One of the biggest misconceptions that I kept hearing is "Investment is only for the rich." It's a very common thing when I told some of my fellow Filipinos to learn to invest their money. Why is investment often thought of as "just for the rich"?
Here are some reasons I feel are misconceptions that many Filipinos have concerning investments:
- Investment is often thought of as investing in huge amounts of money. This has been true whether the investments would be bonds, stocks, and/or insurance.
- Investment is often thought of as building a million-dollar business.
It's very easy to hear the statement, "Invest? I don't have a million pesos!" This brings up the irony that I've observed about turning down investment in favor of gambling (read here). I remembered laughing while writing that article (all the while I was having my house repaired). Are they waiting until they win a million PHP in the lottery, jueteng, mahjong, etc. before they even think to invest? I think the chances are that they will just go gambling instead when they get it. Gambling addiction is very hard to get out of. That's why I don't even want to start gambling. That's why I don't intend to even "invest" in Axie Infinity (read here) or any play-to-earn scams (read here). Besides, nobody ever gets rich gambling except those who run the game.
Realize that investing doesn't have to require a million pesos.
There are investments today that don't require such huge capital. I first opened a savings account. I opened a time deposit account then I went for the retail treasury bond (RTB) and a long-term negotiable certificate of deposit (LTNCD). I also decided to go with the AXA Chinese Tycoon Fund where I invest PHP 3,000.02 per month. Later, I opened a GCash account (which I used to pay for food deliveries not on Grab or FoodPanda) and then decided to slowly analyze GInvest. I placed a small amount of money then decided it should be long-term. There's no way that PHP 50.00 will become PHP 5,000,000.00. Leaving it as is will just accumulate loss eventually. The best thing to do might be to invest at least PHP 1,000.00 per month, follow the minimum PHP 8,000.00 rule to slowly realize gains (read here), and continuously invest within a horizon.
A good example is how I decided to look at Metrobank's Unit Investment Trust Fund (UITF). One can take a look at GInvest or Seedbox (which partners with ATRAM) for a start. Recently, I invested in GInvest's ATRAM equity funds such as the Philippine Equity Smart Index Fund (read here) for local stocks. I'm also invested in the ATRAM Consumer Trends Feeder Fund (read here) and the Global Technology Feeder Fund (read here) to get into imported stocks. I felt relying alone on the AXA Chinese Tycoon Fund wasn't fitting me right especially since it's a bear market. Sure, the PHP 3,000.02 per month will gain more units during a bear market. However, I want to take the opportunity in other funds too via GInvest. These investments can start with a minimum of PHP 50.00 (for beginners but I'd rather start with PHP 1,000.00), PHP 1,000.00, PHP 5,000.00, and PHP 10,000.00.
It could be a good idea to take the PHP 1,000.00 minimum. For example, Metrobank's Metro Aspire Balanced Fund might be good for beginners because it combines bonds and stocks. Bonds are less risky since they're loans for government spending. Meanwhile, stocks are riskier due to the fact it's buying a piece of a company. A person may not become a shareholder but they're investing in a piece of equity hoping it'd appreciate. Eventually, a company will want to engage in a stock repurchase plan. They would buy back the stocks from stockholders whether it was bought individually or though any form of equity fund. It would be good to start with PHP 1,000.00 and then invest more along the way. One doesn't need to be wealthy to at least put aside PHP 1,000.00 per month for 12 months. One just needs to stop wasting one's paycheck on stupidity such as the payday blowout when you can't afford it (read here). Instead, focus on paying bills first such as rentals, tuition fees, groceries, etc. and set aside that PHP 1,000.00 for an investment. Meanwhile, one can start investing in stocks (without having to pick your portfolio) via the Metro Aspire Equity Feeder Fund.
Though, it might also be smart to start saving, forget the payday blowout, and only focus on one's needs. A good example would be purchasing an index fund worth either PHP 5,000.00 or PHP 10,000.00 minimum then adding PHP 1,000.00 per month for a start. This can be harder but it might be a good option. Many of these are linked to the Philippine Stock Exchange index's Top 30 companies. In short, you're buying a piece of each of the Top 30 companies (such as SM Investments) via the UITF. Just reading that SM Investments is investing in renewable energy gives me confidence my index fund will eventually rise up. Though right now, I'm checking on my investments nearly daily to see if there are more chances to "buy the dip". If not, I'll just simply hold on and check next week.
Eventually, with some money earned, it would be best to buy some health and life insurance. I'm amazed that stingy people just don't believe in insurance feeling it's "useless". Yet, insurance is pretty much a good investment. It would mean setting a budget aside if anything should happen. It's like health insurance will mean having a budget in case one gets seriously sick or injured. Life insurance means that the family can have some money in case of sudden death. Insurance is a very important thing that I believe should be maintained.
