February 2009 Archives

The other week, I gave my house help their annual raise in salary and told them I would advance the money for the entire year and open a bank account for each of them with it. (I wish I was the one who came up with this brilliant strategy, but it was Noet Ravalo who wrote about this in his column piece “Savings program for ‘kasam-bahays’") As I was asking whether they had any form of identification that we can use to open a bank account, I discovered that they had applied for SSS membership (something that I had suggested to them a year or so ago) but that it would take six months for them to get their ID. Hmm. Should I encourage them to contribute to the SSS? Back in the 1990s, when I was still a beat reporter for a business newspaper, I remember writing about several World Bank studies questioning the financial viability of the state pension fund. The SSS itself admits that its actuarial life is only estimated to last until 2036 and that’s only 27 years from now, way before my two home angels will retire. The culprit behind the SSS’ weak financial state is that contributions are very low as the level is mandated by law. It's collections are also low and loan payments are dwindling. Retirees now are getting only around P4,000 a month in monthly pensions from the SSS. Imagine having to live on that amount in your old age. Clearly, social security pension will not be enough to fund Filipinos future retirements. More and more, a do-it-yourself retirement investment scheme is looking more attractive.

Some investors are looking for safer investment havens, after having sat through nauseous market rides in previous months. Retail bonds might offer less exciting but more stable income, especially for those who are just starting to build their portfolio. However, as with any investment, know first its mechanics and how it can help you diversify your portfolio. Watch this video of Aboitiz Power CEO Erramon Aboitiz explaining about the company’s P1.5 billion to P3 billion retail bond offering this month.

Most people find stock investing sexy because they are caught up in the excitement of the P1,500-per-PLDT-share shooting up to P3,000 plus in a couple of months. Investors call this “capital gains” or “capital appreciation.” But when the economy is in a swoon and markets go limp, good old boring dividends become the luster of stocks. Dividends--cash the company sends to shareholders as their share of company earnings--are signs the company is doing good especially if the payouts are regular and they increase consistently through the years. This doesn’t mean that companies that don’t pay regular dividends are fundamentally weak. Opting for growth by reinvesting earnings into the company instead of sharing them with shareholders is a strategy many great companies like Microsoft used in its early years. Last year, here are some companies that continued to pay dividends despite the nasty market downturn: Financials Bank of the Philippine Islands (BPI) Banco de Oro (BDO) Metropolitan Bank and Trust Co. (MBT) Philippine National Bank (PNB) Philippine Savings Bank (PSB) Security Bank (SECB) Union Bank of the Philippines (UBP) National Reinsurance Corp. of the Phils. (NRCP) Communications ABS-CBN (ABS) Digitel (DGTL) Globe (GLO) Piltel (PLTL) PLDT (TEL) Cement/Commodities Holcim (HLCM) Construction DMCI Holdings (DMC) Consumer/Food Product Jollibee (JFC) Ginebra San Miguel Inc. (GSMI) San Miguel “A” (SMC) Universal Robina (URC) Utility/Energy Manila Water (MWC) Energy Dev’t Corp (EDC) Meralco (MER) Petron (PCOR) Holding Companies Aboitiz Equity Ventures (AEV) Ayala Corp. (AC) Filinvest (FDC) JG Summit (JGS) Property Ayala Land (ALI) Filinvest Inc. (FLI) Megaworld (MEG) Robinsons Land (RLC) SM Prime Holdings (SMPH) (The usual disclaimer applies, guys. This listing is not a recommendation from MoneySmarts to buy these stocks.)

