult investment professionals such as our Investment Distribution Desk or Specialists in Metrobank branches and Metrobank Trust. We follow a strict process to find suitable investments for you, and at the same time help you increase your investment knowledge.
Open your minds to the changes that are happening and do not insist that the world will return to what it was before. Be prepared to do things differently. We have to be comfortable with technology. We have to be able to communicate clearly even if we are not interacting face to face. We have to decipher what will be needed in the new economy and prepare ourselves for it. This is valid for businesses as well as people. You do not want to own the biggest candle making factory when Edison invented the lightbulb. Reinvent yourself and acquire new skill sets. Use the time you have on your hands to improve yourself.
FERNAND ANTONIO A. TANSINGCO, CFA (TOTO) is the senior executive vice-president and treasurer of Metropolitan Bank and Trust Company. He has oversight of the bank’s financial markets sector covering treasury, wealth management, private banking, institutional investors, and asset management. He also currently serves as the vice-chairman of the board for AXA Philippines, and advisor to the board of First Metro Investment Corporation, and Metrobank (China) limited.
This opinion article is part of Metrobank’s Financial Education campaign series.
Money Talks: Making your money work for you
Investing is an opportunity for everyone to consider. Make the most of it with these general tips to guide your decisions.
The pandemic has brought with it a newfound interest among Filipinos to participate in the stock market. Data from the Philippine Stock Exchange (PSE) showed that the average daily number of trades in 2020 soared 33.7%, while retail participation surged by 47.8%. This follows an increase in online accounts by 19.7% to 936,000, while non-online accounts grew by 3.3% to 460,553.
In this B-Side episode, Ruben L. Zamora, Metrobank’s First Vice President and Head of the Institutional Investors Coverage Division discusses with BusinessWorld why more Filipinos are more willing to “let their money work for them,” as well as how the beginner investor can sift through their options to start their financial journey.
You can be doing more with your savings.
“Putting your money to work is really about making your savings earn more and do a bit more work to build and accumulate wealth through investing,” Mr. Zamora said. “The days of earning interest from a simple savings account, those days are long gone. And that goes for everyone in the world, not just here in the Philippines.”
Investing is [not] a rich man’s game.
Whether with P10,000 or P100,000, there are good options to choose from for beginner investors.
“The good news here to those who are just starting out: You don’t need a big pot of money anymore to start the investing journey,” Mr. Zamora said. “Now more than ever, there are so many investment options for you to choose from. If you want a little bit more return and you’ve done your homework, and feel like you can tolerate and accept a bit more risk with your investments, start with an index tracker fund on the whole market that you know.”
Your participation matters.
Investing is not zero-sum game. More local investors in the market can help its general health in the long run.
“This is something healthy, something that we would welcome for our local capital markets. And the reason is that with the base of retail investors broadening out, more local investors participating, it means that we are not as reliant as we used to be on foreign investors or foreign capital flows,” Mr. Zamora said. “These flows can get pretty cold very quickly and we’ve seen that in this crisis, with foreigners exiting both the stock market and the fixed income market.”
Do your homework. Especially if it’s about cryptocurrency.
“As a beginner investor, you don’t really want to invest in something you don’t understand well enough. You need to do a lot more homework, especially as you move up the risk ladder. And risk ladder-wise, I would put cryptocurrency right at the top,” Mr. Zamora said.
Understanding economic indicators for investment
With investment highs and lows, the best way to protect your finances is to make well-informed decisions. Get yourself started by knowing what to look out for.
Talking about the investment market and the economy can be daunting for any first-time investor. But it does not need to be. Understanding how the economy works in tandem with the market is a valuable skill that any interested investor can develop and cultivate.
First, we need to start by understanding what investing means. Investopedia.com defines investing as the act of allocating your resources, usually money, into assets or endeavors that you expect will generate income or profit for you in the future. But the basic idea is that rather than you working for your money, investing lets your money work for you.
