OFWs as local investors.
Written on Wednesday, June 4th, 2008 at 11:47 pm | by JThe Senate recently passed on third reading Bill 1882, which aims to establish a “provident personal savings plan” to be called the Personal Equities and Retirement Account or PERA.
The law, according to the Manila Times, aims to “establish the legal and regulatory framework for an alternative pension fund that will give tax breaks to its members, and pave the way for voluntary personal savings and investment plan.”
According to Senator Francis Pangilinan, this measure aims to mitigate “concerns regarding the viability of the Social Security System (SSS) and the Government Service Insurance System (GSIS).” This is, of course, a welcome development.
But more than that, what makes me happy about this bill is that its tax exemption provisions could encourage ordinary Filipinos, most specifically those working overseas, to invest their money on shares of listed companies, exchange-traded funds, unit investment trust fund, mutual funds, and things like these.
This bill marks the first time for the government to recognize the fact that there are more to gain from our OFWs other than remittances.
If you come to think of it, the sheer number of the migrant workers we send out to many countries every year should have made our economy gain a lot. But it has not.
True, our OFWs’ remittances have continuously kept our economy alive, but when we talk of long-term benefits, I can say that the Filipino diaspora has so far produced limited results vis a vis the repercussions brought about by brain drain.
This is because unlike the migrant workers of, for instance, pre-industrialized South Korea, our overseas Filipino workers don’t seem to spend their money wisely.
Like instead of putting up businesses, an average OFW would spend thousands for unnecessary luxuries, like a 50 inch plasma TV for example. I have worked as a salesman in Tokyo’s Akihabara Electric Town and I can say that among the biggest spenders in luxury gadgets and appliances are Filipinos. Most of these big spenders are minimum wage earners in Japan.
Similarly, Filipinos tend to spend a lot on lavish events like fiestas, birthday parties and baptisms. I have a relative who spent 20,000 for her grandchild’s birthday party. The next day, she didn’t know how to pay her bank loans. She lost her house and lot a few years later.
There are, of course, many things to blame for this not-so-good attitude of most OFWs towards money and spending. I can imagine our friend benign0 pointing out Filipino culture as the main culprit.
Indeed, many Filipinos tend to spend lavishly on luxury goods and services because of our culture’s high regard for status symbols. Some people I know would even skip lunch to save for a brand new iPod. I’m not saying that it’s an inherently bad attitude. It’s just that this mindset isn’t the way to go if we really want to prosper as a nation.
Add to this is the fact that many Filipinos are- I hate to say this- indolent. It’s not uncommon to hear of people who would not even see the need to find a job just because their second cousins or great grand uncles abroad send them money. In Japan, many OFWs are breadwinners not just to their immediate family, but to their whole clan as well. Having to feed too many mouths leaves these migrant workers with virtually nothing to save, let alone invest.
The indolence and lavishness of many Filipinos are hard to change. But I don’t think they are permanent facets. They can be changed.
And critical to changing these negative traits would be an effort to get these OFWs to invest their money. I think this could be an easier task.
We can perhaps give our OFWs some tax-related perks if they start small-scale businesses for instance. This definitely would be way better a policy than Malacanang’s PhP 500 subsidies for every poor family in the archipelago.
But more than that, it is also vital for the government to encourage our migrant workers to invest not just in businesses but in other instruments and means as well.
The problem is, not many Filipinos are financially literate. Most OFWs don’t have much ideas about stocks and bonds or mutual funds, for example. We need to change that. There must be a vigorous effort on the government’s part to proliferate financial literacy among OFWs. This must be coupled with perks that would encourage them to invest.
One thing that makes our stock market volatile is the fact that there are few Filipino investors. In fact, most of the investors, I heard, are foreigners. If this is true, then we can say that our stock market will always be unstable. This is because foreigners don’t usually have an accurate idea of what’s happening in our country. They are thus reliant on our media, which tends to magnify many bad things about our country, whenever they think of investing in or pulling out of our market. This is probably why a mere coup rumor hurts the stock market hard.
But getting many OFWs to invest on our stock market could help propel our economy. An influx of local investors, who are less fickle-minded than foreigners when investing on Philippine stocks, would also expand our publicly-listed companies. And their expansions could generate more income for the government and opportunities for the people. More importantly, the returns of the OFWs’ investments, unlike the foreigners’, would be spent in The Philippines.
