A closer look at Philippine mutual funds, part 2
By Randell Tiongson on September 14th, 2010The big question in the minds of many: ‘will the local market continue with its good run in the months to come?’ Some sectors are claiming that we are headed into a ‘bull’ territory and see the market continue to gain further; while others are cautioning that the market is in a ‘bubble’ and it will correct itself, if not crash soon. Analysts using fundamental and technical techniques can argue hard for both ways. I’ve spoken to someone who is dead serious that the market is in for an imminent crash because them Elliott Wave Theory says so. On the other hand, you can read that the markets will continue to ride to growth territories because the economy is growing.
Here’s my take on all these: past performance is never an indication of future performance! While historical data can be helpful in determining which investment route to take, I wish to caution the readers not to rely too much on historical data. Many factors can affect future performance like taking too aggressive or too conservative positions in their investment policies. The argument by many advocates of index investing is that they can trust the index better than active managers. Experience in many countries supports such an argument but clearly, the same argument is not the case in the Philippines – another “only in da pilipins” claim we can make.
When investing, regardless of what instrument you chose, always invest according to your investment objective, risk tolerance and time frame. If you are still unsure of the 3 factors I mentioned, take time to find out first before letting go of your hard-earned money. Further, when you do invest in instruments such as mutual funds or UITF (available in Banks), pay particular attention to the fee structure; some funds charge more than the others.
Oh, one more thing (last na!) – whenever you are investing, never invest in something you don’t understand. Take time to learn about the investment which you are planning to take and don’t worry, investing need not be rocket science and try to practice being prudent in as much as you can.
A simple man believes anything, but a prudent man gives thought to his steps. – Proverbs 14:15, NIV.
Before one should invest, INVESTigate.
For many investors who may not have sufficient talent to know the real market world, a good advice is to get ready information from available reliable resources. This data must be professionally and intelligently done, independent, unbiased, and prepared by people without vested interests.
The problem is, we compound the problems to our lack of knowledge or “ignorance” by readily accepting the statements of the so-called “investment professionals” where in reality many of them have their own vested interests. For example,
Would you expect a bank manager who has a “deposit quota” required in his job to encourage you to place your money in instruments other than in bank deposits ?
Would you expect an active fund manager to let you buy your own stocks instead of placing it into a mutual fund where he manages?
Would you expect an insurance agent to tell you that insurance is not good?
I know one big insurance company in the Philippines which markets their products and says ” Every body needs insurance” and yet why would they deny some people of such products if that is the case? They preach about helping people but why would they deny the need if that is what they preach ?
The bottom line is that no matter how you plan your objective, risk tolerance and time frame if you choose the WRONG vehicle, all your effort may just go to waste. And that is not a good financial planning. Before you do anything, make sure all information you gathered are free from biased resources. That is why before you invest, INVESTigate.
Also, I caution about concluding that managed funds find better place in the Philippines vis-a-vis market performance. There is no such data that supports the claim and I am sure there is none. My personal view in fact is that we have a very lousy mutual fund industry in the Philippines.
For iR…
I like it when you say INVESTigate… But you sound so critical.
Haven’t you earned from any of these investment instruments?
In my experience, I have helped many investors. They have earned much from
their mutual funds placement. How come you say its a lousy industry?
Dutch
It’s totally disgusting and a big turn-off for potential and existing mutual fund investors if they visit the ICAP website. Would you know that the page which informs investors about the “latest news” actually showed news that took place in the years 1996 and 2000 ? ….and nothing you could see except those photographs of people that display their faces on the website? What good information does that give to the reader ?
http://www.icap.com.ph/latest_news.html
The website is out of touch in the real business world. The contents are misleading instead of being helpful. That to me is very unprofessional and a big shame. To say it is lousy is actually a better word.
Guys, I’d appreciate if you don’t use my blog as a place to argue your points. This is my blog site, not a forum site and expresses my opinions on life and personal finance. Discussions are welcome over at http://www.income-tacts.com
Very nice post Randell. Our market literally went up on a straight line which can be a cause for concern. In 2006 before the UITF debacle (or before the Fed started hiking interest rates then), the market also spiked up for a span of two weeks. Then all of a sudden, it came crashing down.
I had my first investment lesson learned when I pulled out my money. I didn’t know how to invest then. Just blindly followed my mom’s advise. She too got scared.
Four years later, I’m wiser. I know not to chase after gains as what I did again last 2007. I’ll wait until the market corrects to a decent level before I begin to shift funds.
Thanks for this post!
@ Ken… yeah, the index at 4000.. hmmm. Let’s just pray it is a sustainable surge.
I do not know about your unique rules Randell that only those who would agree with your points are allowed to make their posts in your blog You should have made that warning beforehand so that we know what type of selected posts you favor in your blog.. I thought your blog is a place of fairness and intelligent discussions. I suggest you immediately delete my posts because I don’t want to be associated with this site anymore.
I like your blog. Thanks for sharing this information.