mutual funds

Personal investing in the Philippines: a four-year retrospective

25 June 2017 2 Comments

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

Security Bank – peso emergency fund in a high-interest savings account

Charles Schwab – dollar retirement fund in a low-cost three-fund portfolio

SSS contributions: Are they worth it? (Or, SSS vs mutual funds: a comparison)

21 July 2013 4 Comments

Update June 2017: It’s been four years since I started investing, and my investing outlook has changed quite a bit over the years. Click here to read a recap of my investing journey, where I share some insights based on personal experience.

The two social insurance programs of the Philippine government are the Government Service Insurance System (GSIS) for public employees and the Social Security System (SSS) for private workers. Under the law, membership to either one of these programs is compulsory for all workers below a certain age (for the SSS, it’s 60 years old).

Private employers must obey the law, since they can be sentenced to jail for not remitting their employees’ SSS contributions. However, I have yet to hear of a self-employed individual who was imprisoned for not paying his/her own SSS premiums.

This raises the question: if you were self-employed, would you be better off investing your hard-earned money in a mutual fund instead?

Ideally, one should have both pension and investments, but many Filipinos don’t have the extra cash for the latter, and end up depending only on the former upon retirement.

One advantage of the state-backed SSS is that it is supposed to be steady and dependable for life. It will provide an allowance every month, like clockwork, even if you live up to a hundred and fifty. Sounds good, but the problem is, this monthly pension remains constant despite inflation. I know someone who is relying solely on an SSS pension of P6,000 per month — it might be okay for now, but how about five years down the road, when the prices of goods and services are much higher? It may be hard to live on just P6,000 by then.

To answer my question, let’s compare two scenarios:

#1: Paying the highest premium for self-employed individuals per month (P1,560), and

#2: Investing that P1,560 in a mutual fund instead.

We’ll use actual historical NAVPS data* from a mutual fund for #2. Usually people retire at 60+ after working 30-40+ years, but Philequity Fund (PEFI), which I believe is the oldest existing mutual fund in the Philippines, is less than 20 years old. As such, our hypothetical working period is only 18 years, from 1995 to 2012.

*published NAVPS figures are already net of the annual management fee, which is amortized daily

Some assumptions for simplicity’s sake:

Instead of investing P1,560 per month to PEFI, P18,720 (P1,560 x 12 months) is invested annually at the beginning of the year. For a more accurate comparison it should be monthly, but computation is easier if it’s annually. Same amount, different timing, and way fewer numbers to crunch
Constant 3.5% entry fee every year for PEFI. Perhaps it was higher or lower in the past — I don’t know
Constant maximum allowable contribution per month (P1,560) for SSS. I believe it was only P240 before 1997

For both scenarios, the total amount of money invested is P336,960 (P1,560 x 12 months x 18 years).

#1: As explained on its official website, there are three ways to determine one’s SSS monthly pension:

a) “the sum of P300 plus 20 percent of the average monthly salary credit plus 2 per cent of the average monthly salary credit for each accredited year of service (CYS) in excess of ten years”

P5,700 = P300 + 0.20 (15,000) + 0.02 (15,000) (8)

b) “40 per cent of the average monthly salary credit”

P6,000 = 0.40 (15,000)

c) “P1,200, provided that the credited years of service (CYS) is at least 10 or more but less than 20 or P2,000, if the CYS is 20 or more”

P1,200

The retiree receives the highest figure of the three, which in our case is P6,000. This is the monthly pension of our hypothetical self-employed individual, whom we shall call Juan.

#2: If Juan invested his SSS premiums in PEFI instead, he’ll end up with 90, 407 shares of the mutual fund after 18 years:

If Juan redeemed his shares on 15 May 2013 when the NAVPS was 35.8884, he would have received P3,244,562.58 (90,407 x 35.8884). Three million! That’s a whopping 863% return of investment. With SSS, Juan’s monthly pension will add up to an equivalent amount only after 42 years of retirement (if he’s lucky enough to live that long).

TL;DR: If no threat of jail time, then mutual funds over SSS, hands down. Of course, one shouldn’t redeem one’s mutual fund shares in one go — having millions upon retirement is useless if one is just going to gamble them away the next day. (That’s another advantage of the SSS — controlled release. If you squander this month’s pension, hey, at least you’ll still receive another next month, and the next, and the next…)

Personal investing in the Philippines: Topping up your mutual fund investments online

30 January 2013 5 Comments

When it comes to online accessibility, the relatively small mutual fund industry in the Philippines is far behind the curve. In the US, investors can buy mutual fund shares with a few clicks on their mobile devices. We’re a long ways from this scenario in comparison, but a few local mutual fund companies have at least made some inroads in this direction by allowing additional investments through online banking.