My friend called me last week in apparent distress about his retired mom and dad. He said his family had a little meeting over the weekend and they found out that their parents have four credit cards with overdue payments amounting to P450,000. With his permission, let me share his story with you. They owned an old house in the province and another one that was being constructed courtesy of my friend and his two siblings. Two of them work here in the country while one is working as an expat Filipino. The one working overseas left his child in the care of the parents. Together, all three siblings send home P30,000 monthly for the retired parents’ living expenses. An allowance of P30,000 monthly for two adults and one child in the province living in their own home is not something to sneeze at. So how could they have charged so much money to their credit cards? I know you know how. Refurnishing the new home, splurging on the apo (grandchild), the many road trips they took as they enjoy their “newly retired” status all added up to P450,000—and who knows how much more if they didn’t talk about the situation openly. They didn’t want to let the children know at first, hoping they could fix things by themselves. But now, they had to come clean. The banks are knocking. “They are good people who made bad decisions,” my friend told me. Bailing out parents, for some, is like going through a backyard full of land mines. You think you’re familiar with the territory, but a sudden misstep could cause a lot of damage. After all, they used to call the shots. First things first, remember that it’s not all about the money. That’s, in fact, the easier part of the equation. It’s the psychology, the needed changes in lifestyle and the communication strategy that many people in this situation first have to worry about. Why? Because no matter how brilliant your strategies are to pay down the debt, if they don’t like it, sorry kid. So you need them to agree and to agree with you wholeheartedly. Once that’s done, you can try the following strategies: 1. Cut the cards. First order of the day is to stop the wanton swiping. If that means having them agree to cut the cards, then that’s the best strategy. 2. Debt substitution. Find other sources of funds that don’t charge 42% per annum in interest. This may include a personal loan from the children (with interest but lower than 42%), loans from the Social Security System (I will not recommend borrowing from the Government Service Insurance System) or salary and personal loan from a thrift bank. Whatever you do, do NOT borrow from a loan shark in desperation! 3. Sell stuff to pay off debt. This will be tough, but it’s important for everybody to feel the pain so that the lesson is learned. If it means going without hot water or sacrificing the car, then so be it. 4. Pay down the debt as aggressively as you can in the next six months. It is important that all accounts are made current, so divide any cash between all four credit cards. The objective is to fix your parents’ credit record so that the bank can see that they are doing your best to settle the debt. 5. Visit a credit officer and let them know about the situation. We know that this may be a long shot—appealing to a credit officer for restructuring--but there’s no harm in trying. Any more tips you can share?

"Our message is simple. You can do anything you set your mind to do."

--Team Hoyt

Suze Orman has the big awards and the big bestsellers that will make her win a “personal finance guru” contest in the world hands down. Still, I’m getting tired of her prattle. Last year, she landed on Time magazine’s top 100 artists and entertainers, she has won two Emmy Awards and she has eight bestselling books, some of which I have on my shelf. She’s definitely “on fire”, we hear Oprah saying that again and again. Hey, thanks global financial crisis. Oh she got her own share of brickbats from different kinds of people out there, and one that strikes close to the bone is the accusation that she has misrepresented her credentials. Wiki says:

“In 1998, Forbes magazine reported that Orman had misrepresented her credentials, and criticized some of her advice as simplistic. For example, her book claimed that she had a current Commodity Trading Advisor license, when in fact it had lapsed, and some of her materials stated she had eighteen years of experience working with Wall Street institutions when she had seven.[15] The San Francisco Chronicle ran a follow-up article documenting Orman's lack of follow up. Syndicated columnist Eric Tyson reported on numerous companies in the financial services industry, which Orman has financial ties with and the conflicts of interest that such ties create.”

This, to me, speaks more than blogger James Scurlock’s pot shots at Suze in The Big Money.  I tend to agree more with Felix Salmon in Portfolio.com in that there is nothing wrong with explaining financial concepts in simple terms to reach more people and connect with them. Simplified finance is more effective finance, not necessarily idiotic. So why am I, a former fan, now getting tired of dear Suze? I deeply believe that when someone is down in the pits, the last thing he needs is an adviser who would rub his nose in the gutter. Oh she can call it “tough love” and “saying it like it is.” But there’s such a thing as overdoing it—and to me the strategy has turned into a marketing mechanism rather than a deep desire to really help people. Watch her, truly watch her, and you’ll see what I mean. Johann Wolfgang von Goethe said, “If you treat an individual as he is, he will stay as he is. But if you treat him as if he were what he could be and ought to be, he will become what he ought to be.” The best financial advisers are those who make people believe in themselves and believe they can change. Those who can say the truth without judging, and give you the encouragement to turn the next corner with grace—despite the wrong decisions you might have made in the past. Keep that in mind when you look for a financial adviser.

