Musings of Madam-wannabee · Personal Finance

Wealth Management Series: Mutual Funds

Good morning!

I think my blogging mojo is back. For the past days, I have been regularly waking up at 4:30AM feeling refreshed. The downside is by 8:30PM, even before I finish reading a book to Aki, I am already half asleep. Good luck to me later because I have meetings until 11PM.

Anyhoo, today  I will tackle the backlog that has been sitting on my head since May last year. We started our Wealth Management Project January 2013. Read more about it here. We prioritized sealing the deals for our insurance and emergency funds. One of the cardinal rules of investing is making sure you are secured before you make investments. And by saying secured, I mean you should have enough money in the bank for emergencies and that you have insurance for your family in case something happens to you. Knock on wood.

First let me make it clear that I am no expert. I am just sharing what I know which might be wrong, incomplete or not applicable. Remember, this post was supposed to be published 15 months ago. I would be happy to answer any questions but please take everything with a grain of salt. Read personal finance books and talk to the experts before signing up for a product.

One of the many questions that I asked Efren Cruz, our financial advisor, is what is the best investment tool for us. I was really hoping that he’d suggest mutual funds because that is one product that I am already familiar with. To my relief, we both agree that mutual funds is the way to go.

So what are mutual funds? The idea is that you give your hard earned money to the experts, the fund managers and let them do what they do best, invest. Mutual fund companies decide where it would be best to invest, when to pull out, when to buy etc. My mutual fund agent released an advisory a couple of months ago after the sudden dip in PSEX. They said they had been getting inquiries and complaints as to why our fund was not performing as well as the competition. She advised that they were expecting the pull out of American investors. They waited for the stock market prices to go down so that they can buy stocks at a cheaper price. Information on foreign investor behaviour and trends is something I and probably a lot of other people, don’t have access too. And to be honest, I’d rather pay experts to take on the headaches and the heartaches. I’d rather spend my free time licking mixing bowls with Aki or giving my husband a scalp massage than research about money.

There are other ways to invest in the stock market. The old school way is if you have a lot of money, you can get a broker who will trade for you. Nowadays, you don’t need be filthy rich to invest directly. Some people I know invest thru COL Financial. They are subscribed in Bo Sanchez’ Truly Rich club. They pay a small fee, 500 bucks I think, monthly for expert advice on what to buy and when to buy. Lynn of SmockExchange blogged about it here.

You can also invest in by getting a VUL insurances. These are insurance products that comes with investment components. According to Efren, this is the most expensive option because of the admin fees. He is probably right. I asked one of our MF agents for a comparison of the performance of their VUL and their stand alone mutual fund. At that time, the VUL was at 12% while the mutual fund was performing much better at 19% year to date. VUL’s I think would be an ideal product for those who are not used to regularly saving a portion of their income. With VUL’s, because you don’t want to forfeit the earlier investments made, you will be encouraged to pay the monthly/quarterly/annual fee on time.
There are also UITF’s which is similar to mutual funds but instead of dealing with mutual fund companies, you coordinate with banks. What I like about UITF’s is the convenience. Just go to your preferred bank, tell them that you want to invest in UITF, fill out the form and then come back after several days for the UITF certificate. What I don’t like about it is that there is no agent who gives updates, provides after-sale service and sends greetings on Mother’s day. Ok, the last one is not important but my point is since the money I invested is not picked from a tree, it was something I really worked hard for, I want to be regularly updated on its performance. Funny, when I was filling out the form, the customer service rep of the bank leaned forward and in a semi whispery voice, as if she’s telling me a secret,”Mam I will teach you a trick. …………Buy low and sell high”. I just smiled and thanked her but in mind I was saying, “Naman!!! Hija, my high school economics teacher taught me that back in 1998!.”

