[Finances] Adventures In Peso Cost Averaging

Being the geek that I am, I've wanted to make sure that I make the right financial decisions for the long term. We always go back to the cliche that we're never growing any younger and thus it becomes all the more important to plan ahead for the future.

Of course being in a third world country where corruption is rampant, the business sector is often unpredictable and government oversight is a statistical wild card, it's hard to figure out where to put your money. Quite frankly, there are people who argue in favor of just holding on to your money and keeping out of the system entirely. Plus with typical savings accounts only offering about 0.5% interest per year, simply banking your money is gong to get you anywhere. While there are special deposit products like BPI's Maxi-Saver accounts that offer better rates, it's still not enough to secure you in the long term.

Enter the scary world of the local stock market. This legalized gambling den remains to be your best bet to long term financial stability, provided you keep your wealth-building options sufficiently diverse. So apart from my bank funds, my life insurance polices and associated variable income components, I've recently started to explore the local stock market via Citisec Online.





No, this doesn't mean I've become an active stock trader like you see in the movies. I really don't have the kind of constitution for short-term investing given how volatile the local stock market can be. Instead, I'd like to think that I'm more of a value-driven investor, mainly relying on the principle of Peso Cost Averaging (and thus the point of this entry). Let's face it, geeks like me a very skittish when it comes to high risk and high pressure situations like trying to figure out the stock market. One will always have that general advice in mind about the need to buy low and sell high, but your average guy doesn't have the time to fully analyze and theoretically understand the local market. Worse as a geek, I'd probably obsess about trying to figure out the market and would probably end up doing nothing due to analysis paralysis.

But Peso Cost Averaging makes sense to me, and maybe it'll work for you as well. Let's face it, if you're not a regular reader of this blog, then some investment-related web search brought you here. Given that, I hope this proves helpful to all of you on one level or another.

[Finances] Getting Into Investing

Image via WikipediaMost financial advisers, ranging from your contacts at your local bank to Oprah's latest guest, always talk about the need to diversify your assets. You need to have a good mix of equity / cash, property and investments. Try as I like, my equity / cash side of things has never been all that great, but at least I pay my bills and stay out of credit card debt. I don't have property since I don't have enough cash to start payments on land, unless you consider my very large collection of books to have significant property value. Now that leaves investments to consider.

I've started slowly with two different insurance policies - one is a life insurance policy with an alternative revenue stream in the form of dividends that I'll start to receive after, well, 14 years of paying my premiums. Ugh. The other one is also a life insurance policy, but it's bundled with an investment component that is really what drives income. I need to continue to pour in cash for ten years and will eventually get my dividends and a lifetime insurance policy as well. I get to choose the investment method between their Bond, Balanced and Equity funds, which are pretty much standard choices.

That still doesn't answer the investment side, and so I've started looking into how to really get into the infamous stock market. Insert sound of thunder right around here. What's worse, this is not America, so we're dealing primarily with the Philippine Stock Exchange. Insert whinny of horse here.

A lot of people talk about how playing the stock market is a promising way to get a lot of money in a short amount of time, or to lose a lot of money in a short amount of time. Yes, essentially it's gambling but just somehow more legal, LOL. The stakes are pretty high, but so are the rewards.

In my mind, there are two general avenues to consider when getting into stocks.

First, you can try it on your own. Whether you hire your own stock broker and have him make the deals based on your sole decisions or play around with online facilities for stock trading or whatever. This allows you greater control but at the same time demands more research time on your part and greater vigilance. Depending on what industries you decide to invest in and how many stocks / companies you plan on dealing with, this could take a lot of time that you may not have given your day job.

I suppose that if you take this route, then you'll need to practice. Whether this consists of just reading the paper every day and playing with imaginary stocks or using stock trading games / simulators like this one provided by the PSE. If you choose to remain online (like most geeks), then your options for the local stock market are somewhat limited. Thus far, the most decent site I've found that trades on the PSE is CitisecOnline, but I'm not ready to try this myself so I can't speak around how well this works. Have any of you tried this site out?

In going on your own, you need to make sure you have a healthy understanding of how comfortable you are with risk and looking at things in the long term. It's not all about big wins in just one day and cashing in your chips after. Really playing the market means a lot of time and money, losing for months on end only to win big much later on. Most folks seem blinded by how the likes of Hollywood have painted the picture of trading and how everyone wins it big sooner or later, when that isn't necessarily the case.

The other side of things is to have someone else manage your funds, whether in the form of a mutual fund portfolio that you choose to buy into or an assets management company / broker that you decide to pay in order to make the buying and selling decisions for you.

As a consumer, it's hard to find accessible brokerage firms - at least this is how I feel, and thus the more conventional route is to go through other institutions that have chosen to offer such services like my insurance company or of course banks.

In choosing someone to manage your assets, you'll want to consider the track record of the company, the amount of capital they have to play around with and how transparent they are and how accessible their reports are. Taking things up another geek notch, you also may want to consider how usable their online venues are and how you can coordinate / communicate with them.

At this point in my explorations, I'm a bit more amenable to this route since I'm not at all confident in my ability to make informed decisions when it comes to trading and given my graveyard working schedule, I won't be awake most of the time when the stocks are actually trading. For now I'm considering the investment services offered by BPI and by HSBC, both seeming to have pretty good track records, naturally a lot of capital and lastly their web portals are really friendly and all the reports from their funds managers are pretty good. With banks like these, you buy "units" of their investment funds and each of these funds have a market-determined unit price that becomes the basis for determining the performance of the fund. I'm still looking further into my options and will eventually set up over-the-phone conversations with them to get a better idea of how they work and what to expect and will keep you financially-keen geeks posted in terms of my progress.

How about you guys and gals - what are your Philippine stock experiences and adventures thus far? Or have you not yet considered thinking about your finances on this level? Why or why not?