Showing posts with label mutual funds. Show all posts
Showing posts with label mutual funds. Show all posts
Thursday, August 7, 2014
Words of wisdom from the Warren Buffett of the Philippines
By David K. Ongchoco
MR.Wilson Sy
Dubbed as the Warren Buffett of the Philippines, Wealth Securities and Philequity Fund founder Wilson Sy wasn’t always the stock investment virtuoso he is known to be today.
Sy remembers fondly his days at Xavier School and his education under the Jesuit priests. He credits Xavier School and the Ateneo De Manila University for the values these two schools inculcated in him.
Through the rigorous English lessons, theology classes and liberal arts education, he learned the importance of focus, discipline and hard work.
Working even on holidays and during Christmas break when everyone else was on vacation, Sy would wake up at 8:30 a.m. to help out in the family store, selling such products as soap and toothpaste. At a young age he learned the value of money.
“You don’t just throw away money, it isn’t that easy to earn. For every Colgate I sold, I’d earn one centavo. You then realize that everything counts,” he says.
These childhood lessons came in handy as soon as he landed a summer job at Multinational Bancorporation where he worked in fixed income, money market and equities—his first foray in investment banking. He moved on to investment banking pioneer Bancom after finishing a Management Engineering degree at the Ateneo.
After the 1986 Edsa revolution, he chose to work at Wealth Securities after a seat in a stock brokerage was offered him. After one client after another asked him to manage their portfolio, Sy, with several stockbroker friends, decided to launch a fund management company called Philequity Management, Inc. (Pemi). This was in 1994.
Twenty years later, Pemi has become the distributor of the best performing mutual fund in the Philippines, Philequity Fund, Inc., with an average annual yield in excess of 20 percent.
Through the years, Sy has made it a habit to read newspapers, analyze tables on Bloomberg, give talks in investor briefings, sit on the board of big companies, and trade stocks. He tries to learn something new every day.
“No matter what your status in life is, be grounded. When you start believing that you’re the best, that will be the start of your downfall. You have to keep working hard and learning new from other people,” he points out.
Why invest?
“If you don’t know how to invest or manage your own money, your money will run out.”
Sy believes that learning how to invest is as important or even more important than learning how to make money.
He also stressed that the beauty in investing in stocks is that you get to become partners with the best brands, the best managers and the biggest names out there, while still remaining anonymous. Moreover, the stock market is very liquid; you can easily get out when you want to.
“Companies make mistakes and they’re stuck, but you aren’t. If you see a mistake in a company, you can easily get out of it if you’re a stock investor,” he says. “When you have something good, keep it. When your stock is doing well, hold on to it; keep your bulk. When your stock isn’t doing so well, learn to let go.”
Sy practically eats, sleeps and breathes the stock market: “When you get into stocks, you get hooked. Something new comes up every day; nothing is the same. You never get out of stocks once you get hooked because nothing is similar. Even if it’s similar, there’s always some twist that makes it different.”
The only other thing that keeps Sy awake are NBA games, as he is a big fan of the Los Angeles Lakers. It’s rumored that he even memorizes the statistics of the players the way he keeps in mind stock price quotations.
More focus
Sy is a firm believer in education as the solution to our country’s rich-poor gap. He constantly stresses the importance of going to school and how it gave him the different values he practices to this day.
Sy tries to do his part in helping educate Filipino investors by sharing his ideas, opinions and thoughts on market trends through the Philequity Corner, which is published both on the Philequity website and in a major broadsheet.
With Philequity hitting the 20-year mark this year, Sy plans to release a compilation of his best articles, ideas and lessons on investing.
I ended my interview with Sy more inspired than ever. I had just talked to my dad’s idol and arguably the best Filipino fund manager.
The last piece of advice he shared with me: “I’m not really more intelligent than other people. It’s just that I probably have more focus. So listen to your father, keep working hard, read more, study what the best in their field do, and stay focused.”
Read more: http://lifestyle.inquirer.net/168010/words-of-wisdom-from-the-warren-buffett-of-the-philippines#ixzz39loC0tPZ
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Wednesday, April 30, 2014
Investing in stocks or stock funds
By Randell Tiongson
QUESTION: I am ready to start investing and I would like to invest in equities. Is it better to invest in stocks directly or through pooled stock funds like UITF or mutual funds? —Name withheld per request, asked via e-mail
Answer: As a financial and investment planner, we need to subscribe to the principle of suitability. Without sufficient information, it wouldn’t be prudent of me to categorically say one would be better than the other. The answer really depends on you—if you are knowledgeable enough to select your own stocks, size of funds, and if you have enough time for investing.
