Monday, October 24, 2011

How do I start investing?

Passbook Savings Account
A fixed interest-bearing savings account which enables client to deposit/withdraw through passbook. Withdrawals allowed via ATM for personal accounts.

It was December of year 1999 when my brother send me a hundred dollars as a christmas gift. I was very overwhelmed and I do not know what will I do in the money. As much as I remember, It was five thousand pesos that time.  I tought of buying a playstation, mountain bike and laptop but my mother gave me very brilliant piece of advice.

She said  that " If you want buy all your wants, you must learn to save money first". So, I decided  to put my  money in the bank. My mom accompany me in the nearby branch of BPI and  taught me how to open a savings account. That was my very first savings transaction in the bank.

Peso Term Account (Time Deposit)
A Peso term account that earns higher interest than regular savings account. This is payable at a specified future date and is evidenced by a certificate

A few years later, I had my first job and started to receive a monthly paycheck. Every month, I transfer 50% of my salary from my payroll account to savings account. Upon reaching  my first Php 50,000 worth of savings, my mom suggested that I should transfer it to a higher yield account which is Time Deposit. The bank gave me a 6% interest per annum.

 Cooperative is an autonomous and duly registered association of persons, with a common bond of interest, who have voluntarily joined together to achieve their social, economic and cultural needs and aspirations by making equitable contributions to the capital required, patronizing their products and services and accepting a fair share of risks and benefits of the undertaking in accordance with the universally accepted cooperative principles.

I joined Stradcom Employee Multi-purpose  Cooperative (SEMPC). A employee cooperative in Stradcom Corp that generate profits through employee loans, ink refilling business and food cart in our cafeteria. It was a very sound investment for stradcom employees. I got 100% return of investment in the span of 1 year. SEMPC can even give their members a high dividend that was 50% of member's shares on a semi annual basis.

Unit Investment Trust Fund (UITF) is an open-ended pooled trust fund denominated in pesos or any acceptable currency, which is operated and administered by a trust entity and made available by participation. Each UITF product is governed by a Declaration of Trust (or Plan Rules) which contains the investment objectives of UITF as well as the mechanics for investing, operating and administering the fund.

August 2006, I just finished my contract in my first job and I decided to move in my current company. My income increases but I didn't change my life style.  I knew that I must do something to my excess cashflow
to make it grow. 

I became interested in personal finance,  I began reading blogs, books and forums about investing. One day, I went to the bookstore and I found a very interesting book entitled Wealth within your reach, Pera mo palaguin mo by Francis Colayco. It was a very practical personal finance book that suits the filipino setting. I  learned and became more familiar to different investment vehicle available here in the Philippines.

So, I decided to go out in my comfort zone and started to take some risk in UITF Investments. I've tried all the kinds of funds to know what really works for me.

1. BPI Premium Bond Fund Primarily invests in high-grade government securities, commercial papers, bonds, and other fixed-income investment instruments. Higher returns are gained than conservative investments because there is a steady flow of interest income from investments and compounding as a result of reinvestment.

2. BPI Equity Fund  Ideal for people who wants to invest in the Philippine Stock Market but do not have the time nor the expertise to directly select, monitor, and manage their own stock investments. It primarily invests in equities listed on the Philippine Stock Exchange and some marketable government securities for liquidity

3. BDO Balanced Fund. aims to provide capital appreciation over the medium term by investing in equities and in fixed income securities.

After a few months, I sold  my BPI Equity Fund and BPI Premium Bond Fund and made 15% profit.

Mutual Fund
An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.
One day, an insurance agent went to our office and discussed  insurance and retirement planning. But, I am not interested in having insurance yet because  first of all, I am still in my mid 20s and I'm not a bread winner.
So he offered me their investment product which is Mutual Fund.

The Phiilippine stock market index was  around 4,800  that time. It was August 2008 when the index was at its peak. Not knowing that the market goes up  just because the US federal reseves were cutting rates for a temporary solution to boost the market.

After bagging nice profits from my UITF investment, I became more aggresive and  more focus on
Investment returns. I neglected the risk and I cannot control my greediness that's why I choose to invest in
Equity Funds.

Sunlife Equity Fund The Equity Fund is designed to generate long-term capital appreciation by investing in high-quality equities diversified across sectors.

Obviously, I've just bought a high priced share.
Two months later, the market started to crash.My porfolio went down to 12% unrealized loss or paper loss. It was a very humbling and character building experience for me. I endured the emotional effect of economic woes, tested my patience, and improved my risk tolerance.

During the crisis I became familiar of  the following words:

Recession, Federal Reserve, Lehman Brothers ,Sideways ,Wallstreet,Ben Bernanke,Subprime mortgage crisis,Bailout, Economic Stimulus, Paper Loss

Lesson Learned:
  • The Higher the Risk, The Higher the Return
  •  You have not lost money on it until you sell it.  Similarly, you don't make money on your investments, unless you sell it and cash out.
  • Do not forget to do your homework. research, watch the news about current events.
  • What goes down must come up
  • Invest at your own risk
  • Be greedy when others are fearful and fearful when others are greedy
I hold my Sunlife Equity for three years and last year, I decided to redeem my funds and made 14% profit.

Stockmarket Investment
Stocks are shares of ownership in a corporation. When you become a stockholder or shareholder of a company, you become part-owner of that company.

Last january, I attended the seminar of citiseconline
entitled "Investing in the Stock Market Today".

I learned alot from our speaker, Mr. Juanis Barredo. He discussed about how does stock market works, business life cycle, factors that affect the market, and basic valuation of stocks.

A week after the seminar, I went back to their office and filled up my registration. I've got my COL account the day after.

Using my elementary knowledge in fundamental analysis and stock valuation, I picked my first stock position
which is JFC (Jollibee Food Corporation).

Why did I choose JFC?
  1.  I learned at the seminar that you must not touch what you do not know.
  2.  JFC were already in the business for how many years and I believed that it will stay and count more decades in the market
  3.  The company aquire and build food chains that caters different kinds of markets.
  4.  It is one of the recommended company of COL in their easy investment program.