Sunday, August 4, 2013

And Not a Single F Was Given

I'm here, so I know very little about what's going on. But it seems that either my Facebook contacts are even more clueless about the situation--or they do know but they just could not be bothered. And I guess my FB world reflects society-at-large, if netizen Kira's comment is any indication.

What can we do, indeed? Well, first we try not to surrender to a feeling of helplessness--or worse, apathy. The least we can do is be aware, be concerned, and be informed. Then we can start having conversations about the topic: online, offline, out of line, take your pick. And maybe only then can we be adequately equipped to take action and do whatever we think is best for ourselves, for our families, for our country--in no particular order.

Kira's comment comes from this post about the Janet Napoles case in the blog "Mom and Pop Moments." The article itself is a good read, but you'll find some of the comments more revealing, to say the least. And perhaps the post is the best place to start. I'm not saying all the comments are accurate or sensible, but some are definitely worth reading because at least will make you think. And I believe it's worth saving some of these comments (there are others that I have deliberately excluded but are still worth reading, just scroll further down, you won't miss them), for posterity if nothing else.

Wednesday, July 31, 2013

Free Life Insurance with BPI's Get Started Account


Dear Investor Juan,

I have a question about insurance. I can't decide which of the two is a better option for my husband:

Option 1.Term life insurance for 2 million coverage with premiums in the table below

Option 2: BPI's Get Started savings account with life insurance (5x your adb maxium of 2 million). My husband has 100,000 at present which function also as our emergency fund.  I'm thaninking of putting in addition 300k so that my husbands coverage will be 2 million.

Do you think its better to just do option 1 and invest 300k in uitf? or choose option 2 meaning total saving 400k with 2 million life insurance,at the same time it will funtion as our emergency fund?

Please excuse my grammar and spelling as I have just given birth two days ago and in a hurry to write this as I would like to email you asap so to help me decide which option is better.


Dear Maxine,

Thanks for your email and the very useful information that you have provided us.

The first thing I did was review the details and conditions for BPI's Get Started account. Everything seems to be above-board--it does offer free life insurance with no strings attached. The only possible drawbacks that I see are that only depositors who are 15 to 70 years old are entitled to free insurance and the minimum monthly balance of 25,000 pesos for ATM accounts (75,000 for passbook) is higher than other kinds of accounts, but these are not deal breakers, in my opinion. Also, like other savings accounts Get Started pays interest, albeit at a paltry 0.25%, but I'm sure other banks offer around the same rate.

Thanks for sharing your insurance quotation, it's really helpful especially for people who don't have any idea how much life insurance costs in the Philippines. While the annual premiums are not very high, they are also not negligible. So based on your options (which you formulated correctly, by the way), to get a 2 million peso insurance coverage on the first year, you can either pay 7,900 to an insurer or maintain a 400,000 deposit in a Get Started account. I understand your hesitation in choosing Option 2--keeping 400,000 in a savings account seems to be a waste since it can possibly earn more in an equity fund? But if you can justify keeping 400,000 as an emergency fund--which to me is completely understandable, especially if it's for your entire household--parking the amount in an account that provides extra benefits makes a lot of sense.

How much more value is Get Started providing anyway? Using your insurance quotes, maintaining a 400,000 deposit in the account earns 0.25% interest and insurance that is worth 7,900 for the first year. Which means that your deposit would effectively be earning 0.25% + 7,900/400,000 = 2.225% in the first year. Given the interest rate climate nowadays, that rate is comparable to yields on T-bills and time deposit accounts--but with Get Started you don't lose liquidity, which is a necessary feature of an emergency fund. So yeah, Option 2, most definitely.

For other readers who think 400,000 is too high for an emergency fund, just figure out the amount that is appropriate to you and deposit that in a Get Started account.

Finally, I make these recommendations based on the limited information that I have. If anyone knows comparable benefits offered by other banks, please do share the information with us.

Tuesday, July 30, 2013

The Greatest Food in Human History? Sorry, Not in the Philippines

According to a Freakonomics reader and this follow up New York Post article, the McDouble--at 1 USD in the US (and 9 HKD in Hong Kong) and packing 390 Calories, 23 grams of protein (half a daily serving), 7% of daily fiber, 20% of daily calcium and iron, etc.,--"is the cheapest, most nutritious, and bountiful food that has ever existed in human history."

