How do you do that? It’s simple… buy or investing things that will potentially increase in value in the future or provide some form of income or return — that’s buying an asset. When you buy things that will depreciate in value over time, or even require more money or upkeep — that’s a liability.

Here’s an overly simplistic example. Buying an iPhone 4 on a plan from Globe. I can choose to get a plan wherein I will put out about 10,000 that will require me to fork out about P2,000 on an average plan for voice, texts and data — or I can use that money to buy stocks from Globe (or PLDT) and keep on buying more shares every month which will also make me practice peso cost averaging. If you opt to have your iPhone and the plan that comes with it, here is your scenario: after the customary 2 year lock period, you would have spent about P50,000 on your bills plus the P10,000 handset cost, a total of P60,000.00. Should you decide to sell your iPhone at Green Hills after 2 years, you might get P6,000 to P8,000 still. Not bad you say?

Here’s the other scenario had you chosen to invest the money instead in buying Globe (or PLDT) stocks. Let’s assume that in the 2 year period, the total value of the stocks increases by an average of 1% per month  through stock price growth & dividends (it can actually grow much more). Here’s how it may look out:

Well, I can’t argue the fact that you may also loose some capital investing in Globe (or PLDT) stocks in a period of 2 years but I’m pretty sure you won’t wipe out your whole investments as the said companies are blue chip stocks, profitable & provides good dividends. In anyway you look it I would think that you’d have more money in investments as against spending it on a liability. You can chose to be a customer of Globe (or PLDT) or an owner of Globe (or PLDT).

Question

Answer: Dennis, your question is one that you can call a ‘loaded’ question, so to speak (pun intended). Let me try to simplify my answers because the way most people explain it can cause many a nosebleed, me included. In economic terms, interest rates are largely a function of the government’s monetary policy with the central bank as its chief implementor. The government, through the central bank, tries to influence the economy by manipulating interest rates according to the direction of its economic managers. When the government wants money to circulate in the economy, it tries to keep interest rates low with the belief that money will be spent and invested in businesses that drive economic growth. When interest rates are low, people are discouraged from keeping their money with the government, which is the safest and largest borrower through the sale of government securities (debt instruments).

When the government wants to control the cash circulating in the economy, it increases interest rates and you can expect the market to start putting more money in government debt paper because of its low risk. The interest of government securities, also called treasuries (bills, notes and bonds), is also the basis…

To read full column, visit http://business.inquirer.net/7863/why-are-interest-rates-so-low

I saw a tweet from my good friend Susan Ople of the Blas F. Ople Policy Center where she stated statistics on OFW remittances that blew my mind away. She stated that in 1975, the remittances amounted to US$ 103 Million. Today, remittances are now up to US$ 2 Billion a month!

Unfortunately, I need to state some facts that continues to disturb me and should disturb every other Filipino. A recent study conducted to determine the financial quotient of Filipinos revealed that only 1 out of 10 Filipinos prepare for retirement. NEDA numbers placed the average savings rate of the Philippines at 16% as compared to Indonesia, Malaysia, Thailand, Hong Kong and our other neighbors well above 30%. Less than 50% of Filipinos actually own their home, and that includes those whose homes are mortgaged. Less than 0.5% of Filipinos invest in the Stock Market. Less than 15% of Filipinos (family heads) own Life Insurance. Investments in pooled funds (Mutual Funds, UITFs, Variable Life) remains to be amazingly low.

With the huge amount of remittances being sent to the country in the last 30 years, one would assume that Filipinos today would have more money and a vast majority of our population would have a secured financial future. With the facts I wrote, it seems that money being sent home plus the money being generated at the home front does not end up being put to good work by saving and investing it. Our capital markets continues to be underdeveloped despite the nation having excess liquidity. If money is not being invested for the future, then one can logically assumed that almost all the money now is being used for consumption. The level of consumption of the country has reached an alarming rate juxtaposed with dismal savings rates being experienced.

