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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