Sadly, for some reason, we don't have a McDouble in the Philippines. What we do have is the Double Cheeseburger, which for 99 PHP (or 2.28 USD) you get a whopping extra slice of cheese more. For 1 USD, the best you can have is the Cheeseburger--if you can get over the sadness that one beef patty will inevitably bring. And we're only talking about burgers made of real meat here, so Burger McDo clearly does not count.

Sunday, July 28, 2013

Final Rules for ETFs Approved


The SEC has approved the final set of rules that would guide the offering of exchange traded funds or ETFs.

ETFs are similar to other kinds of investment funds, but unlike mutual funds and UITFs whose value are computed and posted daily by the issuer, the price of an ETF is determined by how much investors are willing to pay for (and sellers willing to receive for) its shares, just like stocks and other assets that are traded in exchanges.

ETFs are a good alternative to currently available investment funds because they are more liquid (easier to convert to cash) and ideally have lower costs.

According to the article, at least three firms, First Metro Investment Corp., BDO Unibank Inc., and Bank of the Philippine Islands have expressed their plan to offer ETFs.

A copy of the rules may be found here.

Many thanks to reader haezel for the heads up.

Monday, July 22, 2013

The DRREW Framework in Action


Dear Investor Juan,

I have a few questions regarding investment. I'm a 24 yrs old, single and my current financial situation:
* Free of debt
* Emergency Fund (good for 6months of expenses)
* Life insurance and Health card (provided by my employer) 

Investment goals:
* Retirement Fund - invest in stocks (longterm), since I'm still 24
* Condo/House - I'm not yet decided on what to buy and I'm still searching for a nice place, but I want to prepare  the money that I will use for buying my own place. For the meantime, I'm planning to put the money in Mutual Fund (Money Market Fund) since I'm not sure when I will be needing the money.
* Future Personal Expense - I'll be using this fund for 3-5 years from now, but I can't decide if I will put it in stocks or Mutual Fund (Equity Fund)

Here are my questions:
1. Based on my current financial situation, do you think I can now proceed to my investment goals?
2. Is it okay to have a fund dedicated to each goals? 
3. Since I have 3 funds to monitor, I'm thinking if it could be costly for maintaining the multiple funds because of the fees. I'm not sure if I'm doing it correctly or not.

If you have any inputs to improve my goal, I am gladly to hear it :)

Thank you.

Best regards,

Dear Jay,

Dear Jay,

I completely support your plan. This is exactly what I proposed in this post about the "DRREW" framework. Congratulations--YOU GET IT. :)

Here are my answers to your questions:

1. Based on my current financial situation, do you think I can now proceed to my investment goals?

Yes. I assume that you already know what portions of your savings to allocate to your retirement fund, the property that you are planning to buy, and "future personal expenses."

2. Is it okay to have a fund dedicated to each goals? 

Since the three goals that you mentioned above involve different holding periods, funds for each must be invested in the appropriate type of asset or fund.

3. Since I have 3 funds to monitor, I'm thinking if it could be costly for maintaining the multiple funds because of the fees. I'm not sure if I'm doing it correctly or not.

Nah, you won't have to pay more since fees are charged as a percentage of the value of your investment--so given the same fee percentage, investing 900,000 in one fund would result in the same fee as investing in three separate funds of 300,000 each. Also, if you do it right you don't really have to monitor anything since your decision to sell or divest should be solely determined by need and not by how much money you are making or losing. To minimize hassle, though, you may want to buy funds from just one bank.

I have nothing more to add, really, given what I know about you situation. Thanks for your email, and good luck!

Friday, July 19, 2013

How Much Does it Cost to be Your Favorite Superhero IRL? Inflation from Different Angles


A friend shared these interesting infographics with me:

How much does it cost to be Batman in real life?

How much does it cost to be Spider-man in real life?

How much does it cost to be the Hulk in real life?

How much does it cost to be Superman in real life?

