Most Filipinos seem too preoccupied trying to make money that they put little thought into the best way to handle cash if and when their savings accounts start to get more zeros.
The dream for most is how to make their money do the work. The most basic goal for anyone building his wealth should be to beat the average rise in consumer prices or inflation. This means making sure that the money you save today can buy just as many things a year, three years, or five years from now. From there, investment goals get more ambitious.
But beating inflation has become impossible today if money is kept in savings accounts, where interest rates offered by banks are close to zero. Fortunately, local financial institutions have become more creative in designing products to fit a wide range of clients.
For this story, Business Inquirer asked several banks and financial institutions, “If someone has P200,000 to spare (a few months to close to a year’s worth of wages depending on which rung of the corporate ladder you’re on), where should this money be invested?”
Getting wiser with your wealth starts with identifying one’s goals. “Investment advice is usually customized in nature, meaning two people would receive two different advice as there are several factors that need to be considered,” said Metropolitan Bank & Trust Co. EVP and trust banking head Josefina Tuplano.
“Age, wealth level, job type, purpose, time horizon and even appetite for risk needs to be considered,” Tuplano added.
People who want to earn more should be able to stomach the sight of their wealth shrinking from time to time, if only to wait for the likely promise of higher returns in due time. In the meantime, investors who may need quick access to their money should be able to accept lower, albeit more stable, returns.
That’s the hard part, fund managers interviewed for this story said. There’s no shortage of investment options, either in the form of unit investment trust funds (UITF), variable unit life insurance funds (VUL), or mutual funds. Pooled funds such as these provide the luxury of getting tailor-fit products for clients who may not have the time and patience to be day-to-day equities traders.
And financial institutions have become increasingly more creative in designing these funds.
For instance, insurance giant AXA Life offers investment products (with insurance features, of course) that follow companies based on the ethnicity of their owners. If a client trusts Filipino-Chinese owners more, there’s the Chinese Tycoon Fund, which has given back 19.8 percent to investors every year since 2011.
Clients who believe in managers with western descent, there’s the Spanish-American Legacy Fund. Since 2011, the fund has yielded over 10 percent a year for investors.
Bank of the Philippine Islands senior vice-president and asset management head Mario Miranda said people should also consider putting their money in more than one fund at a time.
“Diversification may be achieved by investing in three different fund types to ensure that risks are minimized while improving investment returns,” he said. An average investor, he said, should put the bulk of his or her cash in a bond fund, where profits are small but sure. The rest should be in a money market fund that can be withdrawn quickly for emergencies, and in equity-focused funds that are volatile but promise high gains.
Whatever amount of risk a person is willing to take, however, all agree that the best time to invest one’s cash is never yesterday or tomorrow. Now is always the perfect time.
The following are the investment options recommended by some of the country’s top bankers.
Josefina Tuplano
Metrobank
EVP and trust banking head
“Our base case assumption will be a single working individual aged 25-28, university graduate with an average office paying job, compensated above the minimum wage and living with their parents. Investments are currently non-existent and debt is zero. Time horizon is long term, which is at least 10 years.
“As the person is young, there is ample room to let the compounding strength of money and time to maximize his/her earning potential. The long time horizon also smooths out volatility in the equity market, as there are years where returns will be negative but the positive return in others years will exceed the negative ones. Of course, our advice at this point to the individual is to try and set aside a certain amount each regular period (monthly or yearly) and invest in the same fund, as a practice of cost averaging and discipline.”
Mario T. Miranda
Bank of the Philippine Islands
SVP and asset management head
“Investment funds offered by BPI are effective means of building wealth and achieving one’s life goals. For as low as P10,000, clients may choose to invest in any of the money market, bond and equity unit investment trust funds available in all BPI and BPI Family Bank branches, as well as via the Internet through BPI Expressonline or BPI Express Mobile.
“Investing in UITFs is very much appropriate for novice investors as these are managed by professional fund managers. Professional fund managers, working together with a team of research analysts, have access to the latest market information and take on the role of determining what to buy and when to buy the underlying investments of a fund.”
Lourdes Nanette Ferrer
Rizal Commercial Banking Corp.
SVP, head of trust and investments group
“RCBC recognizes the distinct needs and preferences of each client when it comes to investments. We offer a wide array of the Rizal Unit Investment Trust Funds (Rizal UITFs) with varying investment portfolios suited to different types of investors. With the low minimum investment required, the Rizal UITFs are especially ideal for retail investors who want to take advantage of opportunities in the financial markets to generate the best returns possible within risk levels they can tolerate. The Funds provide a systematic approach to building up wealth over time and are also suitable for those who do not have the time or the expertise to actively manage and constantly monitor their investments.”
Tony Isidro
AXA Philippines
Wealth management director
“We have an investment-linked, single-pay insurance product called ’Ambition X’ which gives the customer the opportunity to grow his or her investment and get insurance coverage at the same time. For as low as only P100,000, your money will have access to our various equity and bond funds that can fit your risk-return appetite.
“One of our best performing equity funds is the ’Opportunity Fund’ which invests in blue-chip stocks that are part of the Philippine Stock Exchange Index (PSEi) and other select stocks that undergo a rigorous screening process. These include listed companies in the commercial/industrial, banking/finance, and property sectors. As of end-June, the Opportunity Fund has performed at 20.7 percent since its launch in August 2009.
“We also have two AXA-exclusive funds that have been performing quite impressively as well. The ’Chinese Tycoon Fund’ invests in PSE-listed companies controlled by Chinese-Filipino tycoons and their families. Since the fund started in December 2011, the Chinese Tycoon fund has returns of 19.8 percent as of end-June 2015.
“On the other hand, the ’Spanish-American Legacy Fund’ invests in top-performing public companies listed in the PSE that have Spanish or American heritage. Majority of these companies are characterized with long corporate history, significant market dominance in their respective industries and are generally involved in utilities, telecoms, broadcast media, shipping, beverage and food industries. Since its inception in December 2011, the Spanish-American fund has been yielding 10.3 percent per year as of end of last month.
“We also have our peso-equity fund staple, the Wealth Equity Fund, which has been around for nearly 10 years and has been performing at an annualized rate of 16.8 percent since launching in April 2006.”
Frederico R. D. Ocampo
BDO
Trust and investment group SVP, chief investment officer
“Depending on the age and risk tolerance of the investor, he or she may consider various peso and dollar UITFs. For risk-averse investors, the BDO Peso Money Market Fund is stable and not volatile. Given rising interest rates in the coming months, we favor equities over bonds. The correction in the stock market could present an attractive entry point in the second half of 2015. We remain positive on equities given the expansion of the economy and earnings of listed issues.
“Investors may also consider dollar money market funds and dollar bond funds given the outlook of stronger dollar over the next three years.
“For astute investors, they may want to consider dollar offshore investments. We just launched the BDO Developed Markets Property Index Feeder Fund for an exposure rising global real estate markets. The property index fund gives high and stable income and is an implicit protection against inflation. It is invested in the US, Canada, Japan, UK, and HK property markets.”