Getting the OFWs to invest their money wisely here, of course, would never be the sole solution to our country’s economic problems. It would at best merely compliment sound economic policies (like re-considering our debt service policy, protecting our industries and maximizing public investments for example). But it would nevertheless be a good boost to our economy.
I’m not an economist and I know these scenarios seem a bit exaggerated, but I know enough to say that these things are possible.
Bottom line is, we’ve nothing to lose if we vigorously persuade our migrant workers to invest in our local businesses and nothing to gain if we continue our aimless policy of just sending workers out of the country and relying on their remittances.
It’s about time we get the most out of the Filipino diaspora.
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SONA 2008 FULL TEXT
How sure are you the investing in the local stock market and Unit Trusts, or putting up a local business, as opposed to buying a 50-inch plasma TV is the wise thing to do?
cvj,
The chance for a unit trust, a local business, and a stock to earn money is a fair 50-50 if done wisely.
The chance for a 50 inch plasma TV to earn money for you is zero. Unless you put up a local business to earn using it, like renting it out.
J,
I have to say kudos for your first post on Filipinovoices.
Nick has very recently accepted my “application” to FilipinoVoices and I originally wanted to write about OFWs and entrepreneurship, but since you beat me to it, I’ll post a response to your piece soon.
^^Oops, it isn’t your first post. I was thinking about mine. LOL.
Jon, how did you come up with the 50-50 odds?
Besides, why consider a buying decision as ‘wise’ on the basis of what one might or might not earn in the future?
Tama si CVJ, dont invest, dont start a business, instead a plasma TV na lang kasi hindi naman tayo sigurado. And if you still have money, buy the latest ipod and cell phone. Pinoy kasi!
moya, that does not answer my question. the stock market can crash. most businesses fail. the plasma TV might be for my 80 year old Dad’s birthday. So what makes J so sure that the plasma TV is an unecessary luxury?
for that matter, what makes Jon Limjap so sure about the 50-50 odds of making money? Why not 20-80?
A more viable alternative is to train beneficiaries or recepients of OFW remittances on how to start/run a small business (hindi lang bibili ng passenger jeepney or tricycle, sari-sari store, etc), entrepreneurship. TRC have very good programs.
The RP stock market (with possible insider trading, cross-ownership, non-disclosure, etc.), might be too risky for the less-finance savvy OFWs.
If I have 50k and I live in a pseudo nipa hut in Pampanga, I don’t think I’ll spend that 50k for a TV. I’ll probably save it so I can improve more necessary things like my house. Or educational plan for my children.
Jesus H. Christ, cvj.
—–
Great blog J! This highlights the broader issue of what the substance of our economy is all about. Are our economic indicators propped up by consumption? Or solidly underpinned by activities that robustly expand the capital base of the economy?
The former creates that artificial sense of prosperity we become addicted in good times but comes back to bites us even harder when the party’s over; whilst the latter defers gratification but creates a war chest of productive assets that will see us through the cycles.
The relevant qualifier is ‘if’, and that ‘if’ depends on a lot of things. My understanding is that you have a particular model of a typical OFW plasma TV buyer in mind and a particular context in which he or she buys it. Whether that model is representative of the actual buyers and their though processes, and whether we can make generalizations from these context is my question.
As for me, i spend my extra income on non-fiction books and prefer to keep an old-fashioned CRT-type TV, but that’s just me. My other fellow OFW’s may spend on a new camera or computer, but i don’t judge their decision either way.
BTW, a lot of those who invested on educational plans for their children lost their investments because the Companies couldn’t or wouldn’t pay. (That’s why the PEP Coalition was formed.) So was their decision to invest ‘wise’?
Benign0, ‘Jesus H. Christ’ does not count as a response IMHO.
cvj,
The odds in succeeding in a business is purely a function of business savvy of the person conducting business. For any given business, given sufficient marketing, sales skillz, and in-depth knowledge in the operations and risks involved (or, in a nutshell, a clear SWOT picture) can succeed even if it involves selling ice to the eskimos, so to speak.
So 50-50 represents a 50% chance that a business owner knows what they are doing; if they don’t, those odds will go down significantly. The other 50% represents the chance that shit happens. Businesses can crash at the blink of an eye. That’s a reality we business owners have to live with.
Shameless plug: My wife and I own and operate a home-based travel agency business: http://inavtravel.com . She operates it. It isn’t a big operation, but at least she now earns more than twice her income when she was a pencil pushing marketing personnel.
cvj, I’m not making generalizations. But yes, I do think that the model I was describing represents a significant number of our OFWs. Educational plansare another story.