So it seems that even our favorite superheroes are not immune from the ravages of time--and inflation. Looks pretty bad, doesn't it? But how bad, exactly? How much inflation have our justice friends suffered through in the past several decades?

Say, P is the price of a certain product now, and Px the price of the same product x years ago. The compounded average annual change in price of the product--i.e., the inflation rate with respect to the product--is:

[(Px/P)^(1/x)] - 1

Let's try applying this formula to some of the items in the infographics above (since we can only use the formula for the prices of the same item, we can't use it for Batman's expenses and Spider-man's residence expense, for example).

Subway fare

Given that the inflation rate in different parts of the world has behaved this way since 1986 (have purposely excluded the 50% jump in prices in the Philippines in 1984):

And you hear statistics like these from CHEd:

CHEd said that on the average, tuition would increase by P37.45 per unit or by 8.5 per cent, the lowest percentage increase in the last 10 years.

The national average increase in school fees is P194.62 or by 7.58 per cent, according to CHEd.

Cost-wise, being a superhero may not be so bad, after all. Large changes in price over a long period of time may seem much at first glance, but really reasonable upon closer inspection.

Although it's also perfectly understandable to interpret this as "reasonable annual changes in price translate to insane price differences over a long period of time." It's just a matter of perspective, really. And compounding completely playing tricks with our minds.

Wednesday, July 17, 2013

Making Linux Work on Your PC, Part 2: Productivity and Gaming

If you have decided to give Linux a try as I talked about in Part 1, there are a couple more things that you can do to get more out of your Linux machine and lessen your dependence on Windows.

While Linux comes preinstalled with perfectly usable (and in certain aspects, better) open source alternatives to commercial software (e.g., Libre Office for MS Office and GIMP for Adobe Photoshop), I recommend that you install several more applications to enhance your Linux experience.


Even if Firefox is preinstalled in Linux Mint, I strongly suggest installing and using Chromium, the open source version of Google's infinitely-better Chrome web browser. Installing Chromium is easy: just go to Menu > Software Manager, search "chromium" in the search bar, and then install.

One minor issue that you may have with Chromium on Mint is the custom Google search behind the omnibox. To revert to the default version of Google, just click the Menu > Terminal and type and enter:

sudo rm -fr /etc/skel/.config/chromium ~/.config/chromium


Dropbox is a handy tool that lets you automatically sync selected files and folders across different machines and different platforms--perfect if you use a different machine at work and at home, or if you want ready access to your files via your mobile phone.

First, create a free account on the Dropbox website (or pay a fee if you want more cloud storage space). Then install Dropbox by downloading the Ubuntu installer (choose 32- or 64-bit depending on what kind of system you have). Next, go to Menu > System Tools > GDebi Package Installer and open the *.deb file that you just downloaded to install. Find the Dropbox button under Menu > Internet (or use the search bar in Menu), click it, and log in to connect your Linux PC to your Dropbox account.


Everpad is the Linux port of Evernote, the cloud-based note-taking software. To install, run the following lines (one at a time) in the terminal:

sudo add-apt-repository ppa:nvbn-rm/ppa
sudo apt-get update
sudo apt-get install everpad


Picasa is a free and user-friendly tool for storing, managing, and editing photos. Install by searching "picasa" in Software Manager.


Steam may be the one application that will eventually take Linux to the mainstream. Steam is a platform for buying and playing games for Windows, Mac, and now, Linux machines--kinda like iTunes, but for games. While not every Steam game is currently available to play on Linux, the list--which includes Amnesia, Portal, Half Life 2, Team Fortress 2, and almost all Humble Bundle games--will just get longer over time.

To install, go to the Steam website and download the *.deb package. Same as with Dropbox above, use GDebi Package Installer to open the file and install the application.

Other software

There are some other open source software applications in Software Manager that you may be interested in. I have started learning LibreCAD (an AutoCAD alternative) for 2D designs and I plan to learn how to make 3D models using Blender in the near future.

Linux is slowly turning out to be a viable alternative to Windows and even Mac. While it's still not perfect, it's more than enough for most of our needs, and it just gets better with each passing year. With these series of guides, I hope that I was able to convince at least some of you to give Linux a try.

