MU? LOVE AND INVESTMENTS

Love and Investments?

Last Friday, 14^th of the February to be exact, a lot of people celebrated the so called “Hearts Day!”  People, whether single or currently in a relationship, enjoyed the lovely and once a year scene in the country.  Having in struck in the city’s traffic and not having an evening date, haha! This topci just suddenly pop-out and came out.   

Is love and investments the same?  Do time play a big role?  Are the feelings involved mutual? 

Let me share my thoughts.

What it is?

Love means different from different persons.  Some say that love is a very difficult subject and a complicated thing.  The same with investments!  People have different views and understanding about it, depending on their experiences and background about it.

Essence of Time

For love, time is always is of the essence.  You need time for love to come and grow.  Same with investments, as time is  your precious asset.  Different asset classes (i.e bonds, stocks, etc.) need different time to grow and appreciate.  In addition, time also gives the opportunity for us to learn and know the person or the investment that we fell in love with.

Emotions are Mutual

For love and investments, the feeling is mutual!  Both need courage and patience.  Both have risk and return!

For love, for you to express it, you must have the courage to tell the person of your real intentions and emotions.  Same in going to investments, you must have the courage to try it for you to know of what will be the benefits of it in the future!

For love and investments, risk and return play an important role.  If you cannot accept the risk of being rejected or losing money, you do not deserve the returns you are expecting then. 

Experience will be your Guide

All of us experience the ups and downs in terms of love of investments.  Heartbreaks, emotional breakdowns or sudden down turn of market events to name a few.  All of these mistakes will help us to be a better person and investor.  It teaches us that life is really fair, as the choices we make always define the life we want to have.

We are the driver of our lives! We decide, we succeed, we fail.  But at the end of the day, the things we learn and how we appreciate life will define what the is the real meaning of a successful love and investment life we have. 

Bear Market?.... Again?!

Before I begin, I would like to apologize of being gone for so long.  I need to take a break to focus on my new job so I have only little time to update you guys!

To start, the Philippine Stock Exchange index closed just a little point above the 6,000 level yesterday.   Many people again are questioning and asking if our bullish stock market is in the bear (down) market stage?

To answer the query, I will give my fundamental and technical view of the market.

Fundamentally, the Philippine stock market has still a lot of upside due to the economic achievements like the credit rating upgrades and sustainable economic growth.  Although we face an adverse situation with Yolanda crisis, our economy is still intact and the Christmas season is around the corner!  With OFW remittances and BPO business hit their respective highs any disaster will have a little impact on our financial markets.

Technically, we still need to confirm this by using several technical analysis (indicators) tools.

There are numerous types of technical analysis in the financial market, but I will focus on the Elliot Wave, Relative Strength Index (RSI) and Moving Average Convergence (MACD).  For beginners, these indicators may sound to technical and to better understand them, I will give a brief overview as follows:

Elliot wave - the theory suggest that the market moves in a series of up waves (5 points) and down waves (3 points).  The image below is the guideline on how to see the wave:

Wave 1 to 5 represents the bull (up) market and point A, B and C represents the bear market.

To fully understand the basics of the Elliot Wave, you can visit Introduction to Elliot Wave Analysis link.

RSI - a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. RSI ranges from 0 to 100. An asset is deemed to be overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued and is a good candidate for a pullback. Likewise, if the RSI approaches 30, it is an indication that the asset may be getting oversold and therefore likely to become undervalued.

MACD - is a trend-following momentum indicator that shows the relationship between two moving averages of prices. The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the "signal line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.  

This may sound too technical for us. To make it easy the lines should have a positive signal (value) and should be pointing up to indicate a possible rally on the market.  Likewise, if the signals are pointing down it should indicate that the market will go down and will correct soon.

Now that we know the basics, let us apply it on our Philippine Stock Exchange index:

For us to confirm what will be the trend of the market, we need to analyze the signals of the three (3) indicators.

Based on the Elliot Wave analysis, the market already completed the wave cycle from point 1 to 4 and we can expect that it will rally beyond the previous high.  The question now is can the market break its channel trading of 6,800 resistance and 6,000 support level.

RSI already indicated that it is on its oversold level (below the 30 line).  This is a signal that the market will bounce back and will have upside for the following days.

MACD readings show a downtrend and negative indicators, which means that the market will still go down unless it will be positive on the coming days.