Maybe around 50 times every year since I started writing about personal finance for newspapers and magazines, people ask me this question: What do I do with P100,000? (or P50,000 or some other amount) These days, P100,000 can be stretched in every which way especially by us Filipinos. "Stretched" though can have many different meanings! I can give you a short list of things I can BUY with P100,000 and guarantee that in a couple of hours, I will be happily looking at paper bags of baby stuff and home décor! But no, I am NOT recommending that! The fact that people ask how they can save or invest this amount of money is a good sign. Remember, it’s not the amount that matters especially in the beginning of financial literacy. It’s the discipline and the habit that matters. In a casual conversation among friends over dinner perhaps, people might offer suggestions along with the dessert. Put the money in time deposit or special deposit account in a bank especially since you should keep yourself liquid because of the crisis. (Being liquid means you can easily get the money if you need it). Someone else might say buy shares in mutual funds or unit investment trust funds now that they are cheap. Or stocks. Or a retail corporate bond if you can get access to them. Or government treasuries. Or perhaps invest it in a small business like a food cart. Do I hear someone suggesting putting the money under the mattress and never use it to buy a pre-need plan? The thing with advice is that they need to be tailored to the person asking. So, let’s apply some assumptions here. Let’s say the person who is asking for suggestions has been working for 5-10 years, meaning he is roughly 25 to 30 years old, is starting a family, has parents that are starting to have health issues and who don’t have long-term health care, is gainfully employed and has a spouse who is also in a good job. So far, he has little consumer debt (maybe P10,000) and he pays roughly P3,000 monthly on his credit card debt. His money in the bank is around P20,000. For sure, you would want your P100,000 to grow as quickly as it can. But first things first: pay off ALL consumer debt and fatten your emergency fund. It doesn’t make sense to be paying the credit card company 3.5% interest and earning that same amount from the bank. Second, the problem with investing if you don’t have a buffer fund is that you might be forced to pull out the money due to an emergency when the investment is still losing. If you already have an emergency fund good for three to six months of your family’s needs, I would then start to think of setting it aside for protection (insurance and health care). Getting sick when the job market is full of layoff horror stories can be a nasty wake-up call for all of us. Assuming I already have insurance and health care, then I figure out which investment instruments my appetite for risk can tolerate. Personally, I will add to my UITF and mutual fund shares right now and forget about it for the next three to five years. I have also been thinking of opening up a stock brokerage account for my retirement. But that’s me. How about you? What would you do with P100,000?

This is a guest post from Rose Fausto, mother of Anton, the young boy I featured in my article 12-year-old investment whiz kid:

Thank you very much for that nice article you wrote in Money Smarts.  We showed the article to Anton and he was thrilled but I guess the parents were more excited. I read all the comments and was happy to hear the nice ones, but of course, the mother hen in me was not so happy about a couple of comments calling our kids brats and my boy brash because he paraded his "total assets." Someone also said that these amounts might have just been given to the kids. Anton was more calm about the comments, saying, "That's ok lang Mommy." My initial reaction was to do an Excel file that shows the power of compounding, illustrating how modest cash gifts over the years and more importantly, the weekly savings from allowance, can give you a six-figure-saving at age 12 if you save religiously. Incidentally, the allowances of my sons are on the low end. I remember Pia saying to Anton during the interview, "Fifty pesos lang baon mo? (Your allowance is only P50? [Roughly $1])" Anton, in Grade 6, gets P250 per week; my second boy in second year high school gets P300 per week; my oldest in college gets P600 per week and all of them pay for their own cellphone load and some of their gimmick expenses. It's all a matter of attitude. Marvin, my husband, would joke that it pays to marry an Ilocana when he is asked about family expenses, savings and investments.  Maybe it's true. I grew up hearing my Ilocana mom's mantra of "live within your means, and enjoy the fruits of your labor."  I think the second part is just as important. I liken it to a diet. Depriving yourself too much will make it difficult to sustain. So, this is how we train our boys too.  If I may, let me share with you the system that they follow: Step 1: Put their savings in their treasure chest/box with a tickler (small notebook) that records their savings. Step 2: If the amount in their boxes reaches around P1,000, they deposit it in their ATM accounts (which we call small account for easy understanding) Step 3:  If the amount in their small account goes way beyond the minimum balance of P5,000, they transfer some to their big account. Big accounts, again for easy labeling, are the money market placements that give higher yields but cannot be easily withdrawn like their small accounts. Another option for their long-term investments are the stocks that they can understand. They also know that their money in stocks can sometimes lose some of its original value. (Rose is writing a book about raising her three sons and there is a part where she will discuss in full how she and Marvin train them to be financially literate.)