Saturday, July 13, 2013

The Solution to Being a Shopaholic

This is irresponsible, misleading, and in my opinion, unethical advertising.

But I must admit, it is entertaining. "Christine's" story is chock-full of lols.

Wednesday, July 10, 2013

Why Even a 0.5% Difference in Fees Matters


Dear Investor Juan,

Your blog is really a good find and very helpful for educating newbies. Thank you very much! Now I am seeking some opinion from you. While checking the UITFs of BDO, BPI and Metrobank, I came to know that BDO have the lowest fee - 1% while Metrobank charges the most at 2% plus others. Am I correct in this or I am missing something?


Dear Jovy,

Perfect timing, I've been planning to discuss the effect of differences in fees in investment returns. Maybe this illustration can help convince you that even a "small" difference in management fee matters.

Say there are two equity funds (UITF or mutual fund), A and B. The returns of the two funds, before management fees, in years t = 1, 2, 3... are as follows:

Fund A:

rA1, rA2, rA3, ...

Fund B:

rB1, rB2, rB3, ...

So that after 1 year, an investment in A will have grown by 1 + rA1 times, in 2 years by (1 + rA1)(1 + rA2) times, in five years by (1 + rA1)(1 + rA2)(1 + rA3)(1 + rA4)(1 + rA5), and so on.

If A charges an annual management or trust fee of 1%, then the after-fee value of an investment in A after 1, 2, and 5 years are:

After 1 year: (1 + rA1)*(1 - 1%) = (1 + rA1)*0.99
After 2 years: (1 + rA1)*0.99*(1 + rA2)*0.99 = (1 + rA1)(1 + rA2)*0.99^2
After 5 years: (1 + rA1)(1 + rA2)(1 + rA3)(1 + rA4)(1 + rA5)*0.99^5 = (1 + rA1)(1 + rA2)(1 + rA3)(1 + rA4)(1 + rA5)*0.95

Which means that if you invest in the fund for 5 years, 5% of the value of your investment would go to management fees. And if you invest in A for 30 years, your investment will have the following value at the end of the period:

(1 + rA1)(1 + rA2)...(1 + rA30)*0.99^30 = (1 + rA1)(1 + rA2)...(1 + rA30)*0.74

Let's say B charges a 1.5% management fee. A 30-year investment in the fund would result in:

(1 + rB1)(1 + rB2)...(1 + rB30)*0.985^30 = (1 + rB1)(1 + rB2)...(1 + rB30)*0.64

Assuming that the performance of an equity fund does not depend on the skill of the fund manager so that the long-term return (e.g., 30 years) of two equity funds on any given year is the same,

(1 + rA1)(1 + rA2)...(1 + rA30) = (1 + rB1)(1 + rB2)...(1 + rB30)

This means that compared to a fund that charges 1% per year, investing in one that charges 1.5% results in a 14% loss in value (0.64/0.74 - 1) over a 30-year holding period.

The table below compares the effects on value of different combinations of fees and holding periods.

Holding period 1.00% 1.50% 2.00% 3.00% 4.00% 5.00%
5 .9510 .9272 .9039 .8587 .8154 .7738
10 .9044 .8597 .8171 .7374 .6648 .5987
20 .8179 .7391 .6676 .5438 .4420 .3585
30 .7397 .6355 .5455 .4010 .2939 .2146

So to answer your question, for a 30-year investment, a 2% fee will reduce the value of the fund to 55%, compared to 74% for a 1%-fee fund. It means if you invest in the 2% fund, you'd be losing 26% more (55/74 - 1) of the value of your fund.

I hope this answers your question.

Thursday, July 4, 2013

Short Answers to Unanswered Questions: Preferred Shares and Other Things


Dear Investor Juan,

Am a regular reader of your blog and while you have some articles there regarding preferred shares, I would like to ask the following regarding the dividend rates that goes with the issuance of these shares:
  • How does one company determine the dividend rates for these preferred shares? 
  • What do they use as basis for the dividend rates?
  • Do public companies have different basis for the dividend rates being offered ("as sweetener") vs.private, non-listed companies (if they wish to issue preferred shares to existing stockholders)?
Would appreciate if you can share your insights on the above matter.

