Question: Hi Randell! Good morning! After browsing the net for Filipino personal finance tips, I learned about you. And after reading your articles, I’m very much driven to start investing. I’m already in my 30s and wishing I started earlier. But I can’t dwell on that anymore, so I’m ready to start now. As you keep saying, “the best time to invest was Tuesday, the next best time to invest is today.” With that, I know I should start investing, but where? With the multiple investments available, I don’t know where to start. It’d be great if you could help me on this. Thank you very much and God bless! — Carlo via Facebook

Answer: Hi Carlo! Thank you for messaging me. I’m sharing your query here in my website because I’m sure many Filipinos can relate to your situation. Many hold off saving for retirement because of the mentality that there are still many years left to save, but as you learned, the best time to invest was yesterday, and the next best time is now. Don’t wait until you’re nearing retirement because investments are meant to be long-term. With that in mind, now we know that we should go for investment vehicles that are more for the long term. So what are these investments?

Property

Real estate is probably the favorite investment of Filipinos. While less than 5 percent of the Philippine population invests in stocks, bonds, and mutual funds, 7 in 10 Filipinos own or co-own their homes, according to the Bangko Sentral ng Pilipinas’ (BSP) Consumer Finance Survey.

Real estate is an advisable investment for retirement because the value of property appreciates through the years. Real estate property isn’t like a time deposit which gives you interest after a year (or less). You won’t make much by selling your property just after 6 or 12 months.

Stocks

Another investment vehicle is stock investing. Stocks are advisable for the long-term because they are risky. This means that the prices of stocks go up and down over a set time period, and you can lose money. One way to decrease your risk and avoid losses is to hold your stocks for the long-term, which makes stocks perfect for retirement. I recommend people to keep their stocks for a minimum of 10 years.

Seeing as you are in your 30s, you have about another 25 more years before you reach retirement age. That’s 20 years more than my suggested 10 years to spread your risk.

Pooled funds

I purposely put ‘pooled funds’ after ‘stocks’ because they are closely related. If you want to buy stocks of SM, Ayala, or Jollibee, you would have to buy them individually through a stock broker or your online trading platform. With pooled funds, be it a mutual fund or a UITF, you get a group of stocks in one basket or fund. The pooled fund can have SM, Ayala, and Jollibee stocks, depending which equities the fund manager buys. The fund manager does the investing for you. He picks what stocks go into the pooled fund; all you have to do is make an investment deposit and keep track of your investments once or twice a year. It’s also important to know that there are different kinds of pooled funds, there are funds consisted entirely of stocks, others of bonds, while some funds offer a combination of different securities. For the purpose of retirement, and since you have about 25 years until retirement, a stock or equity-based pooled fund is best for a retirement which is still far away.

VUL

Variable Universal Life Insurance or VUL is a life insurance product that has an investment component similar to a mutual fund or UITF. It is similar to a pooled fund except that it has an insurance component for protection purposes. If you need to build investment values AND you need to benefit of life insurance, this is a convenient instrument for you. However, if you already have enough insurance coverage and you need pure investments only, consider other investments instead.

Cryptocurrency

Some cryptocurrencies particularly the ones with large capitalization like Bitcoin, Etherium, Cardano, etc. can give you potentially very good capital growth that can come in very handy when you retire. However, since these investments are extremely volatile are relatively new instruments, cryptos are not for everyone. If you understand how crypto works and you have a very high appetite for risks, you may consider adding them to your portfolio. Even if you claim to have very high risk tolerance and you understand how cryptos work, I would recommend you limit your exposure to them to about 10 to 15% only to be prudent.

With these investments to choose from, you have a clearer idea of where to put your money for retirement. Now the only thing that’s left is to talk to a real estate broker (for property) head to the bank (for UITF pooled funds), a brokerage firm (for stocks and mutual funds), a financial advisor (for VUL) or open a crypto trading account on-line to fill out your application and open an investment account.

Just remember that there is no such thing as a perfect investment so it is best to diversify.

“Go to the ant, O sluggard; consider her ways, and be wise. Without having any chief, officer, or ruler, she prepares her bread in summer and gathers her food in harvest.” – Proverbs 6:6-8 ESV

Did you know that less than 10% of Filipinos prepare for retirement? Despite the growth of the Philippine economy and the growing wealth of many Filipinos, preparation for retirement is still not a priority to many.

Retirement planning is not rocket science but it requires a process and much understanding to find ways to properly prepare for it.

Attend READY, SET, RETIRE! A No Nonsense Retirement Planning Workshop and learn how to properly prepare for your retirement. At the end of the half day workshop, you will be able to understand how to plan for retirement and what learn the tools that will give you a life you deserve. Find out how you can truly live a life of comfort & learn about the proper investments that is best suited for your needs objectively.