Even nobodies can learn from Warren Edward Buffett
One can argue, "But I'm not Warren Edward Buffett!" I used to say that but now, I can say, "I'll never be Buffet, Buffet is Buffett, but I can take investment advice from him." That's why I wrote a post if people would rather listen to social media gossipers than Buffett (read here). It had me thinking about what Buffett said about buying the index fund. One of Buffett's favorite investments is the Standard & Poor 500 (S & P 500) comprising of the 500 best companies in the USA. In my case, any stock index fund or equity fund dedicated to the Philippine stock market is good. I doubt I'll ever access Buffett's favorite index fund but I can learn from one of his famous quotes.
Buffett has lessons that even the nobodies can learn. For example. I may never make the amount of money that he makes. However, it doesn't mean I can't benefit from them. For example, one of his best pieces of advice is to get an index fund. I can say I'm nobody. I doubt I'll ever become a marketing legend. However, I can still learn from a marketing legend. One advice of him that I can learn is to periodically invest in an index fund. In my case, periodically invest in an equity fund. That's why I haven't pulled out my AXA Chinese Tycoon Fund. I decided to buy more funds during the bear market through the Philippine Equity Smart Index Fund. Prices were so low that I felt like going beyond PHP 8,000.00 will be such a good thing.
Right now, the best thing I can do during a bear market is never panic (read here). The Motley Fool also shares this advice linked to Buffett himself:
3 investing strategies to consider if you want to buy the dipIf you’re thinking about buying the dip for the long term, you have a number of strategies that you could use to find attractive returns. Here are three of the most popular:
- Buy the best stocks in a beaten-down sector. If a whole sector has fallen because investors have turned sour on it, you may have an opportunity to buy the best one or two stocks in the sector. You’ll be able to find the most competitively advantaged players and then buy them before the sector returns to investors’ favor in a couple years.
- Buy a sector ETF. If you don’t want to do the legwork of investing in individual stocks, then you may be able to turn to a sector ETF and just buy a stake in all the companies in the sector. You’ll want to be careful that you’re actually buying the companies you intend, because some ETFs can be misnamed and hold many stocks you don’t want.
- Buy the market with an index fund. If you don’t want to do the work to invest in individual stocks or specific sectors, you still have the option to invest in the market with an index fund. A fund based on the Standard & Poor’s 500 Index can give you a stake in hundreds of America’s best stocks, and you can buy while it’s out of favor. It’s a great pick for investors who don’t have the time or energy required for more intense investing, and it’s also Warren Buffett’s recommendation for most investors.
Besides, he's also one of the reasons why I want to avoid cryptocurrency altogether (read here). Though, more of my reasons to avoid cryptocurrency like a plague come from the news of cryptocurrency crashes are worse than what the PSEi is experiencing right now. I could buy a piece of the Top 30 companies of the PSEi via an index fund. I could invest in blue chips via the AXA Chinese Tycoon Fund. Now, I'm involved in US-based consumer stocks and US-based technology stocks via the GInvest feeder funds.
This also makes me think of 10 lessons to learn from Buffett too. These pieces of advice can be followed even by nobodies:
- Invest in yourself. One can do this by learning new stuff beyond school, exercising, eating healthy, learning stuff beyond one's course, trying to understand a subject you originally hated (ex. I hated high school mathematics, especially trigonometry), and not practicing extreme money habits such as being stingy or spendthrift.
- It can be good not to watch the market too often. I personally have the guilty pleasure of checking my investments too often to analyze. In my case, I tend to check on my ATRAM funds to see if I should either buy more or buy less. However, I need to curb that habit because I'm investing for the long term. If I sell my funds now--I might not make the money I intended to make.
- Becoming more thrifty without compromising one's state. I personally tend to think that a stingy person makes a bad partner even to a thrifty person. I feel stingy people take things to the extreme to the point quality is compromised. Meanwhile, some people really just spend and spend. Somebody may have foolishly said, "What's the use of money when the storm struck?" That's a very foolish thing to say. The money will be useful in the administration of repairs. I tend to think about it that while I tend to spend more at times--I try to avoid luxury goods and not live a luxurious life. I don't need rubber shoes worth PHP 7,000.00. Instead, I could use that PHP 7,000.00 to invest more in an index fund when the market fund or disperse PHP 1,000.00 per month for seven months during a bull market.
