Question: What are the best books on personal finance that you can recommend? Thank you, sir.—Honney Natividad via Twitter

Answer: Best is a relative term and I may not be the right person to give you a qualified answer. However, I can give you my opinion on some books that I personally find insightful and helpful. Finance, even Personal Finance, is a very broad subject matter involving many disciplines and there are many good books out there that are very good read.

There are books that write about the technical aspects of personal finance and zeroes in on specific subject matter, i.e., investing, estate planning, stock market, insurance planning, accounting and the like. There are also books that tackle the broad spectrum of personal financial planning. There are also many books that tackle behavioral issues on finance that belongs on the motivational or self-help genre. Then there are the hybrids that try to give you a more balanced view on the technical as well as the behavioral issues on the finance and I personally go for these books.

Perhaps the most popular finance books are those written by Robert Kiyosaki, which were brought about by the highly popular Rich Dad Poor Dad bestseller. The book is so popular that it created some sort of cult-like behavior among many, which is quite disturbing if you ask me.

Rich Dad Poor Dad and Kiyosaki’s succeeding books have some good points but they are quite over-rated for me because they lack some specificity and many readers question the validity of his claims. Like any book, we should learn to eat it like a fish, we get the meat and throw away the bones, as the saying goes.

Let me give you a list of books that I highly recommend because I like the way they were written—balanced and grounded on solid financial principles; yet they can still help you get motivated. Sorry, Kiyosaki fans, you won’t find his books on my list.

1) Total Money Make Over and Financial Peace by Dave Ramsey—OK I admit it, I’m a Dave Ramsey fan boy and for a good reason. I like his straightforward approach on personal finance. His books, particularly Total Money Make Over is very practical and it is full of real stories of people who overcame financial difficulties.

Ramsey is a no-nonsense finance guru yet you can really sense his sincerity in trying to help people get out of the financial mess they are into. These two books are great starter books that will open your eyes and give you hope.

2) Pwede Na! The Complete Pinoy Guide to Personal Finance by Efren Ll. Cruz—Hands down, Efren’s books are the best personal finance book ever written by a Filipino. It is a concise yet surprisingly comprehensive book that will guide the reader in the many facets of financial planning and financial instruments. As the title connotes, it is indeed a complete guide, yet it will not overwhelm you as you find yourself glued to the pages.

3) Millionaire Next Door—by Thomas J. Stanley and William D. Danko. This is an iconic book that discusses the behavior of Millionaire in the USA. It is not only insightful, it will actually shatter many of our misconception on wealth and wealth accumulation. I particularly like this book because it is based on solid research. This is a good financial behavior book that may help you change your mindset.

4) Automatic Millionaire by David Bach—this book by a best-selling author gives you an overly simplistic view on achieving wealth and yet it is effective in its message that in eating an elephant, we need to do it one bite at a time. Simple, practical and sensible.

5) Money Matters by Larry Burkett—Financial counseling is the most effective route toward achieving financial security but many do not have access to good financial counselors or advisors. Money Matters is a form of counseling book and I like the question-and-answer format. The questions are very practical and real, not superfluous or ambivalent. The answers of Mr. Burkett are successful in providing advice in an emphatic way; yet, you will find that his answers have sound financial grounding.

6) Till Debt Do Us Part by Chinkee Tan—another book written by a local author that I highly recommend. Chinkee’s book deals with an issue that plagues many Filipinos and yet one that is hardly discussed openly. The author successfully convinces the reader that debt is not a good thing and yet it gives us hope that being truly debt-free is within the reach of the average Pinoy. I like the practical steps in finding a solution to the debt trap written specifically for the Pinoy psyche. Chinkee has written many best-selling books but Till Debt Do Us Part remains to be my favorite.

There are so many other good books and reading them is definitely a good idea. Just make sure that you are objective in reading the book and it does help to check the authenticity of the author. Many are led astray by what they read so I want to reiterate this concern. Notwithstanding the many “bad” finance books out there (local and foreign), I implore the Pinoys to get a book on personal finance and read. One good idea can change your future and redirect you to the path to financial peace.

I am in the process of writing a book myself but recommending it here will be self-serving so let me just stick to the six I mentioned. Financial wisdom will be yours if you seek it. Hope this helps.