However, to help you make a more informed decision, let’s discuss the advantages and disadvantages of both types of investing.
On individual stocks
Advantages :
Control—Buying your stocks directly gives you control over what and when to buy or sell.
Residual income—If you buy a stock with a good dividend payout, then you don’t have to watch the price movement anymore. As long as the company is earning and declares dividends, you will get dividends.
Maximized returns—individual stocks that are growing may beat the market and can give you better-than-average returns. Jollibee beat the market last year, moving from P100-P170 while the entire market was down.
Potentially better returns—with proper selection and assuming that you are very good at selecting market performers, the growth of your own stock portfolio can outperform the stock market index and many stock funds.
Fees—buying your stocks directly from brokers usually means lower fees as fund managers charge a higher investment management fee compared to stock brokers.
Disadvantages :
Time-consuming—before investing, you should spend enough time thoroughly understanding how stock market investing works. You should also accumulate enough knowledge of both fundamental and technical analysis.
Fundamental analysis means you must be able to read and understand financial reports of the companies you would like to invest in, the general condition of the industries and market trends to which these companies belong to, general knowledge of macroeconomics and even the management of the corporations you would like to own shares of, etc.
Technical analysis will require you to constantly study charts on price averages, trading volumes and a multitude of technical market theories like Dow theory, Relative Strength Index, Elliott Wave theory and more. While fundamental and technical analysis is not rocket science, it takes considerable time for you to learn them properly. Enrolling in a class like Marvin Germo’s Stock Smarts is a good way to start.
Diversification—all investment professionals will always recommend you to diversify. No amount of study and good performance in the past will guarantee the performance of a particular stock in the future so having several and properly selected stocks is always a prudent thing to do. Unless you have a very big capital for investing, you will be limited to the variety of stocks you can carry in your portfolio.
On stock funds
Advantages :
Professional fund management—this is perhaps the biggest advantage of pooled funds like UITFs and mutual funds. There is a dedicated team of investment experts that looks at investment opportunities and is investing the money according to the investment objectives of the fund. It is common to see CFAs or Certified Financial Analysts leading or being part of these investment teams. Good fund managers are clinical and logical investors and are not easily swayed by emotions as compared to individual investors.
Capital requirements—most of pooled stock funds have low capital entry requirements. One can invest in a fund for as low as P 5,000 to P10,000, with other providers requiring a monthly contribution of as low as P1,000 per month.
Diversification—all stock funds carry well-diversified stocks in their portfolio, usually blue chip or premium stocks. Since these are pooled funds, there are economies of scale in place; fund managers will be able to purchase different shares. Proper diversification will ultimately result in reduced portfolio risk.
Disadvantages :
Fees—While not all stock funds charge the same range of fees, these fees are usually much more than broker fees as there are costs involved in managing funds. Some funds even charges entry and exit fees, which can reduce the returns of your investments. Some funds are being sold through agents and advisors and commissions would need to be paid to them.
Control—you have no say on which funds you want or don’t want in your fund as this is already delegated to the fund managers. You also can’t modify the weight of the stocks inside a stock fund as fund managers follow maximum exposure limits per stock to ensure proper risk management practices. Even if you want more PLDT or Jollibee shares in your portfolio, your fund will only have a limited exposure to said stocks, like 10 percent.
The answer to your question is dependent upon you knowing the pros and cons of individual stock investing or through a pooled equity or stock fund. If you are a new investor, I recommend you invest in a stock fund first and as you get to understand how the stock market works and develop your competency in investing, you may want to start investing in individual stocks.
Do not forget, whether investing in stocks by yourself or through a fund, it pays to invest first in investment education.
Join me, Marvin Germo, Marvin & Rose Fausto, Edric Mendoza, Jess Uy, Alvin Ang and other investment experts at the biggest investment conference of the year, the iCON 2014: It’s time we make investing for everyone! Presented by BPI and Sun Life. For more information, visit http://www.brandspeakasia.com/icon
Randell Tiongson, RFP is a speaker, columnist, author and personal finance advocate.
Attend our FREE personal finance talk on April 24, 7pm at PSE Ortigas by email info@rfp.ph or text <name><email><RFPinfo> at 0917-3464126
For your retirement and other real estate needs, please visit http://www.gregmelep.com.
Sunday, March 30, 2014
Example of a real-life investor.
In this article, we discuss Peso Cost Averaging as an investment strategy. We center on an actual investor of the Philequity Fund who has been employing this strategy since 2003. In fact, this is the same investor whose statement of account we presented during our Investors’ Briefing last March 8, 2014.