Thank you and more power,


Dear Vic,

Here are my answers to your questions.

Firms issue preferred stock to raise money to finance projects or other uses. It's like a more expensive alternative to borrowing. The dividend rate on preferred stock is primarily determined by the market: the dividend yield on outstanding preferred shares issued by companies of the same risk serves as a benchmark. The dividend rate also reflects how much return investors are demanding for lending out their funds.

I'm not so sure about my answer to your last question because I'm not very familiar with preferred stock issues by private companies (as I think they are quite rare), but these should have a higher dividend rate than preferred stock issued by a listed company in the same industry and of the same size because of the following reasons:
  • An unlisted firm would be subject to less stringent reporting requirements, and would be less transparent, and thus riskier, in the eyes of investors.
  • Preferred shares of an unlisted firm would not be tradable in exchanges, and this lack of liquidity would prompt investors to demand a higher return.


Dear Investor Juan,

I would like some advise on investing in BDO UITFs. I am currently a college student and really interested in investing at an early age. I am willing to invest about more than 10K in a BDO UITF product. Could you please explain to me the ff.:

1) The fees/charges I have to pay in investing in BDO's UITF.
2) Do you recommend this EIP Program by BDO?
3) Is 10K enough to start investing?

Thank you. 


Dear Louie,

I would only suggest investing in an equity fund if you don't have any debt, you already have an emergency fund, and you can afford to invest long-term. So if all these conditions are met, then here are my answers to your questions:

1) You don't have to pay anything. All fees and taxes are automatically deducted and paid from the fund's assets and are already reflected by the fund's NAVPU.
2) I'm okay with enrolling in an automatic investment scheme. Deciding which bank you would buy a UITF from is all up to you.
3) Yes.

Good luck!


Dear Investor Juan,

Got any good recommendations for a first credit card? I really need to get one soon.


Dear Marvin,

Local bank credit cards have lower interest than foreign bank credit cards, so I suggest that you just get one from a local bank that you already have an account with.

Sunday, June 30, 2013

Making Linux Work on Your PC, Part 1: Installing Linux Mint

Around a year ago, I replaced my aging Asus EEE PC with a Lenovo X230 Thinkpad that I got on a significant student discount. The X230 came with Intel's i5 processor, 8GB of ram, and Windows 7 Home Edition. My early experience with the system had been fairly pleasant, but soon the OS started to not work properly too frequently (I had to do a fresh install five times in the last six months) that I decided that the only long-term solution to my problem would be to shift to Linux: it's free, more stable, and current versions supposedly offer a user experience that rivals Mac OS's.

Linux Mint

Linux today is leap-years ahead of what we had a decade ago. Current incarnations of the OS from projects like Ubuntu are arguably just a couple of steps away from 100% mainstream usability, and initiatives like Linux Mint take things a step further by including important components such as audio and video codecs and useful software out of the box.

To install Linux Mint on your PC, start by looking at the Linux Mint community's hardware database to find out which version is most compatible with your system. For the X230, Linux Mint 14, code-named "Nadia," seems to be the best choice.

Linux Mint comes with different desktop environments that have been developed by independent groups over the years. I've heard good things about the "Cinammon" desktop, so I decided to use it. Once you have decided which flavor of Linux you want to use, download the DVD iso of the installer and burn the file into a DVD installer disk.

You have several alternatives in installing Linux Mint. One is to install it from within Windows as an application (mint4win). To do this, run the DVD while on Windows and install the OS as you would any other Windows software. While this option is more flexible since it's easy to uninstall if you change your mind, you only get to allocate a maximum of 30 GB of hard disk space to Linux.

Another option is to boot from the DVD and install the OS either side-by-side with Windows or to completely assign your hard drive to Linux. Both of these options offer greater hard drive space options and reportedly faster boot and run times. To maintain access to Windows (in case I need it for whatever reason), I decided to install Linux Mint as a second OS.

Fixing the sound bug

One frustrating bug in Nadia is the seeming lack of playback sound after installation. Fortunately, the fix (which comes from the Linux Mint forums) turns out to be quite easy.

