September 2007 Archives

  An employee for Japanese toy maker Sega Toys displays the world's smallest "Grand Pianist - Hello Kitty Version", which has 88 working keys and can automatically play 115 pre-installed musical songs, including 15 Hello Kitty related pieces. The original version of the Grand Pianist started selling in Japan in April and the new white Hello Kitty version will be put on the market next month. Eighty-eight days to go before Christmas! Many of us scrimp and save the whole year, only to lose it all in December. Parents go crazy buying the best Christmas gifts and serving the best Christmas dinners, mostly to assuage our own guilt when we feel we haven’t spent much time with our kids the rest of the year! I’m guilty here too hehe. If we wait until December to decide on a limit for Christmas spending, it’s easy to be swayed by great commercials and amazing packaging. Hubby and I used to have a “skies the limit” attitude when it comes to getting gifts for the kiddos, but lately, we have decided as a family to lie low on consumerism and focus on what’s really important – family, togetherness, and of course a gift that doesn’t take away the spirit of what we actually celebrate on Christmas time. Let’s swap ideas on gift ideas that will keep giving that warm fuzzy feeling of Christmas even after the celebrations, especially those that go easy on the credit card. Me first: the holiday favorite for my only daughter is a subscription to The Friend, a magazine for children that costs P500-something J so she feels Christmassy 12 months a year, and because she’s money-smart, nanay and papa matching the money she saved the whole year. Your turn. :-)

Sorry guys, the company policy does not allow posting of personal information in INQUIRER.net blogs. This is for your protection . Although I would like to think we are a close-knit community here in MoneySmarts, I know for sure that there are fraudsters out there ready to pounce on loyal readers. So be careful! If you want to contact anyone, shoot me an email at lightdream@gmail.com (*I’m* used to spam) and I will see how I can help.

A reader asked a very interesting question from INQUIRER.net and James Lago of Westlink Global Equities Inc. gave a very interesting reply:

I am writing for my cousin whose wife inherited some NYSE-issued PLDT and NY Steamboat Company stocks from her mother who died in a house fire in Las Pinas about five years ago. It was said that her mother laid on the stocks as the house was burning to protect it, so that the stock certificates edges are burned but they are still readable and intact. The stocks were bought in NY in the 80s. I contacted the NYSE who told me to contact a NY broker. My questions are: 1. Can the PLDT stocks be claimed locally? If yes where and how? 2. Do they need a lawyer to prove the wife is the heir? I am afraid the lawyer and broker fees may be worth more than the stocks whose face value when bought I think were just about $300. 3. Is there a way for us to determine via the internet how much the stocks are worth now? Read the rest of the article here.

James, one of the few analysts I know who writes clearly and effectively, advised Nilo Ocampo, the reader, to talk to PLDT’s Investor Relations in Manila. That’s the quickest way to get answers. This is the person you want to contact: Anna Isabel V. Bengzon Head, PLDT Investor Relations Center 12/F Ramon Cojuangco Building Makati Avenue, Makati City Philippines Telephone: (632) 816-8024 Facsimile: (632) 810-7138 E-mail: pldt.ir@pldt.com.ph What’s more interesting is whether the New York Steamboat Co. stock certificates in question can still be turned into cash. Best bet is they are as good as trash, but if lightning strikes and you are lucky, old stock certificates may actually be worth a lot of money! This article from USA Today says one share of Haloid was worth $1 million in 2000 -- although you won’t find Haloid in the list of stocks in any stock exchange. That’s because Haloid changed its name to Xerox in 1961. Even if those stock certificates do not have any corporate value anymore, at least check whether they have any collectible value. You don’t even have to have really old scrips. BusinessWeek says even dot.com company shares that may be worth nothing now, can be a collectible item in the future. So keep searching those musty trunks or boxes for trash that can be turned to cash. :-)

If you’ve been reading about the foreign exchange markets long enough, you know that forecasting where the peso will end up, say, at the end of the year is futile. I daresay the foreign exchange markets is as fickle, or even more so, than the lady next to you and as temperamental as the toddler next door! During the height of the Asian financial crisis in 1997 when the peso-dollar rate was the staple story in business pages, I spent so much time tracking the foreign exchange markets that one night, I woke up after a nightmare mumbling “The peso! The peso!” That can happen to you when you wait for hours until late at night sprawled on the floors of the Bangko Sentral ng Pilipinas just to get first crack at what the Monetary Board members talked about. :-) But, hey, it’s fun to guess where the foreign exchange rate will go! So here’s an offer. Push that comment button and publish in MoneySmarts your fearless forecast for the peso-dollar rate by the end of the year. The one who comes closest and sends his forecast fastest will get a free personal finance book for Christmas. :-) What do you say? A worker at the Philippine central bank recovers spilled bundles of 100 peso notes from the stacking machine at the currency production plant in Manila. (AFP PHOTO ROMEO GACAD) This photo taken 02 September 2003 shows an inspector checking freshly stamped 25 centavos coins at a stamping machine at the Central Bank's currency and minting plant in Manila.  (AFP PHOTO ROMEO GACAD)

Is there a better way to ask your parents if they are doing okay financially? The timing of our content partner’s article "Probing your parents' finances" could not be better because just the other day, I agonized over how to ask my mother how she is handling her credit card debt. Fortunately, my mother is very smart and she takes advice from a very control-freak daughter gracefully (which is so much more than what I can say about myself taking advice from someone else!). Besides, it appears that my 70-ish mother is a financial wiz! (Yey!) Many of my friends, however, are also wondering how to find a way to get their parents to open up so they can help before it is too late. It really is a diplomatic dance, so goes one article. They could shut the door on your face forever if your tone of voice doesn’t sit well with them. There is also the greater question of whether you can handle the additional financial burden of helping out your aging parents.  Curiously, another article today says older people don’t want to retire and that is actually in the interest of companies who will lose talent and experience if they let go of their senior workers. Our personal finance article for today gives very good tips. Some questions that you may ask include:

1. What are their assets?
2. Do they anticipate needing financial support?
3. What types of insurance do they have and who are their beneficiaries?
4. Have they signed a power of attorney?
5. What are their liabilities?