How hard you want your money to work for you then becomes the next question. Just like everything else in life, the higher the expected reward, the greater the risk you’ll likely have to take. When it comes to investments, a lot of things can go wrong, and the best way to protect yourself from things going wrong is to do your homework. You need to understand what you plan to own and the risks associated with owning them.
The value of investments reflects many things, foremost among them being the economy, or more specifically, the outlook of the economy. What’s happening now has made this more important than ever.
The current COVID-19 pandemic and the negative impact it has had on our economy is a living, breathing, and sadly, still an ongoing example of things going very wrong. The pandemic forced an unprecedented nationwide lockdown for 75 days in the country, ceasing any form of normal social activity, like going to school or seeing friends and family, and in turn grinding the economy to a halt. This meant lost income for many businesses and companies, leading to permanent business closures and job losses. This abrupt slowdown in the economy resulted in a sharp fall in the value of assets held by investors, particularly the stock market, which fell as much as -40% in a matter of days.
While no one really could have anticipated a shock like this, we can and should use this experience to develop a better understanding and appreciation of the economy’s impact on investments. We saw first-hand that when the outlook for the economy turned bad, the value of investment assets fell. It stands to reason therefore that when the economy stabilizes and begins showing signs of recovery, the value of assets should then rise.
Important economic indicators
Understanding the health and outlook of the economy is therefore a vital part of any investment decision-making process. Studying three of the most important “economic indicators”, namely the country’s Gross Domestic Product (GDP), inflation, and unemployment, would be a good start. Looking at these economic indicators will tell you the general state of the economy at that point in time while tracking changes in these indicators over different periods will help you identify “economic trends”, and in turn, the overall direction and outlook of the economy.
GDP, or the total monetary value of all goods and services produced in a country within a specific period, is the most commonly-used measure of the size of the economy. Positive growth is therefore good, while negative growth, or GDP contraction, is not. Because of the health crisis, the Philippines’ economy is set to experience economic contraction for the first time in 22 years.
INFLATION is the increase in the average prices of a fixed basket of basic goods and services in an economy. Rising prices of goods might be viewed as a bad thing, but some inflation in the economy is actually healthy because it indicates strong demand for goods and services in the economy, which of course is positive.
UNEMPLOYMENT is a measure of joblessness, expressed as the percentage of people in the labor force without a job. Clearly, the lower this number is, the better.
Once we have developed a firm grasp of how these key indicators affect the Philippine economy as a whole, then we can relate it to how it affects the stock market.
The stock market and financial markets
The stock market is made up of the country’s largest companies in the country. When the economy is doing well, that is, when GDP is growing reasonably fast, inflation is stable, and unemployment is relatively low, then these companies should be doing well and should experience robust sales of their products and services, and in turn, strong earnings, all else being equal. This should then mean that the company is growing and hence is becoming more valuable.
When you buy a stock of a company from the stock market, you become an owner of a part or “share” in that company, so the more valuable the company gets, the higher the price of that share goes.
The savvy investor must therefore be able to read signs and anticipate changes in economic trends, that is, when things are about to turn bad, and vice versa, as these trends will likely impact the business of a company in which you own a share, and ultimately, the value of that share.
You can think of financial markets, like the stock and bond markets, as a superpowerful computer that processes the expectations of all the buyers and sellers out there, based on everything that is happening in the world, and then spits out a market value or price for a particular stock or bond instantly.
Because people have different views and opinions of what to expect in the future, these market prices are in perpetual motion, always moving as each new expectation is “priced-in”. Sometimes, they move a lot, especially in times of great uncertainty, just like what happened when the pandemic was announced. These changes in prices over time is what is referred to as volatility.
Savvy and successful investors
During periods of high volatility, when prices are swinging around rapidly, the savvy investor is someone who stays level-headed and doesn’t give in to emotions. This is easier said than done, because we are only human, and the forces of greed and fear, euphoria and panic, are indeed very strong.
How do you do this? By starting with a deep knowledge base before you invest your hard-earned money. You need to know the risks involved and understand the level of risk you’re willing to accept and tolerate. Again, the greater the expected reward, the greater the risk you must be willing to take. Successful investors tend to be those who are always learning and planning and are usually a patient bunch.
