Investment Tips 1 MIN READ

Portfolio Management: Balancing short-term and long-term through laddering

Short-term and long-term investments have their advantages and limitations. How do you get the best of both worlds?

December 7, 2022By Daniel Andrew Tan

Is it really possible to get long-term rates with short-term investments?

Let’s find out. When considering the tenor (length of time to maturity) for a potential investment, we often ask ourselves two things: “How long before I might need the money?”, and “How much more do I gain from investing long-term versus short-term?”

The first question is rather straightforward, but is often followed by “what-ifs”. What if a good opportunity comes up? What if I’m faced with an emergency? These concerns (all very valid) tend to push us toward the shorter tenor placements. Why? Any time there is uncertainty, we want to remain liquid, hence the old adage, “Cash is king”.

The second question usually gets us to consider longer-tenor investments. That’s because under normal circumstances, long-term investments will outperform short-term placements. The higher interest rates are meant to compensate for the added risks of locking in longer.

So, how do we get long-term rates while keeping our portfolio relatively liquid?

The right strategy

We can do that through an investment strategy called “laddering”, where maturities are staggered across different periods in the future. For example, instead of investing in a single 5-year security, we can instead invest in three different securities maturing in 4, 5, and 6 years from now.

This gives us almost equivalent interest rates while also adding liquidity and flexibility to our portfolio. In three years’ time, we will effectively have annual investment maturities that are giving 5-year rates.

Do this frequently enough, and our portfolio should look like this:

“Laddering” can be used to schedule the maturities of your investments over time, balancing returns with flexibility and liquidity.

It looks plain enough, but assume we booked all of the investments 4 years prior. Then the year 1 maturity should be giving 5-year rates, year 2 gives 6-year rates and so on. Furthermore, the portfolio has maturities each year, giving the option of reinvesting (ideally in the long end to keep yields high) or utilizing the funds elsewhere as needed. These are the main advantages of adopting this strategy.


It all looks good, but laddering also has some trade-offs. It requires a higher overall investment capital than you would otherwise need, since each placement will need to clear minimum investment requirements depending on the type of security. This makes it either difficult to implement in full, or entails a gradual build-up over time.

Secondly, laddering also requires sufficient planning before it can be properly implemented. It involves timing placements according to one’s needs as well as the interest rate environment at the time of placement. While it offers significant yield benefits, it requires a more active approach than some may prefer.

Bottomline: Laddering is definitely a viable approach to enhancing your fixed income portfolio. Should you choose to implement it, the best time to start would be when rates are already high.

Plan out your maturities according to projected funding requirements first, then just spread out your placements to maintain flexibility and enhance yields. As a general guideline, keep maturities short in a rising rate environment, and tranche in longer as rates peak and start to fall.

(If you are a Metrobank client, you may reach out to your relationship manager or investment specialist to know more.)

DANIEL ANDREW TAN is a Relationship Manager for Metrobank’s Private Wealth Division, whose function mainly involves providing investment and wealth management advice to the Ultra-High-Net-Worth Individuals (UHNWI). He brings with him over fifteen years of experience in both retail banking and financial markets, and he avidly monitors Philippine equities. He applies both active and passive investment strategies to his personal portfolio and strongly advocates for a “tailored” approach to investments.

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Investment Tips 2 MIN READ

Why become a QIB?

Being a QIB (Qualified Individual Buyer) can give you the full advantages of being a savvy global investor. You will have almost all the investment options available to any high-net-worth individual anywhere in the world.

October 14, 2022By Anthony O. Alcantara

The curious acronym is pronounced “quib”. It means Qualified Individual Buyer or Qualified Investor Buyer. And if you are a high-net-worth individual, it may be a good idea to consider being accredited as a QIB by Metrobank.

Asked why being a QIB matters, Jennifer Tan, Metrobank Private Wealth Department Head, said, “If you qualify as a QIB, this means you are a more sophisticated and astute investor who possesses the knowledge and the means to invest prudently.”

That’s because being a QIB opens a world of investment opportunities.