Why is this so? I dare say that despite an increase in income, us Filipinos have yet to fully develop our zest for financial education. Financial literacy is a political, cultural and social issue — one that must be given preferential attention by every Filipino. If not, all the growth in remittances coupled by improvement in local income will be for naught if one will not have a secured future.

Despite the daunting task, I and a number of passionate people will continue to advocate financial education despite the odds even if it take one Filipino at a time. I pray that more and more will heed the call to do our part in bringing about a big change in our attitudes about money and heed the path towards Financial Peace.

By Randell Tiongson

Philippine Daily Inquirer
First Posted 21:29:00 05/03/2011

Filed Under: Investments, Personal Finance, House-Buying – Selling, Real Estate

QUESTION: Is a condo unit a good investment?—Mia Eugenio Marinez via Facebook

Answer: It depends. If you ask real estate brokers, they will tell you that investing in condominium units is the greatest thing since sliced bread. However, many investment experts seem unimpressed with returns from condominium investments and for a good reason.

The bigger question to ask is why are you consideringpurchasing a condominium unit? Is your purpose purely for capital gain or do you intend to live in that condo? I always say that when we select our investment options, we need to take a closer look at our investment objective, risk tolerance and time frame.

In this case, are you already certain as to the three I mentioned?

Assuming that you…

Read full column at http://newsinfo.inquirer.net/breakingnews/nation/view/20110503-334406/Is-investing-in-a-condo-unit-a-good-idea

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As I write this column, the official exchange rate is Php 43.45 : US$ 1. A lot of people are really anxious as to the direction of the once mighty global currency standard. If my memory serves me right, I believe the US Dollar peaked at about PhP 55 : US$1 not too long ago. At a certain point period of time, the annual average depreciation of the Philippine Peso against the U.S. Dollar was pegged at about 7 to 8% per year. About 5 years or so, many Filipinos were still converting their money into US Dollars in an attempt to secure the value of their monies and even experience capital growth.

From its peak, the once mighty green bucks have significantly loss a lot of its value as against many currencies, including our once feeble Philippine Peso – by as much as one fourth, or 25%. If you consider inflation, the impact of the appreciation of the Philippine Peso has greatly eroded one’s portfolio had it been primarily invested in US Dollars.

The big question is, what should you do with US Dollars? If you have them, do you sell them? If you don’t have, do you buy? That’s a tough question to answer. Fortunately, there are some great insights posted at my website (www.randelltiongson.com) when I asked the readers of my blog on the options for the US Dollar. Here are some tidbits:

It depends on your objective. If you plan to retire in the US, then you should start accumulating at these “cheap” levels. If you plan on staying here, why bother with FX volatility. I wouldn’t buy it right now as a means of investment or speculation of it appreciating again (I already got out while it was Ps47). – Rich (unknown respondent)

“I find myself buying more of this currency now for travel funds. My thought is we can’t rule out the dollar just yet after all its still an international currency. But is it a wise investment on my part?” – Roy A. (Printing Business)

“If you have lots of it then keep it. No use selling it now since it already lost 10% of its value. Buy more dollars next year. Eventually it will go up once peso starts going down. Just be sure you are diversified. Just my opinion. (P.S. buti konti lang dollars ko! haha)” – Raymond (Hardware Business)

“Dump my USD before the year ends as the seasonal spikes in the Peso occurs. Then, when it starts to weaken, accumulate again.” – Raffy Pekson II (Corporate Executive)

“I think the dollar will never recover if quantitative easing in the U.S. will continue. With this scenario, I’d rather sell my dollars as soon as I get them. And split it into gold and peso. If a double dip recession comes true, the dollar will further lose value. Gold will appreciate and I would have the option to repurchase dollars with pesos to invest in good US blue chips like Google and Apple in anticipation of the eventual recovery from double dip recession.” Hilbert Cardenas (OFW)

“What to do with dollars? Well, I just burn them. They take up too much space.” Rafael Azanza (Management Professor)

There you go. Such varied suggestions but there are so much insight into such advices. There are a couple more comments in the said blog entry (http://www.randelltiongson.com/what-to-do-with-your-us-dollars/) and all are interesting to read.

