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I received a very interesting and timely text message from a very good friend, one who I really look up to. He gives me wise counsel, particularly in the arena of investments.

The message goes like this: “In market crashes and recessions, heed the H-I-T advice which stands for ‘Hang In There.’ During the ‘Height of Pessimism,’ there’s always H-o-Pe.”

That advice is so wise especially in these times of financial anxiety.

There is a lot of talk recently that people would rather keep their money in cold cash and sale of vaults has dramatically surged in the US.

While I agree that we should keep a portion of our money in cash, having everything in disposable cash is very unwise. Why? Well, crisis or not, we always have to contend with the fact that inflation will always erode our money. Keeping your money out of investments may help you feel secure but, in the long run, it would do more damage toward achieving your financial goals.

The antidote to crisis is opportunity. In times like these, we see investment and business-savvy people really jump in and look around for opportunities. When things are on “Sale,” we tend to buy things—that we normally wouldn’t—because it suddenly becomes cheaper. Many of us are guilty of such practice.

We can use the same mindset in investing, particularly in the stock market today. If you look at the prices in the stock market today, you will see many of stocks priced really low, some even below its book value. I’m not referring to speculative stocks here but to the tried and tested blue-chip stocks that are fundamentally strong and highly profitable.

There are many stocks that are on their 52-week low or very near it, like Ayala Corp., BPI, Banco de Oro, SM, Globe, Metro Bank and even the favorite PLDT. If you have money to invest and you are willing to invest it over a long period, say five years, then investing in the stock market may be a great idea.

Of course, you must always consider your risk tolerance—if you can’t tolerate volatility, the stock market is not for you regardless of the buying opportunity today.

Keeping calm in these times is crucial; be steadfast and avoid the stress brought about by panic. The best form of risk management is not keeping your money in vaults; it is diversification.

What determines the performance of your investments isn’t so much about selection and timing. It’s allocation. While it is always a great idea to be prudent with our investments, we must also understand that things operate on cycles—there are good days and there are bad days.

You can bet that people like Warren Buffet and Henry Sy and his family are not keeping their money in cold cash. They are busy looking at many opportunities—and that’s the reason they are, well, rich.

Let’s take the case of Henry Sy’s family. Economic activity does not deter them from being bullish in their investments. Even when the gross national product is really low, SM opens malls. Why? Well, for starters, things are cheaper when the economy is slow, particularly real estate. They don’t look at economic statistics, they look at golden opportunities.

Remain calm and focus toward the end goal: your investment objective. Here’s some great advice from the world’s richest man, Warren Buffet: turn off the stock market; buy a business and not a stock, you don’t sell your business immediately when times get rough, right?; don’t worry about the economy, buy companies that profit regardless of the economy; manage a portfolio of business; diversify.

Such wise counsel in times like these. No wonder he is that rich!

For those who are feeling the anxiety of the looming crisis, be still. Be comforted by the fact that we are in a cycle, it is down today but it will be up tomorrow (hopefully).

I find comfort by consulting the best business, investment and practical-living book of all time. A book that is not just timely, it is timeless —the Bible. Romans 12:12 (NIV) says: “Be joyful in hope, patient in affliction, faithful in prayer.” God’s words really help bring clarity to our hearts and minds.

By Celine Salazar

I have been an avid follower of Randell Tiongson’s blog on finance-related matters for a long time now.  I love the way he writes as he makes financial concepts that may cause nosebleed for some seem very easy to understand.  I also like the way he puts a biblical perspective in sharing ideas to his readers.  I once chanced upon his blog entry regarding the third run of The No Nonsense Seminar on Finance: How to Invest in the Future, marked it in my calendar and totally forgot about it.  A few days before the event, I got a message from a friend who asked me if I wanted to attend a seminar.  This meant that I would spend half a day less with my kids, but when I found out that it was THIS seminar, I just had to say – I was going to meet Randell Tiongson himself!

