I must send my thanks to all those who have sent me their emails, because my life has definitely changed, after I forwarded it to a total of 2,170,687 people, costing me more than P300,000 in internet café expenses alone.
I no longer have any savings because I gave it to a sick girl (Penny Brown) who is about to die in the hospital for the 1,387,258th time.
I no longer have any money at all, but that will change once I receive the $15,000 that Bill Gates/Microsoft and AOL are sending me for participating in their special e-mail program.
I no longer worry about my soul because I have 363,214 angels looking out for me, and St. Theresa's novena has granted my every wish.
I no longer go to church or pray because God is attached to the files you sent me, and all I have to do is send it to 25 other people, and that earns me prayer points with God.
Thanks to you, I have learned that my prayers only get answered if I forward an e-mail to seven of my friends and make a wish within five minutes.
Thanks to you, I have stopped paying all my insurance premiums (ya right) because from now on, no accident will ever happen to me, after all, I’ve already forwarded your last email to 15 of my friends.
Because of your concern I no longer drink Coca Cola because it can remove toilet stains.
I no longer drink Pepsi or Dr. Pepper since the people who make these products are atheists who refuse to put "Under God" on their cans.
I no longer use cancer-causing deodorants even though I smell like a water buffalo on a hot day.
I no longer use Saran wrap in the microwave because it causes cancer.
And thanks for letting me know I can't boil a cup water in the microwave anymore because it will blow up in my face...disfiguring me for life.
I no longer check the coin return on pay phones because I could be pricked with a needle infected with AIDS.
I no longer go to shopping malls because someone will drug me with a perfume sample and rob me.
I no longer receive packages from UPS or FedEx since they are actually Al Qaeda in disguise.
I no longer answer the phone because someone will ask me to dial a number for which I will get a phone bill with calls to Jamaica, Uganda, Singapore, and Uzbekistan.
I no longer have any sneakers -- but that will change once I receive my free replacement pair from Nike.
I no longer buy expensive cookies from Neiman Marcus since I now have their recipe.
Thanks to you, I can't use anyone's toilet but mine because a big brown African spider is lurking under the seat to cause me instant death when it bites my butt.
And thanks to your great advice, I can't ever pick up the P500.00 I found dropped in the parking lot because it probably was placed there by a sex molester waiting underneath my car to grab my leg.
I no longer eat at KFC because their chickens are actually horrible mutant freaks with no eyes or feathers.
Oh, and don't forget this one either: I no longer take my kids to jollibee because you told me that their burgers are made of worms imported from china.
If you don't send this e-mail to at least 144,000 people in the next 70 minutes, a large dove with diarrhea will land on your head at 5:00 PM this afternoon and the fleas from 12 camels will infest your back, causing you to grow a hairy hump. I know this will occur because it actually happened to a friend of my next door neighbor's ex-mother-in-law's second husband's cousin's beautician.
This is a forwarded chain email to answer and END all forwarded chain emails ...honestly speaking, do you really believe all that crap?
Tuesday, December 30, 2008
Friday, December 26, 2008
ARE YOU A SCAM-BUG?
Scam /’skam/- a fraudulent or deceptive act or operation (Merriam-Webster online)
Bug-an insect or other crawling or creeping invertebrate, some of which are known to love flying around lights(sometimes endangering themselves) or crawl over waste (that’s sh*t to you)
Ponzi scheme -fraudulent investment operation that involves promising or paying abnormally high returns to investors out of the money paid in by subsequent investors, rather than from revenues generated by a real business. Named after the person who started a pyramid scam, Charles Ponzi, an Italian immigrant to the United States who became one of the greatest swindlers in American history. (Wikipedia.org)
Multitel, francswiss, PIP, Royal Manchester, and most recently the Legacy Group of Companies. Which one did you invest in? all or none of the above? Much has been written about “how to tell a scam”, but none is about how to tell if you’re one who is easily duped by one. Based on the reactions of most of the people who were duped in any of the above, I have come up with crude and simple way to tell if you’re one, take a look below and see if it applies to you, it won’t take long.
1.) Insurance agents annoy you, you distrust bankers, and financial planners, however, you are instantly impressed when some hotshot rep of a company you haven’t heard of, or maybe was referred by someone you know, offers you an “INNOVATIVE” way to double your money in 3 to 5 years time “GUARANTEED”!(and this include testimony’s of satisfied clients-persons you know)
2.) You find the intricacies of financial planning such as savings, insurance, bonds, mutual funds, equities, and cost averaging, confusing, dull or boring, and not worth your time, which is why you prefer the”hotshot” who won’t bother you with the details (to explain how the whole thing works,) but goes directly to the bottomline-“ double your money in 3 to 5 years time “GUARANTEED”! Hmm makes sense doesn’t it?
3.) You think savings and investments are only for people who have disposable incomes and claim you can’t afford to have one, even if its only a few thousand for an insurance premium, or initial investment, from well established companies. however when some unknown company dazzles you with its vague” double your money” scheme, you have no trouble coming up with a hundred thousand , and eventually ,when that very same company is shown to be operating a scam, and either folds up or runs away with your money, your fist reaction is denial (that you invested) then, you play down your hundred thousand investment lost as in “at least I only lost that much compared to ...who lost a million or, as in the case of Legacy, you are actually grateful that you still receive a fraction of your total investments as interest payments, despite your principal being lost.
4.) You easily get worried when you hear that the reputable bank in which you have a deposit is exposed to the US sub-prime despite public assurances issued by Gov.regulatory agencies such as SEC, BSP, and even DTI, while on the other hand, you have no problems making an investment with some company who promised to double your money despite warnings by those very same government regulatory agencies about scams and the unsafe and unsound practices of some rural banks.
5.) You think setting aside at least 10% of your net income for savings is too much, while your total expenditures on the lottery (lotto-where you have a one in 80m chances of winning a million,) or maybe swertres (3 digit nos. game-where you have one in 700 chances of winning a few thousand) is at least equal to or more than that.