Two big corporations, Globe Telecoms and Aboitiz Power, have announced plans to issue corporate bonds for the retail investor—that’s you and me, supposedly. Globe’s offering has already begun, and it will end on February 19 (that’s two days from now), while Aboitiz Power hopes to begin offering its retail bonds in the next three to four weeks. In an interview with MoneySmarts, Aboitiz Power president and chief executive officer Erramon Aboitiz said the company would like to be less dependent on institutional investors, hence the decision to issue retail bonds. Proceeds from the bonds will be used to finance many of the company’s power plant acquisitions this year, but Aboitiz also said the company had already raised sufficient capital. “We don’t really need the money. This is just something extra,” he said. Last December, Aboitiz Power had already sold P3.39 billion worth of debt notes for its expansion plans. Philratings has already given the planned bond issuance its highest rating of PRS Aaa (triple A), meaning Philratings is confident you will get your money back when the bond matures. The choices are 3-, 5-, and 7-year placements, and returns are expected to be around 7.5% to 9% per annum, with a minimum investment of P100,000. You can get access to these bonds through the lead managers, which are BDO Capital and Investment Corp., BPI Capital Corp., First Metro Investment Corp., and the Manila branch of ING Bank NV. For the Globe Telecom issuance, the lead managers are BPI Capital, BDO Capital and First Metro. The February 2012 bonds carry a coupon rate of 7.5 percent, payable quarterly, while the February 2014 bonds have a coupon of 8 percent. Alijeffty Gonzales, managing director of ACG Advisors and Management Ltd. Co. and a registered financial planner, said these retail corporate bonds are ideal for investors who want regular cash flows (retirees, for example) and for people who are starting to build their investment portfolio. Bonds are generally less jumpy compared with stocks, and thus provide some measure of stability to an investment portfolio. They also pay interest like clockwork, and this is perfect if, say, you are expecting your son to start going to medical school in five years or for your house construction to begin in three years. In short, for little risk and less bother, you get a steady return. Let’s say you put in P100,000 in Aboitiz Power’s five-year bond at 8% interest and hold it until it matures in 2014.  You will be paid P8,000 per year in interest and when the bond matures in 2014, you will get your P100,000 back. For a P1-million investment, that’s P80,000 interest per annum, taxed 20% of course. (It doesn’t sound as attractive as Celso de los Angeles’ double-your-money in three years? DON’T get me started on that!) If you are drawn to these bonds and feel like they are a good alternative to your time deposits, here’s an advice from Jeff: hold them to maturity. That’s because when interest rates go up (as they might in the next couple of years), bond prices fall. If you decide to sell them before the maturity period and find that interest rates have gone up, you might not get the original amount you paid for them. Be aware also that they do not have the compounding returns of your time deposits.

Last Friday, we were teasing one of our reporters who used to receive bouquets of flowers at our Makati office from her boyfriend. She also used to buy gifts and have them delivered to his office, come Valentines’ Day. They have since gotten married and had children. Amid the ribbing, she said: “If he’s going to get it from the family budget, never mind!” We all guffawed at that good-naturedly. Blame the economy, I guess. On the way home, I told my husband that I was amused to see couples doing HHWWPSSP (what, you don’t know what that means? It’s short for “holding hands while walking pa-sway sway pa!”) Some of them were carrying roses, obviously on their way to some romantic date place. I saw my husband from the corner of my eye smiling and teasing me because we used to be like them. I then punched him gently on the shoulder and greeted him “Happy Valentines Day”, a gesture that earned me a hearty laugh. That was our Valentine’s Day celebration, plus several episodes of “Lost” that we watched when we got home. How far we have fallen from the nice-fancy-dinner, night-out-of-town, chocolates-and-roses-and-stuffed-toys couple. How steep the slide from weeks of planning on how to surprise and delight one another. But come to think of it, the simple snacks and shared moments of TV pleasure were just as, if not, more satisfying. At this time in our married life, we have more pressing matters on our minds: a growing family, amortization to pay, children to send to school, and long-term health care for parents to think about. Are we becoming our own personal Scrooges? I pause a moment to face the situation. Nah, not really. Honestly, financial security is an even better Valentine’s Day gift, and we both felt that deep in our bones. How about you? How did you spend Valentine’s Day?