The conclusion? Well, you really must consider the purpose of your investment first and foremost, your time frame for the investment as well as your risk tolerance. US Dollar, like any other investment, is an asset class. All asset classes have their purpose and particular contribution to any diversified portfolio. Remember, always practice prudence in anything – investing or otherwise.

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What to Do With P 100,000: Three Goals to Fulfill Before Investing

If you had P 100,000, what would be the best way to invest it—assuming you have an emergency fund for crisis situations and no debt? How do you ensure your financial well-being?

“You must determine your investment objective,” says Personal Finance coach, Randell Tiongson. “What is your time frame? What is your tolerance for risk? These are some of the questions you have to ask yourself.”

What you do will depend on whether you see yourself as a low-, moderate-, or high-risk investor.  ”Whatever your goals are, you have to become a no-nonsense investor.

If you are not too keen on risks such as loss of capital, (in other words, you are a low-risk investor) you could look into time deposits, special deposit accounts, treasury bills, or mutual funds/ Unit Investment Trust Funds (UITFs) that are invested in fixed income securities or bonds.” These investments, Tiongson says, are low-yield investments but they are highly recommended for those who want to play it safe.

For moderate-risk investors, he has this advice: “You can look at mutual funds/ UITFs that have both bonds and stocks in the fund, popularly referred to as ‘Balance Funds’.”

For high-risk investors, Tiongson recommends investments that have higher yields— the stock market or going into business.

It is good to set short-term and long-term goals, says Tiongson. He suggests three financial goals you can set for yourself for 2011. Your first goal, he says, is to aim to have a positive cash flow. “Balance the budget and ensure there is a surplus. Everything starts from here. In simple terms, that means you must earn more money or spend less money. It’s actually best if you do both.”

Secondly, you should set savings goals. Foremost, aim to set up an emergency fund equivalent to at least three months’ worth of monthly expenses. Once this has been set up, set savings goals for your short-, medium-, and long- term needs.  Dedicate yourself to generating the amounts you have set as your savings goal.

Your third goal should be to start building your capability to invest. Tiongson suggests that after an emergency fund has been set aside, one should create a separate investment fund, set up solely for the purpose of investing. “Build on it peso by peso. Wait for good investment opportunities.”

Once you have set your financial goals, you may feel that you do not have the resources or the sufficient know-how to achieve those goals. Tiongson outlines specific steps that you can take to ensure your financial well-being. “Budget well,” he says. “Itemize all your expenses and arrange them according to priority. Knowing what you need to spend on helps your budgeting process. Adjust your budget accordingly to ensure you will have a surplus. Be prepared to cut on spending for your wants (as opposed to spending on your needs).”

Finally, Tiongson says that you should also make sure you pay close attention to building your skills, whatever the job or position you hold. “Education is an investment. Build on your competence. In fact, education could be what sets you on the road to earning more money.”

Tiongson wrote “The Twelve Easy Steps to Financial Wellness” as an add-on to the UCC Vision Logbook, available at UCC Coffee Concept stores. Building on the theme “Positive Change and Planning for Change,” the UCC Vision Logbook aims to deliver to loyal UCC customers a blend of motivational and practical information to bring about positive change.

The UCC Vision Logbook was put together by Tiongson, visionary restaurateur and UCC owner Hubert Young, motivational speaker Francis Kong, mind mapping expert Raju Mandhyan, and entrepreneurship advocate, Jay Bernardo, for Let’s Go Foundation.