  1. First, open Menu > Software Manager. 
  2. Type "alsa" in the search box and make sure that the packages "alsa-base," "alsa-utils," and "alsamixergui:i386" are installed. In my case, I had to install "alsamixergui:i386"
  3. Run "alsamixer" in the terminal. A user interface with colored columns should appear.
  4. Press the right directional key until it takes you to the "Auto-Mute Mode" column, which you should find "Enabled" (this is the cause of the issue). Press up or down to change the value to "Disabled."
  5. Issue fixed. Close the terminal window.
Games, productivity, and other things

At this point, you should be able to use and enjoy your new Linux PC reasonably as it comes with everything you need for communication (the Firefox browser and the Thunderbird email client), productivity (Libre Office suite), and entertainment (VLC video player and the Banshee audio player, with all the codecs that you need). Still, the main reason why most people stick with Windows despite the advantages of Linux, particularly Linux Mint, in terms of price, stability, and more and more, usability, is the lack of games and other software. In Part 2, I'll show that this is not the case anymore, and that today there are very few reasons to stay with Windows.

Saturday, June 29, 2013

Google Tips and Tricks for Students

I'm scrambling to beat my monthly quota, so I guess it's time for another lazy post.

I got this from Reddit.

Wednesday, June 26, 2013

Saving and Investing for Your Child's College Education


Dear Investor Juan,

Please don't laugh at my silly question but is it possible to invest 10,000 pesos on something (don't know what kind of investment - UTIF maybe). Long term, maybe 15 years long. would my 10 000 earn enough that it can send my son to college?? It is his birthday next week and I just kept on thinking about his future.


Nice blog by the way. i just stumbled it today and i kept reading about stocks and investments!


Dear Joriel,

It's not a silly question, there's no need to apologize.

Assuming that inflation would be 5% per year and diversified equity funds (such as equity UITFs) will grow at an average rate of 10% per year for 15 years, then the real rate of return of investing in equity funds is 5% per year (please see this post for some background on real rates of return). 10,000 compounded by 5% per year for 15 years is

10,000*(1.05)^15 = 20,789 pesos

At today's prices, would this amount be enough for your son's college tuition? (It's more than enough for some colleges and universities, actually).

If you want to send your son to a university which currently charges 150,000 pesos per year for tuition so that in 15 years you want to have 600,000 in today's peso, then you have to invest this much today:

600,000/(1.05)^15 = 288,610 pesos

If you want to invest in annual installments, you can use the PMT function in Excel using the arguments:

rate = 5%
nper = 15
FV = 600,000

And you'll get 27,805 pesos (please ignore that the answer in Excel is negative), the amount that you have to invest every year (before adjusting for inflation) to have 600,000 in 15 years, assuming that the annual real rate of return is 5%. It's perfectly doable if you ask me. :)

I hope I was able to help. Good luck!

Sunday, June 23, 2013

Almost-Forgotten Emails (Part 2)


As I was trying to reduce the number of unread emails in my inbox, I discovered a handful of emails from almost half a year ago. Here's my attempt to make up and apologize for the oversight.


Dear Investor Juan,

Helpful po talaga yung blog mo. Mejo nagiisip isip po ako ngayon. Kasi ang balak ko po is to invest or purchase ng units every month sa bpi equity ko, im planning 2k-4k per month. And Im planning to do it for a long time. Tapos I have a friend na gusto mg invest sa individual stocks, yung kuya nya kasi ganun yung gngwa. Citisec po yung broker nla and I saw there EIP na 5k ang starting investment then pwd rn mgaadd anytime na gusto mo. Im thinking of investing din sa individual stocks kng san alam ko n tatagal and lalaki p yung company. 

My question is, kung papasok ako sa individual stocks, baba po yung ilalagay ko sa equities ko, and sabay ko po silang lalagyan ng pera monthly ? Should I just focus on equities or I can also try individual stocks? And do you have feedback about Citiseconline? 

Thank you IJ. 

February 6, 2013

Dear Rek,

Stick to the equity fund. Investing in individual stocks is too risky. There's not fool-proof way to pick stocks that will consistently outperform the market index or diversified equity funds. Also, by investing in individual stocks, you subject yourself needlessly to unique risk, which I have discussed in this post.