Bug-an insect or other crawling or creeping invertebrate, some of which are known to love flying around lights(sometimes endangering themselves) or crawl over waste (that’s sh*t to you)
Ponzi scheme -fraudulent investment operation that involves promising or paying abnormally high returns to investors out of the money paid in by subsequent investors, rather than from revenues generated by a real business. Named after the person who started a pyramid scam, Charles Ponzi, an Italian immigrant to the United States who became one of the greatest swindlers in American history. (Wikipedia.org)
Multitel, francswiss, PIP, Royal Manchester, and most recently the Legacy Group of Companies. Which one did you invest in? all or none of the above? Much has been written about “how to tell a scam”, but none is about how to tell if you’re one who is easily duped by one. Based on the reactions of most of the people who were duped in any of the above, I have come up with crude and simple way to tell if you’re one, take a look below and see if it applies to you, it won’t take long.
1.) Insurance agents annoy you, you distrust bankers, and financial planners, however, you are instantly impressed when some hotshot rep of a company you haven’t heard of, or maybe was referred by someone you know, offers you an “INNOVATIVE” way to double your money in 3 to 5 years time “GUARANTEED”!(and this include testimony’s of satisfied clients-persons you know)
2.) You find the intricacies of financial planning such as savings, insurance, bonds, mutual funds, equities, and cost averaging, confusing, dull or boring, and not worth your time, which is why you prefer the”hotshot” who won’t bother you with the details (to explain how the whole thing works,) but goes directly to the bottomline-“ double your money in 3 to 5 years time “GUARANTEED”! Hmm makes sense doesn’t it?
3.) You think savings and investments are only for people who have disposable incomes and claim you can’t afford to have one, even if its only a few thousand for an insurance premium, or initial investment, from well established companies. however when some unknown company dazzles you with its vague” double your money” scheme, you have no trouble coming up with a hundred thousand , and eventually ,when that very same company is shown to be operating a scam, and either folds up or runs away with your money, your fist reaction is denial (that you invested) then, you play down your hundred thousand investment lost as in “at least I only lost that much compared to ...who lost a million or, as in the case of Legacy, you are actually grateful that you still receive a fraction of your total investments as interest payments, despite your principal being lost.
4.) You easily get worried when you hear that the reputable bank in which you have a deposit is exposed to the US sub-prime despite public assurances issued by Gov.regulatory agencies such as SEC, BSP, and even DTI, while on the other hand, you have no problems making an investment with some company who promised to double your money despite warnings by those very same government regulatory agencies about scams and the unsafe and unsound practices of some rural banks.
5.) You think setting aside at least 10% of your net income for savings is too much, while your total expenditures on the lottery (lotto-where you have a one in 80m chances of winning a million,) or maybe swertres (3 digit nos. game-where you have one in 700 chances of winning a few thousand) is at least equal to or more than that.
Thursday, December 25, 2008
A LEGACY OF SCAM-BUGS
Pt. Barnum once said, “THERE’S A SUCKER BORN EVERY MINUTE”. First there was Multitel, then Manchester Royal, then Francswiss, then there was Performance Investments (PIP) and now, it’s The Legacy Group of Companies, and if we are to believe Pt Barnum, there will be more (investment scams and their usual victims) in the future, when will we ever learn? We also have that impression, that only the less umm sophisticated (financially) fall for this kind of scam, look closely, victims of PIP, Francswiss also includes people from Dasma and Forbes, and lest we forget, the US Sub-prime also includes Wall Street as its willing victims. That quote by PT. Barnum should be expanded “THERES A SUCKER BORN EVERY MINUTE-EVERYWHERE”.
Going back to Legacy (yes it was “The Group” that I alluded to in my last blog-“Rural Banks and Double your Money Schemes”, also an article by Dr. Raval) this is one instance that we’ve been issuing warnings and dissuading friends from investing, as early as December of 2005, because some officers of the Legacy group were overheard blaming it (again) at the US Sub-prime. when actually, the problem with legacy goes back 2-3 years ago.,( the current sub-prime crisis only blew up 4 months ago). Even during that time, it already looked like a pyramiding scam. Some of my friends listened, but most didn’t, and to think that it was during those times when Francswiss and the PIP scam were hugging the headlines. I even showed them how to tell a scam. Actually I wasn’t even aware of the full extent until last march, when my Partner informed me that the Regional Director of DTI (CARAGA) was already alarmed because the total investments at Legacy in CARAGA alone had already reached more than P500M, mostly from retirees, and probably their separation or pension. In short-all the money they have in the world.
I heard they had a meeting at one of the hotels here, they were expecting officers of the company to arrive all the way from Manila to clear things or maybe assure them, but none showed up. Now they are contemplating a class suit, in the hopes that once all the assets of Legacy will be liquidated, they will be paid, and some are starting to believe a story going around that there’s an interested buyer, and once Legacy is bought, they will be paid. I wish them good luck. since we’re all intelligent to know a scam when we see one, and we didn’t fall for this one, because were not bugs (and we know the meaning of scam) still its worth remembering: ”If it’s too good to be true..it probably is”.
P.S. If you had purchased $1,000 of Delta Air Lines stocks one year ago, you would have $49 left. With Fannie Mae, you would have $2.50 left of the original $1,000. With AIG, you would have less than $15 left.
But, if you had purchased $1,000 worth of beer one year ago, drunk all of the beer, then turned in the cans for the aluminium recycling REFUND, you would have $214 cash.
Based on the above, the best current investment advice is to drink heavily and recycle.
Going back to Legacy (yes it was “The Group” that I alluded to in my last blog-“Rural Banks and Double your Money Schemes”, also an article by Dr. Raval) this is one instance that we’ve been issuing warnings and dissuading friends from investing, as early as December of 2005, because some officers of the Legacy group were overheard blaming it (again) at the US Sub-prime. when actually, the problem with legacy goes back 2-3 years ago.,( the current sub-prime crisis only blew up 4 months ago). Even during that time, it already looked like a pyramiding scam. Some of my friends listened, but most didn’t, and to think that it was during those times when Francswiss and the PIP scam were hugging the headlines. I even showed them how to tell a scam. Actually I wasn’t even aware of the full extent until last march, when my Partner informed me that the Regional Director of DTI (CARAGA) was already alarmed because the total investments at Legacy in CARAGA alone had already reached more than P500M, mostly from retirees, and probably their separation or pension. In short-all the money they have in the world.