I have been getting emails from concerned pre-need plan holders about whether or not a certain company is in trouble, and whether or not to continue paying. By this time, I suppose most of you know that there are inherent flaws in the products themselves and structural as well as regulatory weaknesses. Having said that, if you have money sunk in these pre-need products, the practical first step would be to find out if the company you bought is one of those in danger of collapsing, or whether it has been managing your money soundly despite the crisis. Here is a list of the companies that have licenses to sell plans for 2009. If the company in the letterhead of your contract is NOT here, it has trust fund problems.

1. AMA Plans, Inc.
2. Ayala Plans, Inc.
3. Caritas Financial Plans, Inc.
4. Cityplans, Inc.
5. Cocoplans Inc.
6. Danvil Plans, Inc.
7. Destiny Financial Plans, Inc.
8. Eternal Plans, Inc.
9. First Country Plans, Inc.
10. First Union Plans, Inc.
11. Grayline Plans, Inc.
12. Himlayang Pilipino Plans, Inc.
13. Loyola Plans Consolidated, Inc.
14. Manulife Financial Plans, Inc.
15. Mercantile Careplans, Inc.
16. Paz Memorial Services, Inc.
17. Permanent Plans, Inc.
18. Philam Plans, Inc.
19. Provident International Plans, Inc.
20. Prudentialife Plans Inc.
21. St. Peter Life Plan, Inc.
22. Sun Life Financial Plans, Inc.
23. Transnational Plans, Inc.
24. Trusteeship Plans, Inc.

Compared with the 2008 list previously released by the SEC, it appears that Pacific Plans has been dropped from the list, as well as Legacy, Ideal Pension Plans Corp., and one—AMA-- added. Remember, a listing here in MoneySmarts is NOT a recommendation for you to buy any plans from these companies. I am merely publishing the list for those who want to know whether or not the company you bought plans from or planning to buy from, is licensed by the SEC. The following list, on the other hand, is composed of companies willing to shell out more money to beef up their capital this year, in anticipation of difficulties in growing their trust funds due to the current rate of return of financial instruments in the market:

1. Ayala Plans, Inc.
2. Cocoplans Inc.
3. Danvil Plans, Inc.
4. Eternal Plans, Inc.
5. First Union Plans, Inc.
6. Himlayang Pilipino Plans, Inc.
7. Ideal Pension Plans Corp.
8. Loyola Plans Consolidated, Inc.
9. Manulife Financial Plans, Inc.
10. Mercantile Careplans, Inc.
11. Pacific Plans
12. Paz Memorial Services, Inc.
13. Permanent Plans, Inc.
14. Philam Plans, Inc. – *did not sign agreement because it says its trust fund is more than sufficient.
15. Provident International Plans, Inc.
16. Prudentialife Plans Inc.
17. St. Peter Life Plan, Inc.
18. Sun Life Financial Plans, Inc.
19. Transnational Plans, Inc.
20. Trusteeship Plans, Inc.

Those who aren't here are in fact, saying, suko na. So guys, be money-smart! ☺

Celso de los Angeles, owner of the Legacy group of companies, appears to be a financial genius. He created a scheme that fell through the regulatory cracks, and stumped both the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas. From the Senate hearings, here is the anatomy of de los Angeles’ perfect scam:

1. His companies sell a pre-need plan to an investor.
2. After some time, another company from the Legacy group, like Legacy Card or Legacy Motors, will buy back the plan and convert it into a deposit-like instrument with very attractive terms. For a P1-million investment, for example, you get P60,000 as advanced interest payment in lump sum and P20,000 a month after that in post-dated checks. That amounts to P240,000 per annum in interest payments alone, or 24 percent per year. On the fifth year, you get your P1 million back plus additional bonus of P200,000.
3. There are other kinds of schemes. Some are double-your-money schemes in three years, some in four. All involve extremely high interest and post-dated checks that can be withdrawn from his rural banks.
4. He folds his pre-need plans, assuring plan holders that they can get their money back because the trust fund is sufficient.
5. Then his rural banks also close shop, with many of his depositors’ money conveniently chopped up into accounts falling under P250,000—the amount insured by the Philippine Deposit Insurance Corp.