When you are armed with this knowledge, then you can make better decisions about your investments, even when markets are volatile. This continuous learning process should involve regular discussions with a trusted investment adviser with a strong handle on very complicated markets. In Metrobank, we call them Investment Specialists. Another alternative to consider is to engage the expertise of a professional investor, such as a fund manager from Metrobank Trust, whose main job is to maximize investment returns while managing risks.
RUBEN ZAMORA heads Institutional Investors Coverage Division, the relationship management unit for Non bank Financial Institutiions in Metrobank’s Financial Markets Sector. Prior to joining Metrobank, he was based in Singapore with UBS, Credit Suisse, and BofAML (now BofA Securities) for Asia ex Japan equities sales and account management. He holds an MBA from the University of Chicago.
This opinion article is part of Metrobank’s Financial Education campaign series.
Finding the fit: How to tailor your financial portfolio
Creating a financial portfolio specific to your needs can help make sure your investments work for you. What should you be considering to get started?
In tailor-fitting their financial portfolios, high net-worth investors easily have access to a wide array of instruments and expert advice from their own portfolio managers, investment specialists, or even private bankers. But for smaller investors like most of us, such services are not available considering limitations on portfolio sizes and fees . This does not mean, however, that we should not enjoy a certain degree of tailor-fitting.
Creating a financial portfolio that suits your needs does not have to be time- or energy-consuming. Thanks to technology, retail investors can now accomplish online or in-app questionnaires to determine their profiles and they are immediately provided with the recommended asset mix suited to their needs and investment outlets.
Our local regulations ensure that financial institutions conduct suitability assessment to determine objectives, risk appetite, and financial sophistication prior to selling any investment product. Some institutions that cater to retail investors have designed model portfolios per investor type.
These are some of the questions that will lead you to the most appropriate portfolio: Who are you investing for? Who will make the decisions regarding the funds? What is your overall financial capacity? What are the financial objectives of your portfolio? How much is your loss tolerance? Do you need a professional to make decisions for you? What is your actual investment experience?
If you are just starting to build a financial portfolio, I recommend pooled funds such as Unit Investment Trust Funds or Mutual Funds that are managed by reputable institutions. These pooled funds allow small investors to access markets and investment themes. Because of the low minimum amounts required, you can create a combination of several funds according to the asset mix appropriate for your profile, thereby achieving your own tailor-fitting.
It is also beneficial to create several portfolios for your different objectives. For instance, one portfolio may carve out a certain amount for near-term liquidity needs, second portfolio may be constructed for long-term capital growth, and third portfolio can be for generating periodic income for household needs.
In building or choosing a suitable portfolio, you need to fully understand its component assets, the potential returns, and the risks involved. It needs to be consistent with your objectives, horizon, risk appetite, and sophistication level. You should also consider your personal preferences and beliefs in choosing investments.
Just like our measurements, our objectives, needs and circumstances also change. Hence, our investment portfolios need to be adjusted accordingly. You may have a new capacity and sophistication to expand exposure into new instruments or sectors. If certain securities or funds in the portfolio are under-performing for specific reasons, it may be beneficial for you to shift.
To keep your tailor-fit portfolio constantly working for you, conduct a periodic review. Assess whether it is performing within your expectations and understand what drove the gains or the losses. Always strive to educate yourself in markets as well. Establish benchmarks against which to evaluate the performance of your portfolio.
Whatever the situation, avoid simply chasing yields without understanding the mechanics, risks, and overall fit with your personal situation. Don’t get into investments just because everyone else does. Understand first why they went into it. Their circumstances, objectives, and risk tolerance may be completely different from yours.
Don’t get into an investment purely based on historical performance. Understand what factors led to such good performance, since they may no longer be true under current market conditions.
As a final advice, an investment portfolio is a personal choice. If your investment portfolio is keeping you up at night and is causing anxiety, then it may not be right for you. Work with something you can be comfortable with and the rest will take care of itself.