These online investment methods require deposit accounts with the mutual funds’ settlement banks and enrollment of said accounts to their respective online banking facilities.

1. Philequity Management (PEMI)

PEMI mutual funds have settlement accounts with BDO Unibank (BDO), EastWest Bank, and UnionBank.

For BDO, one has to enroll each settlement account as a third-party account on BDO Online Banking (Enrollment Services > Other Person’s Account > Enroll) and activate it through ATM or form submission to a BDO branch. If you only have a non-ATM passbook account, the latter method can be quite tedious, and activation can take a while.

For UnionBank, no enrollment is required on EON CyberAccount. Simply go to Transfers > To Another UnionBank Account:

Investing in Philequity Management (PEMI) mutual funds through UnionBank EON CyberAccount

Upon successful funds transfer, send a copy of the transaction receipt and a scan of a completed Investment Application Form to sales@philequity.net. PEMI replies promptly to confirm, and if already enrolled in their e-Confirmation facility, they also email the confirmation notice within two days.

If you wish to do cost averaging and make scheduled transfers of a fixed amount to your PEMI mutual fund(s), this is easily done by going to Frequent Transfers > Enroll Payee > To Another UBP Account > Add Payee:

Investing in Philequity Management (PEMI) mutual funds through UnionBank EON CyberAccount

Enter your customer number in the ‘Payee Reference’ field. To schedule a recurring transfer, go to Frequent Transfers > To Another UBP Account > Recurring Transfer to a Frequent Payee:

Investing in Philequity Management (PEMI) mutual funds through UnionBank EON CyberAccount

2. Philam Asset Management (PAMI)

PAMI mutual funds have settlement accounts with Bank of the Philippine Islands (BPI).

All their mutual funds are listed as billers on BPI Express Online. Simply go to Payments & Reloading > Bills Payment > Enroll All Other Bills:

Investing in Philam Asset Management (PAMI) mutual funds through BPI Express Online

Enter your folio number in the ‘Reference Number’ field. Once enrolled, go to Payments & Reloading > Bills Payment > Pay Bills Today:

Investing in Philam Asset Management (PAMI) mutual funds through BPI Express Online

Unlike with PEMI, there is no need to fill out a subscription form and notify PAMI regarding the additional investment. Your confirmation receipt will be delivered through courier within two weeks. If already enrolled in their Online Access facility, you can also verify your transaction on their website.

To schedule a recurring transfer, go to Payments & Reloading > Bills Payment > Scheduled Bills Payment > Schedule Bills Payment:

Investing in Philam Asset Management (PAMI) mutual funds through BPI Express Online

3. First Metro Asset Management (FAMI)

FAMI mutual funds have settlement accounts with Metrobank and PSBank.

For Metrobank, all their mutual funds are listed as billers on metrobankdirect. FAMI has thoughtfully provided a video with step-by-step instructions (add three zeros before your five-digit client number):

Like with PAMI, there is no need to notify FAMI regarding the additional investment. Your confirmation receipt will be delivered through courier within a week. You can also request for an updated account statement by emailing cor@fami.com.ph.

Personal investing in the Philippines: Why I choose mutual funds and UITFs over individual stocks

27 January 2013 Leave a Comment

As we all know, the assets of equity and balanced mutual funds and UITFs are wholly or partly invested in stocks. So why not simply skip these vehicles altogether and invest directly in the stock market? Nowadays, the average Juan can easily purchase shares of stocks in the Philippine Stock Exchange (PSE) through online brokers, and their fees are considerably much lower than those of mutual funds and UITFs.

Still, I opt to forgo stocks and invest in mutual funds and UITFs instead, for one simple reason: stock investing requires much more of one’s time and attention. Aside from the crucial step of picking the right stocks, one has to keep abreast of the latest financial news, study stock price patterns, etc etc etc…I’m investing for the long run, and don’t have any inclination to do all these and be an active trader.

Many moons ago, my father happened to buy shares of Pilipino Telephone Corp (Piltel) and kinda just forgot about it. It would’ve been great if this story ended like the movie Blast from the Past, where they discover stock certificates of AT&T, IBM, and Polaroid in some old boxes, become instant millionaires, and live happily — and wealthily — ever after. Unfortunately, Piltel went in the red, was bought out by PLDT, and got ultimately delisted from the PSE (ouch). This served as a cautionary tale that with stocks, one can definitely not just “set and forget”.

Mutual funds and UITFs aren’t completely set-and-forget, but at least their shares and units already represent diversified portfolios, and won’t turn completely worthless when one company, out of many, goes out of business. (One also hopes that the fund managers have since unloaded stocks of said company way before such a turn for the worst.) Also, one generally needs a large amount of capital to attain a well-allocated portfolio in stocks. For as low as PHP 1, 000, one can already invest in a mutual fund with a wide array of assets. In the stock market, the same amount of money will only get you less than ten shares of Jollibee.