Appears in Philippine Daily Inquirer

As I find update myself with the world economic events, it makes me think I am in some bizarre new world order. Time was we only concentrate on the economic impact of the warring Middle East but it seems that the four corners of the globe have been sucked up by some economic tornado. In the western hemisphere, the U.S. in a lopsided battle against a sluggish economy still reeling from the devastating effects of the sub-prime crisis.

It appears that the astonishing amount of bailouts has not done much for the world’s largest economy and there has been political pressure on the Obama government. The Wall Street protests are an indication of the sentiment of many Americans and their nation is polarized.

Macroeconomic indices has not been rosy for the American front either – lackluster economic growth plus high unemployment rate is a recipe for economic disaster. On the European front, Portugal, Italy, Ireland, Greece, and Spain with their debt scares continues to give a lot of people sleepless nights (most of them bankers). Changes in political leadership in Greece and Italy might turn the tides to their favor but that remains to be seen.

Watching the developments in that region is akin to watching our “telenovelas” – lots of action, cliff hangers and more so, drama. Moving to the Far East – one the world’s largest economy, Japan, can’t seem to wake up from economic slumber. The once mighty Japanese economic empire is slowly losing preeminence with virtually no economic growth for many years and the recent devastating earth quakes puts a heavy toll on an already burdened economy.

Pockets of economic upheavals also erupted in many areas … the ongoing strife in the Middle East keeps the price of oil up further giving inflationary upward pressure on the world. The ever precarious Israel-Palestine relationship is a time bomb waiting to explode. National disasters are erupting more frequently and cuts across the globe, leaving untold physical and economic damages. China and India are strong economies but one would be foolish to think they will not be affected by the economic slowdown of the Euro-American economy – their biggest market.

What then of the Philippines? How do we fit in this “new normal” or the “new economy”? If first world countries are in a rut, what then for a country like ours? Aren’t we also struggling with a debt issue? Aren’t we also struggling with poor economic growth?

Firstly, let me ease the reader’s concern with our debt issue. The US, Italy, France, Spain, Greece and many others have an extremely high percentage of their debt payments as against their GDP – over 90% and some close to 100%. By comparison, the Philippines debt payment to GDP ratio is only a little over 50%. While we are still at risk in the global economic skirmish, I believe the present situation also opens up a lot of opportunities for us to take advantage of. In the arena of outsourcing, we have a big talent pool of skilled Pinoys who can do the job and do it well at cheaper costs. Our heroes, the Overseas Filipino Workers are ready to take on any job at any given time and in any place. Our banking system remains to be a stable one with good check and balance measures thanks to the Central Bank and surprisingly good legislation. I believe that the whole economic situation created some vacuums and voids a nation like the Philippines can fill, own and thrive at. This is clearly an example of the many advantages of being small, if only we rid ourselves of small mind thinking. In a new economy, one can get lost and forgotten – yet one can find a place to achieve many of her aspirations and goals.

I am generally a positive thinker and not fond of gloom and doom predictions; yet if I am to be objective and if I am to read the writings on the wall, I say that man’s economy is not going anywhere north anytime soon. How do I get to sleep with all these knowledge and understanding? My answer is very simple: I chose to subscribe to God’s economy instead.  Amidst all these, my faith in my creator gives me all the hope and security I need and my personal experiences have validated that I was correct in my subscription. In His presence, I fear no recession, no inflation, no debt crisis, no unemployment – all I experience is peace.

“Trouble and distress have come upon me, but your commands give me delight.”  - Psalm 119:143, NIV.

* Also appears in Moneysense November-December 2011 issue

The 2012 Outlook of Alvin P. Ang

Few weeks into 2012, the fluidity of the global and local markets make it difficult to even give a quarterly outlook on the economy and markets. Nonetheless, there are general trends that we could follow and assess their direction through the year. Let me focus on the 3 critical components of the economy.