I heard they had a meeting at one of the hotels here, they were expecting officers of the company to arrive all the way from Manila to clear things or maybe assure them, but none showed up. Now they are contemplating a class suit, in the hopes that once all the assets of Legacy will be liquidated, they will be paid, and some are starting to believe a story going around that there’s an interested buyer, and once Legacy is bought, they will be paid. I wish them good luck. since we’re all intelligent to know a scam when we see one, and we didn’t fall for this one, because were not bugs (and we know the meaning of scam) still its worth remembering: ”If it’s too good to be true..it probably is”.
P.S. If you had purchased $1,000 of Delta Air Lines stocks one year ago, you would have $49 left. With Fannie Mae, you would have $2.50 left of the original $1,000. With AIG, you would have less than $15 left.
But, if you had purchased $1,000 worth of beer one year ago, drunk all of the beer, then turned in the cans for the aluminium recycling REFUND, you would have $214 cash.
Based on the above, the best current investment advice is to drink heavily and recycle.
Wednesday, December 17, 2008
RURAL BANKS AND DOUBLE YOUR MONEY SCHEMES
I TOLD YOU SO! unless you live in a cave I'm sure you already heard the news about several Rural Banks belonging to a particular group (of companies), closing (or declaring a bank holiday) or being taken over by the PDIC. and if you happen to be a depositor or an investor well.....
actually this was foreseen coming as early as 2005, when this company started soliciting investments in our place, in fact it was even surprising it took this long before it blew all over.maybe it was because the size; the total assets of all the Rural Banks belonging to this "Group" comprised about 11% of the total assets of all the Rural Banks in the Country.
I was exposed to it first hand because it was also the same time I became involved in the financial markets as a financial consultant. I was also invited to be an investor, and to attend their seminar, it worked like this: They were offering a double-your-money-in five-years type of investment, and the icing on the cake was: the interest would be paid to you in advance (the moment you make your investment) in the form of post dated checks. Honestly, you don't have to be a financial expert or an accountant to see (from the business point of view)that the numbers just don't add up, it smelled like a pyramiding scam (and the news on TV confirms this). Some of my businessmen friends were asking me if it was safe or possible, to which my answer has always been in the form of a another question: "Where can you find a business that actually pays in advance the profit, before the business has even started to operate'? (because thats how it looked like) unfortunately some did invest, which just goes to show that when it comes to greed, even level headed people are not immune. (remember the current US sub-prime crisis?) and now, reps from "The Group" have the audacity to put the blame on the current US sub-prime crisis. below is an article that I emailed to my clients way back at the time when people started investing with "The Group", before the US sub-prime even exploded. Take note of the date of the article, and take heed-because this also concerns other Rural Banks, Financial Establishments or investment instruments as well.
ASK Dr. NOET
By Dr. Johnny Noet Ravalo
INQUIRER.net
Last updated 12:59pm (Mla time) 05/10/2007
What can you say about the 20% interest per annum paid by some rural banks? Interest is paid monthly, covered by the PDIC, tax exempt, with five years maturity. In five years, a time deposit of P1 million will double to P2 million plus? -- Geno Real
A rural bank in my place offers an interest rate of six percent for a regular deposit and as much as 10% for a time deposit. Is the risk worth taking? I will only deposit the amount covered by the PDIC, Where can I check the strength of a rural bank to evaluate the risk I may be taking? Chester Barcenas
Geno, Chester, your respective inquiries are quite similar so let me just take them together.What is probably being offered to you Geno is a double-your-money type of deposit. This takes advantage of a provision in the law that exempts 5-year deposits from the final withholding tax. With this tax break, you would only need an interest rate of 14.8 percent to double your money in five years.
What are the risks to these? The same law that exempts you from the withholding tax says that if you withdraw before the five years are up, you have to pay the tax. The risk here is whether you have enough resources elsewhere to keep you from withdrawing the money you put in the potentially 5-year deposit. If liquidity is an issue, the chances of doubling-your-money in five years are quite remote.
Oh, just to be safe Geno, please make sure that the bank is indeed offering you a deposit instrument that is duly covered by the Philippine Deposit Insurance Corp.In both of your questions, the deposit rate being offered is something you should think about. For banks to continue operating, its lending and investment operations have to earn a premium over the deposit rates it pays out.
Under present reserve requirements (that’s the portion of funds banks are required to keep as reserves), this premium would be roughly 27 percent. That means a 10 percent deposit rate translates to a 12.7 percent loan rate to fund itself. This is before taxes, before administrative costs, before regulatory fees and before any premium for taking the additional risks.
(To put it plainly, if the bank promises you a 20% interest rate, then they have to loan out that same money at least 35% just for them to pay that 20%interest rate with the additional 15% as “spread” -the percentage they charge for operational expenses of the bank, we’re not even considering the profit the bank also has to make for that same transaction. For such a small place, like Surigao-how many do you think can afford to pay such loan rates, and the bank has to loan out that money if they are to pay back the 20% interest rate that they promised- Nards)
Make a judgment if the deposit rates these rural banks are offering seem reasonable to you given its environment and business because, no matter how you spin the calculations, these are the hurdle rates the bank must face to continue doing what it is doing.
The insurance provided by PDIC is a safety net. It should not be counted on as a first way out. The insurance should not give you a false sense of security. The point here is a commonly cited tenet in risk management: 100 year wars do not happen often but they do happen. And when they happen, the chances of you outlasting the war aren't too bright either.
When all have been said and done, the ultimate issue goes back to something Chester asked. It would still be part of your due diligence to judge the stability of your potential bank. It is your money so take the pain to make an informed choice of which bank you can trust with your money.
It all boils down to "trust". Thankfully, this does not have to be a leap of faith since there are clear tangible issues that you can consider and evaluate. But it is also not an exact science. Ask around the place what people think of the bank. Some will like it, others will have their own gripes here and there.
