By Marjorie Gorospe INQUIRER.net This is an interesting piece from one of our reporters: When I was still taking entrepreneurship and statistics classes, I yawned a lot. I was never a huge fan of numbers and finance terms. Now, experts say they can teach these subjects and still put fun in the classroom. GE Money Bank Philippines and Let's Go Foundation in collaboration with local experts come up with a financial education program called Women Entrepreneurship Program, and part of this program is FUNANCE. Funance was developed by Maurino Bolante, a professor from the Asian Institute of Management. The idea is to use an interactive classroom activity approach to make learning easier for both teachers and students. Using videos and online materials, Funance has modules on the basics of Balance Sheet and Income Statement, a case study entitled "Pasta At Iba Pa" where students are inspired to explore business ideas and a module that helps students make decisions on cash flow and cash management in a form of a board game. Schools that want to use the module may have the all the materials for free. Too bad, this was formulated just after I survived the boring hours of my entrepreneurship class. I could have been one of those students rolling the dice on the Funance board game, finding the right definition of a concept with my classmates or pretending to be a tycoon--enjoying yet learning the lessons.
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By Aya Laraya, RFP* With the global financial crisis hitting everyone and so many people losing their shirts, a lot of people are beginning to lose heart and quitting the whole financial planning mindset. And as lousy as it can be to talk investing when you have just lost your life's savings, you will only be able to recover from things like this if you develop a sound and coherent plan. How? By being the one who actually decides where your money goes. What do I mean by this? Consider the following: First, ask yourself, how did you arrive at the decision to purchase your last investment? (Let's say a pre-need educational plan.) Did you decide on your own or was it recommended to you? Did you consider other options before deciding on the pre-need plan? (Like stocks, mutual funds, etc.) What factors made you decide to take that option over the others? (Risk? Accessibility? Rate of Return? Cost?) Second, who decided on which provider to buy from? Did you research who the industry leaders were? Or was it based on word-of-mouth? Or on the fact that your friend or relative worked for said provider? Third, who decided on the amount you would invest? The worst thing that you can do here is to allow an agent to decide how much of a certain product you "need". Keep in mind that a great number of them work on commission and that the more you invest, the greater they earn. Consequently, their objectivity in this matter would be somewhat suspect. Ok, so much for the questions. How about some suggestions? The ideal decision process would be as follows: First, decide what you want to accomplish. At this point, it can still be something vague like "Provide for my child's education" or "I want to retire at 55". Second, quantify that target. You have to get an idea as to how much you will need to hit your target. Talk to your desired school to get an idea of how much their tuition fees increase annually and use a calculator or Excel to project that figure to the time when you expect your child to need it. Third, (this is actually interchangeable with the second step), examine your current finances to determine how much you can truly afford to invest. Ideally, you should make a projection for the period during which you expect to make the payments to truly see if you can pay them all. Very many people fail in this step and end up defaulting on payments. Fourth, using the figures from steps two and three, determine what investments can achieve the desired rate of return. This is the most technical step in the process and you may want to get outside help. However, the key point here is that you have to be the one to decide which investment vehicle to ride in. Fifth, examine the different companies that sell these investment instruments. Find out who the industry leaders and laggards are. Make it a point to visit their head offices to see how they do business. Is their office all flash but filled with unresponsive people? Do they try to hard-sell you the minute you walk in? How easy is the office to get to? What is the process for you to get your money back? (In my experience, making that initial investment is the easiest thing in the world. It's when you want to get your money back that you suddenly have to fill-up so many forms and jump through so many hoops.) Sixth, get proposals from at least three firms. Make sure that the terms come from you so that it will be easier to compare options. Think of this step as like going to the pharmacy with a prescription. For example: I have P50,000 right now, what blue-chip stocks would be good to buy? I don't want oil, mining or other speculatives. Or: I can pay P4,000 a month for the next five years. What plans can your company offer me? In both cases, the control lies with you. You already know what you want and it simply becomes a matter of whether they can provide it or not. If it’s the latter, then just walk away. Lastly, always monitor the company you invested with. If the past year has taught us anything, it’s that even century-old institutions can be wiped out and that it’s the individual investor who pays the price. Ask for financial statements on at least an annual basis. If you invest in a managed fund that dabbles in stocks, make sure you check their portfolio regularly. Simply put, NEVER assume that investing is a fire-and-forget process. The hard truth is that you can never relax because, at the of the day, everyone is looking after their own interests so you better make sure you protect yourself. *Registered Financial Planner