First, GDP growth. GDP growth for 2011 will likely fall around the 3.5 and 4.% forecast made by agencies and fellow economists. This expected growth is respectable considering that the economy treaded a difficult global scenario brought about by the political problems in the Middle East, the Eurozone debt problems, the tsunami in Japan, lower exports and our own local political concerns. Growth drivers remain to be the components of the service sectors boosted by demand in the tourism, finance, real estate and the BPOs. For 2012, tourism will be on overdrive with expected external demand for Palawan and the direct flights to Kalibo by regional airlines. This industry’s huge forward and backward linkages will spur hotel and leisure activities, apart from travel. With construction taking time, rentals in tourist destinations will surely be boosted. BPOs also continue to expand albeit selectively in highly trained skilled manpower. The flock to quality of BPOs ensure that the threat of US withdrawal will not significantly affect the country. Meanwhile, the local manufacturing sector continues to consolidate due to the China and fellow ASEAN dominance of the global industry. But the Philippines continue to have competitive advantages in the food, beverage, furniture and paper industries. These will continue in 2012. OFW remittances continue to be resilient despite global challenges. Studies have revealed that it is countercyclical to crisis particularly where the OFWs are located. For 2011, it is expected to have reached US$23Bn growing at about 7%. Although this has slowed down from recent years, in absolute numbers it has breached more than 1/3 of total exports. A growth of 5% in 2012 will surely be achievable. These sectors will continue to lead growth for 2012, especially as the country shakes its weak institutional and capacity image abroad. Foreign Direct Investments (FDI) will likely reconsider the country as the transparency and corruption-cleaning of the government take effect. The improvement in the perception of the country’s capacity is a crucial ingredient in ensuring sustainability of growth in the medium to long-term. The investment of the current government in this direction is a step in the right direction. Thus, 2012 growth will most likely better 2011 to between 5 to 5.5%.

For 2012, two critical indicators remain important challenges. Inflation is under threat from the fluctuating oil prices. The BSP will take a stance to ensure that it oscillates around the 4.5 to 5% band. With the new basket and base year (2006), food share to the CPI basket has declined from 42% to around 37%. Housing and related expenses remain above 20% and transportation increasing to close to 10%. Managing inflation will entail ensuring adequate food supply chain and stability of oil prices. The focused manufacturing and services sectors do not have enough demand for funds and the ease of raising funds through the bond markets by the conglomerates will continue the low interest rate regime for 2012. This is coupled by the government’s good cash position as shown by the average 91 T-Bill rate of less than 3% – the lowest in decades. Foreign exchange, on the other hand, will likely hover around 43.50 to 44 as the supply of OFWs temper the rising demand of imports for raw materials and capital expansion. The global uncertainty will continue to make precious metals a safe haven for long term liquidity. Gold reached all time highs in 2011 and will likely attempt it again this year.

Lastly, unemployment continues to be the bane in the economy. The limited growth drivers and the large and institutionalized educational system in the country are causing supply choke points. It is critical for the government to ensure sustainable growth to create an environment for long term employment. The recent improvement in the economic freedom ranking gives the hint where to focus. A fast, reliable and standardized business registration system all over the country remains the single most important obstacle for business growth and employment generation. Efforts to making this a reality is underway in different fronts. a fully operational public-private partnership coupled with renewed vigor of government expenditures will be great signs for this year. A special focus on disaster preparedness and management is also a crucial government activity. Overall, 2012 is a breakout year for the economy – rebuilding the base and renewing confidence in both local and international investment are taking roots for a better medium to long term outlook.

Alvin P. Ang has more than 20 years of professional experience in both public and private sectors.  He started his Economist experience with the National Economic and Development Authority (NEDA) of the Philippines where he developed his skills in Development Planning, Policy Formulation and Analysis.  He also worked in Investment Research and Economic Forecasting with his stints at the Philippine National Bank and All Asia Capital as Chief Corporate Planner and as Economist, respectively.  Within those periods, he has been teaching part-time at the University of Santo Tomas in Manila.  In 1999, he joined the academe as full-time Faculty member after completing his Master in Public Policy at the National University of Singapore as a Scholar of the Singapore Government.  He went on to complete his Ph.D. in Applied Economics at Osaka University in 2006 as a Japanese Government Scholar.  He has published in renowned journals such as the Review of Development Economics, Asia Pacific Social Science Review, among others.  His research fields are in Labor and Development Economics and his research interests include Privatization and Development Finance.  His researches on Remittances and Economic Growth in the Philippines have been widely circulated.  He has also consulted for the World Bank, World Health Organization, the European Union, Asian Development Bank, International Labour Organization and the USAID on policy matters. He recently won the first prize (together with Jeremaiah Opiniano) in the Outstanding Research for Development in the 2011 Global Development Awards (besting 400 entries worldwide)  held in Bogota, Colombia.  He is a lifetime member of the Philippine Economics Society where he currently is Vice President.  He is an advocate of responsible personal finance and has lectured on this topic in many fora.  Presently, he is Director of Research for Culture, Education and Social Issues and a Full Professor of Economics at the University of Santo Tomas and Visitor Professor at the Ateneo School of Government.