Joining me at this workshop are two of the country’s most sought after experts in the are of finance and economics: Rex Mendoza and Dr. Alvin Ang

Mr. Rex Mendoza is the President & CEO of Rampver Financials, a dynamic niche player in financial services specializing in investments, and one of the biggest distributors of mutual funds and other financial products in the Philippines. He sits as a director of Globe Telecom, Prime Orion Properties, Inc., Esquire Financing, Inc., the Cullinan Group, TechnoMarine Philippines, Seven Tall Trees Events Company, Inc., Mobile Group, Inc., and Trustee of the Bataan Peninsula State College.  Rex is also a member of Bro. Bo Sanchez’ Mastermind Group, and is cited by many as one of the best leadership and business speakers in the country. He served as the President & CEO of Philam Life, one of the country’s most trusted financial services conglomerates and was Chairman of its affiliates and subsidiaries. Prior to this, he was previously Senior Vice President and Chief Marketing and Sales Officer of Ayala Land, Inc.  He was also Chairman of Ayala Land International Sales, Inc., President of Ayala Land Sales, Inc., and Avida Sales Corporation.

Dr. Alvin Ang, PhD is a professor of the Economics Department of the Ateneo de Manila University and a senior fellow of the Ateneo Eagle Watch. Currently, he sits on the Board of the Philippine Economic Society after serving as President in 2013. He was also the Director of the Research Cluster for Cultural, Educational and Social Issues at the University of Sto. Tomas. He has over two decades  of professional experience in public and private sectors spanning development planning, policy formulation and analysis, investment research and economic forecasting, academic, consultancy and teaching. Dr. Ang is one of the most sought after though leader in economics.

Here’s how you can join the program:

1. Pay the fee via BPI 0249-1113-09 or BDO 006440069496 (under John Randell Tiongson)
2. E-Mail your screenshot or copy of deposit slip to [email protected] along with your full name and contact details.

Hurry, slots are limited!

QUESTION: Hi Randell, I am 22 years old and working at my first job. My dad tells me that I should already start saving for my retirement, but I think it’s too early for that. There are so many things that I want to save money for, like traveling to Europe and buying my own place. Besides, I’ll probably make more money as I get older, which means I can set more aside for my retirement. Do you think my dad is right? What’s a good age to start saving for retirement? Thank you very much! — Anna, from Facebook

Answer: Anna, your dad is right. The sooner you start saving for retirement, the better. In fact, your first job is the best time to start preparing for your golden years—even if you’re only earning an entry-level salary. There are many reasons why you should be doing it now.

You’re probably still single and living with your parents. This means you don’t have any bills to worry about or other full-time responsibilities like caring for a child. Even if you are contributing to the household expenses, this probably doesn’t amount to how much you would actually spend if you were living on your own. Given the lack of financial responsibilities at this point, you may be tempted to spend your salary on shopping and keeping up with your friends. But this is a great opportunity to begin setting money aside for your mid- and long-term financial goals.

It’s good to know that you plan on traveling the world or buying a house. These things are necessary for your growth. However, these should not get in the way of planning for your retirement.

Consider this scenario: Let’s say you begin saving for retirement at age 22. You set aside P24,000 a year (or P2,000 a month), and you putt this money in an investment vehicle that grows 8 percent a year. By the time you are 65 years old, you will have P8.5 million to use for your golden years.

Now let’s say you wait until you are 35 to start saving. You put away the same P24,000 a year, but for only 30 years, and earnings grow at 8 percent annually. By the time you are 65, you will end up with only P2.9 million. This is less than half of what you would have saved if you had started at 22!

Anna, you are very wise to already be thinking about retirement at the best age to start saving for it. And you are not the only one in your peer group. A survey I once read showed that 36 percent of Filipinos age 18-25 are already starting to prepare for their retirement. The next step is to start building your fund.

At this point, you need to make sure you use the right instrument that gives you the most returns. In this same survey I read, it shows that Filipinos age 36-45 are more reliant on traditional bank products like savings accounts, which are generally ineffective methods for growing a retirement fund. On average, a savings account will only grow 0.06 percent annually. That means if a 35-year old sets aside P24,000 a year in a savings account for 30 years, it will only grow P726,735.

Younger generations, however, seem more aware of better options for their retirement funds. Twice as many 18-25 year olds are looking to use investments for their nest’s egg, compared to older generations. It’s great to know that young adults are becoming more educated about growing their money. I encourage you to do the same and learn more about investment options.

While you are young, you can still afford to use more aggressive approaches to investment. Educate yourself about moderate to aggressive investment vehicles, like unit investment trust funds (UITFs), mutual funds and stocks. These options are high risk but have great potential to give you greater yields in the long run, which makes them ideal places to put your retirement funds in. These funds are also great places to invest money for your mid-term financial goals, like traveling to Europe or buying a house. Evaluate your expenses carefully and only place an amount that you’re sure you won’t miss. If you withdraw your money in three years or less, you run the risk of capital loss.

There are other things you need to think of when planning for retirement, such as the lifestyle you want to have when you retire, and unforeseen events like medical expenses. Read books, attend financial seminars or talk to your dad about ways to maximize your working years so you can retire comfortably. Don’t delay starting your retirement fund because the best age to start saving for retirement is now.

Let me leave you with an awesome advise written thousands of years ago: “Go to the ant, O sluggard; consider her ways, and be wise.”—Proverbs 6:6, ESV