If you are a QIB, you’ll be able to invest in almost everything available to investors globally.

Tan said the value of being a QIB becomes apparent when the investor, for example, realizes he couldn’t invest in, say, bonds issued by a bank in Korea, such as the Export-Import Bank of Korea, which is way bigger than banks here in the Philippines. (See our top picks for bonds on our bonds page.)

“If you see opportunities like that, you can go grab them, if you are QIB,” said Tan.

But just as important as the opportunities is the trusted advice of Metrobank’s experts and third-party research providers such as CreditSights, an award-winning global credit research firm owned by the Fitch Solutions Group. (Learn about CreditSights’ four lessons for 2022 here.)

How to become a QIB

There are two ways to become accredited as a QIB: have a net worth of at least PHP 30 million or stock-listed securities of at least PHP 10 million in market value. Proof of trading must also be presented, i.e., two to three buy and sell transactions a year.

The accreditation is done every three years and the QIB client must meet the criteria stated above and execute the required two to three buy and sell transactions annually.

“Managing your wealth can indeed be much easier when all the options for investments are available to you,” said Tan. “When you complement that with expert advice backed by extensive experience and rigorous research, you’ll have everything you need to make smart investment decisions.”

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Investment Tips 2 MIN READ

Got a time horizon of 3 to 5 years? Here’s what to do with your money

Knowing where to put your money is not a one-size-fits-all endeavor. However, Fernand “Toto” Tansingco, head of Metrobank’s financial markets sector, said understanding time-tested principles and having a long-term outlook can help.

October 4, 2022By Anthony O. Alcantara

If you’re wondering what you can do with your money when markets are alternately simmering and boiling, there’s a good chance you won’t go wrong with a few well-placed investments in stocks and bonds.

That is, if you have an investment time horizon of three to five years at least.

Fernand “Toto” Tansingco, Metrobank’s Treasurer and Financial Markets Sector Head, said growing your wealth is possible if you have a “long time horizon.”

Hunting for undervalued stocks

“It’s very hard to time the market,” he said. “But if you just buy now and just sleep for five years and then wake up, you’ll be up.”

There are many sources for tips on undervalued shares of companies. He cites Bloomberg as an example.

(Editor’s Note: Wealth Insights also offers ideas and tips on undervalued shares of companies in the Stocks section under Portfolio Picks).

“They have an interesting page where you have the analysts’ consensus citing where the share price would be in one year. A lot of these shares have an outlook of more than 30 percent and some even 50 percent upside,” he said.

“But of course, that has a lot of assumptions,” he cautioned, citing the economic situation in the future, the policy response of central banks around the globe, and other socioeconomic factors.

Quickly jumping into one opportunity after another is also not a good idea for most investors.

Think ahead with bonds

“You always need to have a long-term outlook because with trading, especially in Philippine bonds, the bid and offer spread will erode your returns. Even if you get a capital kick, the cost to liquidate is high,” said Tansingco.

When investing in 10-year bonds, for example, he said the ideal investment horizon is “five years, possibly three years, but definitely not one year.”

For now, inflation and the peso depreciation may make you, and most investors for that matter, anxious. Stabilizing the two may take some time.

Inflation may also go back to historical norms in 2024, and the peso may reach the “ideal” PHP 55-to-the-dollar level only when the peso interest rates become more sustainable, Tansingco added.

Still, opportunities await those who can wait three to five years, or even longer.

“I think now is the best time to start looking for what you want to get into,” said Tansingco.

(If you’re a Metrobank client, you can reach out to your relationship manager or investment specialist for more information, or you can log in to Wealth Insights for more investment ideas.)

ANTHONY O. ALCANTARA is the editor-in-chief of Wealth Insights. He has over 20 years of experience in corporate communications and has a master’s degree in technology management from the University of the Philippines. When not at work, he goes out on epic adventures with his family, practices Aikido, and sings in a church choir.

