Four years ago, I began my foray into investing. My posts during this nascent period can be found under the Finance category. I’ve learned a lot since then, and I thought it would be a good exercise to take a look back in review:
Part I: Mutual funds
I wet my toes with mutual funds. It was an exciting first step, and naturally I wanted to try everything. I opened accounts with three (!) mutual fund companies, namely First Metro Asset Management (FAMI), Philam Asset Management (PAMI), and Philequity Management (PEMI). (This was before COL Financial unveiled COL Fund Source, the “1st fund supermarket in the Philippines”.) Between the three of them, I invested in no less than six (!) different funds. My rationale back then: I didn’t want to put all my eggs in one basket. Obviously, it became difficult to keep track of everything. I also got fed up with their myriad greedy fees, with entry and exit fees on top of annual management fees.
Lesson: Don’t spread yourself too thin. Stick to three funds at the most. I have since closed all my mutual fund accounts (after the prescribed holding periods so no exit fees), but if mutual funds are your cup of tea, it’s better to invest in them through COL — the offerings of the country’s major mutual fund companies are available in one convenient place in their fund supermarket with no entry and exit fees.
Part II: Unit investment trust funds (UITFs)
My next step was UITFs. This time I learned my lesson, and opened just one account with BPI Asset Management and Trust (BPI AMTC). BPI AMTC’s funds have no entry and exit fees and holding periods, which made them more attractive than mutual funds. AMTC was the convenient choice, since the account could be managed through BPI’s online banking facility, where I already had a savings and checking account enrolled. While I had no problems with AMTC itself, I couldn’t take BPI’s poor customer service anymore — I recently cut ties with BPI completely, AMTC included.
Lesson: Invest in UITFs with a bank that provides a good overall customer experience, and not just with their investment arm. Otherwise, they will end up as collateral damage. I switched to Security Bank from BPI and so far, so good. However, I don’t plan to open an investment account with them, so I can’t personally recommend their UITFs.
Part III: Stocks
During the early days, I wrote about how I preferred mutual funds and UITFs over stocks. The truth is, not too long after that, I made the leap and opened a trading account with COL. Why? While the UITFs at BPI AMTC have seemingly lower fees than mutual funds, they still have other insidious fees — custodianship fees, external auditor fees, etc.
Brokerage firms like COL charge commission for buying and selling stocks, and that’s it. I am investing for the long term and not planning to engage in active day trading (which I view as gambling, not investing), so I found stocks, with their per-trade fee schedule, more palatable than mutual funds and UITFs, which take a piece of the pie every year with annual fees.
Stocks are the riskiest among the three, but as the saying goes, high risk, high rewards. There were some growing pains in the beginning — I invested in no less than ten (!) blue-chip stocks included in the Philippine Stock Exchange Index (PSEi). I repeated the mistake I made with mutual funds and dabbled in everything, which made tracking them difficult.
Lesson: Alas, not all blue-chip stocks are created equal. Many haven’t recovered from the crash in 2013. I downsized to five solid stocks, and I’ve been happy with my portfolio ever since.
Part IV: Love and marriage
Two years ago, W. and I got married. Our marriage opened up new avenues for investing, since W. is from the United States. (I manage our finances, since W. doesn’t like anything to do with numbers.) I started researching on personal investing in the US, where the landscape is way more mature than in here — US stock market capitalization is 100x bigger than ours. They have more than 8,000 mutual funds alone, while in the Philippines, mutual funds, UITFs, and exchange-traded funds (ETFs) combined probably don’t even reach 300.
More competition means lower fees, which are in a race to the bottom. One of the current leaders is Charles Schwab, where we opened an account. One of their biggest equity index funds, the Schwab S&P 500 Fund (SWPPX), has an annual expense ratio of only 0.03% (!). Compare it with say, BPI AMTC’s BPI Philippine Equity Index Fund (BPIPEIF), whose annual trust fee of 1.5% is a whopping 50x higher.
I couldn’t help but feel dismayed by the investing scene in the Philippines, which remains a seller’s market with high fees. But, I’m not giving up completely on investing here.
Lesson: While I’ve divested all of my local mutual fund and UITF shares, I’m holding on to my stocks — the Philippines is a fast-rising economy, and it would be a shame to miss out on all that high growth.
Part V: The present
So far I’m happy with our current state of affairs, which we’ll revisit when we have kids in the future:
COL Financial – peso growth fund in select blue-chip stocks