Based on the indicators above, the market is a bit volatile in the short term for traders.  Unless the market breaks again its support and go down below its previous low of 5,600, all we can see is a range trade from 6,000 to 6,800.

For long term investor, this is the right time to invest or add shares to your portfolio!  There are a lot of shares right now that are cheap to buy and their fundamentals is good.

If you have any questions, suggestions and request, please don't hesitate to put your comments here.  I am very willing to help!  Good Day!  Happy Investing!

Q and A: Credit Upgrade?! What it is?

Hello Guys!

Yesterday, we received news that Moody’s is undergoing a review for a possible upgrade for the Philippines. Click here for the news.

Earlier this year, we already received a couple of upgrades from the other credit rating agencies namely Fitch and Standard and Poor’s.   I received several questions regarding the upgrades and its effect to the country and its economy.   

So for this week, I will share my thoughts about the credit ratings.

What is a credit rating?

In its simplest terms, a credit rating is score or assessment of credit worthiness or the ability of the entity to meets its obligations. The entity may include but not limited to a corporate or a government.  It can be higher or credit worthy or lower or risky.

Who are the agencies allowed to do the ratings?

The entities responsible are the rating agencies.  These are independent groups responsible for analyzing the particular country or company’s ability to meet its obligations, risk profile, growth and other developments.  The three major credit ratings agencies in the world are Fitch, Moody’s and Standard and Poor’s.

How the credit agencies evaluate their ratings?

The agencies evaluate the ratings not only using the plain math but also analyzing qualitative characteristics of the entity like its future growth and profitability.

What is the effect of credit ratings?

Higher credit ratings means the entity or country have a good standing and can sustain its growth and steady economy.  As result, the entity or country can fund or borrow with lower rates to fund its future projects and developments.  On the contrary, if the entity or country receives low credit rating, its borrowing cost is higher as the lenders are taking more risks and uncertainty in a not so stable economy.

What is the effect of the upgrade for the Philippines?

For the economy, it is good as it will enable us to fund government future projects with lower rates.

For the people, more job opportunities as the upgrade will allow other investors to come in and invest in the country. 

For the investors, It is more fun in the Philippines! 

By this time, you already know the basic foundations for you to achieve financial freedom at your own style.

To give you better views and understanding about the different aspects of a sound financial plan, I will share to you the updates or posts you can expect from the blog moving forward.

Monday to Thursday! Its Q and A Days!

From Monday through Thursday, I will try to answer the specific questions that you will asks about managing your funds or your financial plans i.e budgeting, investments and portfolio management just to name a few.

Friday – Our Portfolio Day!

To better appreciate our understanding in the financial markets, together we will start building up a portfolio of invesments. Every Friday, I will update you about the developments and the strategies we will make to achieve the goals we will set in!

Saturday – Special Fundamanetal and Technical Analysis Day!

We will be analyzing the financial market, specifically the bond and stock markets, and will try to predict or project the trends using fundamental and technical analysis.

Sunday - Special or Free Posting Day!

This is a free posting day! I will post something or everything under the sun except showbiz news, haha! Whether related to cars, sports, gadgets and other matters!

Hope the schedules above will help you enjoy your journey towards financial freedom. For questions, just post it on the comments section, or reach me through email and facebook account at mjinoncillo@yahoo.com.

Final Step! Your Safety Nets!

By now, you already know two (2) out of the three (3) basic principles in personal finance, which are budgeting and setting up your financial targets. Today, I will be discussing one last principle, building your safety net, which I personally considered will play vital role towards achieving your financial freedom.  

The final step towards your financial freedom is building a safety net! The safety net will help you prevent any financial disasters as a result of illness, disability and death. In personal finance, there are two main types of safety nets, these includes the emergency fund, which is for short term needs, and insurance.

Do you have any emergency fund or any Insurance policy?  

If you have both, then congratulations! If you have at least one or nothing, then this next post is for you!

First, let us talk about emergency fund.  

In my previous post about budgeting, I suggest that you should allocate at least 10% of your salary to the fund. Emergency fund is a fund needed to cover any unforseen expenses, like car repairs, illness, sudden loss of job or other major expenses.  

How much will you set aside for the emergency fund?