Bottomline is, many of our OFWs do not plan enough, if at all, for the future. They spend their money on goods and services. And, like I said, I don’t think this is inherently bad. What I’m saying is this is not the way to go if we want real prosperity as a country.
Government merely relies on remittances. Again, not bad. But considering bad effects of brain drain, I think we ought to get more from our OFW.
Like encouraging them to invest.
If they invest, they’ll have the opportunity to learn ways on making more money out of their money rather than just investing them. Seen from the larger perspective, their investments could propel the economy.
Win-win solution, right?
jakcast,
“A more viable alternative is to train beneficiaries or recepients of OFW remittances on how to start/run a small business (hindi lang bibili ng passenger jeepney or tricycle, sari-sari store, etc), entrepreneurship. TRC have very good programs.”
This is a good policy. I’m happy to know about TRC having these programs. But I don’t even know what TRC is. Which means most OFW families don’t know they have these programs. Which means government must do more to proliferate awareness regarding this.
And maybe we could couple this with, I don’t know, maybe tax perks for OFW investors?
“The RP stock market (with possible insider trading, cross-ownership, non-disclosure, etc.), might be too risky for the less-finance savvy OFWs.”
I’m not really sure. But my idea about stock market is that trading is risky, but mere investing is not so much. I think people should, like me and especially our OFWs, should know more about the stock market. If we have just half of our OFWs investing on local stock market, maybe it won’t be that unstable anymore.
But what I really want to say is that the money our OFW make should be used to propel our economy in the long term.
@Jon, so the reality is we do not know the odds. That’s the reason why i think we should be more prudent in preaching entrepreneurship.
Just because someone becomes a millionaire with lotto does not mean that everyone should buy a ticket.
@J, i agree that more domestic investments would propel the economy but what i question is the assumption (common among the Middle class), that the OFW’s are less than rational or prudent in spending their money. The equation is simple, higher risk of loss equates to higher potential return. By investing in stocks and/or businesses, you are asking the OFW’s to risk more for the uncertain promise of higher return
In terms of engaging in business, of course from the point of view of society, it may be good since the more OFW’s (and Filipinos) try their luck in business, the more economic activity they will create which is a good thing. Sure a lot of these businessmen will fail but Society as a whole may benefit.
So the solution you are proposing is not exactly ‘win-win‘ but more like ‘many individuals lose, some individuals win, Society as a whole wins‘. Now if i were the individual OFW thinking about putting up the business, what would the ‘wise’ decision be and from whose perspective would it be considered wise (or unwise)?
Basta, Tama si CVJ! Huwag kayong mag-invest o mag-negosyo kasi maraming pwedeng mangyaring mali! Bili na lang kayo ng TV kasi siguradong laging may Eat Bulaga!
cvj,
That was in response to your sinking back to counting the proverbial microscopic bumps rather than regarding the proverbial spherical nature. Small minds always look at a ball bearing and say it is not a sphere because irregularities at the molecular level cause its radius to vary along its surface.
I don’t think we should be “prudent” in “teaching” entrepeneurship. The prudence should come from the recipients of said teachings. It is their responsibility to make use of the teachings and exercise prudence in applying said teachings when they go out and invest.
Your mentality is all about withholding information and not trusting the recipients of the information you withhold to exercise their better judgment. Entrepeneurship is as much about failure as it is about success. One cannot exist without the other — thus the 50-50 nature of it. People should be allowed to fail as much as they should be allowed to be successful.
It’s not about you dude. This is not a comparison of individual approaches but generalisations based on an opinion about collective trends. You do have an opinion don’t you?
And yes, I think we are all entitled to “judge”. At least here in the blogosphere, that is. That’s the whole point of this blog and most blogs. You publish your judgment and open it to scrutiny and critique. So maybe grow a couple and give it a try, dude.
moya, mere repetition is not a valid response.
benign0, just to clarify, what i mean by ‘prudent’ is *not* ‘to withold information’ but, rather, not to give any unrealistic expectations on the odds of success e.g. ‘50-50′. For example, i’ve been in Multilevel Marketing and i’ve seen some strike it rich so i know the potential is there. I’ve also seen up close entrepreneurs who are still struggling. So different kinds of outcomes are possible. The reality is a person who becomes an entrepreneur won’t know unless he tries, however, there is a very real chance that he or she will fail and lose all his investments. I’d be wary of Anthony Robbins type of preaching as it sets false hopes.