Some info that you might be interested to know about mutual funds
Continue reading “Wealth Management Series: Mutual Funds”

Musings of Madam-wannabee · Personal Finance

Philippine Stocks Rose to A New All-time High For the 3rd Straight Day

Philippine Stocks Rose to A New All-time High For the 3rd Straight Day

Philippine Stocks Rose to A New All-time High For the 3rd Straight Day

Philippine Stocks Rose to A New All-time High For the 3rd Straight Day

Philippine Stocks Rose to A New All-time High For the 3rd Straight Day!!!

I AM SO HAPPY!!

 

 

Mrs. Monologues · Musings of Madam-wannabee · Personal Finance

On Emergency Funds

As I mentioned in one of my previous wealth management posts, our financial planner, Efren Cruz, clarified that the emergency fund should be worth the cost of expenses for at least 3 months. This was a major eye opener because all this time I thought the emergency fund should be basic salary times six. We are big on savings so the difference of the expenses and salary is quite significant.

What is an emergency fund?  As the name implies, it is the fund that you set aside for emergencies such as loss of a job, illness or any unexpected major expense. One of the cardinal rules of investing, I read, is to have an emergency fund first before actually investing.
One of the questions I asked Efren is that “is there a way to maximize the returns of our emergency fund?”.  Would it be wise to invest it in low risk instruments?  Efren said that the EF should be placed in a monthly time deposit so that it still earns somehow but we can pull it out anytime. We also placed several weeks worth of EF in a savings bank account that has an ATM since emergencies may take place during non-banking hours.

And so, we recomputed our emergency fund, consolidated it and parked it our trusted government-run bank (let’s use TGRB, ok?). Why government-run? Someone told me that government banks are more stable than commercial banks since they run on the citizen’s taxes. Not sure if this info is true but it does make sense.

Some learnings from our experience in opening an account for our emergency fund

– Banks require two official government ID’s. Company ID’s are not considered official.
– A friendly customer-service-oriented branch manager makes the banking experience a lot better. In general, I don’t like banks.  The offices are boring and services have a lot of opportunities for improvements.  We love the branch manager and staff in TGRB, though. I only brought one government ID. Because the branch manager knows us, she allowed me to open the joint account and submit my ID on another day. I also like that she calls every roll-over date to confirm if we will retain our monthly time deposit.
– There is such a thing as aggregate interest. Franco’s parents also have savings with TGRB. The branch manager, gave us a better interest rate based on the sum of our emergency fund and hubby’s families savings.
– Don’t forget your old signature. Hahaha. Franco had an account with TGRB even before we got married. We closed that account and opened a joint one. The process got longer than necessary because hubby forgot his signature 10 years ago!
– One of the things that bother me nowadays is estate tax. When we die, our beneficiaries may not get the full amount of the investments that we will leave behind. The government will take out estate tax. Grrrr! Being a product of a state university, I am thankful to taxpayers for financing my education. However, now that I am working and see my payslip, I can’t help but wish that one third of my salary does not go to income tax. Imagine, how much more comfortable our lives would be if we get that our salaries in full? Sorry for disgressing. I asked our branch manager if there are ways to avoid paying tax estate or at least reduce it. She bit her lip and told me there are ways but she can’t tell me. Hahahaha! Can someone please tell me?
– PDIC insures deposits only up to 500K per depositor. That means if I have 300K in time deposit and 450K in regular savings, should the bank declare bankruptcy, I will only get a maximum of 500K.

Here is a very informative post on emergency funds.

Mrs. Monologues · Musings of Madam-wannabee · Personal Finance

What I Learned from Our Insurance Shopping Experience

One of the most stressful projects that we did this year was to shop for life insurances. The day after Franco semi-failed the medical exam for his insurance application, an officemate, who was Franco’s batchmate in college, passed away in her sleep. We were all shocked. It was so sudden. She even went to work the night before. Her youngest was only 10 months old. I cried for days because of sadness for her and her family and because I was worried sick for my husband. Not just Franco’s health, I also lost sleep analyzing the costs. First we asked for insurance proposals for X amount. After realizing that the cost would badly hurt our regular savings, we decided to ask for new proposals for Y amount which is equal to X minus the value of our group life insurance from work. Then, I asked for different payment schemes. From 10 year pay periods, I thought of considering the 30 year pay proposals. After Franco’s medical exam, I reconsidered the variable unit linked proposals. Since we are going to spend a considerable chunk of our annual budget to insurances, might as well pay for insurance that comes with investments. In the end, we decided to go with traditional whole life 10 year pay insurance.