Whew. In the Philippine setting, just talking about this will raise ire, fire and indignation. Good luck to us all.

Sexy mutual fund returns are a sure way of getting most people's attention. With the recent turbulence in the equities market, however, many realize that it’s also important to look at how often a fund outperforms the index, and not just by how much. Of course, the sweetest thing would be to find a fund that outperforms with great returns all the time! But perhaps that’s like looking for that dream girl or boy. :-) Read my article on how to look for a mutual fund you can count on here. Plus, here is an excerpt of my interview with Fernando Jose Sison III, president of BPI Investment Management Inc. He also heads the Asset Management & Trust Group, which manages the ALFM family of funds. ALFM accounts for roughly half of the mutual fund industry. What are the factors why you are the biggest? It’s a combination of the distribution, the returns and the types of funds we have. The ALFM family of funds is the only one that boasts of multi-currency bond funds. We have peso, US dollar and Euro, so customers can diversify not only among asset classes but also among currencies. The yields have been fairly consistent. Not necessarily the best but certainly not the worst, so customers are happy with the consistency. The type of feedback we give them by way of performance report is that every month we give out a hard copy and this is also available in the website and the distribution network is also very wide. What is the best way to choose funds? People must understand the financial requirement first before they match a product to their requirement. Second, they must know how much investible money they have. If what they have is just enough for living expenses, amortization, and the like, they are not yet in the investment stage. They must be aware that the amount they have for investment is just for investment. They cannot say I will put it there and then next month I’ll get the income. That mentality is best suited for time deposits. Since we cannot project what the future yield will be – the fund has to match their risk profile, their time horizon and their investment objective. Some are asking if they should borrow money from places with low interest rate. We don’t recommend borrowing money for investment because the investment is not guaranteed whereas the loan obligation is a sure thing. Assuming they have gone through the initial stages of analysis, how do they then choose which mutual fund to invest in? What should they look at? Reputation of the fund manager and consistency of the yield. The best performing fund in one period may be the worst performing fund in another period. You wouldn’t like that because you do not know when you need money. If you need money at the time the fund is performing the worst, then you would have lost everything you made in the previous year. Go for more consistency, so that every time you need money, the fund would show a respectable or superior return compared with traditional investment deposit products or plain vanilla corporate securities. So check the reputation of the fund manager, the consistency of yields, the ease by which you can get in touch with sales agents. How to read the NAV table Know what your acquisition cost. As long as the current price is higher than your cost, you are making money. Second, relate the time period for the current price to when you bought it. The time frame has to be factored into the valuation, not the absolute increase in price. What is ALFM all about? ALFM should be earning higher than what an investor would get if he invests on his own. Second it must be convenient for him if he wants to add or redeem. He must not be kept in the dark on how his fund is doing. Last but not least, he must be able to have this security that even if he hibernates, the fund manager will always be there to take care of his investments. How do you operate as a company? The funds have different fund managers. They watch the market and manage the funds. We have a separate group that sells. Another group facilitates the payments and redemptions and do the transactions for investors. The backroom prepares the reports, for the investor, for senior management and for regulators. It’s a team effort, with a research analyst, a position analyst, and a middle office person. These positions are there whether its P10 million or P30 billion. What qualifications do you look for in a fund manager? Fund managers can be trained. These new officers are required to undergo the BPI training program. When they are on the job, somebody is sitting in with them. Everybody can be a pilot as long as they have a good vision. There are ten people in a basketball team. Each one can dribble. But when they are in the game, you will see that two are better than eight. You will not see that during the tryout. Why would I buy a stock index fund instead of going directly to the stock market? People who go directly to the stock market must know three things: what to buy, when to buy and how much to buy, at what price to buy, and when to sell, how much to sell, at what price to sell at what price. If you go to an index fund, it will behave like the composite index. And the minimum is only P50,000. If you will play the stock market with P50,000, you will be limited in your choices. You can have the services of a broker with P50,000, but you have to call them up. They will not call you up. Why should I buy ALFM rather than other funds? Because you can sleep well at night and we have the distribution network. You can log on to ALFM.com and see the price. In BPI branches, even if they don’t sell the fund, they will make the price available so customers can just check what is the price. ALFM is the only mutual fund that offers a free life insurance for P200,000 if the investment is worth at least 100,000. For novice investors who are starting to create an investment portfolio, the free insurance is an attractive proposition. Our observation is, as the investment goes bigger, that attractiveness of the insurance diminishes. Some of our investors with P20 million investment don’t even bother to fill up that application form. But to somebody who is putting in P100,000, that’s attractive. The entry-level point for our peso fund is P50,000, but the entitlement is P100,000. For the ALFM dollar its $1,000, for the euro 1,000 euro and for the stock index fund P50,000. For people who are dollar earners, do you recommend that they convert their earnings because the dollar is weakening? It depends on their needs. If the money is for monthly living expenses, convert immediately. For savings, it will also be good to diversify into US currency especially if they continue to earn in that currency. We don’t have a crystal ball, so we cannot read the market accurately. A good policy would be to convert 80%, keep 20% in the original currency, that way they can’t go wrong. Even if the peso appreciates, when they earned, they earned in dollars. They didn’t buy from peso to dollars. There’s no loss. How do you minimize the losses from more volatility in the financial markets? Investing only what you are prepared to lock in for a long time. You lose only when you sell. The stock goes down, but you hold on to it. You must be prepared to ride out the volatility. That’s the natural characteristic of equity investments. They are riskier, but they earn higher. People who don’t have the stomach for it will never have high returns but will not suffer from the risks of equity investments. What is the total cost to your investors? What are your fees? For ALFM Peso, 1.5%, for ALFM dollar 1.25%, for ALFM euro 0.5%, for our stock index fund 1.5%. We don’t charge a sales load, but if redeemed within the first 180 days, we charge an early redemption fee of 1% of the amount that is redeemed early. (If the investor takes his money out after 180 days, there is no redemption fee.) It’s not an exit fee, it’s a penalty. We tell them, if your mindset is three months, just put it in a time deposit. But some say, the stock market will grow this much in two months, I don’t mind the penalty. If it grew 19% in two months, you will take away 1%, 18% na lang, I don’t mind because I won’t earn that much in a time deposit. But for a dollar fund that’s earning 6%, and then they pay the penalty, that’s not attractive. This is to instill discipline at the outset that you should be prepared to hold on for six months or so. If there is no redemption penalty, they will come in and out like an ATM. If they understand their needs better, that sort of puts them in line. All costs are disclosed in our prospectus. What are the risk profiles of your four different funds? For our Peso Bond Fund, more than 70% are in government securities. For our Dollar Bond Fund, we have Philippine dollar denominated securities, US Treasuries or supranationals like the Asian Development Bank. The quality of securities are very high. Our Euro Fund has two-thirds in Philippine securities or German securities. Our stock index fund has the same composition as the PSEi so the stock can be sold at any time and they are very marketable securities.