The seminar was held last July 10 at 1:30 pm, at the Victory Center Greenhills.  I made sure that I wouldn’t be late, so I was there before 1:00pm. It ….

Read the review at http://thepoc.net/thepoc-features/mukhang-pera/mukhang-pera-opinions/8842-a-review-of-the-no-nonsense-seminar-on-finance.html

God bless.

Back by popular request, I’ll be running No Nonsense Seminar on Finance: How to Invest for the Future. This is the program that teaches people on the rudiments of investments and investing.

Just how does investments work? What are the differences between investment products? How does one start with investment planning? The answer? Attend this seminar… it’s a very good investment, guaranteed.

So what is happening to the stock market? People have discounted the market as a place to invest money into partly because of the recent world-wide financial turmoil, but largely because of financial ignorance. Here’s what you miss… in the last 12 months, our local stock market index or the Phisix has steadily been increasing. A year ago, the index was at about 2200 points. As of yesterday, the market is hovering at about 3200 points. Simply put, had you invested P 1,000.00 in May 2009, your money would have grown to about P1,500 today – a whopping 50% annual rate of return.

Our local market has been performing positively and to the few who took a risk of investing a year ago, they are smiling today. I know of a lot of people who purposely stayed away from the market because they say that during an election year, one should stay off investing.  I don’t why we torture ourselves of doom and gloom scenarios every time we elect our leaders anyway. For those who were paralyzed with our periodic doom and gloom fantasies, you missed making your portfolio grow by a enormous 50% return!

Does this mean that you should go and empty your bank and head on to your stock broker? Wooah! Hold your horses. The stock market, though it gave a very good performance in the last 12 months, is still not for everyone. One should go through a process before making any investments regardless if it’s buying stocks, bonds, mutual funds, uitf, real estate or any other form of investment. Remember to be clear about a few things first: your investment objective, your risk tolerance, your time frame and your risk tolerance.  If investing in the stock market will help you achieve your financial goal, you can take the volatility of market, you are willing to leave your money for a while and you have rudimentary understanding of how the stock market works – then go! However, if you will lose a lot of sleep (and sanity) whenever the stock market moves south, don’t go there even if you can see surges in the market like 50% in a year.  Remember, an investment that can give you a 50% hike in a year can also make you lose as much in the same period. Returns will always be determined by the risks you take – always has, always will! I can’t believe there are still detestable beings preying on the innocent (or the ignorant) making them believe that what they offer is high yield but low risk. Whenever someone offers you an investment that will make your money grow with very minimal risk, he is either misrepresenting or he is scamming you.

Will the market continue on an upward trend like the last 12 months? I have no idea. All I know is that what goes up must come down at some point. However, if you are willing to be patient and will not mind the gyration of the Phisix, then go ahead and allocate part of your money but always be prudent and sensible. Do not put all your eggs in one basket and diversify. If you are not comfortable with letting go of your money, always remember that the money you do not invest will be safe but it does not mean that it will not lose value. Inflation is constant and an invisible risk we are all exposed to. Here’s a very sensible tip that I got from my good friend Efren Cruz: “Invest early, invest wisely and invest regularly”.

“After a long time the master of those servants returned and settled accounts with them.  The man who had received the five talents brought the other five. ‘Master,’ he said, ‘you entrusted me with five talents. See, I have gained five more.’”His master replied, ‘Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness!’”

-– Matthew 29:19-21, NIV

Louis and I have regular chats, over coffee or over the keyboard – in our latest chat, he was complaining about how difficult his exams are … stochastic matrices, markov chain, fractals, modern portfolio theory, CAPM, APT… etc. I told Louis a few things I know about his subjects; for instance, I said “modern portfolio theory is a theory of investment which tries to maximize return and minimize risk by carefully choosing different assets; or in other words, the concept of diversification in a mathematical formula.” Nose bleed alert!