Since 2003, both the SEC and the BSP started sniffing into his operations. Whatever happened during their joint meetings, it is apparent that both agencies were at a loss how to deal with the complex financial instruments de los Angeles created. If the plan holder sells his plan to another company, does that still fall under the ambit of the SEC? Please look into it, BSP, the SEC says. Somewhere along the way, the regulatory structure fell silent on what to do and how to deal with this perfect scam. Clearly, BSP and SEC need more power, both legally and structurally, to deal with the complex financial world and criminal minds prowling the streets today. That’s something that lawmakers can solve, if they really have a mind to help the ordinary Filipino investor trying to make his way in this world. An early warning system would protect more investors. Immunity from suits would allow BSP examiners to act more speedily and forcefully. Why not create one financial regulator for the entire financial services industry so that nothing falls through the cracks? But the most potent solution against the perfect scam is this: investor education. If everyone understands what he is getting into, and knows how these types of instruments will fall like a pack of cards bringing his savings down with everyone else's, scams like these will never prosper. Unfortunately, as they say, victims are born every second. Just wait until the next perfect scam comes along.

By Vandermir Say, CFA Value Investor Most investors dream of having a large snowball one day. You want to make sure that the snowball keeps growing, however slowly, and one of the best ways for you to achieve this is by making sure it never shrinks along the way. Placing a snowball close to grave danger in exchange for possibly large returns is not something an intelligent investor does. A high-yield investment scam is one such grave danger. If you don’t get out before the scam collapses, an investor can find his snowball has significantly shrunk. An investor will have to invest whatever little is left, and start all over again. In the worst cases, snowballs can shrink to almost nothing. In another example, investing in a business that has owners or management with questionable integrity would be like pouring hot water on your snowball. Remember, you never want your snowball to shrink. The Sage of Omaha Years before the US Tech Sector crashed, Warren Buffett was criticized by many as an old investor who missed the boat since he did not invest in the sector. In 2002, Warren made the following statements: “Charlie (Charles Munger) and I are of one mind in how we feel about derivatives and the trading activities that go with them: We view them as time bombs, both for the parties that deal in them and the economic system.” “Charlie and I believe, however, that the macro picture is dangerous and getting more so. Large amounts of risk, particularly credit risk, have become concentrated in the hands of relatively few derivatives dealers, who in addition trade extensively with one other.” The Sage of Omaha may have been five years early, but most of us may agree that being right five years early is so much better than being wrong. Integrity Integrity is a trait valued by Warren and value investors, especially in cases where one acquires a minor share in a business. When you invest in stocks, you become an owner in the companies that you buy. Warren is regarded as having a very high level of integrity and he makes it a point to do business only with those with similar characters. In the past, Warren passed on deals that could make him hundreds of millions of dollars because it meant that he would have to do business with someone who would cause his stomach to churn. In the current crisis, shares of companies run by people with a higher level of integrity are not as badly hit as those with a lower level of integrity. Examples of companies with a higher level of integrity are: Berkshire Hathaway and Wal Mart and I believe, we don’t need to exert too much effort to identify those with the opposite character. The crisis has exposed many unethical and illegal investment practices. In the Philippines, we have observed, time and again, the numerous unethical and illegal activities that have taken away assets from Filipino investors. It is very important that individuals involved in these activities are punished to reduce their occurrence in the future. We can learn from the US model where they have arrested Madoff and Cosmo and caused company leaders to lose their jobs. Credit and trust Credit is a critical component of the global economy and we now observe what happens when the credibility of major financial institutions are questioned. Warren has recently said, “This economy (American) doesn’t work well without the lubrication of credit and trust and that’s been lost. And it’s a huge problem.” It is necessary that credibility is regained and this can only be done via responsible and ethical actions. In this crisis, value investors generally avoided losing money by not investing in unethical entities. Investors can invest in entities or markets that will continue to have or regain a superior level of credibility. I shall end with a statement from Warren’s longtime partner, Charles Munger, who commented on some practices of banks and financial institutions: “In some of these institutions, the main product is not banking, it’s testosterone.” (Every other month, the Chartered Financial Analyst Society of the Philippines writes articles for MoneySmart readers as part of the organization's advocacy on financial literacy. The CFAP is a member society of CFA Institute, the global membership association that administers the Chartered Financial Analyst (CFA) curriculum and exam programs worldwide; publishes research; and sets voluntary, ethics-based professional and performance-reporting standards for the investment industry. CFA Institute has more than 96,000 members, who include the world’s 83,000 CFA charterholders, in 133 countries and territories, as well as 135 affiliated professional societies in 56 countries and territories.  CFAP was founded in the Philippines in 1997 with the support of the Capital Markets Development Council, Inc. (CMDCI).  CFAP’s mission is to be the thought leader in the Philippines’ investment and finance industry.  For more information, please visit www.cfaphilippines.org.)