Rafael B. Buenaventura, the former Governor of the Bangko Sentral ng Pilipinas and an internationally seasoned banker was often heard saying: if it sounds too good to be true, it probably is.
Take heed. That is very wise counsel from a man who I consider to have very, very few equals.
*Noet Ravalo is the first Filipino to earn a PhD in Economics from Boston University and is a macro-financial economist by practice and profession. He was chief economist of the Bankers Association of the Philippines until 2002 and has since been doing consulting work for multilateral and foreign agencies. His current engagements are with the Bangko Sentral ng Pilipinas and the PDS Group. Over the past 12 years, he has been asked to provide technical inputs to both the Senate and the House of Representatives on various economic and financial legislation, some of which will have big impact on Filipinos’ personal finances.
actually this was foreseen coming as early as 2005, when this company started soliciting investments in our place, in fact it was even surprising it took this long before it blew all over.maybe it was because the size; the total assets of all the Rural Banks belonging to this "Group" comprised about 11% of the total assets of all the Rural Banks in the Country.
I was exposed to it first hand because it was also the same time I became involved in the financial markets as a financial consultant. I was also invited to be an investor, and to attend their seminar, it worked like this: They were offering a double-your-money-in five-years type of investment, and the icing on the cake was: the interest would be paid to you in advance (the moment you make your investment) in the form of post dated checks. Honestly, you don't have to be a financial expert or an accountant to see (from the business point of view)that the numbers just don't add up, it smelled like a pyramiding scam (and the news on TV confirms this). Some of my businessmen friends were asking me if it was safe or possible, to which my answer has always been in the form of a another question: "Where can you find a business that actually pays in advance the profit, before the business has even started to operate'? (because thats how it looked like) unfortunately some did invest, which just goes to show that when it comes to greed, even level headed people are not immune. (remember the current US sub-prime crisis?) and now, reps from "The Group" have the audacity to put the blame on the current US sub-prime crisis. below is an article that I emailed to my clients way back at the time when people started investing with "The Group", before the US sub-prime even exploded. Take note of the date of the article, and take heed-because this also concerns other Rural Banks, Financial Establishments or investment instruments as well.
ASK Dr. NOET
By Dr. Johnny Noet Ravalo
INQUIRER.net
Last updated 12:59pm (Mla time) 05/10/2007
What can you say about the 20% interest per annum paid by some rural banks? Interest is paid monthly, covered by the PDIC, tax exempt, with five years maturity. In five years, a time deposit of P1 million will double to P2 million plus? -- Geno Real
A rural bank in my place offers an interest rate of six percent for a regular deposit and as much as 10% for a time deposit. Is the risk worth taking? I will only deposit the amount covered by the PDIC, Where can I check the strength of a rural bank to evaluate the risk I may be taking? Chester Barcenas
Geno, Chester, your respective inquiries are quite similar so let me just take them together.What is probably being offered to you Geno is a double-your-money type of deposit. This takes advantage of a provision in the law that exempts 5-year deposits from the final withholding tax. With this tax break, you would only need an interest rate of 14.8 percent to double your money in five years.
What are the risks to these? The same law that exempts you from the withholding tax says that if you withdraw before the five years are up, you have to pay the tax. The risk here is whether you have enough resources elsewhere to keep you from withdrawing the money you put in the potentially 5-year deposit. If liquidity is an issue, the chances of doubling-your-money in five years are quite remote.
Oh, just to be safe Geno, please make sure that the bank is indeed offering you a deposit instrument that is duly covered by the Philippine Deposit Insurance Corp.In both of your questions, the deposit rate being offered is something you should think about. For banks to continue operating, its lending and investment operations have to earn a premium over the deposit rates it pays out.
Under present reserve requirements (that’s the portion of funds banks are required to keep as reserves), this premium would be roughly 27 percent. That means a 10 percent deposit rate translates to a 12.7 percent loan rate to fund itself. This is before taxes, before administrative costs, before regulatory fees and before any premium for taking the additional risks.
(To put it plainly, if the bank promises you a 20% interest rate, then they have to loan out that same money at least 35% just for them to pay that 20%interest rate with the additional 15% as “spread” -the percentage they charge for operational expenses of the bank, we’re not even considering the profit the bank also has to make for that same transaction. For such a small place, like Surigao-how many do you think can afford to pay such loan rates, and the bank has to loan out that money if they are to pay back the 20% interest rate that they promised- Nards)
Make a judgment if the deposit rates these rural banks are offering seem reasonable to you given its environment and business because, no matter how you spin the calculations, these are the hurdle rates the bank must face to continue doing what it is doing.
The insurance provided by PDIC is a safety net. It should not be counted on as a first way out. The insurance should not give you a false sense of security. The point here is a commonly cited tenet in risk management: 100 year wars do not happen often but they do happen. And when they happen, the chances of you outlasting the war aren't too bright either.
When all have been said and done, the ultimate issue goes back to something Chester asked. It would still be part of your due diligence to judge the stability of your potential bank. It is your money so take the pain to make an informed choice of which bank you can trust with your money.
It all boils down to "trust". Thankfully, this does not have to be a leap of faith since there are clear tangible issues that you can consider and evaluate. But it is also not an exact science. Ask around the place what people think of the bank. Some will like it, others will have their own gripes here and there.
Rafael B. Buenaventura, the former Governor of the Bangko Sentral ng Pilipinas and an internationally seasoned banker was often heard saying: if it sounds too good to be true, it probably is.
Take heed. That is very wise counsel from a man who I consider to have very, very few equals.
*Noet Ravalo is the first Filipino to earn a PhD in Economics from Boston University and is a macro-financial economist by practice and profession. He was chief economist of the Bankers Association of the Philippines until 2002 and has since been doing consulting work for multilateral and foreign agencies. His current engagements are with the Bangko Sentral ng Pilipinas and the PDS Group. Over the past 12 years, he has been asked to provide technical inputs to both the Senate and the House of Representatives on various economic and financial legislation, some of which will have big impact on Filipinos’ personal finances.