- Learning to stay away from unnecessary trouble as much as possible. In short, think before you act. One of the worst things I did was compete with my classmates who were spoiled rotten. So what if I don't have a nice luxury car or the latest video game console? What's important is that I have what I need. It would be best to stay away from trouble such as avoiding stuff like cryptocurrency, play-to-earn games (and Axie Infinity is one of them), or any idiotic Get Rich Quick scheme that's too good to be true (read here). That's why I even wrote a post where I imagined a company called Intrigador Financials (read here).
- Keep it simple as much as possible. I think I'm happier having simpler standards. I could enjoy a low-class restaurant more than a five-star restaurant if the taste is better. I could think about how I collect rentals and eat a simple lunch at Mingnan Cuisine or Kara's Fried Chicken. I could imagine eating a budget meal at Mang Inasal. I would only eat more if I have more work and eat less if I don't have much work.
- Having a good reputation. One of the biggest things that are truly real is that it takes 20 years to build a reputation but only five minutes to ruin it. I could remember losing trust because I wasn't careful in making my decisions. I could remember how I ruined my reputation by screaming at someone because things never went my way. It's very difficult but sometimes, we need to take the long way by building an honest reputation. It's like how I insist on correcting faulty transactions even if said faulty transaction would benefit me. I would rather make a few honest profits than a huge profit based on cheating.
- Working with trustworthy people. If you work with a cheater then you can expect to lose money. I heard someone ran a business with her close friend. However, said close friend later cheated her and never returned. Would you still want to trust such a person if the person can't be trusted? It's also like I'll never do business with someone who conned me out of money and hasn't returned it until now.
- Never borrow money to buy stocks. Right now, I have to make sure that any money I buy on stock index funds is not a loan. I heard that someone borrowed a million pesos to buy stocks, his stock trading failed, and he attempted suicide. Loans can be very cumbersome. Yet, so many people tend to do it even those who are financially struggling. Loans should just be focused on supplementary financing--not primary financing.
- Be fearful when others are greedy and be "greedy" when others are fearful (read here). This can be applied during the stock market. I think some people tend to foolishly buy in bulk during a bull market and end up panic selling during a bear market (read here). The crowd tends to do stupid stuff. So saying that if you're not with the majority then you must be a subjective idiot is a stupid thing to say. The crowd can be right or wrong. It's best to stick to right or wrong regardless of what the crowd does. I could think about it that now I'm "greedy" when others are fearful. Right now, with the stock market at a low, I think continual investing will be a good thing. That PHP 1,000.00 will be able to buy more units than it did during a bull market.
- Making sure that I'm happy in doing what's right. It's one thing to do stuff just because I want to do it. One reason why I decided to take B.S. Information Technology (BSIT) is not because I wanted it but because only others were taking it. I didn't want to be left out. I decided to take Associate in Computer Science only to find out that programming wasn't my thing. There were even a few things I could've learned myself such as the use of Photoshop, Corel, and maybe even Macromedia. I found myself happier taking B.S. Business Administration (BSBA) instead. Some people were happier having left BSIT for other courses that suited them right. When I'm not happy or motivated--performance can actually dwindle. Unhappy employees don't make a good workforce either. That's why work production in miser-ran companies and dictatorships is very poor.
Lastly, the humble starts for some big-time businessmen prove that investing isn't just for the rich
Did you know some of the richest people today used to be very poor? I used to hate being called janitor by a bully (who ended up having to do janitorial work later). It's really problematic when there's a toxic view about menial workers (read here). What shocked me was that some of the richest people in the Philippines today (and anywhere else) actually started out with nothing.
One good example would be Lucio Tan Sr. He was known to be a janitor at a tobacco factory while pursuing his degree in chemical engineering. Just reading this from Business Mirror makes me think if only more working students I met had his mindset:
Business mind-setAs a working student, the young Lucio Tan busied himself with mastering the craft of mixing chemicals and flavorings at the Bataan Cigar and Cigarette Factory. Through hard work and a frugal lifestyle, he slowly raised the seed of his envisioned enterprise. While still working for the cigarette firm, he became a partner in a cornstarch venture and, later, established an electronics shop producing transistor radios. Though both attempts at entrepreneurship didn’t take off, these setbacks only fueled his determination to pursue his dream.Sowing the seeds of an empireAt 25, he started laying the groundwork for a chemical manufacturing and trading firm. While others of similar age were busy establishing careers after college, Tan was already forming the foundations of what would become one of the most inspiring corporate success stories in the Philippines.Making the most of what he learned from his chemical engineering studies and his work of mixing chemicals at the Bataan Cigar and Cigarette Factory, he drew plans and purchased second-hand machines and reconditioned American trucks for his envisioned enterprise.On November 18, 1960, Himmel Industries Inc. was born. The company started small, venturing into the trading of chemicals, such as refined glycerin, sorbitol, industrial honey, menthol and flavoring compounds. While the company’s original target market was the burgeoning cigarette industry, it later expanded operations to supply major ingredients to the food, pharmaceutical, beer, paint, ink, textile, cosmetic, paper, glue, plastic, rubber, PVC and cement industries.Within the same year, Tan married Carmen Khao Tan. They have seven children.