What is Peso Cost Averaging?
As we said in our article last week (The Time to Invest is Now, March 24, 2014), Peso Cost Averaging “is an investing technique which involves buying a fixed peso amount of stocks on a regular schedule.” To illustrate, an investor applying Peso Cost Averaging can invest P10,000 on a monthly basis. Another investor can opt to invest P5,000 every week. The amount and the frequency of investing will depend on one’s financial capacity and tolerance for risk.
Why is Peso Cost Averaging stress-free?
Investing can be stressful especially for first time investors who have never experienced volatility in the markets. Also, many are daunted by the thought of investing a large amount of money in one go. But with Peso Cost Averaging, as the following example will show, one can reach a gross investment of P1 million in a short amount of time by investing as little as P5,000 on a weekly basis.
A real-life investor
During our Investors’ Briefing last March 8, 2014, we included in our presentation the actual statement of account of Mr. Cecilio Castro, Jr. In our article today, we narrate how Peso Cost Averaging has allowed him to build his investment in the Philequity Fund.
Mr. Cecilio began investing in Philequity Fund in September 2003 with an initial investment of P31,000. Since then, he has been investing regularly – investing around P4,000 to P10,000 weekly or biweekly. Even throughout the vicious bear market of 2008, he continued Peso Cost Averaging.
Here is a snapshot of his ledger:
The table below shows how Mr. Cecilio’s gross investment grew each year. By the end of 2008, he had reached a gross investment of P899,000. Today, his gross investment of P1.28 million has a market value of P4.27 million as of last Friday, March 28, 2014.
Straight from the horse’s mouth
We interviewed Mr. Cecilio over the phone and here is what he had to say about his experience as an investor – from choosing the right fund to investing consistently even during bear markets.
Q: How did you start investing in mutual funds?
A: I worked in Philequity from 1998 to 1999 and in a brokerage firm prior to that so I had knowledge on investments. I started investing once I had enough income to set aside. My first choice was Philequity because I knew how the fund invested…
Q: Which was?
A: Value investing. I also chose Philequity because it was not affiliated with any investment bank or insurance company. But most of all, I had full belief in Wilson Sy. For me, the fund manager’s reputation is a very critical aspect in choosing a mutual fund.
Q: What was the market like when you started investing in 2003?
A: I don’t remember. But I do remember the NAV at which I first entered the fund: P4.42 per share.
Q: What was your experience as an investor during the bear market?
A: I just kept investing. For those who set aside funds to invest regularly, you should not look at what the index level is. Investing consistently has proven to give you a good average cost in the long run. You cannot catch peaks and bottoms in the market.
Q: What can you say about financial literacy in the Philippines?
A: It still has a long way to go but people are much more knowledgeable now. Back in 2003 and much more in 1994 when Philequity started, only those who were in the industry of capital markets knew about mutual funds. But now, people are more aware as seen, I think, in how Philequity Fund has grown. I think Philequity has made investing in mutual funds very accessible by making the minimum additional investment only P1,000.
Learning by Example
We would like to thank Mr. Cecilio Castro, Jr. for allowing us to use his account as an example during our Investors’ Briefing and in our article today. He did not mind being interviewed as he shares in our advocacy of teaching people how to invest. In fact, he was even interviewed by ANC. We hope that this real-life example will help our readers understand how to use Peso Cost Averaging to achieve their investment goals.
For further stock market research and to view our previous articles, please visit our online trading platform atwww.wealthsec.com or call 634-5038. Our archived articles can also be viewed at www.philequity.net.
For your retirement and other housing needs, please visit http://www.gregmelep.com
Tuesday, March 25, 2014
The time to invest is… NOW.
In this article, we come out with the most frequently asked questions that we encounter, as well as some of the other questions that were discussed in our investors’ briefing last March 8, 2014.
1. When is the right time to invest?
We encourage everyone to save so that they can build their own investment portfolios. With that said, we believe that everyone should have a certain part of their investments in equities. Therefore, for those who are not invested in the stock market or are underinvested in equities, the right time to start investing is now.
2. Why should we buy stocks?
We have always said that buying stocks is like being a part-owner of a business. Buying stocks therefore allows one to partner with the greatest minds and the most profitable businesses in the country. If one wants to invest in local mall operators, he can buy SM Prime Holdings (SMPH) or Robinson’s Land (RLC). If one wants to invest in a snack food producer or a fast food chain, he can buy Universal Robina (URC) or Jollibee (JFC). If one wants to invest in diversified property companies, he can buy Ayala Land (ALI) or Megaworld (MEG). These are a few examples of companies that have strong business models and have continued to perform well over time. Consequently, their stock prices have also appreciated over time.