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Investment Tips 3 MIN READ

Asia Credit: Four lessons learned in 2022

It may be time to recalibrate your bond portfolio. CreditSights, an award-winning global credit research provider, recently shared with our high-net-worth clients four things they learned and where to look for bonds to invest in.

October 3, 2022By Anthony O. Alcantara

This article is exclusive to Metrobank preferred clients.

Log in your Wealth Manager account to get access to investment insights, bank views, and webinar videos.

CreditSights Singapore, an award-winning global credit research firm owned by the Fitch Solutions Group, distilled for us four key lessons for bond investors in Asia for 2022.

As our new global research partner, CreditSights complements our strengths and expertise in the financial markets, and further enhance our ability to filter out the noise to focus on the things that matter most to investors.

Lesson 1: China policy is unpredictable.

“Policy movements can be sudden, traumatic, unpredictable,” said Sandra Chow, Co-head of Asia-Pacific Research, CreditSights Singapore, during the “Forecasts and Prospects: Lessons Learned in 2022 by CreditSights” webinar hosted by Metrobank.

Chow said prices of bonds, equities, and commodities undulated wildly because investors were hoping that the Chinese government would introduce some economic stimulus to support various industries.

“The Chinese authorities seem to be calibrating policies carefully. They are introducing measures to maintain economic growth and protect social stability. But they are also pausing or pulling back when it seems that stimulus measures could cause specu

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Investment Tips 4 MIN READ

What do you do with your portfolio when inflation is soaring?

There are a few things you can do to preserve your wealth in these times: Be patient. Don’t panic. Consider your time horizon

August 5, 2022By Anthony O. Alcantara

It’s normal to feel panic when prices are galloping, the markets are in disarray, and your investment portfolio is in dire need of resuscitation.

For Don Carlo P. Hernandez, Metrobank’s Portfolio Strategy and Advisory Division Head, it is best to quell that panic first and make a little effort to understand what’s happening.

How inflation affects portfolios

He said inflation affects your investments in two ways. On a general level, it affects your purchasing power and your minimum goal for investing.

“As inflation goes faster, you will have less purchasing power. And when you talk about investments, at the very minimum, they should beat inflation. Otherwise, your investments will lose value over time. High inflation increases your hurdle rate,” he said.

On a more technical level, which affects the financial markets, inflation is a welcome thing. It indicates economic growth as long as it is managed between the targets set by the Bangko Sentral ng Pilipinas (BSP).

“Inflation is a precursor for growth,” said Hernandez. “If inflation is within the BSP’s target of 2-4%, then financial markets should be neutral about it.”

Higher inflation is signaling the central bank to hike interest rates to give citizens an incentive to save their money instead of spending it. This tempers inflation by reining in demand for non-essential goods and services. For fixed income instruments such as bonds, this means yields will increase over time.

Inflation will also affect equities because the valuation of companies is based on computations that use interest rates to determine how much the company is worth. An unexpected swift rise in interest rates, therefore, affects these computations toward stock price declines.

Finding the right strategy

Risk events, or those unexpected events that affect financial markets, such as Russia’s invasion of Ukraine, are priced in by financial market participants, reflecting risk sentiment towards investment assets.

These events pushing inflation higher are perhaps priced in, according to Hernandez. But uncertainties remain, and there may be room for further increases.

You have the option of choosing between two types of portfolio management: active or passive. With the volatile environment that we have, it is best to be passive, said Hernandez.

Active portfolio management refers to intraday buying and selling, short-term buying and selling, and specific stock selection. Buy low, sell high is the mantra.

“This type of portfolio management is probably not the best one right now. Some academic literature shows that less than 10 percent of active managers actually get it right in highly volatile markets. Only a few people do so,” said Hernandez.

“The recommendation in high volatility markets is to stay passive and just track the index. Don’t do anything fancy, especially if the time dedicated for investment research and market trading is limited,” he added.

Asset allocation

“At the start of the year—of course, this is already hindsight—it would have been better if you stayed in cash. But right now, after the markets have fallen, the recommendation is to go for fixed income, more than equities. Some yields are becoming attractive, especially for those who depend on interest from investments,” said Hernandez.