“But mutual fund and UITF fees are so high! Stock brokers charge so much lower commission rates!” Well, that’s the price of convenience. We can’t have our cake and eat it too.

Perhaps my risk appetite and interest level will change in the future and I buy some individual stocks, but until then, I’m content with mutual funds and UITFs.

Personal investing in the Philippines: Keeping track of your investment portfolio online

25 January 2013 Leave a Comment

It’s easy enough to know the current value of your holdings in mutual funds and unit investment trust funds (UITFs). For mutual funds, simply multiply the number of shares you have with the latest Net Asset Value Per Share (NAVPS). For UITFs, multiply the number of units of participation you have with the latest Net Asset Value Per Unit (NAVPU).

The latest NAVPS of all Philippine mutual funds can be found conveniently on a single page on the Investment Company Association of the Philippines (ICAP) website. Unfortunately, there is no one page for Philippine UITFs; one has to check the websites of the different Philippine banks for the latest NAVPU of their UITFs.

If you have wisely diversified your investments across several mutual funds and UITFs, this process can become quite tedious. Luckily, you can keep track of all your investments collectively at Bloomberg with their Watchlist (Portfolio Tracker). Bloomberg has data on all Philippine stocks, mutual funds, and UITFs. Registration is free.

Once registered, simply search for your stocks, mutual funds, and/or UITFs through the search box and click them to add to your watchlist. For instance, if you have invested in the Philippine Stock Index Fund (PSIF):

Bloomberg Watchlist (Potfolio Tracker)

Once added, go to Edit > Add new lot to enter specific information regarding your holdings. For instance, if you bought 100 shares of PSIF on 2 January 2013 at NAVPS: 647.15, and topped up on 10 January 2013 with 50 shares at NAVPS: 664.61:

Bloomberg Watchlist (Potfolio Tracker)

And that’s it. Bloomberg will show, among other data, the current value of your investment holdings, your gains for the day, and your total gain. Repeat the steps above for all your other stocks, mutual funds, and/or UITFs, and simply add a new lot for any additional investments you make in the future.

You can also access your portfolio on mobile devices through the official Bloomberg mobile app:

The app has its drawbacks, though, which I hope Bloomberg will address in the future:

Mobile watchlists will sync to your desktop account, but not the other way around
Philippine Peso (PHP) is not among the default currencies
Dark background is not user-friendly

Personal investing in the Philippines: Investing in an index fund

15 January 2013 8 Comments

In my previous post, I wrote about how mutual funds in the Philippines have such expensive fees. The Motley Fool admonishes that sales loads are “one of the things that a Fool should never pay when purchasing a mutual fund,” but one doesn’t have much of a choice in the Philippines, where almost all mutual funds are actively managed and charge entry and exit fees.

There is certainly a dearth of low-cost, no-load mutual funds in the country, unlike in the US. The only no-load Philippine mutual funds that I know of are the ALFM Mutual Funds, which are managed by BPI Asset Management, a subsidiary of Bank of the Philippine Islands (BPI).

One of their mutual funds is the Philippine Stock Index Fund (PSIF), which is an index fund that tracks the Philippine Stock Exchange Composite Index (PSEi). In the US, many financial experts recommend index funds over actively-managed equity funds because index funds consistently outperform managed funds year after year. One of the reasons for this is the former’s low fees. Take the famed Vanguard 500 Index Fund (VFINX), a no-load mutual fund that tracks the Standard & Poor’s 500 Index (S&P 500) — its annual management fee, or expense ratio, is only 0.17%.

PSIF’s annual fee of 1.5% pales in comparison, but the lack of sales load makes it far more attractive than the only other stock index fund in the country, the Philequity PSE Index Fund (PPSE), whose sales load are as high as 5% (whaaat?).

Edit: Philippine National Bank (PNB) has a UITF described as an “enhanced” index fund, the PNB Enhanced Phil-Index Reference Fund.

Being the lesser of two evils, I chose PSIF as my index fund. The fact that it was indeed the top-performing peso equity fund in 2012 doesn’t hurt, either.

Like investing in BPI UITFs, which I detailed in my previous post, it’s quite easy to invest in ALFM Mutual Funds if you already have a BPI deposit account enrolled in their online banking facility, BPI Express Online. Just follow the same procedure, but go to Investments > Apply Now > Mutual Funds instead. PSIF is restricted only to “aggressive” investors, so choose “D” as much as possible on their risk profile questionnaire.

Now that I’ve invested in an index fund, I look forward to see how it will fare this year vis–à–vis Philequity Fund (PEFI), my managed equity fund. Also, here’s hoping Philippine mutual fund companies will follow the lead of ALFM Mutual Funds and waive their dratted sales loads.