Wednesday, December 10, 2008
The Power of Compounding
One of the things you need to know about building wealth is the power of making regular periodic investments and reinvesting rather than spending the profits.
The results you will with this discipline are surprising. Let’s say you start with nothing, and decide putting PhP 5000 of your income into an investment account every month, and you commit not to touch your money in investment. That means you can’t take withdraw any funds until you’ve reached your long-term goal.
The overall market, at least as measured by the S&P 500 index, returned 11.8%, on average, annually over the past 10 years. If you achieve that same return, you’d have PhP 1,140,000 after 10 years. But it gets better. You’ll have PhP 4,860,000 if you stick with the plan for 20 years and a cool PhP 17 million in 30 years.
The process described here is a combination of two powerful investing strategies:
Compounding and peso-cost averaging.
Compounding is simply reinvesting rather than spending your profits. By doing that; you capture the future returns on your reinvested profits as well as on your original investments.
Peso-cost averaging means that your fixed monthly investment buys more shares of a mutual fund or stock when prices are low, and fewer shares when prices are high. For instance, if you were investing PhP 5000, you’d get 500 shares if a stock were trading at PhP 10, but roughly 555 shares if it dropped to PhP 9.
Discipline Required. The hardest part of implementing these strategies is making the regular monthly investments. It’s easy to procrastinate adding to your account if the market is down or if you could use the cash for something else.
The best way to make sure that the regular investments happen is to automatically deduct a fixed amount from your monthly salary and directly invest it in a mutual fund account every month.
The Rule of 72
Do you want to know how long it takes for your money to double if you know the interest? All you need to do is apply the Rule of 72. Divide 72 by the given interest rate.
Example: Someone asks you to invest your hard-earned money at 8% interest per annum.
You can easily compute in your mind, 72 divided by 8 is 9. It will take 9 years before your money doubles. Then decide if this is in accordance to your personal financial objectives or not.
Do you want to know at what interest would your money double if you know the length of time your money will be invested? All you need to do is apply the Rule of 72. Divide 72 by the period.
Example: Someone asks you to invest your hard-earned money for 10 years.
Divide 72 by 10 and the results would give you 7.2. The investment should yield 7.2% per annum for your money to double in 10 years.
Links:
www.business.inquirer.net/money/personalfinance
www.pinoysmartsaver.com
www.colaycofoundation.com
http://www.apersonalfinanceguide.com/
The results you will with this discipline are surprising. Let’s say you start with nothing, and decide putting PhP 5000 of your income into an investment account every month, and you commit not to touch your money in investment. That means you can’t take withdraw any funds until you’ve reached your long-term goal.
The overall market, at least as measured by the S&P 500 index, returned 11.8%, on average, annually over the past 10 years. If you achieve that same return, you’d have PhP 1,140,000 after 10 years. But it gets better. You’ll have PhP 4,860,000 if you stick with the plan for 20 years and a cool PhP 17 million in 30 years.
The process described here is a combination of two powerful investing strategies:
Compounding and peso-cost averaging.
Compounding is simply reinvesting rather than spending your profits. By doing that; you capture the future returns on your reinvested profits as well as on your original investments.
Peso-cost averaging means that your fixed monthly investment buys more shares of a mutual fund or stock when prices are low, and fewer shares when prices are high. For instance, if you were investing PhP 5000, you’d get 500 shares if a stock were trading at PhP 10, but roughly 555 shares if it dropped to PhP 9.
Discipline Required. The hardest part of implementing these strategies is making the regular monthly investments. It’s easy to procrastinate adding to your account if the market is down or if you could use the cash for something else.
The best way to make sure that the regular investments happen is to automatically deduct a fixed amount from your monthly salary and directly invest it in a mutual fund account every month.
The Rule of 72
Do you want to know how long it takes for your money to double if you know the interest? All you need to do is apply the Rule of 72. Divide 72 by the given interest rate.
Example: Someone asks you to invest your hard-earned money at 8% interest per annum.
You can easily compute in your mind, 72 divided by 8 is 9. It will take 9 years before your money doubles. Then decide if this is in accordance to your personal financial objectives or not.
Do you want to know at what interest would your money double if you know the length of time your money will be invested? All you need to do is apply the Rule of 72. Divide 72 by the period.
Example: Someone asks you to invest your hard-earned money for 10 years.
Divide 72 by 10 and the results would give you 7.2. The investment should yield 7.2% per annum for your money to double in 10 years.
Links:
www.business.inquirer.net/money/personalfinance
www.pinoysmartsaver.com
www.colaycofoundation.com
http://www.apersonalfinanceguide.com/
Wednesday, December 3, 2008
INVESTMENT AND THE EIGHT DUH’s: IT’S NOT THE ECONOMY STUPID!
“It’s only when the tide goes out that you will know who’s been swimming naked.” Warren Buffet
It’s hard being an insurance salesman nowadays, its hard enough making new clients, you also have to pacify the old ones’ as well, more so when the company I’m connected with is right in the midst of it.(AIG-Philamlife) and since I’m into investments, like mutual Funds, the common question is always, “Is it safe?” to which my answer has always been, no, but it’s wise, which obviously puts me in a dilemma. No in a sense that, there is no safe investment (see duh no.5) crisis or no crisis, both answer still applies. Actually now would be a good time to invest (in Mutual Funds) since the value per share is low (as they say in Trading 101:”Buy when everyone else is selling, and Sell when everyone else is buying”) but I’m cautious about recommending this last one, with all these big firms folding up (Lehman Bros.) and some local banks exposure to sub-prime, everyone just wants to get out while their money is still intact. Some are willing to accept loses, while others won’t. ironically what the present crisis has taught us is-there are no new lessons, the same old rule still applies, in the end, the basic fundamental reason and consideration for investing hasn’t change, and once we deviate from its “raison de etre”, that’s when the problem starts, unfortunately, that’s what Wall Street did, (including AIG) or maybe, they’ve never learned at all, and now we’re in this mess. Below are my personal reflections, If there is really a lesson to be learned from all these, it can only be described in one word: “duh”
Meet the eight duh’s:
Duh no. 1) Never invest with a goal of “Getting Rich”.