“To be honest, if you are not comfortable with volatility, then you might as well stay nearer the conservative side of things. Stay with fixed income and money market investments, then fight the battle when you are already comfortable. However, if you are invested already, just be patient,” he said.

One consideration is your time horizon.

If, say, you started with PHP 500,000 and it was whittled down to PHP 300,000, ask yourself, “Do I need this money by next year?”

If the answer is yes, Hernandez said it is best to keep it in cash and put it in a time deposit. If the answer is no, and you have a longer time horizon, say, five years, then you can be more aggressive in holding on to your investments until recovery, and in hunting for undervalued assets.

You could also consider tranche investing or cost averaging, said Hernandez. Divide your funds into tranches, then invest the first tranche when the market falls, the second tranche when it falls again, and so on.

He cautioned, however, that you should be prepared to stomach the volatility given current market conditions.

“If you have a longer time horizon and you want to bet on equities, go ahead. I’m very positive about the long-term returns when you’re invested in equities,” he said.

Final tips and recap

“Many are asking what to do to preserve their wealth. To be honest, just be patient. It is all about patience at this point,” he said.

“If you need cash next year, just stay in more conservative investments. If you are invested, be patient. Don’t buy and sell like crazy. If you’re invested in equities, just watch the index. As long as you can handle the volatility and you have a longer time period to invest, that’s OK,” he said.

One final tip: consult your investment specialist. Everybody can benefit from the experience and perspective of a trusted investment professional.

ANTHONY O. ALCANTARA is the editor-in-chief of Wealth Insights. He has over 20 years of experience in corporate communications and has a master’s degree in technology management from the University of the Philippines. When not at work, he goes out on epic adventures with his family, practices Aikido, and sings in a church choir. 

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Investment Tips 3 MIN READ

Which financial asset is suitable for you?

From savings accounts and bonds to UITFs and derivatives, there are options for specific types of investors.

August 3, 2022By Anna Cudia

There are various asset classes nowadays, but which of these actually fits your overall profile?

This starter kit can guide you when you talk with your investment specialist. But first things first, what type of investor are you, really?

The Risk Averse

If you want to preserve your principal at all times and can only take the least possible risk, then look no further, because you belong to the risk-averse cohort. Risk-averse investors just park their money for emergency purposes so they can withdraw it anytime. Given the short investment horizon, the potential gain is also capped at a minimal level. Risk-averse investors are typically familiar with and have opened savings accounts. For better yields, time deposits are also a viable option given that they are insured by the Philippine Deposit Insurance Corporation (PDIC) up to a given amount.

The Conservative

If your goal is to preserve your capital but you can deal with a little more risk compared to risk-averse investors while staying in low-risk investments, then you can be considered a conservative investor. This type of investor usually has liquidity requirements and needs a regular payout. While conservative investors usually have time deposit placements, they may also have peso government securities such as Retail Treasury Bonds (RTBs), given that these have higher returns if held until maturity. RTBs are also virtually risk-free assets backed by the National Government.

The Moderate

If you can forego some capital preservation in lieu of capital growth, do not require regular withdrawal, and only save for some future expenditure, then you are a moderate investor. This type of investor withdraws funds only when necessary, and is knowledgeable and experienced in investing in government securities and corporate bonds and notes. Other suitable products that can provide higher returns but with some issuer credit risk are investment-grade foreign-currency bonds or notes, vanilla derivatives such as forwards and swaps for hedging purposes, and asset swaps with underlying investment-grade securities.

The Aggressive or Sophisticated

If you are open to having exposure to high-risk assets and potential capital loss in the short-run, in exchange for higher long-term gains, then you are an aggressive or sophisticated investor. Aggressive investors’ primary goal is to enhance their wealth. Thus, they are willing to wait for years until they reach their desired yields. These investors have prior knowledge and experience in equities, mutual funds, Unit Investment Trust Funds (UITFs), real estate, derivatives, and regulatory capital instruments. Worth a second look are additional investment vehicles with the highest returns and maximum capital growth, but with volatility, credit, market, and regulatory risks such as foreign currency bonds or notes, asset swaps, and Tier 2 capital instruments.

