Time, Wealth and Retirement

October 28, 2011 6 Comments


Before I started this blog, I was thinking all the time that the true measurement of wealth is the amount of money that we have save and invest. With this mindset, I was always on a search for the right amount of wealth needed by a person to sustain his day to day expenses after he retire.

Actually, it’s been years before I realized that its true measurement is not the amount of money that you put on your investment or savings basket, but the time it will sustain your daily needs after you quit your wage slave job.

To give an example:

Case 1:

You have a savings of 10million peso after your retire, and your average annual expenses is 1 million peso. This means that your wealth could only last 10 years.

Case 2:

You have an investment of 10million peso after you retire, and this investment earns more than a million peso a year. With an annual average expenses of 1million peso, this could only mean that you have an infinite wealth.

So what does it teach us?

1. If you retired and you haven’t put your money were it can work hard. Your wealth will just be limited for over a certain period of time. And once you used it all, you will have to go back to your 8 hour job.

2. If you retired and you have manage to put your money where it can work hard to sustain your daily finances. You will have an infinite wealth to enjoy your retirement.

3. It may sounds the same for a mediocre, but saving and investing always yields different result. By investing, you own something that creates wealth. It’s like a wealth generating more wealth.

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The Power of Small Amounts

October 20, 2011 1 Comment


Aside from worrying too much about the future (the “What if” mindset), the other reason why some people has not venture investment is because of the “Not Enough” mentality.

Actually, they want to get start on investing however, this “Not Enough” mindset were holding them back. Instead, they were thinking that if I they are not making 100,000 peso investment at a time they will not likely become wealthy.

This is the common mistake most people think about investment. I said before that a 1 million peso started from a single peso, so if we want to strengthen our financial arsenal, setting aside a small amount for investment would someday gives us a Corps-size army of money.

To give you an example:

Case 1:

Saving an amount 1000 peso every month somehow sounds dull. Anyway, this amount is good enough to buy 2 box of pizza. But doing this regularly for a period of 10 years, how much money do you think were kept in your purse?

You have awesome cash worth 120,000 peso.

Case 2:

Instead of saving, you are regularly investing 1000 pesos every month. Let us say your investment yields 12% year on year. And by doing this regularly for 10 years, how much money do you think were kept in your investment basket?

You have cash worth more than 300,000 peso.

Investing your 1000 peso regularly/faithfully every month gives you wealth. Imagined, if you could spare a bigger amount, how much wealth do you think it will give you?

The lesson here is we should not belittle the day of small beginnings, and everybody should develop an understanding about the power of small amounts.

So, the next stop is where to invest this small amount?

In Philippines, most Mutual Fund companies requires only 5000php minimum initial amount to open an investment account and a minimum 1000php for every additional investment.

A Mutual Fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.

It is one good option to get started on investing.

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Quotes :

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki

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Invest With Less Worry

October 18, 2011 Leave a comment


Do you know why there are lots of people afraid to invest in the stock or bond market? I think the best answer for this question is that they worry too much. Think of this, rich people become wealthy because they owned something that creates wealth. This wealth creating instrument were maybe in form of investment, business or other source of passive income.

If this wealthy people worries too much by asking themselves “What if the companies that I invested goes bankrupt” or “What if bad economic condition comes and wipes out the price of the stocks I hold.” Would you think they will achieved their goal of becoming rich.

Actually, these “what if” mindset holds back our potential success story. We are living in the world of uncertainty and we don’t know it, yesterday was uncertain, today is uncertain, and tomorrow for sure will be uncertain. But if we are going to succumb to these daily worries, we will not move on.

So I think you got the logic now, if you are too worried or afraid to get your feet wet on investing, you are also afraid to walk through the path of wealth. Investment is not only for tough people with huge wealth and exceptional intelligence, it is for every body with dreams of becoming free from their financial bondage or from their wage slave job.

Just think of this, every amount that passes through our hands is a seed to our financial future. However, if we will not plant this seed it will not yield anything. We should not give second thought “to failure or worries”, once we made our choice we should take control of it, and soon we will realize that we are getting closer and closer to our ultimate goal.

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Quotes:

It doesn’t matter where you are, it matters where you are going. – Anonymous

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Retire Young and Wealthy

October 15, 2011 6 Comments


The reason why I venture the world of Investment and other passive income generating instruments is because I want to retire at a not so old age. Actually, I want to retire at an age of 50 (if god willing). Sounds an early age for retirement but I guess this is the right age to retire. Just imagined if you retired at age of 65, what else could you do at this age? I know there are some people that are still active even at the age of 65, however, would it be more meaningful if we enjoy our retirement doing something like traveling the world, snorkeling, hiking, and doing other things that needs a little amount of youthful energy. Actually, I hate the concept of retiring because you couldn’t work anymore or you are near the age of expiration. How could you enjoy your retirement if you are catching your breath by just walking a few meters or sitting on a chair with wheels?