Of course, you could judge other people’s buying patterns, i’m just saying i don’t because i think to do so would be presumptous. I’m also wary of stereotypes based on middle class prejudices.
cvj,
I’ve been an OFW myself. I have many relatives, including my parents and their siblings, who are OFWs. I have many friends who are dependent on OFWs. I can never be accused of being anti-OFW.
But to be frank, I DO think that a significant number of OFWs are not prudent when it comes to spending.
Yes there are risk in business, like there are risks in trying one’s luck as an OFW abroad. But that doesn’t mean investing one’s money is not prudent.
So what do you want to do with OFWs’ money? Just let them to spend it for goods and services? What happens when they retire? They send their children to work as OFWs and be dependent? And their children would not invest their money because there are risk and instead spend it on goods and services solely just like their parents did? What happens when they retire? They send their children to work as OFWs and be dependent? See, it becomes a vicious cycle.
OFWs should spend their money not just for goods and services. They should make the most out of it, with long-term effects in mind.
Now what if their businesses fail? Well at least they learn from it. And can work again to try again. Losing their money because of failure of business is the same as spending 50k with a plasma TV I guess.
Now, is encouraging OFWs to invest a win win solution? I still think it is.
Consider this:
We let a great number of OFWs invest.
Society wins because we have economic activity, as you said.
Successful investors win because they get return of their investments, again as you said.
Unsuccessful investors ALSO WIN because they have a better country boosted by their investments.
See, win-win!
J, my view is that the individual who earns his or her money is the best judge on what to do with it, whether to save it, risk it or spend it. As an equal, i won’t judge what you, Jon or Benign0 do with your hard earned cash.
As for the benefits of investments and entrepreneurship, i think we are all in agreement. What i disagree with is all the exhortation, preaching, promises and sales talk. There is a principle that you have to pay to get people to play. It is up to the Philippine government and Society to make our place a more hospitable one for investments and entrepreneurship. Build such a place and the entrepreneurs will come.
As for the Unsuccessful investors ‘winning’, i think you used the same word but it has been redefined to mean something different. The fact is unsuccessful investors are the ones who lost money. Now as to whether they can pick themselves up and try again or whether they can benefit from the collective gains of Society is something i don’t think you can guarantee.
@ J
That’s Technology Resource Center formerly the Technology and Livelihood Resource Center (TLRC). Please check http://www.tlrc.gov.ph/
cvj,
See, you concede that investing the OFWs’ money is good. You just think our environment is not hospitable to investment.
I agree that we need political reforms to boost investor confidence among OFWs. That’s why I laud the PERA bill. That’s why I want government to implement policies favorable for OFW investment. That’s why I want the government to raise OFW awareness on entreprenaurship and investment.
By raising awareness I also mean making them aware of the risks of investing, not brainwashing them.
I don’t guarantee anything. But I do believe that they have better chance of picking themselves up to try again after they fail if the society gains from their investments. And yes, they can benefit from the collective gain of the society because they are part of the society.
I understand you are risk-averse. But would you rather do nothing and let the cycle of Filipino diaspora continue? Don’t you want a chance for future Pinoys to make money here and not abroad?
Nick Joaquin sheds a bit of light on this risk averseness inherent to the Pinoy in his brilliant essay A Heritage of Smallness.
Hmmm, what is it about the word “small”. It seems to be a re-curring word of late…
J, that was my position from the very beginning which is why i said (at 10:49 am) that ‘Society wins’ (although a lot of individual OFW businessmen may lose in the process).
Thanks for your clarifications on the intent of your post, maybe i missed it because i was focused too much on how you went about making your case, i.e. telling people what was ‘wise and unwise’.
When we try to attract Foreign Investors, how do we go about doing it? If you told a prospective foreign investor that you don’t think it is wise that he just spent his money on a 50-inch plasma TV, what do you think will he say?
In making a pitch for investments, we usually don’t begin by telling prospective foreign investors that they are ‘not wise’ in spending their money, right? As far as i’m aware, we normally explain to them (as honestly as possible, i hope) what are the attractions of investing in the Philippines. Then it’s up to the foreign investor to see how your business case would compare to the alternatives. Failing that, we then reexamine our incentives to see why other countries are more successful in attracting foreign investors and, if necessary modify our policies accordingly.
How come the difference in approach when it comes to prospective OFW investors?
I don’t think ‘doing nothing’ is an option, and like you, i am looking forward to the day when we don’t have to leave the Philippines to make money. I’d just give more emphasis on the parenthetical remarks in your blog entry i.e.