But not only him but another Tan, Tony Tancaktiong, also had a life story to tell. Now, Jollibee exists to be a multinational franchise (read here). That's why I believe it's bogus to say that letting foreign direct investments (FDIs) will harm the local industries. Now, time ot give an excerpt of Tancaktiong's family went from poor to middle class then to rich. In fact, his father, started out as a cook in a Buddhist temple. This information from Business News Philippines also refutes the idea that investment is only for the rich:
There is no question that Jollibee is the most popular fastfood outlet in the Philippines. Surely, its owner Tony Tan Caktiong is a Filipino billionaire businessman! He is the founder and chairman of Jollibee Foods Corporation, and the co-chairman of DoubleDragon Properties. But did you know that this rich businessman hailed from a poor family?
He is the third of seven siblings from a poor family who immigrated to the Philippines from China. The son of a cook who used to work at a Buddhist temple, Caktiong experienced hardships early in his life. But this inspired him to help the family earn money.
Their hardworking parents introduced them to business. As kids, Caktiong and his siblings worked as helpers at their family’s restaurant business in Davao. They did everything from washing dishes to bussing tables to serving customers.
The family would soon have a stable income and was able to send their kids to prestigious schools. Caktiong graduated from the University of Santo Tomas (UST) with a degree in BS Chemical Engineering.
There are also other honorable mentions. From eCompareMo.com, we can also have these examples that show investing isn't just for the wealthy:
- Mariano Que of Mercury Drug used to be a drugstore employee before the Second World War.
- Alfredo M. Yao of Zesto-O used to do a lot of odd jobs at 12 years old to feed the family.
- Socorro Ramos of National Bookstore only had PHP 211.00 (which was huge at that time) for an initial investment.
- Corazon D. Ong of CDO Foodsphere used to be a dietitian at a hospital.
- Rey E. Calooy of RNC Marketing Philippines used to be a house helper and a public market porter. He had only PHP 20,000.00 for a starting capital.
- Diosdado Banatao of Chips and Technologies Co. was the son of a rice farmer and a housewife from Cagayan Valley. He used to walk barefoot in his earlier years to get his schooling done.
- Julie Gandiongco of Julie’s Bakeshop used to run a sari-sari store and did a sewing job. They also once tried sugar plantations but the sudden drop in sugar prices caused them to close down. Both she and her husband are late bloomers since they did manage to start bigger at 50.
- Libereto “Levy” P. Laus of LausGroup of Companies used to be a small sub-dealer. They were still starting small but they got big.
- Edgar “Injap” Sia of Mang Inasal (of which 70% is now owned by Jollibee Foods Corporation) had a meek modest start in Iloilo.
How did they get wealthy? They knew how to invest well. If they didn't invest then they would never have gotten where they are now. However, the purpose of my learning from them isn't so I can become a billionaire. I doubt it I'll be as wealthy as them. Instead, it's all about knowing that anybody can start investing now. Sure, not everybody will get rich otherwise there will be no one to employ. Not all people will create a nationwide business either. However, the important thing is not to be broke. That's why it's important to learn from basic investments. Don't dream of becoming them. Instead, learn from them and maybe you might become the next billionaire. If not, just be thankful that even if you'll never be rich that good money habits mean you'll never be broke.
References
Websites
"10 Lessons From Warren Buffett" by David Butler (January 7, 2020)
"Buying the dip: Is this a good strategy when markets are falling?" by James Royal (May 26, 2022)
"From Broke To Billionaire: 10 Success Stories Of Self-Made Filipino Entrepreneurs" by eCompareMo (March 9, 2020)
"How two Filipino brothers staved off competition from McDonald’s to build global fast food chain Jollibee" by Karen Gilchrist (April 30, 2019)
"Lucio Tan at 25: Birth of an enterprise" by BusinessMirror (October 8, 2015)
"Rags to Riches Story of Jollibee’s Tony Tan Caktiong" by Medardo Jr. Magallanes Lazarte (March 8, 2022)
"Warren Buffett: Why This Bear Market Could Be an Investor's Best Friend" by Catherine Brock (July 9, 2022)
"What Is A Stock Buyback?" by Benjamin Curry (Updated: June 27, 2022)
"What Is an Index Fund? An Easy Way to Enter the Stock Market" by Kevin Voigt (March 20, 2021)