Finally, try to convince your friend to move to an equity fund, if it's not too late already.


dear investor juan,

good evening sir.
i've been reading your blogs a lot since i stumbled into it last week. i love your blog! it's been a great help.
from reading your blogs, i was already decided this morning on investing 1M on bdo equity funds.
but when i asked for an opinion from a metrobank investment officer about investing in equity funds now,she said it's better if i wait for the market correction. and it's too expensive now.
when i checked just now,it increased by 1.27%.
what is your take on this sir?
i'd love to hear from you.
thank you.

February 18, 2013

Dear Kristina,

Well, in hindsight, the investment officer that you talked to appears to be a genius since the correction that he mentioned seem to have happened just recently.

It's kinda funny that so-called experts have a knack of saying that a correction will happen, but fall short of saying exactly when it will happen and by how much prices will go down.

Anyway, with regard to investing in the long term, short term fluctuations--"corrections" included--does not really matter. And if you can't afford a long-term horizon, I suggest investing in something safer like bond or money market funds.


Dear Investor Juan,

I have bdo and metro uitf and would like to know if it is a good time to invest with pnb-allied uitf. Pnb-allied uitf performed well for 2012 and I was thinking of bdo-equitable/pci merger,  now the bdo equity fund which I believe was originally equitable-pci product is performing way ahead of bpi or metro equity fund. So my question is in such mergers, does the uitf become better, what do you think of pnb-allied merger in particular will it be good time to invest in its uitf? Though I have exsisting accounts with both banks, the bank personnels/manager is not much help when I inquire saying the merger has just taken effect (feb 9) so no info is given to them.

February 19, 2013

Dear Maxine,

I don't have data to support this claim, but I strongly believe that events such as bank mergers have nothing to do with the performance of UITFs. 

The performance of a fund depends on the performance of its constituent assets, and the composition of the fund (of a particular type) is determined by the fund manager. However, US data shows that skill may not be enough to consistently beat the market index. Finally, high fees make it even more difficult for investors to earn market-beating returns. IMO, neither of these factors--the skill of the fund manager and the level of fees--has anything to do with bank mergers.

Tuesday, June 18, 2013

Almost-Forgotten Emails (Part 1)


As I was trying to reduce the number of unread emails in my inbox, I discovered a handful of emails from almost half a year ago. Here's my attempt to make up and apologize for the oversight.


Dear Investor Juan,

I have been visiting your blog for the past few months or so.

I had just cleared all my debts I have incurred while I was in college and my not so fortunate first job.

I was just starting to build up some savings when I stumbled upon your blog.

It was very reassuring knowing I was on the right track while reading your "A Guide for Newbie Investors" posts!

Thank you very much for sharing the things that you know.

I'm slowly trying to read backwards from your oldest post to the most recent ones, I'm even reading the comments!

Currently I am debt free and about 80% on my emergency fund.

As I have yet to actually venture into investing I am still a green horn so to speak and can only hope that you would indulged me and my questions.
  • Do you still think UITF's are good vehicles for long term investments? (Already asked on older posts, just checking to see if it still is the case now)
  • On the "A Guide for Newbie Investors", its says the next step for me would be to invest in assets with relatively lower risk, I did some checking comparing different funds, and it seems BDO outperforms its competitors every time (at least on the dates I've checked, as far as 2008 and even recent histories). Logically I would choose to invest on BDO, but seeing that their unit price for their balanced fund is currently valued at 3400~. It seems a bit steep and has a high chance that I would lose money even if I intend to invest on a long term basis. Am I wrong?
  • Secondly, why is it that BDO balanced fund is valued so high compared to the other balanced funds and yet they still managed to out perform their competitors?   
  • This is a silly, please humor me. Should the bank go under, would I still be able to claim my investments?
  • Let's say I invested some money at 1000 pesos per unit and opt for the 5 year term, when maturity date came I discovered that the value per unit is 800 pesos. Naturally I wouldn't want to withdraw my investment just yet. Would they(banks) be able to force me into withdrawing my investment? What would happen in this scenario?


