MANILA, Philippines – Being financially secure opens up a world of opportunities: to live more, to work less, and to have time for your loved ones.
As a 20-something career semi-shifter, I figured that a crash course was in order. So I grilled 3 men on how they do it.
When it comes to growing their money, these men have different levels of experience. But they have one thing in common: they’ve taken money matters into their own hands.
I talked with Paolo Vasquez, who runs a skateboard and retail distribution business, and Patrick Dino, the National Sales Manager for one of the Philippines’ top food brands. I asked them about how they manage their investments on top of their busy careers and family commitments.
From the experts’ side, I spoke with George Wong, head of Private Clients Groups at COL Financial.
This goes out to the fellas, but ladies better listen up too. After all, who says only guys have the monopoly on money?
Here are their investment lessons:
1. Your savings won’t stand a chance against inflation
Most parents said most of our money should be put in the bank. Back in their day, it was already a pretty good option.
Interest rates were high in the 1990's that there were no incentives to invest elsewhere. Bank savings then easily earned at least 10% to 12% interest per year.
Today, a bank account’s annual interest will range from 0.5 to 1.5%.
Then there’s the inflation rate. It’s pegged at 3% to 4% per year. That means our savings won’t be earning fast enough to let us live the life we want. Every year, what we put in to a regular savings account decreases the purchasing power of our money.
2. Risks are part of the challenge
Think of investing as a challenge to increase our personal wealth – and it comes with strategies that we can master as we play along.
When we put our money in the stock market, let's be prepared for the constant fluctuations of share prices. Paolo says we shouldn’t expect our money to double within a year. In fact, we should be prepared to hold on to our equity investments for a longer period.
In the short term, stock prices go up and down but over time it increases in value as the companies we invest in grow. In the stock market, choosing strong and resilient companies with very strong earnings performance and potential is the best route.
George, Paolo, and Patrick all recommend investing part of our hard-earned money into the stock market. In the last 10 years, the stock market grew by a compounded annual growth rate of 19% per annum versus 4% in Treasury Bills.
The stock market used to be the exclusive game of big guns. But online stock trading has pretty much democratized the game. Today anyone can invest as low as P5,000 and be part-owners of the largest conglomerates in the country.
We're naturally averse to trading stocks because of the risk factors involved, but here's a reality check: Any type of investment carries risk. The value of real estate properties tend to increase, but should we need cash at any point in time, we don't have the flexibility of liquidity.
Running a business also has its risks because there are lot of factors we cannot control: costs, people and competitive environment, among others. Bonds' risk comes from selling before maturity date.
Check out this video to get a better idea:
courtesy of COL Financial
3. It’s important to reward yourself
BALANCING ACT. Paolo enjoys the present while preparing for the future. Photo by Martin Chaves
Paolo shares an interesting method for deciding how much of his money goes into investing: “I set a rule for the amount of money that I put in – it’s my ‘luho’ (leisure) money. Whatever amount of money my wife and I would spend to go out, to shop, I’ll try to match that.”
He sees investing as a way of forced savings, without compromising his right to enjoy what he earns.
For Patrick, investing is a way of paying yourself: “You can’t keep working forever. At one point in your life, you have to have the passive income coming in.”
Patrick and Paolo have set up their bank accounts to transfer a fixed monthy amount regularly into their online trading account. That makes it easy to keep the discipline of investing regularly even with their own busy schedules.
They say that we can start with a small, manageable amount for now, so we don’t need to compromise our lifestyle.
Patrick sees investing in stocks as a form of diversification. “I have other investments. They all don’t earn in the same way. For me, this is a smarter alternative to help achieve my financial goals.”
By spreading his risk across different products, he knows that at least some his money is safe in case of crisis.
For Paolo, investing on an online platform allows him to make the most of his time. “Every month, I get an alert when the money comes in [into the account]. And on that day, I’ll spend 30 minutes, just deciding what I will buy. I’ll probably just check every now and then, just in case I need to sell.”
Having an online portfolio makes Paolo more confident about his future. “I have found the perfect balance between running the business I am passionate about, and investing into companies who have such strong growth prospects to help me secure my future even more.”
5. Listen to the experts
The most important lesson that Patrick and Paolo shared is that learning doesn't stop. They say taking charge of our money doesn’t require turning into a financial geek overnight.
There’s a wealth of information on how to get started. It’s a matter of determining which resource is the best.
This is where experts like George come in. As a former broker for one of the country's largest foreign institutions, he provides his private clients with advice on the best investment ideas for superior, long-term returns.
TRUST THE FINANCE EXPERTS. If unsure, listen to the professionals. Photo courtesy of COL Financial
Investing is a full-time endeavor for George. “You need to manage your money regularly, and make it grow in a most efficient matter,” he warns. If unsure, it is best to seek the help of a professional.
“Investing is actually a very entrepreneurial concept,” George says. Filipinos warm up to the idea of helping a friend out in starting a business. Investing in the market is no different.
“In the stock market, you buy shares from a company that you feel is doing well. Essentially, you put money into their trade, and trust the guy to earn money for you.”
George recommends that before getting started, it is important to identify financial objectives and understand risk appetites.
Trading requires patience, he says.
“When investing in stocks, it should not be about going after the short-term gains but building long-term growth that could result in exponential returns in your portfolio.”
Welcome to Rappler, a social news network where stories inspire community engagement and digitally fuelled actions for social change. Rappler comes from the root words "rap" (to discuss) + "ripple" (to make waves).