A common mistake a lot of investors make, or you could simply call it greed (duh) that’s how Wall street got us into this mess in the first place, (and to think most of these guys are Ivy Leaguers). Here in the Philippines it’s the same thing, with some agents, fund managers, analysts and even some financial columnist, saying the same thing. Not surprising, when you consider that, two years ago, the equities market were doing annual rates as high as 72%. And a lot of agents were only too willing to overlook (instead of correct) that impression and happily oblige clients and investors, deviating from the basics: Investments and Savings (for that matter) form a part of financial planning in order to achieve specific financial goals, i.e future education for the kids, health management, retirement, etc. and while you might actually end up getting rich in the process, be specific and realistic about your goals. When you finally decide to make an investment-keep repeating to yourself…”There is only one Warren Buffet”.
2.)Yield is not all that matters.
Going back to no.1, it is always a common reaction, that every time a new investment opportunity comes along, the main question is always the rate of return, maybe it has something to do with coming from a place where it used to be that the only financial options we had were savings accounts and time deposits. Unfortunately in my experience, most of the people who invests solely on the basis of high returns, are the people most likely to fall for double your money schemes and investment scams. Another point to consider is the liquidity, hidden cost, fees and penalties for such instruments. Of what good is the promised high rate of return, when it can easily be offset by the high fees and deductions in the event of an early redemption or if they could even be redeemed at all (lock-in-periods)? And of course, there is the age old adage: “the higher the return, the higher the risk”.
3.)Never invest with the sole purpose to avoid or evade paying taxes.
Fortunately, these do not apply to us: the Hoi Polloi’s, but to High networth individuals (that’s rich to you) There are offshore investments, and there are tax havens. In the Philippines, earnings of Mutual Funds are exempted from withholding Tax, take note however that the purpose of diversifying your portfolio is to spread the risk. And a part of Wealth Management and Asset protection, should be about, helping you pay your taxes, thru savings, insurance and Estate Planning, and not avoid them. (On a personal level): its only proper to pay back what is due to the state, who has guaranteed, and protected our rights and privileges, so you can be where you are right now. (On the financial side) I have yet to hear Warren Buffet (one of the most meticulous financial analysts around) tout the virtues of investing in the Cayman Islands.
4.)Never predict nor foretell the future, with your, (or other people’s) money.
It’s called Financial Planning, not predicting, nor foretelling (hello) and leave the forecasting to fashion, the weatherman, and Actuarians. Last time I checked, they still don’t include “Witchcraft, or Crystal Ball Reading 101” in Financial Planning, Economics, Fundamental or technical Analysis, Management and Accounting. So don’t ever believe when experts tell you (those same experts that got us here) how long this recession will last, because NOBODY KNOWS, and THE END IS NOT YET IN SIGHT!
5.)No Investment, or Savings (for that matter ) is ever risk- free or Bulletproof.
You still hide your cash under the mattress? Then make sure its fireproof,
burglar Proof, ...etc. the list goes on. From the high yielding, (and higher-risk) Hedge Funds and Derivatives, to the more common savings accounts (your local bank’s exposure to Lehman Bros.) there is always a risk involve. Diversifying your portfolio is about spreading and minimizing your risk. If you are risk averse, then be conservative, and include savings plans and Insurances such as
endowments, and participating plans, in your portfolio, if you have considerable
assets, hire a professional financial planner. When it comes to investments,
the truth hurts, and the truth is: “never invest more than you can afford to lose”.
6.)That’s why it’s called “Financial Planning”.
Because, you first must have a specific financial goal in mind, And since there is no such thing as the best all-in-one investment instrument. (more so now). Each instrument should fit a specific goal,-an educational plan for your child’s future education, A pension plan for your retirement, and so on. In the end, it all depends on how much you’ll need, how much you can afford to pay, and how much time you are willing to allot.
7.)It still takes time.
Some things in life are simply that way, usually, the lasting and productive ones-the blooming of flowers, the bearing of fruits, wines and spirits, evolution,
change and most of all, GROWTH, that’s why it’s called MATURITY.
8.)Speculation is the mother of Recession.
With regards to the sub-prime fiasco, the verdict on Wall Street is out, GUILTY. The crime: GREED. Hard to believe, the CEO’s, Investment Bankers, and Fund managers of these companies, were students of economics once. Maybe they thought they were just too smart for the rules. By mobilizing these funds, securities and investments are supposed to help develop the capital markets, to finance the expansion of Industries that produce goods and services, provide employment, promote savings, and an equitable distribution of wealth, and help stabilize the stock market. By deviating from these basic, (tried and tested) fundamentals, they have violated the trust of millions of investors, who have entrusted them with their hard earned money, and of course, created the mess were in right now. It’s not the economy stupid-it’s elementary my dear Watson.
P.S. I normally don’t recommend books, but those of you who love to read good old-fashion novels might want to check out an old bestseller (circa 1977) that I have just read and enjoyed, while it’s a 70’s book, you’d be surprised at the uncanny resemblance to today’s headlines. Entitled: “The Crash of 79” by Paul Erdman. It’s a thriller and international intrigue, in the tradition of Forsyth and Le Carre’. Whose hero is a (lol) Banker.
Investment advice (By Boo Chanco)
If you had purchased $1,000 of Delta Air Lines stocks one year ago, you would have $49 left. With Fannie Mae, you would have $2.50 left of the original $1,000. With AIG, you would have less than $15 left.
But, if you had purchased $1,000 worth of beer one year ago, drunk all of the beer, then turned in the cans for the aluminium recycling REFUND, you would have $214 cash.
Based on the above, the best current investment advice is to drink heavily and recycle.