Reader Mike wanted to know:

Where and how do I get corporate bonds? Are they available in small amounts e.g. P5000 like RTBs (retail treasury bonds)?

There’s a great website called AsianBonds Online that gives at-a-glance information on investing in bonds. If you go to that website, you will find that bonds in the Philippines are either Long-Term Commercial Papers (LTCPs) or private corporate bonds. You’ll even find a list of private corporate bond issuers. For issues of four years and over, the minimum amount of bid is P20,000. The minimum amount goes up as the tenor becomes longer to as much as P100,000. Bonds are bought through financial institutions – mostly banks. The documentary requirements are quite stringent.  Ask branch managers of your bank or their Treasury departments. There’s another way to buy corporate bonds: through bond funds whether UITFs or mutual funds. This is the newbie’s preferred entry into the local bond market. Fewer headaches, lesser need to monitor the market. Hope this helps. Happy investing!

Sure, you can get rich with a big inheritance from a great aunt you don’t really know. The source of real financial independence, however, comes from the little money decisions we make regularly. This article from Lucena City, courtesy of the Philippine Daily Inquirer’s Southern Luzon Bureau, says volumes:

LUCENA CITY – Schoolchildren in northern Quezon towns are contributing a few pesos of their daily cash allowance to help fund a campaign against government dam projects in the Sierra Madre mountain rivers and avert a possible environmental disaster.

“Grade school children have all been made aware of the importance of their signatures in the petition,” Pol Derillo, board chair of the Metro Infanta Foundation (MIF), said in a report posted in the group’s website over the weekend. “Some of them even made a vow to contribute a portion of their ‘baon’ just to show commitment.” Chyrralenin Suapero, a Grade 2 pupil of the Disciple Christian School in Infanta, said she was aware of the danger posed by the dams once these are completed. “I’m afraid that it will again bring floods to our town. I don’t want that to happen,” she said in Filipino. Aside from signing the petition, Suapero said she contributed P5 from her P20 daily school allowance to support the anti-dam campaign. “My schoolmates have also affixed their signatures. Some of them also gave portions of their allowance. And we’re all willing to contribute more to stop the dams,” she said.

Read the rest of the article here: MIF may not know it, but they have just ingrained an important personal finance lesson in the lives of these children. Regular savings will do so much more than big, one time but unsustained efforts to build a nestegg. This kind of mentality also weans us from the mistaken notion that we can only begin to seriously start out savings program when we receive a bonus, a commission, an inheritance, a higher salary ... anything that will happen out there in the future. Sort of like beginning a diet tomorrow. Which makes me think that the problem is not that Filipinos don't want to save. We do, but we want to do it tomorrow when we have more money... A student from a public school in Manila looks longingly at school bags. Photo credit: AFP.