BY MALAYA LARAYA I recently conducted a half-day seminar on financial planning for some professionals and it was a rather enlightening experience on the mindsets of people when it comes to financial planning. As always there was an open forum at the end and quite a number of questions were asked – some were the usual and some were rather unusual. So for those of you who may have had some of these questions in mind but didn’t know who or what to ask; here is a small FAQ on financial planning. What is the best investment? This is definitely the most common question that has been asked and the short answer is this : There is none. More specifically, there is simply no investment tool that is the best for all people all of the time. There are instead, instruments that are best suited to each individual’s particular needs, plans and current financial condition. Simply put, what is good for your friend, spouse, relative, lover, workmate, neighbour or child may not necessarily be good for you due to the undeniable fact that you and your friend, spouse, relative, lover, workmate, neighbor or child are two different individuals. Consequently, the two of you will have different sets of wants and needs at different times and will therefore need different solutions. Therefore, be very wary of anyone who tries to sell you a panacea for all of your investment needs as it simply does not yet exist. Where can I get information about (x)? Despite the fact that we are very much in the online age, very many people still do not know where to get even the most basic information about financial products. From equities to managed funds to pre-need plans; people seem to be at a loss as to where to go. Here are some websites that you can visit as well as what you can expect to read. For Equities : 1. www.pse.com.ph : This is the Philippine Stock Exchange’s official site. Lots of content from latest market news to an online trading simulation. Best site for IPO news as well as corporate changes such as cash and stock dividends. The bad side is that the site is sometimes abysmally slow and their market ticker has been known to display faulty data. For UITF’s : 1. www.uitf.com.ph : This is a site run by the Trust Officer’s Association of the Philippines or TOAP. Site contains basic information about UITF’s as well as links and info about the participating companies’ UITF’s. Not a very nice site as quite a number of links are broken and there doesn’t seem to be a way to compare fund performance between different banks. All in all, about 17 banks are participating so this is still quite a good source of preliminary info. For Mutual Funds : 1. www.icap.com.ph : Maintained by the Investment Company’s Association of the Philippines, this site lists a pretty large number of funds dividend by their primary investment type – (Equity, Balanced, Bond, etc.). Has a pretty good primer but the heart of the site is the page detailing the returns of each fund. This site allows you to directly compare and contrast different funds so it is easy to see which funds in each class have been performing the best over the short, medium and long-term. Are investment returns guaranteed or risk-free? The short answer here is no. In the interest of public safety though, here is a breakdown of common investment products and the answers for them. EQUITIES: No broker, agent or salesman is legally allowed to guarantee the performance of any stock. MANAGED FUNDS: Regardless of whether the fund is a Mutual fund, a UITF or some other managed fund; managers are not legally allowed to make any guarantees about a fund’s performance. BANK PRODUCTS: Savings accounts, time deposits and other bank deposit products are allowed to make guarantees. To be certain, check the fine print. PRE-NEED PLANS: It depends. Certain pre-need plans promise a fixed return after a specified period and that is ok. Other plans promise a return based on the performance of a pre-determined standard and a guarantee for those products is not ok. As a rule of thumb, check to see if the words “Past performance is no guarantee of future returns” or something similar appear on the materials given to you by the salesperson or agent, then they are not allowed to guarantee any return. Where can I get (x)? Quite often, after you have decided to get a certain product, finding someone who actually sells that product is quite a chore. Here are some ideas on where to get certain products. BANK PRODUCTS: Not surprisingly, you get bank products from banks. However, aside from savings, checking and time deposit products, many banks also offer other, more sophisticated stuff. To start, go to your bank’s branch and ask if they have any retail investment products available. Most often, they will offer you their UITF though the really big banks will probably offer you a lot more options. MANAGED FUNDS: UITF’s are sold by banks so if you are interested in them, go to the nearest universal bank. Mutual funds are sold by investment companies and they are slightly harder to get hold of. You can begin by asking within your social circle as it always helps if the agent is someone you see regularly. Failing that, you can go directly to the investment company’s head office and open an account there. PRE-NEED PLANS: If you live or work in the Philippines for a significant amount of time, it is almost 100 percent sure that you will know someone who sells a pre-need plan of one kind or another. Just send an email or text to everyone in your address book and there will be someone there who either deals in these products directly or knows someone who does. STOCKS: You can either sign-up at one of the online brokerages or you can troop over to one of the two trading floors (Ortigas or Ayala). Should you choose the latter, you can ask the guards at the ground floor to point you to one of the brokerage houses in the building. To open an account, you will basically just need your tax identification number and two government identification cards. Some brokerages will also require a minimum investment account though not all do so. That’s about it for now, if anyone has any further questions, post it here and I’ll try to answer it in a future FAQ. Safe investing everyone.