We learned from Efren Cruz, our financial adviser, that the best way to compute how much insurance one needs is to imagine the worst and estimate how much time and money one will need to get back on her feet. I think I need  5 years. Franco, since he earns more and he is the more resilient between the two of us, might need just 3 years. From the 20-30 plus proposals that we reviewed and the many agents I met, here is what I learned:

– Depending on the face value of the policy, your health, you and your family’s medical history and your age, you might be required to undergo a medical exam.

– Depending on the result of the medical exam, you might get rated which will effect the premiums and coverage. Or you could be denied. Because Franco is overweight, his annual premium increase by 50%! It was also from the medical exam that we learned that Franco’s blood pressure is considered pre-hypertensive. One of the riders that was important to me, the rider that pays out once the policy holder is diagnosed as having a critical illness like cancer, stroke etc, was not granted at first. I wrote an email to the head of the underwriting department and requested for reconsideration since Franco has no history of hypertension. They granted my request but they doubled the premium for that rider. Overall, the annual premium for Franco’s insurance jumped up by 50% because of his weight and elevated blood pressure.

– Insurance companies have a shared database of the ratings of their policyholders and applicants. If insurance company A denies your application for insurance, insurance company B will most likely find out.

– There is a two-year contestability period. If something happens to the policy holder, the insurance company has the right to investigate the cause of death. If they find out that the policyholder withheld important information or misrepresented facts during the application, the insurance company may opt not to pay.

Continue reading “What I Learned from Our Insurance Shopping Experience”

Musings of Madam-wannabee · Personal Finance

One Weekend, Four Agents

After months reading at least 30 proposals and checking out reviews of different pooled funds, last weekend, we finally decided and opened accounts. This is in relation, of course,  to our  2012 family new year’s resolution which is wealth management. I blogged about it here.

These are Vicky and Tita Beng, our agents for our life insurances.

Jen, our agent for our retirement, Aki’s education, honeymoon and car funds


The guy on the left is Kevin. He is our agent for our retirement and baby # 2’s education fund. To answer your question, no, I am not preggers. Continue reading “One Weekend, Four Agents”

Musings of Madam-wannabee · Personal Finance

Our 2012 Family Goal: Wealth Management

That is my fancy term for save more, spend less and investly wisely. Doesn’t  “wealth management” sound more motivating? Every time I pass by MiniStop and get tempted to buy another cheesecake ice cream, I silently say “wealth management” to myself and then walk away. Same case when were eating out last Saturday. Simply saying “wealth management” made that  all-meat pizza seem less appetizing.

Here are our specific steps to  get closer to our 2012 goal.

1.  Review our Finances. We made the following files
– Statement of Assets, Liabilities and Net Worth
– Summary of Constant and Variable Cash Flow
– Mutual Fund and UITF performance trackers

2. Organize our financial documents.  Should something happen to one of us (knock on wood!), this expandable folder will make it easier for the bereaved spouse to move on.

3. Go back to budgetting. I am proud to say that Franco and I are very good at staying on budget.

4. Learn more about financial planning
– Read books – check! I highly recommend these two books.


– Subscribe to financial planning blogs. I did not just put them on my favorites. I subscribed to the blogs via email so I won’t miss a post.
–  Attend a seminar. This is still a question mark. I think we know the basics already. What we need would be guidance on how to invest.  Enter specific step # 5. Continue reading “Our 2012 Family Goal: Wealth Management”