Let’s get one thing out of the way. Saving and investing are not the same, although they are both important and part of the same spectrum. Sometimes, we feel like we are investing, when actually we are still in the saving stage. Getting mixed-up over the two raises expectations that are not unrealistic. This list of options in the Philippine setting is not by any means exhaustive. It includes the major savings and investment instruments. Where would you draw the line to separate the savings from investment products? 1. Cash. Yep, I just learned last weekend that some Filipinos still prefer to keep their money in cash at home, fearful even of the possibility that they will lose money deposited in banks. 2. Deposit products. These range from savings and ATM accounts, to checking accounts and time-deposit accounts. These are the most popular financial products in the Philippines, but they typically give returns ranging from 0 to 6% as of today. Cooperatives also have some deposit products sold only to their members. 3. Deposit products in different currencies. Although multi-currency accounts have been around for ages, not a lot of Filipinos take advantage of them. 4. UITFs and Mutual Funds. These are pooled, managed funds that have slowly been gaining popularity especially among the emerging middle class which includes overseas Filipino workers. Money invested in these funds are not guaranteed by the Philippine Deposit Insurance Corp. (PDIC) and the principal is not guaranteed unlike deposit instruments. UITFs are sold in banks, while mutual funds are sold by mutual fund companies. 5. Treasury bills and bonds. These are government debt securities that give regular income, and present the investor with possible earnings from price and interest rate fluctuations. Treasury bills are those with a life of less than a year. Bonds are those with maturities of 2 years, 5 years, 7 years, 10 years and 20 years. They are sold through banks. 6. Corporate bonds. When you buy corporate bonds, you are basically lending your money to companies. Interest rates are the most important indicators to watch when investing in Treasury bills, government bonds and corporate bonds. 7. Stocks. Buying stocks allow the common investor to become a part owner in any public company. The attractiveness of stocks lie in possible share price increases and cash dividends. This instrument is riskier than bonds, and therefore carries a higher probability for earnings. 8. Properties. The real estate sector has a cyclical nature, so many of those who invest in properties expect to benefit from selling properties when the industry is on an uptrend. Those who belong to the older Filipino generation are more comfortable with investments in real estate. 9. Some believe jewelry, paintings, coins and other collectible items are also investment instruments. True or false? 10. Own business. This is a different kind of animal and carry a different amount of risk compared with items one to ten. How you choose to divide your money among these instruments is a highly personal choice. Some get rich just by focusing on properties and their own businesses. They don’t invest in stocks because they don’t feel comfortable with the stock market. Some try to reach financial independence by buying stocks because they like the feeling of being a “player” in the stock market. Noet Ravalo says:

For me, dividing the pie into three main chunks works. One chunk is for pure saving which is what I use for any unplanned expenses, from spaghetti meals to those branded stuff that we end up getting at a moment’s notice. The other is for pure investment, which is for the kids’ future and our retirement as best we can provide it. And the third slice is for those rare episodes of wanting to be a Soros-wannabe. This third slice is a spare for me and is the smallest both in relative and absolute terms.

What’s the best strategy for you?

I’ve been hearing this advice from a lot of people lately: Get out of the dollar. Put your money in pesos, euros, Canadian dollars and other currencies. This begs the question: Is the dollar a doomed currency? After the Fed rate cut, investors rallied towards the peso, causing it to gain a surprising half a peso in just one day. Trading at the Philippine Dealing & Exchange Corp. reached an all-time high of P26 billion. Investors were buying both short-term and longer-term tenors. A case of increased bullishness in the peso? Knee-jerk reaction? Or is the peso really becoming a better choice over the dollar? I can’t believe this is proof of investor confidence in the Philippines as a whole when you have the ZTE deal drama going on at the same time. INQUIRER.net hit a million page views in one day because of the ZTE coverage. Joke time. What’s the Filipino version of the American alphabet? A, B, Z, T, E, F, G…

There’s insurance for credit card debt, personal loans, mortgage loans and other kinds of loans usually offered through direct mailers and sometimes by telemarketers. It’s a complex product with a simple goal: to protect the borrower and the lender from loan default in case something happens to him while paying the loan. But here’s a voice of reason from a bank that offers this product. “Not everyone needs it.”

Is it worth it to get credit card-related insurance? This is a question only the borrower will be in the best position to answer. Ask yourself: Is it worth it to get someone to help me pay off my credit card dues in the future when I can’t? Those who charge only a little amount on their credit card monthly, or regularly pay off the total credit card balance at month’s end don’t need it. (Read the rest of the article here.)

Protection for rainy days. Do you really need it? Photo from AFP.  Hmm. Thank you for pointing that out. Payment protection insurance is quite expensive and from personal experience, there’s something very wrong with the way it’s sold. The MoneySmart's way is to just pay your credit card bill in full every time so that you don't need to pay extra for payment protection. If that's not possible, Citibank says it’s important to read the fine print on what is actually covered. That’s an advice worth taking, whether or not you are in a hurry or just too lazy to read that fine print in gray font. We all feel like skipping that part, admit it! :-D In taking out a home loan, for example, payment protection insurance adds quite a sizable amount of money to the loan, but not all real estate companies are transparent about it. Before you take out that loan and sign up for payment protection insurance, ask:

• whether payment protection insurance is compulsory,
• whether it will really cover you at your present age,
• whether there are policy exclusions,
• whether you can find a cheaper payment protection insurance somewhere else,
• whether you have payment options (i.e. upfront payment or monthly basis).

A lot of questions, I know, and I hope the agent is patient enough to answer your questions. Still, it’s always better to be informed than sorry.

Philippine Long Distance Telephone Co. (PLDT) is slashing its workforce. More than 500 employees will be forced to retire with P1.1 million by September 15. PLDT says that's the average compensation of the employees the company needs to let go. If you suddenly find yourself out of a job, has skills in telecommunications traffic operations, fleet services and network, and suddenly holding P1.1 million in your hands, what are you going to do with it? Food for thought on a very slow news day.