UCC customers can avail themselves of the basic vision logbook by presenting an accumulated P5,000 in UCC Coffee Concept Store receipts. A customer may claim the logbook by presenting receipts issued within the promo period (December 15, 2010, to February 28, 2011). More add-on modules designed by the Beacons of Change are also available for every P 1,500 single minimum receipt purchase at UCC Coffee Concept Stores within the promo period.

Getting into an investment program that will give you growth which is way below inflation rates (even at its lowest levels) over a long period of time was bereft of any sound reasoning. I was curious as to why he often proposed such a strategy and I was baffled by his response. He said the US dollar has historically performed well against the peso and showed me a chart that the average depreciation of the peso was about 8 percent per year. He then said  the 2-percent growth added to the 8-percent depreciation of the peso will result to an effective annual return of 10 percent over a period of 15 years.

Arguably, the explanation of the adviser will seem to be a compelling one to many. His mathematics being a bit off tangent notwithstanding, I politely queried about the possibility of the pesos depreciating slower than 8 percent and even a probability that the peso may actually appreciate against the mighty US dollar in a span of 15 years. He confidently replied that such a scenario will never happen, citing history and an obvious over-confidence on the US and a discontent for the Philippines.

With a bruised nationalistic pride, I could have carried on the discussion pointing at a closer review of historical data (a longer span of the parity rates will result to a lower depreciation rate), macroeconomic factors, geo-political considerations and fundamental analysis and so on; but it was not my place to argue my position. I just gave the adviser a personal advice to consider diversification in his recommendations and to think about other factors prior to making a pitch to his potential clients. Even at the time of the said discussion (The US dollar was still soaring), the argument of the advisor was full of folly, the most dominant of which is the consideration of risk factors.

Today, those who listened to the said adviser are now trying to accept the bad decision they have made. Clearly, they have lost a significant amount in the value of their hard-earned monies. Whilst I do understand that one can’t predict the future, economic or otherwise, sound financial principles such as diversification and asset allocation would minimize substantial erosion of one’s savings and investment. A good adviser would have considered many things prior to making recommendations and he must always stick to prudence before anything else.

Be careful before listening to any advice. It is not too difficult to discern competence if we listen intently.

“Whoever strays from the path of prudence comes to rest in the company of the dead.”­ —Proverbs 21:16, NIV

As I was listening to the radio a few days ago, I heard a DJ give an advice and she referred to it as “retail therapy.” She said that one way she deals with a “bad day” was to go shopping. Even if she does not need anything, she will set out to buy something regardless of worth, and such an activity will help her through the day. I have tried to find some semblance of any logic on the advice but I was dumbfounded and could not find any. I shrugged in antipathy because the advice was so, well… bad.

I have always expressed that we should seek counsel especially in matters of finances. Many of our woes are brought about by our innocence and many times by our ignorance on financial issues. Seeking counsel then is not only prudent; it is the wise thing to do. However, wisdom reiterates that we must also seek sound advice and always avoid bad advice. There are many who claim to be financial advisors and some will even carry such a designation and yet not all of them will give sound advice and may actually give horrible advice.

Many years ago, I once had a lengthy discussion with a financial adviser who always recommends US-dollar investments for his potential clients. I engaged the advisor further when I realized that the investment program he was recommending carried quite a low yield. I believe it was like a measly 2 percent p.a. compounded over a period of 15 years.

… to be continued.

Features Chinkee Tan, Cito Beltran, Paulo Tibig, Randell Tiongson & Miriam Quiambao.

January 29, 2011 at Megatrade Hall, SM Megamall.

For inquiries, get in touch with Jen Magalong at jcignacio.magalong@gmail.com or 0939-1177856

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Ireland is facing debt issues as dollar is falling against euro, yen and Swiss franc. The debt crises in Ireland is not showing any improvements and there is rising alarm as whether or not Ireland will be able to provide large funds for a government bailout. If Ireland accepts a bailout to rescue indebted banks, the economy of USA. Take a look at how the debt crises in Ireland will affect the economy of USA.