The 2nd reason why I want to retire early is, I found my corporate job too stressful that I always think that it will rob me of my sanity if I am going to stay here for another 20 years. Sometimes, I was thinking that I was paid to lose my mind so that others could keep their sanity.

I like my job as an engineer,  but being an engineer you need to solve a lot of problem on a day to day basis. And although my salary is good, I find it not worthy to trade my sanity for this healthy compensation.  I feel like this stress is shortened my life. I think there are some other ways to earn a living without putting yourself into too much stress.  So while I am still working, I always keep aside a certain amount for my retirement.

Of course everybody can retire early but, it will not make any sense if I retire with only a penny in my purse. I need a reasonable amount of wealth that could earn and sustain my day to day expenses and to finance all those in my bucket list.

My best plan to achieve this goal is to keep on investing, and create wealth through it.

Actually, it was quite tough achieving this ambitious retirement age of 50. And in case I missed this goal, I am still happy to retire at an age of 51.

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Quotes:

Retirement has been a discovery of beauty for me.  I never had the time before to notice the beauty of my grandkids, my wife, and the tree outside my very own front door.  And, the beauty of time itself.  ~ Hartman Jule

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Investing Is Fun

October 12, 2011 1 Comment


I said before that  investing is so unfamiliar to many people that when you speak of the word “INVESTMENT”, you are so closed to considered speaking another language from the 2nd moon of the planet Saturn. (I just made this up, actually nobody knows the language spoken in the moon of Saturn.)

Honestly, before I ventured the world of Investment, I think of it as a subject of the rich and only a wealthy people could explore and enjoy the wealth it could offer.

After understanding that you don’t need a huge amount of money just to get your feet wet on investing, I first ventured the exciting world of stock market and bond investing thru mutual fund. Of course, my 1st year was full of worries, before I become familiar with trading stocks. For me, investing is somehow a mixed emotion of fun and frustration. It is fun especially when you are making money but, it becomes a frustration if you are losing it. I guess the choice is still within ours to view it us fun, or succumb to the burden of frustration.

Actually, many people view investing as an additional burden or an extension of their wage slave job. The investment stress brought by studying numbers, always on the lookout, confusion and worries would somehow reduce the enthusiasm of every investor.

So, how do we make investing fun?

Let us view investment as a game of treasure hunt. When looking for an investment opportunity or scouting for stocks with good business fundamentals, just think of it as game of treasure hunt in which you are looking for a wealth that your stock pick or investment choice will bring. Isn’t good to think that you enjoyed stock picking because, you treat it with fun rather than work. Normally, this mindset stimulates and creates opportunities for our financial growth and the same time improved the quality of our life.

The truth about this “Investing is Fun” mindset is neither right nor wrong, but I am pretty sure that it will bring us to our Financial Success. The choice is still ours, we could choose to have “FUN” or “FRUSTRATION” in Investing.

The road to riches is not an easy destination to be reached, but it should be a journey to be enjoyed. Making money through investment is good, and enjoying it at the same time yields twice.

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Higher Wage Is Not The Answer

October 9, 2011 2 Comments


Do you think a better compensation will make us rich if we will not properly manage our finances?

We must realize that higher wage will not likely make us wealthy. You might say that bigger pay check means more cash, but most of the time this will not solve our money or financial problem.

Actually, the money we get from our slave wage job is like a magnifying glass, the higher we get paid, it also brings brighter light to our spending habit. Think of this, if you are not financially capable of handling a job that pay 5 digits (assumed 50,000php per month), the worst possible thing that could happen to you are to look for a new job that pays 6 digits. With higher wage but low on financial literacy, higher compensation will not bring you wealth.

Maybe you know some person earning 100,000php per month but are living paycheck to paycheck. Actually, the real problem is not the size of their paycheck but instead it is the way how they taught to use the money.

By properly managing our expense and controlling our spending habits, rest assured that financial prosperity will soon follow.

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Philippine Mutual Fund Performance (3rd Quarter 2011)

October 7, 2011 3 Comments


The Philippine Mutual Fund performances were badly hit by series of  macro-economic event. The recent turmoil cause by the European Debt Crisis and the US credit downgrade wipes out the last quarter gains of Philippine Mutual funds.

Equity and Balanced Mutual Funds which has an exposure on the Philippine Stock market has all closed to the negative side.

YEAR TO DATE PERFORMANCE OF MUTUAL FUNDS IN THE PHILIPPINES

End of the 3rd Quarter of 2011 (January to September 30, 2011)

EQUITY FUNDS (Invested in Peso equity securities)

  1. Philequity PSE Index Fund –> (-0.4%)
  2. First Metro Save and Learn Equity Fund –> (-1.4%)
  3. Philequity Fund –> (-3.6%)
  4. Sun Life Prosperity Phil. Equity Fund –> (-3.8%)
  5. Philam Strategic Growth Fund -> (-5.8%)
  6. ATR KimEng Equity Opportunity Fund –> (-6.7%)
  7. Philippine Stock Index Fund –> (-7.7%)
  8. United Fund –> (-8.1%)