Buckle up. The smooth ride is over; it’s time to embrace volatility. After all, that’s just the nature of the beast. Or at least, that’s what Bangko Sentral ng Pilipinas Gov. Amando Tetangco Jr. is saying. It’s probably just a nice coincidence that several business stories indicate that the private sector is on the same page. If you missed reading the business pages in the last 24 hours, you should at least read these: $246M in 'hot money' fled RP in Aug. Peso continues to strengthen, closes at P46.47:$1 MANILA, Philippines -- Some $246.44 million in net foreign investments in stocks and bonds fled the Philippines in August due to global market jitters triggered by the worsening US housing slump, the Philippine central bank reported Thursday. MoneySmarts: Hot money has nothing to do with the weather, nor hot ladies. When reading business stories, simply remember that hot money comes mostly from foreigners interested in making a quick buck in Philippine stocks, bonds and money markets. The Philippine stock market is quite dependent on them, that is why we are vulnerable to things like the subprime mortgage mess in the US and anything that makes first world economies sneeze. The more technical terms for ‘hot money’ are short-term capital flows or portfolio investments. Shares close lower on oil surge, political concerns MANILA, Philippines -- Shares closed lower Thursday, unable to sustain early gains as caution prevailed after oil prices shot up to fresh record levels and a day after the anti-graft court handed down its guilty verdict in the six-year corruption trial of former president Joseph Estrada. Investors continued to gauge public reaction to the Estrada verdict while waiting for fresh cues from overseas markets ahead of the Federal Reserve's policy meeting on Sept 18. Euro climbs to record $1.3920 LONDON -- The euro rose to a fresh record high against its US rival on Thursday, reaching $1.3920 dollars in early European trade. The European single currency had Wednesday topped the $1.39-level for the first time on market expectations that the US Federal Reserve will next week begin trimming interest rates. Asian stocks gain, dollar soft on US rate view TOKYO -- Most Asian stocks rose on Thursday with energy stocks higher as oil held near a record peak above $80, while expectations of an US rate cut next week pinned the dollar near an all-time low versus the euro. Metrobank investment unit less upbeat on stock market MANILA, Philippines -- First Metro Investment Corp. (FMIC), the investment banking arm of Metrobank, the country's largest bank, expects the stock market index to hit 3,500 by the end of the year and not 4,000 as earlier expected. FMIC lowered its forecast primarily due to fears of an economic slowdown in the United States, the country's main trading partner. Central bank bracing for volatility RP can handle fluctuations, Tetangco says MANILA, Philippines -- The Philippine central bank is bracing for further volatility in the financial markets, but says the country is strong enough to withstand the worst of its effects. "The current macroeconomic environment is the most stable we have seen in over a decade," Bangko Sentral ng Pilipinas (BSP Governor Amando Tetangco Jr. said Wednesday in an economic briefing. He stressed that the country's economy was strong enough to withstand increased volatility and the perils brought about by the growing global aversion to emerging markets. MoneySmarts: Financial markets and the economy in general go through periods of boom and bust. That’s just the way it is. Media likes to write about every market hiccup as if the sky is falling. That kind of reporting sells newspapers, after all. But the truth is, markets are more resilient than most of us think. Now here’s a firm who doesn’t seem to mind the volatility. Firm aims to make a splash in the stock market MANILA, Philippines -- A Philippine company that took off selling hair spray in the 1980s and is named after that decade's romantic comedy "Splash" aims to take its fortunes a step further by listing on the stock market next year. Splash Corporation, the country's largest Filipino-owned personal care and cosmetics company, began as a P12,000-backyard business over two decades ago before growing into a multi-billion peso firm competing with the likes of Unilever and Procter & Gamble Co. Miscella-news Hefti is new BIR chief MANILA, Philippines -- Malacañang has appointed Lilian Hefti as commissioner of the Bureau of Internal Revenue (BIR) after the tax collecting agency met its revenue goals in July and August. MoneySmarts: I learned from Transparency Accountability Network chief Vincent Lazatin that Hefti is shaking things up a bit at the BIR in a good way. That probably means she is not going to stay long, he says with a naughty smile on his face. CTPL system seen to work just fine MANILA, Philippines -- Nonlife insurance firms claimed that the temporary system established recently to regulate the compulsory third-party liability (CTPL) business has curbed the sale of fake CTPL policies. The Philippine Insurers and Reinsurers Association Inc. (PIRA) said complaints against fake CTPL policies have subsided since the interim solution was put in place two months ago. Hope these news flow can turn into cash flow for you. Tagline courtesy of CNBC. :-)

A reader writes:

I got married six months ago, and am now finding out that my husband and I have different attitudes towards money. Maybe because we come from different backgrounds – I had to work to pay my way through college, while he was fully supported by his parents. Any advice so this won't come between us? – Laine from San Juan.