If your profile does not match the asset that you want to invest in, fret not, as there is a thing called a waiver. Ask your investment specialist or relationship manager today for more information.

ANNA DOMINIQUE CUDIA, CSS, is the Head of Markets Research and Strategy at Metrobank’s Trust Banking Group, spearheading the generation and presentation of financial markets insights to internal and external clients. She used to be with Metrobank’s Investor Relations, where she brought in international awards and took part in various multi-billion peso and dollar capital raising activities. She has a Bachelor of Science in Business Administration degree, cum laude, from the University of the Philippines. She is also a CFA Level I exam passer, a Certified Securities Specialist, and a Global MBA (Finance) candidate at the University of London. She is a naturally curious person and likes to travel here and abroad.

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Investment Tips 3 MIN READ

Should I trade or invest?

There is a misconception going around that trading is investing. Well, not exactly. Knowing the difference may help you become a better investor, or even a trader, for that matter.

July 5, 2022By Don Carlo P. Hernandez, CFA

Let’s face it, we all have at least one friend on social media who shares his or her success through trading stocks, foreign currency, or cryptocurrencies over a short period of time. The humble brag is followed by an invitation to everyone to join him in his journey of trading these assets for a profit using investible cash.

When you are hooked with interest and ask him how, he proceeds to lecture you about how it is a waste of time to put your money in deposits, funds, UITFs (unit investment trust funds), insurance funds, and whatnot, and that trading is the best way for you to “invest”.

Then here comes the question, should you believe your friend and trade your hard-earned money for profit?

First, let’s restate the above scenarios to what is true.

  • Investing should be a part of managing your finances.
  • It is possible to earn a huge income through trading.

Remember your purpose

However, there is one truth that is oftentimes undermined: There is no one investing activity that fits everybody.

You see, trading is an investing activity, but it is not what defines the term “investing”. Trading is not the be-all of investing. It is the act of making short-term buy or sell transactions with the purpose of selling or buying the same at a profit – buy low, sell high over a short period of time. Trading can give you a huge payout if you have correct calls consecutively, but it can also lead you to a huge loss of principal if you repeatedly make the wrong calls.

On the other hand, investing is a purpose-driven action where you put your money to work in response to your unique, individual monetary needs. These needs are distinct and incomparable in totality, no matter how similar you are to individuals in terms of personality, state of living, etc. Trading is simply a type of investing activity.

Which ROI do you want?

For example, Edison and Ron have been best friends since the first grade. They lived in the same community and went to the same school. They both have PHP 100,000 in each of their accounts. Edison takes up a trading position and grows his money to PHP 120,000, or a return on investment of about 20%.

He immediately hounds Ron to join him in trading, saying that the activity is easy to learn and that he can have that same 20% return on investment, or ROI. Should Ron? Well, to be honest, he could. But he must consider all his needs first. The thing is that Ron already has a 6-year-old daughter. He needs the PHP 100,000 to pay for her school fees over the next six months.

While trading activities may give Ron a huge payout, he is also putting his capital at risk. His trading calls to buy or sell may turn out wrong (i.e., he decided to buy, and the stock price fell, or he decided to sell when the stock price turned positive).

Consider the risks

Trading could work very well for Edison, who can spare cash for losses, but it may not work as well for Ron, who may need the money soon. If the trading call goes wrong and Ron’s principal falls by 50%, he’ll have a headache. He won’t be able to pay for his daughter’s tuition.

It turns out that a six-month time deposit would suit him better, given his current needs. The returns may be boring compared to what trading may or may not bring, but at least he has the principal ready when he needs it the most.

You see, trading is not bad. Trading is not gambling if you do your homework, if you do your own research before making investment decisions. Consider your investment PATH (Purpose of your fund, Appetite for risk, Time horizon, and other Hurdles).