3. How much of our money should we put in stocks?
The amount of money one should put in stocks will depend on his investment goals and risk tolerance. One should always follow an asset allocation plan that involves diversifying one’s investments across various asset classes. Among the various asset classes that one should have are real estate properties, cash, deposits, fixed income, stocks or even businesses for some.
4. Should we buy everything now?
Timing the market in the short-term is extremely difficult even for professionals. Instead of buying all your equity exposure in one shot, we recommend buying in tranches or using peso cost averaging. Peso cost averaging is an investing technique which involves buying a fixed peso amount of stocks on a regular schedule. Depending on one’s total investment, this can mean buying every day, every other day, once a week or once a month. Doing this would eliminate the timing aspect while allowing investors to gradually increase their stock market exposure.
5. With so much uncertainty around the globe, shouldn’t we wait for the stock market to come down before we start investing?
The short-term movement of the stock market is impossible to predict. Nobody really knows how certain events will unfold in Russia, Ukraine, China or the US. We do not know what Putin or Yellen will say in their next public announcements. We also do not know if another company will declare default in China. What we do know is that there are local companies which have solid business models and will continue to thrive in any environment. Though the short-term picture may be murky, we are confident that the long-term upward trajectory of our stock market is intact. Further, we believe that many local stocks are currently at reasonable valuations given their attractive growth prospects.
6. Some technical analysts point that our stock market is currently overbought and a correction is imminent. Should we now wait for better levels to buy?
Though we prefer to buy on a dip or correction, it is extremely difficult to predict when a correction will occur, how deep it will be or how long it will last. Moreover, a correction can come in different forms – it can be a quick but sharp drop, a relatively shallow pullback, a prolonged sideways movement or even a rotation among the different sectors in our stock market. One is never certain of the correct levels to buy or if one can buy all the shares that he wants at that price. Rather than wait for a correction, it might be better for one to gradually build his equity exposure over time.
7. What happened to our stock market last Friday? Why do you refer to it as the “Friday madness closing-out sale?”
Last Friday (March 21, 2014) was the last day for FTSE rebalancing. Our market dropped substantially at the last second of trading as foreign fund managers scrambled to align their portfolios with the specific indices that they are following. Days like this are generally marked by heightened volatility and high volume market orders at the close. However, this is a rare fire sale where one can buy stocks at discounted prices. One may see blue chip stocks sold down by as much as 5 percent for no apparent reason. This one-day, one-shot selling is like a closing-out sale in retail stores or malls, as foreign fund managers are practically giving away 2-5 percent discounts to the lucky buyers. See Wealth Report dated March 21, 2014.
8. Should we invest directly in stocks or in mutual funds?
Those who do not have the time or expertise to invest on their own can invest through mutual funds such as Philequity Fund. Professional fund managers will then take care of studying which stocks to buy, when to buy them and how to diversify your investments into various stocks and sectors.
Those who are willing to spend more time and are quite familiar with the market can invest directly in stocks. Although stock brokers may provide some advice or recommendations, it is still important for one to do his homework and study the stocks that he buys or plans to buy. This will help one pick stocks better and avoid possibly painful losses.
9. You recently launched a dividend yield fund. What is the difference between this and your flagship Philequity Fund?
The Philequity Dividend Yield Fund is structured to focus its investments in Philippine stocks that provide high dividend yields. Aside from this, the fund will also concentrate on dividend growers or companies that can grow their dividends on a regular basis. We expect these stocks to continue providing steady dividends even when the stock market is volatile. Further, these stocks tend to perform relatively better when the stock market experiences protracted downturns or long consolidation phases.
10. How is the Philippines performing relative to other emerging market (EM) countries?
The PSE Index is up 7.6 percent year-to-date (YTD) while MSCI Emerging Markets (EEM) is down 6.7 percent YTD. The chart below shows how the PSE Index has performed relative to EEM.
Source: Stockcharts.com
As the chart above shows, the PSE Index has outperformed EEM by 15.4 percent YTD. This shows that Philippine stocks have continued to go up this year despite various global headwinds and the weak performance of EM stocks. This probably means that the Philippines is finally being differentiated from other problematic EM countries.
For further stock market research and to view our previous articles, please visit our online trading platform atwww.wealthsec.com or call 634-5038. Our archived articles can also be viewed at www.philequity.net.
For your retirement and other housing needs, please visit http://www.gregmelep.com.
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