"I tell you this, family is more important than work. I have my priorities straight because my employer will know that they are not the most important thing in my life. So in 30 years, I will tell my children "Money will make me happy" is a lie and "Happiness comes from within."

This video was created for the AARP U@50 video contest and placed second. It is based on the Argentinian Political Advertisement "The Truth" by RECREAR.

Most of us tightwads would rather bear the discomfort of sitting uncomfortably for hours, clicking through websites on personal finance and reading blogs like MoneySmarts just to learn more about financial management than subscribe to magazines that we can curl up in bed with. From time to time, though, I make an exemption. Being the first and only personal finance magazine in the country, it truly deserves the P120-per-copy invesmtent you'll make. MoneySense is a fixture in our home and something that I give as a gift to some close friends. (The fact that I have a column there is definitely not the main reason for this! (smile) This year, check out its new look and new sections just in time for its second anniversary. There’s Savvy Investor, which offers investment primers and comparing stocks and funds, and also Income Earner, featuring money-making opportunities and career advice. Its regular sections, like Easy Money has become more interactive while Smart Spender is now more diverse in advising how you can get the best value for your money. This special issue also carries features like where to invest in 2009, how to know if your bank is safe, keeping your money secure this year of crisis, and how actress and multi-endorser Dawn Zulueta, continues to enjoy her hard-earned success. MoneySense also has stories on global franchises under $50,000, money market funds, personal loans, health insurance, and dollar time deposits. Currently available in over 200 outlets nationwide, MoneySense is founded by veteran business and finance journalists with a combined 50 years of publishing experience. To learn more about MoneySense, visit www.moneysense.com.ph. For subscriptions, contact 339-3361, 728-1073 or email info@moneysense.com.ph.

Reader Dupax sent me an email with a question I know most of you are also thinking about:

I've been a fan of your MoneySmarts articles ever since I've decided to become a financially literate person. I'm an OFW for over a year now. I have two kids, and my wife is taking care of them full-time. I've been reading a lot of stuff about mutual funds and I really would like to start investing in it, even if there's a global financial crisis. I know I can put my savings in a time deposit right now but I know that there's a better way of saving it. Instead of putting it in the bank, I'm willing to initially invest P50,000 in mutual funds, UITFs (unit investment trust funda), or other investment vehicles, and then invest P10,000 every month in the period of three years. My wife already talked to a Sun-Life Prosperity Fund  agent last year. But then, I want to know if I need to wait for the market to hit rock bottom before I start investing. What's your advice? Which bank or investment company is reliable? I don't have any financial mentors here so I took the chance of asking you.

Here are two answers from independent financial advisers:

1. It is good to have a disciplined buying program. It is better to make sure that the buying program will continue even through bear markets.
2. Consider an online vehicle that focuses on blue chip companies. Another way to go is to invest in an index fund that charges low fees and has strict guidelines to track the PHISIX or a major Philippine Stock Index. BDO, Ayala, Sunlife and ING are some reputable firms.
3. If you are just starting, then the next three months would be a good time to start. This is only a guess as no one can tell you if we are at or near the bottom of the market. It usually doesn't pay to try and time the market and it usually pays to invest based on understanding fundamentals. If one doesn't have the time nor the will to understand the fundamentals, a low cost index fund is one of the best instruments to use.
4. Note that equity investments are volatile and if cash inflows are required, fixed income instruments are more appropriate.

Vandermir Say (Chartered Financial Analysts Philippines president Vandermir Say follows the strategies of value investing.)