Money doesn’t ruin marriages. Attitudes towards money do. People may have general similarities when it comes to handling money, but I bet that 10 couples given P20,000 each and one half day in the mall would have 20 different shopping bags at the end of the day. Those are 20 different attitudes from 20 different people! Thing is, when it comes to money and marriage, the devil really is in the details. It’s simple to fall in love and get swept off your feet, but after the excitement of the wedding day, the bills come and real life begins. This INQUIRER.net article entitled “What’s yours and mine and ours” gives some tips to make sure money attitudes don’t come between husband and wife. Here’s a summary. I winced a couple of times when I read it hehe: 1. Talk about what money means to you. 2. Discuss and set your financial goals. 3. Be honest and let each other know how much you earn. 4. Prepare a budget together. 5. Decide on how you will handle bills. 6. Talk about how to handle purchases. 7. Give each other a personal fund. 8. Consult each other before assuming any debt (e.g., car loan, housing loan, etc.). 9. Discuss how savings are to be invested. 10. If there are family obligations to be met, such as parental support, make each other aware of the details. Suze Orman was once asked, “Do you really believe that people can change their financial attitudes simply by talking about money?” To me, the best part of her reply was: “Once you start talking honestly about money, you will be able to understand the basis of each other’s attitudes and behavior.” Here’s a challenge. Once when you and your spouse are feeling secure, ask each other to reveal a money decision he/she has been hiding for a long time. This is definitely a night for adventurous people who are willing to forgive in an instant! I've been sharing with you a lot about my interview with entrepreneur and well-known public speaker Francis Kong. He shared a very good personal example on how this tip could work in marriages. While having a good long talk, he said he and his wife agreed that he was very good in making money but very bad in keeping the money. Francis built the famous high-end Replay jeans brand in the Philippines; he loves clothes and fashion and admitted with good-natured candor that he spent way too much. On the other hand, his wife was an accountant and worked as an auditor and was very good in keeping money. So when they both had that a-ha moment during a long talk, they immediately decided that he would take care of the business side, and his wife would handle all the money. At one point during the interview, his wife joined us and it was very amusing to see the couple speak to each other in a sort of verbal shorthand that I did not understand. As we went on with the interview, I observed that Francis’ wife was looking at receipts. That convinced me more than Francis’ words that they actually practiced what he was saying. No two couples are the same, so a good long talk on money can build a good foundation for financial intimacy that can work for that couple alone. For this approach to work, however, honesty and a huge dose of open-mindedness will go a long way. Courage, too, in facing personal weaknesses. Are you willing to tell your spouse exactly how much you earn? Does your spouse know about all of your bank accounts or investment accounts? Does your spouse know at any given time how much debt is charged to your plastic? Keep the discussion non-judgmental and always remember that financial intimacy is built through time. When things don’t seem to look so rosy, remember to give yourself and your spouse credit for trying. And as Suzy Orman says: “Place people first, money second.”

Yesterday, I threw a question at you on whether it’s better to time the Philippine market or hold on to investments for the long haul. To me, the significance of this question is magnified by the inefficiencies in our local stock market and the investment environment. I wondered whether Philippine-centric issues such as market inefficiencies make the Warren Buffet-style investing ineffective here. Thank you for your replies. Read what the experts say: Ramon del Rosario, Jr. President & CEO, PHINMA

People have been known to be successful with both approaches, but timing the market is a much riskier approach. When you choose that approach, you better know what you are doing. You need to constantly watch the market. You can also play the market by allowing professionals to do it for you.

Mark Yu President, CFA Society of the Philippines

There are two things: strategic and tactical. Tactical refers to the yearly changes that you do with your portfolio. If you are churning your portfolio a lot, definitely you are going to do worse than the market. There’s a very high degree of probability. If you are churning it in a year’s time, if you are selling at a short-term peak, you will lose money. But from a macro scale, you can definitely make money by reallocating the portfolio (periodically) than just leaving it there.

From a macro perspective, generally if interest rates are high, the stock market does poorly. When interest rates are low, that means there’s a lot of money in the stock market. When you see the government start raising interest rates, then you start reallocating. Maybe you should start selling some of your stocks. When you know its going high already, you may want to be overweight on bonds (again depending on what stage you are). Generally, when interest rates start going down, bond prices start going up, then you make more money.

Fernando Jose Sison III President, BPI Asset Management Inc.

It depends on the investor. If he doesn’t need the money, he can just leave it there. If you look at PLDT in 2002, the price was just P300 per share. When it tripled to P900, many have taken the profit. Now it’s at P2,700. Those who left the money in the stock earned much, much more. Plus, cash dividends add to the attractiveness of holding on for the long term. It can add to your coffee or dinner budget (smile).

Now, when investing in a mutual fund, people should rely on the skills of the fund manager. Do not try to duplicate or act like a fund manager. If they duplicate or think they can act like a fund manager, then they might as well do the investment themselves. The job of the fund manager is to watch the market and time the market.

A READER sent an intriguing question to INQUIRER.net and I’ve been spending quite a big chunk of my time going around business circles and asking experts what they think. But before I post their replies, I want to know what MoneySmarts readers think. Here goes:

After reading all of the columns and articles on investing, personal finance, and wealth management, there is still one question the bugs me to this day? Yes, we've learned about asset classes, risk and return, profiling, suitability, a lot of other terms. But when it comes to managing your money, especially to those who have the time to do it on their own and probably not have enough to qualify for a private bank account, which is the greater truth?

1. Invest long term, don't actively manage your investments, and just invest in the market via index funds, or 2. Invest using short term cycles (i.e. time the market) and actively manage your investments by picking the potential winners.

Hopefully, the truth will set everyone free as what The Inquirer "promises". Thanks and best regards. Warren Buffet Wannabe (name, address, and e-mail containing my real name, withheld upon request)

Come on guys, what do you think?