ANGELICA “JIKEE” REYES, CFA is Senior Vice-President and Head of the Metrobank Treasury Banking Group. She has oversight of balance sheet management and trading activities of the bank. Prior to her current role, she headed the bank’s financial markets sales, brokering, structuring and risk advisory units.
This opinion article is part of Metrobank’s Financial Education campaign series.
This article was first published on BusinessWorld.
Navigating the world of Investments
Make your money work for you with guidelines that can help you move further along your own investment journey.
It is often said that investing in the stock market is a rich man’s game. And perhaps no place has internalized this statement more than the Philippines.
According to the Philippine Stock Exchange’s latest Stock Market Investor Profile report, the total number of stock market accounts was recorded at 1.23 million last year, a number that, while impressive, is but a tiny fraction of the country’s more than 100-million population. There are a number of reasons why.
First, a portion of our population still lives on a day-to-day basis so investments for them are still a luxury. For those with excess cash, our tendency is to purchase more immediately-felt, luxury goods rather than save and invest for the future.
Second, financial literacy is not part of the general curriculum in most educational institutions. If properly taught in schools, many Filipinos should have a firm grasp on the importance of investments at a young age.
Third, the rise of networking businesses had somehow overshadowed traditional investment vehicles. Traditional investments have suffered as a result, with many people believing them to be “low-yielding” instruments compared to business ventures.
Despite the challenges mentioned, traditional investing remains to be a viable medium to grow one’s nest egg.
Understanding the different asset classes is important when you start investing. It is also important to know some common investment misconceptions.
One misconception is that equity investments are greatly associated with luck and give quick returns. The truth is equity investments are not short-term investments because short-term gains in equities usually overshadow the risk in the near-term.
Another misconception is that Filipinos believe that you need a large amount of money to start investing, when in fact there are collective investment schemes like mutual funds and Unit Investment Trust Funds (UITFs) offered by popular commercial banks that have very low minimum starting amounts.
Investing has also become very convenient with the advent of online platforms offered by financial institutions. One needs only to take a few minutes to set up an account with any of the available online investment platforms or with their bank to start investing for their future.
When you start to invest, there are several things to be considered. The first thing that needs to be established is how much money or savings you will need by the time you retire so that you have a goal to achieve. With that goal in mind, you need to determine how many years you need to save for that amount. An amount needs to be set aside regularly towards that goal.
The best time to start investing for retirement is right now. If you invest later on in life, you run the big risk of not having enough savings to sustain your lifestyle after retirement.
Next, we need to determine what type of investments is needed to reach our goal. If the investor opts for safer investments like only time deposits and bonds then the annual contributions will need to be larger, if they add equities in the portfolio mix then the annual contribution may be less.
In addition, you also need to assess your own personal liquidity situation. Will you be needing your money over the next year as you plan to make a huge purchase? Will you need you money in the next few years? In general, for funds you will need in a year, it should be limited to time deposit. Funds that will be needed in the next three years should be limited to bonds, and any excess cash that will not be needed in the foreseeable future should be invested in either equities or real estate.
The problem with most investors is that they tend to stick to the asset class they are familiar with only. In some cases, most investments are lumped in Time Deposits and Bond only which, as mentioned above, hardly beats inflation. In other cases investments are limited to local currency investments only. A good mix of safe and risky investments will ensure that a portfolio can reach your desired goals.
For new and inexperienced investors, we suggest investing in a healthy mix of collective investment schemes like UITFs or mutual funds for starters. As they get more investment savvy, they can start investing on their own or hire experienced asset managers to run their investment portfolio.
Speak to the experts and continue to learn. Understand in what scenarios each asset class performs well in, who are the major players in that investment market and how do they think, the technical aspects of the investments particularly valuation (whether it’s cheap or expensive). Let the experts manage your personal investments. Hire an asset manager for this purpose as they have the skill, expertise, resources, and infrastructure to make sound investments.