Do the work

If you can afford a long waiting game and have the willingness and capacity to take bigger risks, then you can have a bigger trading position. Otherwise, it would be better to take a moderate stance when investing.

Trading requires discipline. It shuns greed. It entails humility to accept when you are wrong, take the losses, and start over. It comes with the responsibility to do your homework in order to understand what and why you buy and sell. It requires effort, but it’s necessary work that will save you from gambling.

DON CARLO P. HERNANDEZ, CFA, is Metrobank’s Head of Portfolio Strategy and Advisory Division under the Trust Banking Group. He leads the research, credit, and portfolio solutions team in providing a strategic point of view regarding the investment efforts of the whole group. He advocates for financial literacy and inclusion, especially for the young and unbanked. He is an old soul and a music junkie who listens to Frank Sinatra and Michael Bublé. He also enjoys spending his free time resting under a tree.

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Investment Tips 2 MIN READ

Finding the right time to invest in REITs

Investing in REITs may be good for your investment portfolio. You probably have to wait a bit to maximize your returns.

June 14, 2022By Anthony O. Alcantara

There are many things to like about REITs. 

They give you a chance to invest in real estate without having to construct a building yourself or buy land. You get dividends year in and year out. These dividends grow as the company grows. Furthermore, you will only be taxed 10%, compared to 15% capital gains tax for stocks or 20% for government securities. For corporations who invest in REITs, dividends are tax-free. 

REITs or real estate investment trusts are companies that own or manage real estate. They invest in various properties such as office buildings, malls, hotels, hospitals, warehouses, apartment buildings, etc. They are also mandated to give out most of their net income, at least 90%, as dividends to stockholders. 

“These properties have something called the escalation rate,” said Emuel Olimpo, Merobank Investment Officer. He has been avidly studying REITs for Metrobank and its clients.  

“The potential total revenue and the total dividends that REITs will be paying out will continue to grow. That is normally 5% to 10% growth every year per their contracts with their tenants,” he explained. 

There are a few REITs you can choose from: Ayala REIT (AREIT), Double Dragon REIT (DDMP REIT), Filinvest REIT (FilREIT), Robinsons Land REIT (RL Commercial REIT), Citicore REIT (Citicore), and Megaworld REIT (MREIT). 

REITs vs government securities 

With all the benefits just mentioned, REITs seem to be an ideal investment. For Olimpo, however, any investment should always be compared to other comparable investment instruments. 

He said government securities, which also provide steady income, are a good benchmark for anyone interested in investing in REITs. The difference, however, is that, unlike REITs, fixed income instruments such as government securities can’t give more than their original coupon rate throughout the term of the bond. 

“Of course, if property rental rates go down, dividend payouts for REITs could also take a hit. But the current REITs all have best-in-class and premium properties that make them resilient,” he explained. 

“If the dividend yield for a REIT is 6%, and fixed income or government securities offer 5%, then it’s a no-brainer. You choose REITs. Right now, however, dividend yields have fallen in line with fixed income,” said Olimpo.

Because government securities offer a safer alternative, Olimpo believes it’s best not to invest in REITs at this time, especially since the situation may not change in the next two years or so.  

Thinking long-term 

But still, for those who think long term, perhaps five years or 10 years, there’s definitely value in REITs. 

“The most exciting thing about REITs is their property infusions,” said Olimpo. “Once we see those infusions happen, investors should be ready to capitalize on the opportunity.” 

These property infusions occur when the parent company includes new properties in the REIT. For example, if a REIT starts out with some 200,000 square meters of real estate, it may later be injected with new properties to grow its portfolio, which will ultimately benefit investors because of more dividends. 

It may not be the perfect time to invest in REITs right now, but for Olimpo, that chance to invest may come soon enough.

ANTHONY O. ALCANTARA is the editor-in-chief of Wealth Insights. He has over 20 years of experience in corporate communications and has a master’s degree in technology management from the University of the Philippines. When not at work, he goes out on epic adventures with his family, practices Aikido, and sings in a church choir. 