After a few more nose bleed discussions, I told Louis… “wanna know a secret?” All those stuff doesn’t really work in today’s environment! Those investment theories will require very high IQs but will not mean squat in the real market. Theories assume that people’s behaviors are rational … the more you study the market’s history, the more you realize that rational behavior is always missing in the market. The more you try to understand what’s going on, the more you see things are fundamental… the more things go back to the basics like supply and demand. The market is a representation of people’s sentiments – and people’s sentiments are either overly optimistic or disastrously pessimistic.

So will I advise Louis to quit school? Never. Louis will need to learn all the nose bleed stuff for him to have a more intelligent view of things that are fundamental in nature. If you’re reading this Louis, go hit the books!

You often hear the word “diversification” when investments are discussed. Diversification is important; in fact, it is considered one of the most effective risk-management tools, minimizing investment losses.

What does Investopedia (a favorite online site for investment stuff) say about diversification?

“A risk-management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.

“Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.”

Diversification is often misunderstood and its execution has always been a mystery to many. To many of us, diversification is just putting your money in different banks or buying different pieces of property in different areas. However, diversification is much more than that and here are some ways to diversify:

1)                  By asset class—Cash or near cash (savings or checking accounts, time deposits, treasury bills or money market accounts); fixed income (government securities, corporate bonds); equities (stocks); real estate; collectibles (paintings, jewelry, etc.); enterprise (business)

2)                  By time frame—short term (about a year); medium term (up to about five to seven years); long term (over seven years)

3)                  By risk—conservative, moderate, high or speculative

4)                  By liquidity—highly liquid vs. nonliquid

Above are just a few ways to consider classifying your assets/investments regarding diversification. Here are some diversification tips: vary your asset classes; combine short-, medium- and long-term investments; combine highly liquid and nonliquid assets.

By practicing diversification, you are also practicing sound risk management. A properly constructed diversification strategy will minimize the risks of your investments and, at the same time, give you better yields as compared with taking an ultra-conservative position. With a good diversified portfolio, the risk of totally wiping out your wealth is highly unlikely, but at the same time, allow you to experience better growth which will be more than inflation.

But diversification also has its downside. Sometimes, a portfolio that is too diversified can also prevent you from earning properly, as the volatility of many of the players in your portfolio can cancel each other. However, having a very risk-averse position can be just as dangerous as taking a risky option, as inflation can erode the value of your wealth. The more prudent option then would be to learn diversification.

Do not be too afraid to try out diversification, it is not rocket science. Come up with a diversified program that is consistent with your investment objective, risk tolerance and time frame and you are on the road to achieving financial peace.

I really like the way the Bible talks about diversification. Yes, the Bible is a good source of investment wisdom and here’s proof: “But divide your investments among many places, for you do not know what risks might lie ahead.”—Ecclesiastes 11:2 (New Living Translation)

Since the Bible advocates diversification, I am assured that it’s a great idea.

As financial planners, are we getting our message across? Are Pinoys any closer to financial freedom? I am elated to see more and more financial planners, more books and articles and a gazillion blogs on personal finance. I’ve seen, heard, read a lot about personal finance of late—some are great messages; while others are really rubbish, but at least the message to do something about one’s personal finance is being mentioned. Let me repeat my earlier question, are we getting our message across? From my perspective, it seems that whatever we are doing is a mere drop in the bucket, and my colleagues in this field need to realize that we are not as effective as we believe we are (apologies to bruising the egos of my colleagues).

There’s definitely nothing wrong with what we are advocating, and our message is extremely relevant. I believe that there is something wrong with the manner we convey our message. To the real world out there, we sound like condescending self-righteous bigots telling everyone they are wrong and we are right. Have you heard personal-finance speakers? They will tell you not to drink Starbucks coffee and stick to 3-in-1 or not to buy a flat TV or a new car. They will tell you that gratification is evil and will burn you. Let me use an analogy here: It’s like hearing a preacher tell you that ogling a beautiful woman will cost you eternal damnation. Yes, they are probably right, but they may not look at things from the right perspective. It’s not just about the message, it’s also about the delivery of the message.