My mentor and most of financial planners suggest that the fund should be at least 3 months of your living expenses. For example, if you are earning Php13,000.00 a month and 50% or Php6,500.00 of are allocated to your necessary expenses, your emergency fund should be at least Php19,500.00. I recommend placing the fund in an account that you can easily withdraw, like savings or checking account as this is very important in emergency situations.

After establishing your emergency fund, let’s discuss about Insurance.

A study about Filipinos showed that 8 out of 10 still prefer to save in banks than to take up an insurance policy. Experts explained that the main reason why Filipinos do not engage to insurance is not because they don’t want to have one but the lack of knowledge about the products and benefits of it.

What is an insurance policy?

An insurance is a contract or policy in which an individual or entity receives financial protection or reimbursement againts losses from an insurance company. (Source: http://www.investopedia.com/terms/i/insurance.asp)

What are the main types of insurance policies?

In the Philippine market, there are numerous types of insurance policies to choose from depending on your needs and preferences. For this post, I will just discuss the two types that I feel every Filipino should have. These are Long term disability and Life insurance.

• Long term Disability Insurance – this will help replace your income if you are unable to work in an extended time due to illness or injury. I sugget this kind of insurance to those on the workforce or don’t have any other financial resources than their job.  
• Life Insurance - is a necessity especially if you have dependents who will suffer in case of death. 

How will you know if the insurance is right for you?  

When shopping around for an insurance policy, you should look at the best package available that is right for you! You should consider the premium payments, claim process, coverage and other matters that will feel you comfortable.

When is the best time to have an insurance policy?

The best time is NOW! Why? Because your age is important! The premium payments are directly related to your age, the younger you are! The lower the premium payments you are required to pay! Another thing, most of the insurance policies is payable within 5 to 10 years. If you are 25 years old today, you will finish paying your premiums by 30 to 35!  

For comments, questions and topics you want to discuss, do not hesitate to post it below.

  

Step 2! Make your Financial Plan!

In my previous post, we learn the importance of  Budgeting, which is the first step in achieving your financial freedom.  I believed that by now, you already assessed and made your own budget to fit your style!  

Just bear in mind and take this as a friendly reminder, you should stick to your budget for you to be a Millionaire! Like? Hehe!

Let's go to the second step in achieving your financial dreams.

   

Throughout our lives, we need a plan to achieve our goals.  If we don’t plan, we are open to mistakes and may lead to misdirection.   

So, how can we avoid it?

 

Have a financial plan!  The financial plan will serve as the blueprint and guidance in achieving your financial dreams!  Here are the steps to have a sound financial plan:

First, Identify!

You must first identify and write down your goals.  Your goal is dependent to your age and personal preferences.  For example, for young professionals, their main goal is to save and accumulate wealth while for those in the mid 30’s to late 40’s, their main goal is to pay home or car mortgage, or to support their child’s college degree.  

Next,  break down your goals!

After you identified your financial goals, you must categorize them based on the time you want the goals to achieve.  In personal finance, the three (3) main categories are as follows:

·         Short Term – you want to achieve this goal about 3 years or less.  This may include saving for a vacation or paying off a personal debt;

·         Medium Term – you want to achieve this goal around four (4) to seven (7) years.  Example of this are saving for a down payment for a house and lot or for a car, or saving for your child education; and

·         Long Term – you plan to achieve this goal around eight (8) or more years.  The best example of it saving or planning for retirement.

Next, educate yourself!  

I encourage you to read books, blogs (like this one! Hehe!), magazines or attend seminars if given a time.  By educating yourself, you will not only add value and learn but also will help you to make successful and sound decisions that will lead to the success of your financial plan.

Lastly, evaluate and monitor your plan!  

You should review your progress daily, monthly or at any point in time you are comfortable with.  By doing this, you will be able to monitor if your plan needs some adjustments or needed re-evaluation to your approach to achieve the plan.

The above steps are just the basic foundation for a sound financial plan.  The most important thing is to do it NOW! START NOW!  Why? Even if you have the best financial plan in the world, if you don't start, you will not achieve your goal.  Always remember, that the best asset to achieve your financial goal is TIME!

 For comments, questions and topics you want to discuss, just hit the comment box below.

Budgeting... First Step to Successful Financial Plan

After introducing about Personal Finance 101 last time out.  We will now go to the key areas that will help you achieve your financial goals.