Marvin and his wife Rose are also in the forefront of the financial education advocacy. Along with their 3 sons, the Fausto’s are role models on how a family can have financial peace and enjoy a deeper purpose in life.

The 2012 Outlook of Mr. Marvin Fausto

We remain cautiously optimistic for the Philippines in general.

Even with the global economic slowdown, the resilient domestic consumption is being supported by steady OFW remittances and outsourcing revenues. To this, I estimate that the economy could grow anywhere from 4-5% GDP.

The financial sector on the other hand will remain very liquid coupled with stable inflation rates and low interest rates —  ideal for investments that is expected to generate employment and sustain domestic demand. Interest rates are expected to remain stable at around 4-5% while inflation also to remain benign at 3-4%.

As for the stock market, the Philippine stock exchange is expected to trade positively at around the 4,800 level. Last year’s reduced Government spending that caused the GDP slowdown, is slowly picking up and is expected to be the driver for growth for the country as well as the listed companies in the stock exchange this year.

Investments will center on infrastructure, agriculture, tourism, and education. Barring any major economic dislocation for our OFWs in the Middle East, US, and European markets, our domestic economy is expected to remain robust for 2012.

Marvin V. Fausto is the Senior Vice President and Chief Investment Officer of the country’s largest bank, BDO and in charge of the Investments unit managing close to P580B under the BDO Trust Banking Group.

Prior to this, he held the position as head of the Trust Banking Group of Equitable PCI Bank from 2002 to 2007 primarily responsible for its overall business and operations. He also held the position of Vice President and Investments Head at Citytrust Banking Corporation. He started his career as an analyst at the former Far East Bank & Trust Co.

After having served as President and director, Mr. Fausto is currently a Board Adviser to the Trust Officers Association of the Philippines, the umbrella organization of the Trust Industry. He was also the Founding President and current Director of the Fund Managers Association of the Philippines.

Mr. Fausto graduated from the Ateneo de Manila University in 1983 with a Bachelor of Science degree in Management Engineering and took MBA units at the Ateneo de Manila Graduate School.

Mr. Fausto is married to Mary Rose F. Fausto, the author of the insightful book “Raising Pinoy Boys” and has three sons, Martin, Enrique and Anton who are one of the country’s youngest investors.

2012 Outlook of Marvin Germo

The Philippine market has been moving sideways for the past year and based on history the  longer a certain market is sideways the stronger the upward or downward push that would follow.  Amidst the doom and gloom that people are projecting in the financial markets of 2012, my outlook is quite optimistic brought about by:

-The move of the world economies to the emerging markets like the Philippines, as money have been flowing to these markets due to cheaper costs, bigger growth potential  and the murkiness of the European and American markets, have made a stronger case to build businesses in emerging economies.

-More government spending, cleaner transactions, higher approval ratings would certainly boost business confidence in the country which would translate into more jobs and bigger business ventures.

-Robust fundamentals in Philippine based companies which are in expanding industries such mining, energy, and construction will see continued growth this year and thus bring in more jobs and business.

To top all this things, I remain optimistic due to the fact that I know God’s Blessing is in the Philippine and because of that I know that the great days of this nation are still right ahead of us!

Marvin Germo is the General Manager of Ephesians Management Corporation and is a Financial Planner and Advisor who is one of the up and coming personal finance gurus that this generation has ever seen. His Passion and zeal to educate the Filipino people has translated into transformed lives, financially free families and has moved ordinary consumers into investors.

He is an Entrepreneur and Financial Resource Speaker who out of his eager desire to make an impact in this nation has spoken in different spheres of society – corporations, government agencies, churches, schools, clubs, organizations, and numerous public events. His ability to breakdown complicated investment concepts and translate it into something that is simple, basic and understandable has made him one of the most sought after money speakers in the land.