I think it’s about time people like us realize that folks have dreams and they must enjoy these while they can. Dreams do have a deadline, as my mentor aptly phrased it. Are you going to have that dream family house when all your children are grown up and have moved out of the house? Will you buy that nice flat TV when your eyesight has become so weak? Our life has a timeline and we must act according to the set time we have. I like how the Bible puts it—“Man’s days are determined; you have decreed the number of his months and have set limits he cannot exceed” (Job 14:5, NIV). Knowing what we want in life is critical and the way we live should be reflective of our goals. It’s not all about accumulation of wealth that we should be concerned about but also the purpose for accumulating wealth.

It’s about time we really know what our dreams are and that our “dreams have deadlines”; it’s about time we know the purpose of our dreams. Oh, it’s also about time for financial planners to change the way they sing their song.

“The man who plants and the man who waters have one purpose, and each will be rewarded according to his own labor” (1 Corinthians 3:8).

INDEX  3,000 in November. The index finally got over the hump, breaking the 3,000 index level last November 11.

Bitten by the Gold bugs. Rising gold prices was a also a positive catalyst as it reached $1,174/ ozt in November, helping PX reach P20/ share

Outperformers. Universal Robina Corp (URC up 20%) which is finally catching up with its book value of P15.50/ share.

Ayala Land (ALI up 20%) also attracted foreign buying after 3Q09 results showed recovery in residential revenues (which accounts for 42% of Operating Income).

Underperformers. Laggards for the month were Megaworld Corp (MEG dn 4%) and Energy Development Corp (EDC fell 3.6%).

Strategy. Global equities suffered a setback from Dubai World’s request for a “standstill” on debts worth $60 bn.

ADVICE: Better be waiting in the sidelines than brave a potential storm brewing.

Financial planners are not known for extravagance and flamboyance—in fact, people have always looked at us as misers. Financial planners are very prudent people; they are not the kind that will spend money on a whim and will really take a lot of time trying to ascertain needs from wants.

My friend Rex was very much a financial planner in all sense, highly knowledgeable in the aspect of personal finance and one who really practices what he preaches. However, the Rex I was having lunch with seemed to be a different person, a changed man singing a different tune. What happened to my old mentor? Has he gone to the dark side? I was trying to figure out who I was having lunch with. Years ago, this was the guy who was telling me that every peso counts, that Starbucks coffee was evil (because of the cost) and that investing was the only activity we should engage in…get the drift? The “new” guy I was having lunch with was talking about expensive LED lighting, koi pond and exquisite veneers for his house renovation, playing golf every weekend, traveling all over…and I almost choked on what I was eating when he mentioned driving a Porsche. That’s it, I am certain that my old mentor and friend has been possessed, cloned or just plain, well, lost his marbles. I was just about to gag this guy to ask him what he did with my friend when he uttered something that pretty much left me speechless for a few moments: “Randell, after all these years, I finally realized that ‘dreams have deadlines.’” Er, what—say that again?

My lunch encounter with a former mentor got me into thinking, and the words “dreams have deadlines” seemed to me like experiencing LSS (last-song syndrome). Financial planners have been preaching about living a life of extremes while the real world has a totally different view with regard to the use of money. Filipinos and financial stability are two words you don’t normally see in one sentence. Just look around you—how many of your acquaintances do you know need a spanking with the way they handle their finances? Our country remains to have the lowest savings rate even in Asia, yet we see a steady increase in consumer debt among our population—a definite recipe for disaster. The solution: financial literacy. If our brothers and sisters become financially literate and have a better mindset with regard to the way they use their money, we would definitely see a lot more happier people. The solution is simple—or is it?

… catch part 2!