At the end of the day, investing gives us an opportunity to further grow our hard-earned money to prepare us for the future.
LEANDRO ANTONIO “DONDI” SANTILLAN is Senior Vice-President and Head of the Metrobank Trust Banking Group. He sets the overall direction for the trust banking business in terms of profitability, performance, and industry ranking.
This opinion article is part of Metrobank’s Financial Education campaign series.
The Pursuit of HappyNEST
Preparing the next generation for the family’s wealth can be a difficult balancing act. Find out what you can do to make it easier.
Wealth management and preservation for the ultra-high-net-worth (UNHW) is a daunting task which goes beyond financial management. More importantly, it involves the perpetuation of the family legacy. This is why it is equally important to ensure the general well-being of family members across generations.
UHNW families have various business interests and own substantial assets locally and offshore. With multiple sources of income, they have complex needs and face numerous concerns that need to be managed well. First among these is BUSINESS — the setting up of strategic vision & direction as well as day-to-day business demands. Second is management of financial and & real ASSETS, owned individually and by the family. Third is FAMILY MANAGEMENT.
The first generation is usually focused on business and asset management because wrong decisions could result to huge financial losses. For this reason, they engage the best consultants in the industry to deploy or reallocate assets to the next most promising venture, talk to their bankers about loans and investments to maximize business profits and optimize portfolio returns.
What about Family Management? How important is this for the UHNW?
Many among us are familiar with numerous celebrated “Family Feuds” that have turned mean and ugly that has led to costly legal tussles over control of business and assets which sadly ends up in the tragic breakdown of family relationships. Surely, this goes against the long-term vision of the wealth creator for the clan.
This leads us to the main thesis of this piece:
“That breakdown of the family system is the single biggest destroyer of wealth and the one true source of unhappiness among the affluent. Wealth is not meant to destroy family relationships, it is meant to forge it.”
Pinoys are generally known to be ultra family-centric. Parents look to accumulate wealth over and beyond what they need because it is critical to leave something substantial to the children. However, only a few believe that their children are prepared to handle a huge inheritance and even fewer have revealed their actual wealth to their heirs. Most Filipino families have weak successor training and very restricted information sharing.
Why is this so? Why are Filipino families not actively addressing this area of concern?
Parents are rightfully concerned that knowledge of wealth may affect their child’s values, work ethic and security. And while they truly believe that the family would benefit from developing a formal set of principles to guide the purpose and meaning of their wealth, only a selected few have actually done so. Why? Perhaps because crafting a family vision is a long and tedious process that involves commitment from all family members.
Filipinos are innately family-centric. I often see this in parents who look to accumulate wealth over and beyond what they need because it is critical for them to leave something substantial to the children. Only a few of them, however, believe that their children are prepared to handle a huge inheritance, and even fewer have revealed their actual wealth to their heirs.
This is where trusted advisors come in. Usually, there is a need for an objective third party to fully unearth and understand interpersonal relationships, historical conflicts and other family needs. There are multiple providers & products available that help address specific areas of Family Management. Metrobank is well-placed to partner with independent counsellors who are experts in Family Education & Governance.
For us, the state of “health” of our families is as important as the weather-proof portfolios that we build for them. In order to ensure the family’s well-being over time, these are some things that the first generation can reflect on:
- How are the children being prepared to handle bigger responsibilities?
- Are succession lines clear and defined?
- How will the perpetuation of the family legacy be ensured?
- Is there a STEWARDSHIP mindset in the family, or just consumption?
- Is there an effective conflict resolution process in place?
At Metrobank, we encourage clients to think about both Family Management & Portfolio Management because each family is unique and there is no one-size-fits-all solution for a successful wealth transfer strategy in the pursuit of a happy nest.
LIZETTE PEREZ is Head of the Private Wealth Division of Metrobank and has over 20 years experience in Private Banking. She is a B.S. Business Economics graduate of the University of the Philippines and earned her master’s degree in Economics at the University of Southern California.
This opinion article is part of Metrobank’s Financial Education campaign series.