He completed the Registered Financial Planners Institute (RFPI) program, he is a Stock Market Trader & Investor more than four years experience in the Philippine financial industry. He also owns (www.marvingermo.com), a financial planning help site. He graduated from Mapua Institute of Technology with a Bachelor of Science in Electronics & Communications. He has just recently completed the Philippine Stock Exchange Certified Specialist Course in the Ateneo Center for Continuing Education.

2012 Outlook of Henry Joseph Herrera

• 2012: a volatile year for global equities on account of fiscal deficit and debt issues largely in EU and US, slowdown of global economy and its impact on emerging markets, and worsening impact on countries of natural disasters (such as those caused by global warming).

• Spikes in interest rates may be in the menu for countries who are unable to get a handle of their ballooning fiscal deficits and national debts. More country sovereign credit downgrades may be expected.

• Investment opportunities abound where financial threats exists. Focus should be on safety and liquidity of invested assets while the “dark clouds” persist. Reduced weighting on risky assets is the prudent approach at this time. The possibility of much cheaper asset prices sometime in the near future is not unlikely. Returns on fixed income instruments will remain subdued, at best, given the low prevailing rates in the country.

  Mr. Henry Joseph Herrera was the former President and CEO of Sun Life Philippines and a well sought after expert in his field.

  Henry joined Sun Life in 1998 and has held a number of senior positions including EVP & Actuary, VP & Actuary, and SLAMC COO.  He was AVP, Actuarial for the Region in 1998.  Prior to his career at Sun Life, Henry was the President and Director of Philippine Asia Life Assurance Corporation.

  Henry has over 28 years experience in the life insurance industry. He holds an MBA degree major in finance and a B.S. in Statistics, cum laude, from the University of the Philippines. He is also a Fellow and past president of Actuarial Society of the Philippines and a member of the International Actuarial Association.  He is a past president of the Philippine Life Insurance Association.

Here’s the 2012 Outlook of Mr. Joseph James Lago

On PSEi:
Should the Philippine economy post at least a 5.0% GDP growth in the first two quarters of this year, corporate earnings continue to improve, concerns of a domestic real estate sector glut is not a severe as currently anticipated, and the US economy continue on a moderate growth path even if the euro zone enters a recession as a whole, we believe the PSEi could finally hit the 4,800 level in the 2nd half of 2012.The arguments to a resumption of the bullish trend are weighted on the 1st half of the year as valuation and global
economic growth concerns linger. The immediate support of another potential sell-off is the 4,100 level. A triple bottom pattern at 3,705 cannot be discounted in the medium-term.

Peso – US dollar:
The dollar’s appreciation is likely to be sustained in 2012 if the US economy continues on a moderate growth path as anticipated. The other push factor is the euro’s loss of allure as an alternative reserve currency given the still unresolved debt crisis. If the 44.70 level is
surpassed, the peso could depreciate to around 45.50 – 47.00.

On Domestic fixed income yields:
Given that excess liquidity might still be a dominant factor even if this year’s average inflation will be close to 4.0% more or less, we expect negative real returns on the short-term yields to continue despite it gradually rising and seeking a new equilibrium level.
Yields on the longer-tenor instruments might dip further as investors continue to seek more attractive peso yields. As a result, the spread between the average short-term and long-term yields should finally normalize to around 250 – 300 bps for the year, with the yield curve still essentially normal.

Equities portfolio:
Smart foreign portfolio managers began changing their equities strategy in the middle of 4Q last year given the uncertain short to medium-term outlook, and the unusually low fixed income yields. Following the massive sell-off and flight to safety that ended in
September, equities portfolios were realigned to be geared primarily towards dividend capture. This is not an unusual strategy as smart domestic investors already implemented this strategy in the latter part of the 2000 – early 2003 period. Local telco stocks that carry high dividend yields that were unappreciated for about two years
became the darlings in December.

We are essentially underweight equities for the first half of 2012, in line with our overall outlook for the PSEi. Our recommended equityportfolio allocation strategy is that the portfolio be skewed towards issues with a high dividend yield, and at the same time firms that practice a dividend growth model. We believe that value stocks whose leading PER and PBV are at a discount to both the PSEi and regional averages will be good additions to round out the equities portfolio.