It’s hard being an insurance salesman nowadays, its hard enough making new clients, you also have to pacify the old ones’ as well, more so when the company I’m connected with is right in the midst of it.(AIG-Philamlife) and since I’m into investments, like mutual Funds, the common question is always, “Is it safe?” to which my answer has always been, no, but it’s wise, which obviously puts me in a dilemma. No in a sense that, there is no safe investment (see duh no.5) crisis or no crisis, both answer still applies. Actually now would be a good time to invest (in Mutual Funds) since the value per share is low (as they say in Trading 101:”Buy when everyone else is selling, and Sell when everyone else is buying”) but I’m cautious about recommending this last one, with all these big firms folding up (Lehman Bros.) and some local banks exposure to sub-prime, everyone just wants to get out while their money is still intact. Some are willing to accept loses, while others won’t. ironically what the present crisis has taught us is-there are no new lessons, the same old rule still applies, in the end, the basic fundamental reason and consideration for investing hasn’t change, and once we deviate from its “raison de etre”, that’s when the problem starts, unfortunately, that’s what Wall Street did, (including AIG) or maybe, they’ve never learned at all, and now we’re in this mess. Below are my personal reflections, If there is really a lesson to be learned from all these, it can only be described in one word: “duh”
Meet the eight duh’s:
Duh no. 1) Never invest with a goal of “Getting Rich”.
A common mistake a lot of investors make, or you could simply call it greed (duh) that’s how Wall street got us into this mess in the first place, (and to think most of these guys are Ivy Leaguers). Here in the Philippines it’s the same thing, with some agents, fund managers, analysts and even some financial columnist, saying the same thing. Not surprising, when you consider that, two years ago, the equities market were doing annual rates as high as 72%. And a lot of agents were only too willing to overlook (instead of correct) that impression and happily oblige clients and investors, deviating from the basics: Investments and Savings (for that matter) form a part of financial planning in order to achieve specific financial goals, i.e future education for the kids, health management, retirement, etc. and while you might actually end up getting rich in the process, be specific and realistic about your goals. When you finally decide to make an investment-keep repeating to yourself…”There is only one Warren Buffet”.
2.)Yield is not all that matters.
Going back to no.1, it is always a common reaction, that every time a new investment opportunity comes along, the main question is always the rate of return, maybe it has something to do with coming from a place where it used to be that the only financial options we had were savings accounts and time deposits. Unfortunately in my experience, most of the people who invests solely on the basis of high returns, are the people most likely to fall for double your money schemes and investment scams. Another point to consider is the liquidity, hidden cost, fees and penalties for such instruments. Of what good is the promised high rate of return, when it can easily be offset by the high fees and deductions in the event of an early redemption or if they could even be redeemed at all (lock-in-periods)? And of course, there is the age old adage: “the higher the return, the higher the risk”.
3.)Never invest with the sole purpose to avoid or evade paying taxes.
Fortunately, these do not apply to us: the Hoi Polloi’s, but to High networth individuals (that’s rich to you) There are offshore investments, and there are tax havens. In the Philippines, earnings of Mutual Funds are exempted from withholding Tax, take note however that the purpose of diversifying your portfolio is to spread the risk. And a part of Wealth Management and Asset protection, should be about, helping you pay your taxes, thru savings, insurance and Estate Planning, and not avoid them. (On a personal level): its only proper to pay back what is due to the state, who has guaranteed, and protected our rights and privileges, so you can be where you are right now. (On the financial side) I have yet to hear Warren Buffet (one of the most meticulous financial analysts around) tout the virtues of investing in the Cayman Islands.
4.)Never predict nor foretell the future, with your, (or other people’s) money.
It’s called Financial Planning, not predicting, nor foretelling (hello) and leave the forecasting to fashion, the weatherman, and Actuarians. Last time I checked, they still don’t include “Witchcraft, or Crystal Ball Reading 101” in Financial Planning, Economics, Fundamental or technical Analysis, Management and Accounting. So don’t ever believe when experts tell you (those same experts that got us here) how long this recession will last, because NOBODY KNOWS, and THE END IS NOT YET IN SIGHT!
5.)No Investment, or Savings (for that matter ) is ever risk- free or Bulletproof.
You still hide your cash under the mattress? Then make sure its fireproof,
burglar Proof, ...etc. the list goes on. From the high yielding, (and higher-risk) Hedge Funds and Derivatives, to the more common savings accounts (your local bank’s exposure to Lehman Bros.) there is always a risk involve. Diversifying your portfolio is about spreading and minimizing your risk. If you are risk averse, then be conservative, and include savings plans and Insurances such as
endowments, and participating plans, in your portfolio, if you have considerable
assets, hire a professional financial planner. When it comes to investments,
the truth hurts, and the truth is: “never invest more than you can afford to lose”.
6.)That’s why it’s called “Financial Planning”.
Because, you first must have a specific financial goal in mind, And since there is no such thing as the best all-in-one investment instrument. (more so now). Each instrument should fit a specific goal,-an educational plan for your child’s future education, A pension plan for your retirement, and so on. In the end, it all depends on how much you’ll need, how much you can afford to pay, and how much time you are willing to allot.
7.)It still takes time.
Some things in life are simply that way, usually, the lasting and productive ones-the blooming of flowers, the bearing of fruits, wines and spirits, evolution,
change and most of all, GROWTH, that’s why it’s called MATURITY.
8.)Speculation is the mother of Recession.
With regards to the sub-prime fiasco, the verdict on Wall Street is out, GUILTY. The crime: GREED. Hard to believe, the CEO’s, Investment Bankers, and Fund managers of these companies, were students of economics once. Maybe they thought they were just too smart for the rules. By mobilizing these funds, securities and investments are supposed to help develop the capital markets, to finance the expansion of Industries that produce goods and services, provide employment, promote savings, and an equitable distribution of wealth, and help stabilize the stock market. By deviating from these basic, (tried and tested) fundamentals, they have violated the trust of millions of investors, who have entrusted them with their hard earned money, and of course, created the mess were in right now. It’s not the economy stupid-it’s elementary my dear Watson.
P.S. I normally don’t recommend books, but those of you who love to read good old-fashion novels might want to check out an old bestseller (circa 1977) that I have just read and enjoyed, while it’s a 70’s book, you’d be surprised at the uncanny resemblance to today’s headlines. Entitled: “The Crash of 79” by Paul Erdman. It’s a thriller and international intrigue, in the tradition of Forsyth and Le Carre’. Whose hero is a (lol) Banker.
