If you haven't read my previous blog "Our Motivation", I recommend that you do before proceeding to this blog. It presents our reasons why we dared to explore the world of investing.
Having some spare cash from the separation pay of my wife when her company closed during the crisis, we have thought of several medium or investment products as we are already aware that keeping it in a savings account will make us virtually lose money because of inflation. As newbies, we don’t know any medium where our money can earn except for time deposits. We asked our parents in the Philippines to inquire to PDIC-member rural banks’ time deposit rates. We expected a range of 8 to 10% p.a., and to our surprise, the highest rate they can offer is a merely 4% with your money locked up for 5 years. Well, that would still make us virtually lose our money since our country’s 20-year effective annual inflation is between 5.5 to 6.5%. Also, Bo Sanchez said in his book that 8% p.a. is the minimum acceptable return for any investments and he considers this only as ‘walking’ towards financial freedom.
Then, I have this colleague who has several credit cards and a considerable portion of his salary is going to the payment of those cards where their interest rates range from 2.5 to 3% per month plus all the charges. Since he’s a bit close friend as well, I thought of offering him to close all his cards and pay me instead at 1.5% per month without any charge. That’s an effective 19.56% p.a. so it’s within my theoretical investment return range. So I thought that I can make my money earn and at the same time help my friend in that small way. We made the deal to settle it monthly for a year (amortized over the year). First, things were smooth, but on the latter months, it felt like I have to beg for the money that he owes us. It’s really out of my personality to do such a thing, so in the end, I decided to just let him pay us the exact amount he owed us without a single centavo interest (we even lost some due to all our calls, SMS, and the priceless headaches).
As we continued our search to find the proper investment medium, we decided to temporarily invest our money in bonds (The National Bonds – Dubai). It has a very small yield of almost 4% but there was a chance to win weekly prices so it’s still better than a savings account.
We tried to explore FX trading and opened a test account on one of the brokers online. We found a really good site where it teaches the basics of FX trading. For a couple of weeks we are actively reading the lessons on that site while attempting to apply them on our test account. We are about to open a live account however, we were discouraged by some comments / blogs posted by some people who had bad encounters with FX trading.
In the meantime, my wife has started with her new job. However after 9 months, her company decided to merge with a stronger company. Luckily she was absorbed by another company (a more stable one) so we were not really so bothered about her yet another termination. Before she started with this new company, we decided to go home for a 2 week break. We maximized our vacation by exploring the world of Mutual Fund, VUL and Stocks.
We went to first to BPI to open a joint account. We did not miss the opportunity to ask whatever investment that they can offer us. They briefed us with their new product called Max Yield 1 – a dollar lock-in investment which offers high watermark feature wherein the highest level achieved will be the guaranteed investment at maturity. This also comes with life protection, accident and health coverage. We didn’t really have the time to think about it since we only have a limited period in the Philippines. We decided to open a minimum investment. (I won’t claim here that this was indeed a good decision because honestly we were really disappointed about this investment and the level of customer service that they are offering).
Next stop was to open a Mutual Fund account. Based on the limited research that we did, we have narrowed down our options to either Philam life or Sunlife. We picked Sunlife because we thought that it is more stable than Philam. Also because the location of their office is just right next to Citisec, where we intend to open an online trading account. We were welcomed by the Unit Manager and she discussed their products, requirements and procedure. We were very conservative at that time since it was 2 months before the elections. Therefore, we opened Bond Fund and GS Fund. (After the elections, when we felt that there is positive effect on the economy, we transferred our holdings to Equity Fund and Balanced Fund. So far we are happy with our Funds performance as well as the customer service in Sunlife).
Now that we have bonds, VUL, and mutual funds, one common investing medium is left - STOCKS. We searched for the best online stock broker and we found in several forums and blogs that Citiseconline is the best. It was Bo's recommendation as well. So we browsed their site, brought all their requirements, and that's it, we had opened an account with an initial fund of Php30,000. To add funds in our account while we are here in UAE, we just have to send the money in our BPI account and transfer it to our Citiseconline account through BPI's online banking services. Very convenient.
Next blog: Our First Stock Trading Experiences