We acknowledge that price returns with some stocks will occur and maybe realized even in an uncertain market. But the issues will most certainly be random. Should the domestic economy indeed meet the minimum growth hurdle rate, and the US economy continue on a moderate growth path as aforementioned, the equities portfolio must then be
re-balanced in the 2nd half of the year to capture price returns.

Joseph James Lago is the Head of the PCCI Securities Brokers Corp. He has over 2 decades of experience in the investments industry in various capacities. He is also a professor of the De La Salle University Graduate School teaching in Management and Economics. He is a sought researcher, economist and analysts.

Here’s the 2012 Outlook of Ms. Riza Mantaring

There is a lot of uncertainty attached to 2012.  While prospects appear to
have improved over the past few months from the earlier fears of a double
dip recession in the US or worsening of the European debt crisis, a number
of factors can affect global economic growth — a still bumpy and difficult
resolution to the Euro debt crisis, the struggle to cap large deficits in
other developed countries, political tensions in the Middle East and North
Africa, slower growth and higher inflation in emerging markets, and
political uncertainty as several countries undergo elections.

While 2012 is difficult to predict, we feel the Philippines is in a strong
position to weather the challenging economic and market climate this year.
Interest rates are projected to remain low, which should encourage
investments, while the robust flow of OFW remittances should continue to
support strong private sector consumption.  Increased government spending
is expected to boost economic growth.  Even under the best of circumstances
though, we expect volatility given the challenges in the global front, and
we do not expect equity markets to post outsized returns.  Still, fund
managers who adopt the right trading strategies through the market ups and
downs can produce good returns.  For fixed-income, the outlook for rates
remaining low underpins the outlook for decent returns.

Who is Riza Mantaring?

Ms. Mantaring is currently the President and CEO of one of the country’s preeminent financial services company, Sun Life Financial. Sun Life is a leading provider of life insurance and mutual funds. Riza has been in the financial services industry for over two decades and has been involved in information technology, customer services and operations. She was later named as the COO of Sun Life prior to her appointment of CEO. Under her management, Sun Life continues to improve its market share in the country and introduced many trail blazing enhancements. Sun Life has recently launched a pioneering financial literacy advocacy called “It’s Time” utilizing multiple media which resulted to their winning of many awards, even an international award.

Just how risky is Italy? The worsening debt issue of Italy is scaring a lot of people, particularly financial institutions that owns a lot of Italian debt. Standard & Poors recently downgrades Italy from A+ to A but the downgraded rating still makes Italy’s debt ‘investment grade’. The economy of Italy is in a precarious state and the whole world is now looking closely as to how the Italians will handle their situation with much anxiety. Just recently, a new leader was elected in the Italian parliament, a technocrat who just might change the fate of a country rich in heritage.

The Philippines is considered an emerging market, a politically correct term for ‘third world’. Unfortunately, our country is considered a laggard even amongst Asia and not a favorite destination of foreign investments. Philippine sovereign debt is not a choice investment by many owing to many factors such as bad governance, debt issues, political instability, among others. The leading credit rating agency, Standard & Poors gives this Southeast Asian archipelago a rating of BB, two notches below ‘investment grade’.  The Philippines is one of those countries that send thousands of its workforce to work for Italians.

In investing, yield is always a function of risk – the higher the risks are, the higher the yields should be – at least in theory. Following the credit ratings of S&P and owing to the nature of the economy of Italy and the Philippines, it would be logical that our country is a much riskier one than Italy. If we are riskier than Italy, then it is only logical to assume that investing in Philippine debt should give a much higher yield than Italian sovereigns. That is not the case today. Italian sovereign debts now give a yield of about 7% p.a. (Yield to Maturity or YTM) while Philippine debts (popularly known as ROP) now yields about 3 to 4% p.a. While credit raters, economists and the media say we are a very risky nation, the market has declared otherwise. Price is a function of value – if Italian debt is now cheaper than Philippine debt, I would like to think that the market has made its judgment. Another question in my mind is just how credible and relevant are credit raters today? Raters have been giving the Philippines below investment grade (also referred to as junk) yet we continue to be faithful in the payment of our obligations, no scenario of default and our debt to GDP ratios are twice better than first world nations. Go figure!

When an investment grade country’s sovereign debt gives higher yields (ergo riskier) way above the sovereign debt of a below investment grade country (ergo less riskier) – that is the new normal in a new world order.