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Investment Tips 4 MIN READ

Active vs. Passive Investing: Which is best for you?

One is not necessarily better than the other. Find out the pros and cons, the virtues and shortcomings of passive and active investing.

May 23, 2022By Daniel Andrew Tan

The debate between active and passive investing has been going on for quite a while now, with strong advocates on either side. However, despite the strong opinions and many arguments within the financial community, these terms may sound foreign to many.

So what do they mean, really? Let’s talk about the mindset behind each strategy, their pros and cons, and how and when to apply them.

Just keep in mind that while the discussion on active vs passive discussion happens mostly in the equities space, these concepts apply to fixed income, i.e., bonds, and other asset classes as well. 

Active Investing

Put simply, an active approach to investing involves monitoring prices of investment positions to “actively” buy or sell to maximize gains and minimize losses. Active investing can be done by the individual investors themselves, or portfolio managers who can do the work for them for a fee.

The goal of every active fund is to beat the benchmark for its asset class. Because of this, active fund performance is measured by how much better or worse they perform relative to the market. This excess return above the benchmark is known as alpha.

To achieve high alpha, active investors generally apply a combination of analytical tools, market expertise, experience, and even “gut feel” in order to make the best possible investment decision at that point in time. This is a more involved process and entails frequent trading and continuous monitoring of the portfolio, thus it naturally comes at a higher cost vs. passive investing. 

Passive Investing

Known also as “index investing” or indexing, passive investing mainly involves buying into index funds or exchange-traded fund (ETFs) with the goal of matching the performance of the chosen index or benchmark. This is a more hands-free approach with less frequent monitoring and trading.

The main philosophy driving passive investors is called the efficient market hypothesis, which states that markets are efficient and shares are always fairly priced because they reflect all information available to investors at any given time. According to the theory, consistent alpha generation, or consistently beating the benchmark, is impossible.

What approach is better, and when?

One popular proponent of passive investing is Warren Buffett, CEO of Berkshire Hathaway and currently one of the five richest people in the world. If you think about it, it seems ironic since he runs a business managing active investments.

Why is that so? What’s the difference? Simply put, it’s about time and experience.

Mr. Buffett’s advice is directed toward the average investor, for whom it is widely accepted that a passive portfolio works best over the long term. Statistics support this as well. Nearly 80% of actively managed US equity funds do not manage to outperform their respective benchmarks. A passive portfolio requires minimal expertise and less time spent monitoring the portfolio as indices typically only have quarterly “rebalancing” or adjustment periods to reflect intended changes in its composition.

Active portfolios, however, do have their own merits. At peak levels, active funds have been known to post year-on-year gains well above the benchmark. Due to their nature, active funds can also react more swiftly to changes in market conditions, especially in highly volatile periods.  As stated earlier, this more hands-on approach also entails higher fees, which may cut any gains you may have.

Here’s a brief summary of the benefits and disadvantages of each approach:


Despite the comparisons between the two, it’s always best to remember that you don’t have to pick just one or the other. While some would prefer to stick to a single investment strategy, there are many portfolios that have both active and passive components. The active portion provides the opportunity to achieve high returns, while the passive portion grants stability and steady returns over the longer term.

Whatever strategy you decide on, I personally believe there is no wrong choice. Be it active or passive, bonds or equities, simple or complex, the key word here is “investment”. We invest to grow our wealth to enhance or preserve our quality of life. The means may vary, but the goal has always remained the same.

To quote the famous economist Benjamin Graham: “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.”


DANIEL ANDREW TAN is a Relationship Manager for Metrobank’s Private Wealth Division, whose function mainly involves providing investment and wealth management advice to the Ultra-High-Net-Worth Individuals (UHNWI). He brings with him over fifteen years of experience in both retail banking and financial markets, and avidly monitors Philippine equities. He applies both active and passive investment strategies to his personal portfolio and strongly advocates for a “tailored” approach to investments.

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Investment Tips 6 MIN READ

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.

December 22, 2021By Sharon Zulueta

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.


This article was first published on BusinessWorld.

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