Investment advice (By Boo Chanco)
If you had purchased $1,000 of Delta Air Lines stocks one year ago, you would have $49 left. With Fannie Mae, you would have $2.50 left of the original $1,000. With AIG, you would have less than $15 left.
But, if you had purchased $1,000 worth of beer one year ago, drunk all of the beer, then turned in the cans for the aluminium recycling REFUND, you would have $214 cash.
Based on the above, the best current investment advice is to drink heavily and recycle.
Thursday, November 20, 2008
MEET RICO SANTOS * THE WORLD’S RICHEST AND MOST SUCCESSFUL PERSON
He makes no money to speak of, and at the moment, is unemployed, and yet, his net worth is trifling, he is 25 year old Rico Santos. Like most everyone who comes from a comfortable middle class family, he went to exclusive elementary and high schools. The son of a Doctor, (and coming from a family of Doctors,) Rico has no interest in medicine, he recently graduated with a degree in Computer Science from a well known University.
For now, Rico has not yet decided what to do with his life, whether to work in a call centre, or an IT company, here and abroad, or maybe if he changes his mind, take up nursing as a second course(like most people he knows). But still...it’s up to him. Either way, Rico Santos has the enviable freedom to choose his path, and for the moment he has chosen to postpone his quest for the bankable variety of wealth, to pursue his passion: Surfing, A sport he took up, a few years back as a student, while on vacation in Siargao Island with his friends one summer.
Before he plans to pursue his career, he and a group of friends, plan to surf the waves of the remote islands of Batanes, and the Spratleys. Santos figures he probably will be needing around, P30, 000.00 for those trips, and he doesn’t know how to raise the money, but he has the earning potential, and with the oceans before him and wind offshore, Santos is very well fixed already.
You might be wondering how a guy like that gets to be the world’s richest and most successful person. Before I proceed to explain why, let me first introduce who Rico Santos really is. If you are between, 21-30 years old, single (no dependents), healthy, with no liabilities (walang utang) and possessing a college degree, then “YOU ARE RICO SANTOS”. that’s because you are rich in assets of another kind. You have youth, health, confidence, and a top notch education-a wealth of what economist call human capital, the kind of person Human Resource Managers look for. In addition, your obligations are nil and your options are virtually limitless, a status in life, money can neither buy nor preserve.
If wealth can be defined as independence, opportunity, and the amount of control someone has over his/her own life-and many would argue that those attributes are essential to a sense of well-being-then you, (the Rico Santos’ of the world) are the richest and most successful person today. The bad news is, you will never be much richer than you are now, your options will inevitably narrow, your responsibilities (both: personal and professional) will mount with time, and with it comes, financial liabilities: bills, loans, mortgages, tuition fees.etc. As you age, you use up human capital the way an old machine loses its productivity. Not to mention, that your single most important asset-your health” will start to deteriorate (unless you do something about it of course) only financial Capital, and more of it, can pay the obligations that grow out of work and family and accumulate as one matures.
Financially speaking, your financial capital value (assets both, solid and liquid) should increase, as your human capital value decreases. While it is “assumed” that your income will increase as you grow older, such won’t be the case when you retire. So one of the best options for you now would be to start your financial planning-on building financial wealth. So as I said earlier, your options are still open, question is-what are you going to do about it?
*The name Rico Santos is purely the product of my imagination, any reference to an actual Rico Santos is purely coincidental and unintentional
References and Links
www.pinoysmartsaver.com
www.colaycofoundation.com
www.business.inquirer.net/money/personalfinance
www.rfp-philippines.com
For now, Rico has not yet decided what to do with his life, whether to work in a call centre, or an IT company, here and abroad, or maybe if he changes his mind, take up nursing as a second course(like most people he knows). But still...it’s up to him. Either way, Rico Santos has the enviable freedom to choose his path, and for the moment he has chosen to postpone his quest for the bankable variety of wealth, to pursue his passion: Surfing, A sport he took up, a few years back as a student, while on vacation in Siargao Island with his friends one summer.
Before he plans to pursue his career, he and a group of friends, plan to surf the waves of the remote islands of Batanes, and the Spratleys. Santos figures he probably will be needing around, P30, 000.00 for those trips, and he doesn’t know how to raise the money, but he has the earning potential, and with the oceans before him and wind offshore, Santos is very well fixed already.
You might be wondering how a guy like that gets to be the world’s richest and most successful person. Before I proceed to explain why, let me first introduce who Rico Santos really is. If you are between, 21-30 years old, single (no dependents), healthy, with no liabilities (walang utang) and possessing a college degree, then “YOU ARE RICO SANTOS”. that’s because you are rich in assets of another kind. You have youth, health, confidence, and a top notch education-a wealth of what economist call human capital, the kind of person Human Resource Managers look for. In addition, your obligations are nil and your options are virtually limitless, a status in life, money can neither buy nor preserve.
If wealth can be defined as independence, opportunity, and the amount of control someone has over his/her own life-and many would argue that those attributes are essential to a sense of well-being-then you, (the Rico Santos’ of the world) are the richest and most successful person today. The bad news is, you will never be much richer than you are now, your options will inevitably narrow, your responsibilities (both: personal and professional) will mount with time, and with it comes, financial liabilities: bills, loans, mortgages, tuition fees.etc. As you age, you use up human capital the way an old machine loses its productivity. Not to mention, that your single most important asset-your health” will start to deteriorate (unless you do something about it of course) only financial Capital, and more of it, can pay the obligations that grow out of work and family and accumulate as one matures.
Financially speaking, your financial capital value (assets both, solid and liquid) should increase, as your human capital value decreases. While it is “assumed” that your income will increase as you grow older, such won’t be the case when you retire. So one of the best options for you now would be to start your financial planning-on building financial wealth. So as I said earlier, your options are still open, question is-what are you going to do about it?
*The name Rico Santos is purely the product of my imagination, any reference to an actual Rico Santos is purely coincidental and unintentional
References and Links
www.pinoysmartsaver.com
www.colaycofoundation.com
www.business.inquirer.net/money/personalfinance
www.rfp-philippines.com
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