After the enlightening talks of Mr. Velarde and Mr. Lee, COL’s Fund Analyst, Mr. Marvin Fausto went onstage as he tied up the morning’s wealth of informative discussions with a reiteration on Smart investing.
Here are the 5 Basic Principles of SMART Investing, as imparted by Mr Marvin Fausto:
S – Stay Invested
You cannot win if you’re not in. You must be in the game. You should invest for the long term.
This is a simple illustration of what may happen in our country 10 years from now if you’ll remain invested until that time:
The table shows an average GDP growth of 5.3% from 2005 to 2015. Mr. Fausto tells us that if we assume the same pace that we grew in the past 10 years, it is not that hard to imagine that our economy will double again, now that our GDP growth even reaches the 6-7% range.
Looking at the table, we could safely estimate that everything will double up except for the OFW remittances because when a country becomes prosperous, Filipinos would definitely return home.
As for tourist arrivals, 10M is not that hard to also imagine. Today, Singapore has 15M tourist arrivals while Thailand has 25M. so 10M for a country that has much to offer is not that hard to achieve.
As for the stock market, what can happen?
The picture above shows that from 2005-2015, the stock market tripled in size, when the economy doubled! From 2096-level, all the way to 6952-level, that’s about 3.3 times growth! Mr. Fausto explained that it is because the largest companies of the stock market are the beneficiaries of the growth of the economy as well as its drivers.
For the past 10 years, there has been a compounded annual growth rate of 12.7%. Now, being conservative, Mr. Fausto said, what if we grow only by 10% for the next 10 years?
With that projection, the Philippine stock market can reach 18,000 by 2025!!! That’s 2.5x from where we are today, where we’re currently at 7500-7800 points.
We have to remember that reaching that 18,000 mark is not smooth sailing. We have to experience many ups and downs before getting there, but we have to be reminded that this is how the market works. That is how it works around the world. We just have to learn to manage the risk, accept that volatility is part of it, and that we could never enjoy it if we don’t stay invested.
M – Manage the Risk
Stock market has volatility. It regularly goes up and down. He said that we should not avoid risk but should instead learn to manage risks by diversification. Spread the risks by putting it in different asset classes.
You could be able to manage risks by having different fund allocations through COL’s Fund Supermarket. With COL’s Fund Supermarket, Filipinos may now invest in 26 pre-selected mutual funds from the country’s top mutual fund houses.
A – Asset Allocation
When it comes to asset allocation, you must know how much of your money you want to set aside per asset class. You have to decide based on your capacity to take risks and affordability.
He enumerated these famous persons and their respective styles of allocating their assets:
- Warren Buffet: My wife’s inheritance should be put in 90% low cost index fund, 10% government bonds
- Benjamin Graham – 50% fixed income, 50% stocks
- John C. Bogle (Vanguard Group Founder) – Your age in bonds, the rest in low cost equity index funds.
After that, he localized the setting by suggesting these kinds of asset allocations for us Filipinos:
- Aspiring Wealth Builder – For 35 years old and below, 80% equity, 20% bond funds.
- Because you have a lot more time in your life so why not be aggressive and accumulate more cash.
- Wealth Builder- For 60yrs old to 65yrs old – 50% equity, 50% bond funds.
- As you near retirement age, it is prudent to be a bit more conservative in terms of your investments.
- Wealth manager- For 66 yrs old and above – 20% equities (because you’ll live a little longer), 80 % bond funds
- After working for 30 years, you should now be a wealth manager!
R – Regular Investing
Because we are emotional beings, we are usually affected by sudden highs and lows of the stock market. That’s why we sometimes delay or skip investing. Whether the market goes up or down, we should still invest monthly.
With COL’s Easy Investment Program, investing regularly is hassle-free since you can assign a fixed amount, automate it and just monitor online.
For more information about how this works, you may find the COL Easy Investment Program here.
T – Targets Review
After doing all the first four steps, remember to review your targets and to regularly conduct a market review. Mr. Fausto suggests that one of the best times to do this is during your birthday. If you’re married, anniversary time would also be a good time. We must look where we are and rebalance our portfolio, if needed.
He emphasized that we need to allocate our assets according to our values, dreams, goals, and needs. We have to design our allocation strategy in line with our financial goals and life goals.
Mr. Marvin Fausto ended up his piece by saying, “To achieve real wealth is having enough for yourself that you can give what’s in excess to help others. And it is not just about money. It could be time, effort, skills, talents or even what you have learned today.”
“Investing is not for the rich or for the experienced; investing is for everyone, because you and I will agree that everyone deserves a richer life. And that’s how it works,” he concluded.
Well, this and the previous three articles on the event only covered the morning session! Whew! I hope you learned a lot and I do hope that somehow, I was able to bless you by sharing what I have learned from this event.
There’s still another part, the afternoon session, but I would rather end it here. What’s important on the afternoon session were the stock picks from COL which I shared already.
Here are some important insights from the afternoon session that I want to share:
- The Duterte administration is lucky because it has a strong balance sheet to start with. The debt level of the government has gone down. The government has finances to cover up for its expenses. The Philippines was lucky enough to enjoy 10 ratings upgrade back in PNoy’s administration, which means that if there are investment opportunities, our government is in a good position to borrow.
- The 10 point agenda of President Duterte, specifically the acceleration of infrastructure projects, will have a positive impact on our GDP and will significantly boost the global competitiveness rank of the Philippines as an investment destination. The Duterte administration was also cited to also focus on developing the rural areas.
- From 12 infra projects in the 6 years of PNoy’s administration, the current administration will aim for 17 projects in 18 months. Alongside this, the government will also reduce approval time, from project proposal all the way to awarding of a contract. From 29 months in the previous administration, the current administration aims to shorten process time to 18-20 months.
- The Duterte administration also reassured us of maintaining the macroeconomic policies that were started by PNoy’s administration.
- If you have an SM stock with you, good for you. The top officer of SM told us that SaveMore will be the exclusive supermarket of all City Malls that will be constructed by Double Dragon Properties. Aside from that, they partnered with Lazada so that you could shop for SM products straight from Lazada’s online e-commerce site. As for BDO, good news too as they are currently tapping many parts of Mindanao to increase market share and visibility. They started this already by buying a famous bank in Mindanao.
- If you have Double Dragon stock, Ms. April Lee Tan, told us that it is much better to be cautious on this stock as of this moment. Their market capitalization today is just the same as Robinsons Land. But look at Robinsons Land versus all the completed projects of Double Dragon? Still, a caveat.
- If you have PLDT stock with you, Ms. April Lee Tan also told us that as of now, TEL might not be a very good stock to buy since their legacy product, which is the landline that most of us had before, is slowly losing its market share due to increasing availability of social applications like Viber, FB Messenger, WeChat and the likes.
- We have overcome many challenges in the stock market: Interest rate hike last December of 2015, falling oil prices in February this year, Philippine election last May 2016 and the infamous BREXIT, which happened in June this year. With regards to all of these, Philippines stands as one of the best performers in the global market year to date
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