BALANCED FUNDS (Invested in Peso bonds and equities)

  1. Optima Balanced Fund –> (-0.03%)
  2. First Metro Save and Learn Balanced Fund Inc. –> (-3.1%)
  3. Sun Life Prosperity Balanced Fund –> (-3.3%)
  4. NCM Mutual Fund of the Phils. –> (-4.1%)
  5. Bahay Pari Solidaritas Fund –> (-4.7%)
  6. MFCP Kabuhayan Fund –> (-5.2%)
  7. Philam Fund, Inc. –> (-5.2%)
  8. GSIS Mutual Fund –> (-7.3%)
  9. ALFM Growth Fund -> (-10.8%)

BOND FUNDS (Invested in Peso Bonds)

  1. Cocolife Fixed Income Fund –> 6.05%
  2. First Metro Save and Learn Fixed Income Fund –> 4.75%
  3. Ekklesia Mutual Fund –> 4.17%
  4. Philequity Peso Bond Fund –> 4.07%
  5. Philam Bond Fund –> 3.71%
  6. Sun Life Prosperity Bond Fund –> 3.55%
  7. ALFM Peso Bond Fund –> 2.66%
  8. Sun Life Prosperity GS Fund –> 1.73%
  9. Prudentialife Fixed Income Fund –> 0.64%

Source : Investment Company Association of the Phils.

I think it is now a good time to accumulate more shares in Mutual Fund since, the Philippine equity market is now trading at 12x P/E. Anyway, it takes more courage to step into the stock market knowing that most investors want to get out. In the world of investment, cash mixed with calculative courage yields wealth.

Just like the famous Warren Buffett quotes “Be fearful when others are greedy, and be greedy when others are fearful.”

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Stocks Fundamental Measurement : Return on Equity (ROE)

October 6, 2011 Leave a comment


Stocks Fundamental Measurement : Return on Equity (ROE)

Return on Equity – shows the rate of return to share holders by dividing net income to the book value. Some investors consider this as the ultimate measure of a stocks success. It measures how efficiently a company uses its assets to produce earnings.

Bigger is always better for this number because it means that the company is making a lot of money from the investment that shareholders made. For me a good number for ROE is anything above 13%.

Again the right ROE number will still depend on every investor decision making process. Also, like all other metrics, this fundamental measurement is best applied in comparing companies on the same industries. It may also be more meaningful to look at the ROE over a period of the past five years, rather than one year to average out any abnormal numbers.

With the convenience of internet, it is now easy to look for this ROE numbers in the internet. Actually, almost all the stocks fundamental numbers is a click away from the internet

Websites like “Bloomberg” could easily provide us the ROE numbers of each stock.

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About Money, Investing, and Financial Freedom

October 5, 2011 Leave a comment


It is a fact that the many people wants to become rich. However, most of this people who are dreaming to be wealthy someday never have an idea of getting there.

Actually, the general population has a love and hate relationship with money. And for those who don’t have it, they resent the wealthy people, but spent their entire lives just to earn it. I guess the main reason why majority of them never owns a substantial amount of wealth is because they don’t understand the nature of money and how it works.

One of the common mistakes most people made is that they need a huge amount of wage or salary before committing themselves into investing. If they aren’t able to come up with a big amount to start their investment, they will not likely become rich. This “Not Enough” mentality serves as hindrance in creating a wealth. We need to develop an understanding about the power of small amounts, it won’t take a genius to realize that a 1million peso were built 1 peso at a time.

Also, we can make money as our employee. Each amount we invest is like an employee. By investing regularly over a course of time, you will likely make more and more workers of money. And time will come that you can live alone from the income it will generate.

And just think of this, every amount we save and invest is buying us a freedom. These might be a freedom to quit our 8 hour wage slave job, freedom to retire an early age, or freedom to stay home with our loved ones. Any amount that we save and invest will be a good foundation of our financial freedom.

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Stocks Fundamental Measurement : Net Profit Margin

October 4, 2011 Leave a comment


Stocks Fundamental Measurement : Net Profit Margin

A company’s net profit margin is determined by finding the net income as a percentage of revenue.

Formula:

Net Profit Margin = (Net Income/Revenue) x 100%

Where:

Net Income = Revenue – Total Expenses

In simple math, if the company make 1000php and pays 800php in expenses. Its net profit margin is 20%.

Let’s Compute:

Net Income = Revenue – Total Expenses = 1000php – 800php = 200php

Net Profit Margin = ( 200php / 1000php ) x 100% = 20%.

For this metrics, the higher the company’s net profit the more it is profitable. Normally, a high profit margin will tell us that the company’s management is good at controlling cost (or expenses). Actually this is great because for every peso saves from any unnecessary expense is a one more peso of profit for shareholders.

High net profit margin is the foundation of companies that dominate their industries. When the economic problem comes, companies that are able to maintain a high profit margin will likely to survive.

Actually, this fundamental not only tells us about the stocks stronger bottom line, but it also tells us that its management team is well ahead of their competitors.

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