For Filipinos who are just starting to get their long-term savings acts together, mutual funds have slowly become the investment instrument of choice. It’s not very hard to see why. For a minimum of P5,000, small savers get a professional fund manager working to grow their little nest egg. (Photo of cuckoo's nest courtesy of Michelle Morelos) Businesswoman Liah Alcantara is confident returns from the company she has nurtured will help her retire perhaps better than she initially expected. Lately, however, she realized she needed to “put her eggs in different baskets” and invested some of her extra money in mutual funds. She says she is not a financial person and knows little about how the market works. After listening to her financial planner, however, she decided to make a go for it. Next steps: learning to keep calm amid the gyrations of the market and decoding the mutual fund table. It’s hard not to be affected by market jitters especially when the mutual fund table looks like a message from the man on the moon. Here’s how to understand it better. The first thing you need to remember is that whatever you see in the table is the past. That’s that. Remember what your spouse told you yesterday? The past is the past. :) That’s just like investing. Past performance do not guarantee future returns. (Please click on the tables and graphs to see entire images.) Column number one simply lists the names of mutual funds. You will notice that funds are grouped now into five: stock funds (mostly invested in the stock market), balanced funds (mix stocks and bonds), bond funds in peso instruments (mostly bonds and near-cash instruments), bond funds in foreign currency instruments, and money market funds. The industry has certainly grown since the 1990s when investors only had three types to choose from. The second column refers to the Net Asset Value per share. I like to think of this simply as the price of each mutual fund share. One quick way to find out if your investment is earning is to compare the price when you bought it, and its price today. This is no different than comparing the price of that lot you bought five years ago and its going rate at today’s prices. The story lies behind the movement of the NAVPS, not in the level itself. “You have to know your acquisition cost. As long as the current price is higher than your cost, you are making money,” says Fernando Sison III, president of BPI Investment Management, Inc., which handles almost half of the assets of the entire mutual fund industry. Now, here’s a simple factoid that many equity mutual fund investors forget every time the stock market goes crazy. Whatever difference you see is a paper loss or gain. You realize that gain or loss only when you sell at that price. The next columns go into details that make your mutual fund snapshot more interesting. The 1-year return allows you to compare the price of your mutual fund share to its price a year ago without punching your calculator buttons. Three-year and 5-year returns allow you to see the historical returns. Sison says the time period is very important when reading the mutual fund table. “The time frame has to be factored into the valuation, not the absolute increase in price,” Sison says. The YTD return column shows “Year To Date” returns. It answers your need to find out how much you are earning today IF you bought shares last January 2, 2007. As of today, September 6, 2007, the mutual fund table shows that Sun Life Prosperity Philippine Equity Fund, Inc. is outperforming everyone else in the equity game with a 15.95% gain YTD. I took time to plot the NAVPS since January 7. Check out the graph. To tell you the truth, I like looking at the graph because the YTD, 3-year and 5-year returns smoothen out the returns too much for my taste. Although, mutual fund investors do not have to worry about timing the market, looking at the graph at least once every six months can give a sense of the volatility of the fund. Looking further at the mutual fund table, you will see that if you bought your shares last September 6, 2006, exactly a year ago, your earnings would be 38.43%. The 3-year and 5-year returns are much lower, but certainly much higher than time deposit rates. For Balanced Funds, GSIS Mutual Fund gives the best YTD returns: For Peso Bond Funds, ALFM has left the others way behind: Can the mutual fund table hide the truth? It smoothens out the returns. A 15% 5-year return, for example, does not mean the fund earned 15% consistently for the last five years. That’s an average figure, and may mean that for some years, the return could have been negative and fantastically high the other years. Hopefully, the mutual fund industry will include in the table a measurement of funds’ volatility as well in the coming years.

  Jumper Kim Hopwood is seen as he leaps from the top of the 421-metres Kuala Lumpur Tower, during the International Tower Jump 2007, 24 August 2007. (Photo from Agence France Presse) Here’s something I picked up from my interview with Francis Kong, veteran entrepreneur, public speaker and writer:

“Taking risks is good.”

He wasn’t talking about jumping from a tower. He was talking about entrepreneurship and how you jump with both your feet into it. He said it’s the adversity quotient that separates entrepreneurs from the rest of humanity. AQ – the ability to roll with the punches when things go wrong. The “tibay ng loob” and “kapal ng mukha” to do anything (except anything dishonest, of course) to save his business. I’m pushing the pencil further and drawing a longer line. Generally, Filipinos need to understand that taking some amount of risk is good. Generally. We can’t rely on guaranteed returns forever. (More on the interview with Francis Kong in my post for Open For Business, INQUIRER.net’s entrepreneur blog. Join our virtual ribbon cutting!)

By Bianca It was not your run-of-the-mill first meeting. True, there were muffins and sodas and a lot of getting-to-know-you questions but then Joe posed this query: “Who are your parents?” And he did not mean their names. Joe explained that we are our parents – how we spend, earn, our attitude toward money – they are mainly because of what we were taught, what we observed from our parents, what we hated but imbibed anyway, whether consciously or unconsciously. That if we understand them, we understand ourselves. I began to understand.I am a combination of my solid, stable father who loves to gamble every now and then and a mother who never quite forgot her less than humble beginnings that even with a million-dollar home, she still thinks she has not gotten away from being ankle-deep in the dirty flood waters of Sta. Cruz. Half devil-may-care, half guilty for every little thing I spend my money on, I realized that unbeknownst to me, I am them, and like them, I will be safe and solid money-wise, but trapped. I do not want to be trapped. Neither does my husband who has komunista parents turned kapitalista. He’s a nut case too when it comes to money – he’s a rogue painter in jeans and a wanna-be entrepreneur who cannot stand leaving a single centimo in his wallet. We are quite a pair. So it is quite serendipitous that we found Salve Duplito, who, we are convinced, has a heart of pure gold, and Salve found Joe Ferreria, our financial planner, who was funny, genuine, asked questions that hit home and cared enough to go all the way to our house and bring his wife’s callos at this point in our lives when we were ready to conquer bigger things, like ourselves and our latte factors, and ready to step beyond our comfort zones. We found friends that first night of our foray to living a better life. And suddenly – financial freedom, stability, being rich - is not so impossible anymore. (Bianca is one of the volunteers for MoneyMakeover. In MoneyMakeover, two financial planners have committed for one year to help out a couple and a young urban professional to achieve their financial goals. We all don’t need another Sermon on the Mount on financial independence. It’s time to show readers how this can be done. Read previous articles here.)

