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When investing, know what you really, really want

During the Financial Fitness Forum 2015 organized by the Registered Financial Planners Philippines held at the SM Aura SMX Convention Center on March 28, the registered financial planner and entrepreneur asked the audience to shout out a travel suggestion for the Holy Week. People replied Jerusalem, Boracay, and crowd favorite Sagada, among others.

Being the backpacker, blogger, book author that he is, Villafuerte takes Boracay for its beach and the Ariel’s Point. “Some of your suggestions are good,” he said, “but there is one great answer, which is Boracay. Why? Because [it] considers my preference toward jumping into the water.”

So the great answer, too, to the investment conundrum may very well depend on your preferences. His talk then centered on one thing: “Know what you want – what you really, really want.”

Qualify and quantify those wants

Design your life before adopting any kind of investing strategy. Focus on aspirations, dreams, passions that can translate into financial goals.

Villafuerte quipped, “there is a cost to that dream and you can actually compute it.”

If you aspire to become a homeowner at a particular age, or retire in a mansion with two Ferraris – you can estimate the future cost of the house or luxury sports car you fancy. And then you take a step back to figure out the money to devote.

In 2010, Villafuerte wanted a new car that will be worth P1 million by 2015. He arrived at a monthly investment of P20,000 ($450.65). Hitting the goal happened earlier for him when the stock market boomed in 2012. That was his cue to pull his cash out: the investment and his goal were now equal in value.

Let goals and decisions match

Consider these options and their annual return rates:

A – 4%, special time deposit for Banco De Oro (BDO), locked in for 5 years

B – 10%, long-term commercial paper for Jollibee, locked in for 15 years

C – 18%, private equity investment for SureBall Incorporated, locked in for 2 years

Villafuerte uses this example to quiz the participants – millennials, Gen Xers, and baby boomers alike – on their investment pick. As it pays to know yourself, the same thing applies to the companies you eye.

“Are they operating legally? Are they allowed to issue securities and bonds? What is their business model?” are some checks to include in your due diligence.

Again, reviewing your objectives is also key. The time deposit option is appropriate for emergency funds, as it is low-risk. Banks nowadays allow for pre-termination of the account, plus the pro-rated regular rate instead of the time deposit rate.

Option B is great for retirement goals, which is relatively long term, since Jollibee proves to be a big and stable company and has an outlook of remaining so; while C will work as a source of passive income, and likely to match the needs of someone who has covered retirement or children’s education.

Build and diversify

Once wants have been determined and measured, investing should not be delayed.

“Just invest,” Villafuerte urges participants. After education comes execution. A person with as low as P1,000 ($22.42) to spare can now begin to invest.

Make sure each goal has its own investment, be it backpacking across Southeast Asia, purchasing a car, starting a business, or seeking an early retirement.

Classify them accordingly, he adds, under short-, medium-, or long-term. And when it comes to portfolio management, when the math seems daunting, the likes of Villafuerte enter the picture.

Villafuerte reminds everyone to not ask financial planners on what the best investment is, as they may throw the question back. See the future and ask yourself instead: “What am I going to buy? Where am I going to spend this money on?”

He cautions against investing blindly, doing it only because family, friends, or people in your Facebook network have taken the plunge. Find out your ‘why’ – the aspiration, the dream, the passion.

So you will also be discerning about getting out. He adds that money, after all, is only a tool for accomplishing things. “What will make you happy in life is accumulating experiences.” –

A freelance business writer, Shadz Loresco follows stories on entrepreneurs, technology, and finance. Her background includes 5 years of writing and editing for online business-to-business (B2B) marketing and reputation management.

$1 = P44.61

Investment word collage image from Shutterstock