Green Horn
December 28, 2012

Dear Green Horn,

In general, UITFs are still the best investment vehicle for the "ordinary" investor since they offer a convenient and relatively inexpensive way to diversify. At least until something better becomes available (like lower-cost index ETFs... hopefully).
  • Evaluate UITFs based on fees, performance (% change in NAVPU over time), reputation, etc., but not on the actual NAVPU on any given day. It's misleading to compare NAVPUs of different UITFs because even if they are of the same type, their exact composition may be significantly different. If you're concerned whether a UITF is overpriced or not, then you should evaluate whether the stocks and/or bonds that comprise the UITF are overpriced.
  • There is evidence that superior fund performance is as likely the result of expert fund management as plain dumb luck.
  • If the bank whose UITF you have invested in goes bankrupt, you're still entitled to your units. You are the legal owner of your investment, and the bank is just the trustee of your funds and the UITF is not part of its assets.
  • I'm not sure if I completely understand your last question, but if you're talking about a UITF investment, then no, I don't see how the bank can force you to divest from the fund.


Dear Investor Juan,

First and foremost, thank you for making planning for investments and future financial security easy to understand. I would just like to ask for your opinion regarding the best possible course of action for me to take right now. I am a 22 year old student and I have recently invested a bulk amount of Php 200,000 in an Equity UITF (November). I have also invested in an Easy Investment Program for the same Equity UITF.

Given the continuous growth of the stock market and the upcoming release of the first ETF's in the Philippines, I would just like to know if I should cash out my UITF's and/or

1) Invest in different company stocks listed in the PSE
2) Redirect my funds to the ETF's expected to be launched during the first half of this year
3) Keep my UITF investment as is

Which do you think has the largest potential for  long-term growth, especially for a student like me?

Thank you very much!

More power to Investor Juan!

January 12, 2013

Dear Stephanie,

There's no infallible proof that fund managers can consistently outperform the index over a long period of time, and we are 100% sure that a 0.5% trust fee is better than 1%. So if a lower-cost (i.e., has lower fees) fund such as an index ETF becomes available, I suggest transferring your investment to that.

Until then, don't redeem your units until you need the money, or have some better use for it.


Dear Investor Juan,

I just started last 2011, I all ready have at least Php 200,000.00 in the bank and currently Php 100,000.00 is in a time deposit. I also have a sun life mutual fund I current still paying. My dad want me to put the other Php 100,000.00 in a time deposit but in the current percentage the bank is offering its not worth it (it too low). The bank offered me to invest it in Peso Money market fund , peso bond fund , GS fund , Peso fixed income fund , Peso balanced Fund , Equity Fund. 1st off , I don't really know all of that. I would like to invest if possible but since i can't understand it. I kind off hesitant to invest.

Can you give me an idea on how should i invest? I know that the Philippines economy is getting better and will get better in the near future. I think it is good to invest in stocks. What direction should i go?

Also will the peso dollar exchange rate decrease? I would like to buy dollar if possible and also invest it.

If you have article i can read for reference it would help me a lot. I would like to risk my money but since i don't have an idea I can't. Also that some of the mention fund and bond that the bank is offering the minimum is 100,000.00 and 10,000.00.


January 21, 2013

Dear Carina,

It's impossible to accurately predict how the economy will perform in the near future. So-called experts can't do it, and mere mortals like us can't as well. Same goes for exchange rates.

The very LONG term is a different story, however. In 30 years or more, it would be safe to bet that advances in technology and increases in productivity will result in significant economic gains and greater wealth. In 30 years, life should be significantly better than it is today. Well, if it doesn't turn out that way, then we'll have more serious concerns than investment returns.

Given this premise, your investment decision should be determined by your risk preference and your investment horizon.

If you want zero chance that you'll lose principal, then invest in time deposits, t-bills, or money market funds. Also, these investments would be best if you'll need the money soon, like in five years or less.

If you can afford a bit of risk or are investing for the short or medium term, then invest in a fixed income fund or individual bonds.

Finally, if you have a long investment horizon, like at least 10 years, although longer would be better, then invest in an equity fund.

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