I wonder how President Gloria Macapagal-Arroyo handles huge swings in emotion. If she’s not on the verge of a tantrum (Are you telling me these people from the NSCB are liars??? – additional question marks mine), she’s on cloud nine about the GNP figures. Expect to read all sorts of analysis about the GNP and GDP figures in the coming days. I wrote about what these figures mean in this post. Two of the smartest economists in the country, Dr. Felipe Medalla of the UP School of Economics Cielito F. Habito of Ateneo, both former socioeconomic planning secretaries, earlier this year expressed doubts on the integrity of the national income accounts. They should know what they are talking about. The National Statistics Coordination Board was once an agency under them. I would like someday to write a detailed report of what it takes to churn out the GDP. I would like to pretend for example that I’m a mole inside the bag of the first NSCB survey person that goes out to gather data :-) . For now, I’m content to chew on this question: why are economic figures – GDP, inflation, trade figures, balance of payments –always under fire? That’s the way it was under the Cory, Ramos, Estrada administrations, that’s the way it is until now. People just can’t seem to believe them. I heard from foreign investment analysts that they have to rely on a bit of “economic sleuthing” to make up for the poor reliability of data coming from the Philippines, especially because these data are often revised. Imagine that. The discontent comes from an obvious wide disconnect between official data and expert perceptions on what the real score is. This Reuters article written by Rose Francisco, for example, says people don’t feel the growth and don’t enjoy it on their table. Some economists would tell you the country needs to grow consistently by 7% (give or take several basis points) for more than a couple of years more for people especially those in the bottom rungs to actually feel the growth. That sounds reasonable enough, until you realize that you’ve been hearing that argument since the Ramos administration when the economy was also doing well. People are tired of waiting. One answer could be to accept that GDP could not totally measure a country’s achievements. Anyone interested in gross national happiness? Dr. Romulo A. Virola, director general of the NSCB, explains:

Progress, when conventionally measured in terms of economic growth or even in terms of the UNDP concept of human development apparently cannot always be equated with happiness. It seems too, as many of our readers have probably come to acknowledge, that it is not easy to be rich and be happy at the same time. If we cannot have both, what should we then aspire for?

He continues:

On a scale of 0 to 10, Pinoys scored in the middle range of happiness with 6.4, tying for 40th to 43rd with Czechia, Greece and Nigeria. Topping the list is Denmark, followed by Switzerland7, Austria, Iceland and Finland. At the bottom are Tanzania, Zimbabwe, Moldova, Ukraine and Armenia. Among the ASEAN countries, Singapore with its high suicide rate is surprisingly tied for 29th to 33rd; Indonesia is 38th and Vietnam is 48th to 50th. Other Asian countries are China, 44th; India and Japan, 45th to 46th and South Korea, 56th to 57th. In terms of happy life years, Pinoys also scored in the middle range at 44.1 years, with a life expectancy of 69.0 years. On top of the list are Switzerland, 69.9 years; Denmark, 62.7 years; Iceland, 62.2 years; Austria 61.0 years and Sweden, 60.8 years…Interestingly, the Japanese, with the highest life expectancy of 80.8 years only have 50.4 happy life years, ranked 30th among the 95 nations. On the other hand, what is in the Scandinavian countries that make their people so happy? It is quite clear that nations which score high in happiness do not necessarily have lower suicide rates. For instance, Denmark, which has the highest happiness score has suicide rates 8 times that for the Philippines among males, and 5 times among females. Of course, we cannot discount the possibility of errors in the measurement of these variables, but the relationship among economic growth, happiness and suicide seems intriguingly complex.

I found this part of his article very interesting:

Dr. Allen Tan, former president of the Psychological Association of the Philippines … studied a group of upwardly mobile farmers and a group of more economically stagnant farmers; one of Dr. Tan’s conclusions is that happiness could be viewed as a choice! A choice between what ones referred to as optimistic explanatory style and a pessimistic explanatory style. An optimist would attribute good fortune to something internal within oneself (hard work, innate intelligence) and bad fortune to something external (supersungit na biyenan, chismosang kapitbahay). A pessimist would explain it in reverse: good fortune to something external (help of others, God’s will) and bad fortune to something internal (I am stupid).

Can you guess which group the President belongs to? Hehe. I think the GNP and GDP are overrated economic figures. Ralph Andreas Thurm, chief operating officer of Global Reporting Initiative based in Amsterdam gave a fascinating speech during the recent CSR Expo of the League of Corporate Foundations where he said GDP tells the wrong story.

“You cut down trees, you increase GDP. We count ourselves richer without thinking about the damage.”