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I am an advocate of Risk Management, thus I need basic information on the person inquiring like his age, risk tolerance and purpose of his investment. These information are vital in providing a very sound investment advice. You can also conduct your own personal risk management by asking yourself the following questions:

1. Am I ready to invest? 2. What is the purpose of my investments? 3. Can I invest for the short term, medium term or long term? In the absence of specific information on your situation, I would say that it is generally still unsound to invest a big chunk in equities now. Mutual funds would be a good investment vehicle or UITFs. Managed funds are usually good vehicles since you are not around to look into your investments. But still I suggest balanced funds not equities. Also, don’t invest all of your savings. Maintain a considerable amount in your time deposit for liquidity purposes and to soften any big drop in your investments. Around 20% to 30% should be enough for investments and the rest should be maintained in your time deposit. Make sure that the company where you will put your investments are known to you and the public. Due diligence must be done first. There are a lot of illegal investments firms that are going around victimizing OFWs nowadays--the bigger the return, the more one should be cautious! Tony Balmori Officer-in-charge International Association of Registered Financial Consultants Through the years I have followed financial markets as a business journalist, I have seen many try to predict market bottoms. Technical analysts would say the charts tell you what to do. Others will say “experience” and “gut feel” will tell you what to do. In hindsight, these are all intelligent guesses at best. What I am sure of is that whenever the markets turn, none of those who made their forecast are quacking. So, happy investing guys!

Malaya Laraya, a registered financial planner, called my attention to what his friend recently experienced with a certain bank. It’s an eye opener, especially since I have often written that if you think you’ll miss payments on your bank loans, it’s better that you call them before they call you. So Aya’s friend decides to pay the bank a visit in the spirit of being proactive with pay-slips and bank statements showing his financial situation in tow. “Much to his chagrin, the bank refused to even discuss the matter.  From the bank’s point of view, there was nothing to discuss as my friend simply just had to pay the loan,” Aya writes. “Now, in better times, the bank could definitely not be faulted for taking such a hard-line stance.  After all, a loan IS a loan.  However, given the extraordinary circumstances we all find ourselves in, (even the bank said that it expects to make much, much less this year due to the crisis) the bank’s refusal to even sit down and discuss possible options strikes me as rather short-sighted to say the least and almost exploitative if you think about it,” Aya adds. If I were Aya’s friend, I would ask to see that bank officer’s boss. I would not stop until I talk to a real decision maker. Then I would tell MoneySmarts which of the banks are that heartless :-D. People need to know which banks know how to discern between someone who is trying proactively to solve a possible problematic situation and borrowers who would just default because they don’t care. After all, the bank loses more if that person defaults, because it will have to write down that loan and that’s a strain on his resources.

To hear Senator Mar Roxas say it, the Securities and Exchange Commission is either sleeping on the job, sleeping with the enemy or both. The problems of Legacy Consolidated Plans have resurrected old ghosts and painful lessons for hapless parents trying to prepare for the future. Issues hounding College Assurance Plans, PET Plans, Pryce Plans, Pacific Plans, TPG and many others raise serious question for students of financial planning. Do we still trust the pre-need industry? Do we still trust regulators? How in the world can we steer clear of potholes that can endanger our precious savings? There has been serious regulatory oversight, that’s pretty obvious. Only 5% of plan holder’s payments are placed in the trust fund? My children’s education is worth only 5% of what I paid? Where did the rest go? What also caused my extreme dismay is that it took a Senate hearing for the SEC to start thinking about freezing Legacy owner Celso de los Angeles’ assets, which he says can reach P1 billion--almost enough to pay off all his plan holders. It’s been two days and the SEC still does not know that he has 30 companies they can run after. “Where are your forensics teams? Where are their computers?” Senator Roxas asked in obvious frustration. Legacy asked for voluntary dissolution in December. It is now February. I don’t like politicians much but he has a point. Now, much as it is fashionable to point fingers, there are things we plan holders can do to safeguard our own money. Suppress the greed, learn how to do your own due diligence, educate yourself, make your own decisions. Finding integrity among businessmen in this whirlwind world of business is an increasingly difficult thing to do. The government was supposed to help us with that.

The brick walls that are in our way are there for a reason. They are not there to keep us out. They are there to give us a way to show how much we want [something].

~~ Professor Randy Pausch, who died of pancreatic cancer in 2008.

This quote was part of his "Last Lecture" at the Carnegie Mellon University, a traditional lecture series where professors are given the chance to say what they would to their students if they were to die soon. For Dr. Pausch, the theoretical exercise literally became true, when he was diagnosed with the debilitating disease. Watch the full lecture on Oprah.