Personal financial planning involves three key areas which include the following:

• Budgeting and saving – which involves monitoring of your finances that support and enjoy your life;
• Choosing and setting your financial goals – choosing your financial goals, course and targets such as buying a car and a house, sending your children to school and preparing for retirement; and
• Having insured – building a financial safety net to help you prevent any financial disasters caused by illness or other personal tragedies.

For this particular post, we will be focusing on the very first and basic foundation for a successful financial plan.  It will be a little longer but I will assure you that this is one of the key to your financial dreams and targets.

Now, why we should have a budget? 

To be able to control and monitor our expenses, we need to have a budget.  For most of us, “budget” seems to be a nightmare every mid and end of the month.  When pay day or salary day comes, most of us say “Parang dumaan lang yung sweldo ko!” or “Sweldo na ba? Di ko ata naramdaman?” Funny, right?  But if we are serious and really want to be financially free in the future, we need to control our spending.

Is salary really matter in an effective budget? 

I will share you one important thing that my mentor always remind me.  He always says “whether you make thousands or hundred thousand pesos a month, a budget is necessary as it is the first and most imporant step you can take towards achieving your financial dreams”.   At first, I don’t understand what he is trying to say, but looking deeply in the statement reveals that it is the ability of one person to manage his/her money that separate the rich, the middle class and the poor families from each other.  

So, how can we control or manage our finances? 

Used an investment jars or simply “JARS”!

I first encountered the Jar system two (2) years ago in a blog.  It was introduced by T. Harv Eker (Please click here for full biography ).  Harv emphasized that the most important thing is to separate your income or salary into different accounts for specific purposes.  

I agree with Harv’s principle that it is better to focus your time and energy on allocating amounts of your income/salary regularly through JARS than spending your hard earned money without accounting for it.  Below are Harv’s concepts of JARS:

·        

•  Necessary Expenses.  Take 50% towards paying for your necessary living expenses.  These expenses may include your daily meal, transportation, rent and other costs necessary for you to survive.
• Long Term Savings Fund.  Take 10% for long term savings funds. This fund will be used for contingency measures  to cover unexpected expenses aside from your necessary expenses.  An example of it are car repairs and home maintenance.
• Financial Freedom Account.  Take at least 15% of your monthly salary and set a financial freedom account.  This account will be then invested to different investments available like stocks, bonds or properties.  Remember, if you want to retire as a Millionaire and financially free, “You should  never, ever, ever touch the money that you invest” even the profits that come from it.
• Education. Take 10% towards saving some money for your education.  Increase your value by taking up Masteral Classes, Seminars, Training Courses, buying books.  By doing this, you will not only invest in yourself but have a potential of earning more in the future.
• GIFT.  Take 5% towards gifts and helping others.  It is also important to value others and not just your personal life. 
• PLAY.  Take 10% and put it towards an account that you can do whatever you want with, but you HAVE to SPEND it and REWARD yourself!  Does something luxurious like buying gadgets, having a travel, go to malls and other things that you want to do.

To suit it on your style, you can change the percentage to be allotted to particular account.  For me, the concept of this one helps as you actually monitor your expenses and you also automatically saving portion of your income/salary (Long term and Financial Freedom Account)

I have implemented this system, not with actual jars as suggested by Harv’s, but by putting it in the excel file, and it really helps me to remember what my actual finances should be at the end of the month.

To see how it works, let us assume you are currently earning Php 11,000.00 net of tax salary per month.

		Monthly	Yearly	5 Years
Monthly Salary		11,000.00	132,000.00	660,000.00
JARS/Account
Necessary Expenses	50%	5,500.00	66,000.00	330,000.00
Long Term Savings	10%	1,100.00	13,242.43	67,148.67
Financial Freedom	15%	1,650.00	20,542.38	121,236.81
Education	10%	1,100.00	13,200.00	66,000.00
Gift	5%	550.00	6,600.00	33,000.00
Play	10%	1,100.00	13,200.00	66,000.00
Savings Account Return	0.70%
Financial Freedom Return	8%

The good thing about the system is that you are restricted to allot portion of your salary to the savings and financial freedom account.  As you can see in the illustration above, you will have an emergency fund of Php13,242.43 after a year and a financial freedom account of Php20,542.38.  Think about this, if you don’t have a proper budget, where these funds will go?  I will just leave you the answer to the question.

Next article will focus on Step 2.  Building your financial goals.

For comments and suggestions, just post it in the comment box below.