The more we focus on the above, the less we will have to rely on exhortations.
cvj,
Yes, we have to rely more on political and economic reforms too. You and I can devote a lot of blog entries for that.
But we also need to exhort them to invest and use their money wisely, which is what I did in this particular post.
And when I talk to an OFW, I don’t see them the way I see a potential investor, who needs to be always praised and pleased. I tell them if their actions are wise or not. And I do think the way most of them spend their money is not wise.
I still don’t think spending lavishly on parties, luxury items, and not saving or investing is wise.
How come the difference?
Nice Nick Joaquin article, benign0.
cvj, because I’m concerned with them.
J, ok then, point taken.
cvj,
Oh, but that’s where you are TOTALLY WRONG. Really really bad analogy.
Lotto is a game of chance. Completely a game of chance. Ticket buyers absolutely have no hand in determining whether they win or lose, and the chances are so small that they are designed to lose over and over again.
Entrepreneurship, at the end of the day, is just another career, which has a rather high barrier of entry. Much like rockstardom and professional sports. Some people are born naturally talented. Some people study it and practice.
Some people enter it and think smalltime, akin to singers who move from variety show to variety show joining singing contests. Some people enter it, start small, but end up big, like a kid who joined the Milo basketball clinic so he could play in the varsity in elementary, got noticed in highschool, and made a good enough impression in the UAAP to get drafted in the PBA. Some people hit it big soon after they start. Some succeed. Many fail several times before they succeed.
So no, it’s totally unfair to attribute it to pure chance. It’s not. And if you succeed in going bigtime, you will be able to afford as many 50″ Plasmas that you like.
Another area of business which OFWs could pursue, instead of sinking their savings in the stock market, is to get a franchise. The franchise will include setting up the operation, training of the franchisee, provision of goods, supplies, and services. A good franchise will involve step-by-step engagement, which have been proven successful in several markets.
There are still many affordable franchises, both home-grown and foreign.
Nice idea, PSimeon.
Jon, it may not be totally a game of chance but as you said above (at 10:26am) ‘shit happens‘. There is no way for us to tell what the odds are in a particular business opportunity. The operative word on entrepreneurship is that ’some’ (i.e. not all) succeed. That should be part of the message (and not just in the fine print).
this requires lot of persuading and teaching for OFWs. True, they shouldn’t just settle buying tricycle or jeep etc. But we need the government to properly guide them how to invest properly.
My mom told me “invest where ayala invested, you can’t go wrong…” but i think there’s more to it than following one company’s footsteps. Investing is fun once done in the right way. And NO, it’s not even just a game of chance. There are risks, but through guidance, this is one effective way to help the economy.
this model was a smaller version of what was proposed last last last year (i think) by a group who called their project: brain gain network. check them out.
btw. nice post jj
I personally feel that GMA should sign this bill for the benefit of the majority and the country as a whole. Commentaries in local newspapers have been mentioning about the role of the government to proliferate the business culture and investing in the country. This for me is one way of encouraging Filipinos to participate in the business environment, which in the long run will serve them well.
OFWs and Remittances
Aside from the BPOs coming to the rescue for GMA, all of us will agree that the remittances sent by OFWs is the major factor the keeps our economy alive. Allow me to cite figures from Bangko Sntral ng Pilipinas.
(OFW Remittances Course through Banks)
Year 2000 = $6,050,450,000
2006 = $12,761,308,000
2007 = $11,865,982,000 (Jan-Oct)
And this is only 79.3% of total remittances sent home by OFWs. Even electronic products, which are the biggest export of our country aren’t even close to 10% of the total value remittances sent to us. Then one would ask “there’s a huge amount of money coming in but why do Filipino family continue to struggle?” Why is it the our economy is not growing as fast as the other South East Asian countries like Thailand, Malaysia, and even Vietman? A probable answer would be, because Filipino families, particularly those that have relatives working abroad, don’t spend their money wisely. They tend to buy things that are not really needed and thus, waste valuable cash that could be used as a capital for business or investments.
Low Financial Literacy
Economists and financial analysts conclude that Filipino family spends so much money on gadgets and other luxuries. Although there is a significant increase in the basic consumption, which also fuels the economy, this won’t hold a sustainable growth of economy according to them. They have also increased their spending on utilities (phone bills, electric bill, etc-etc.) leaving very little for savings. These are clear signs that indeed families lack financial literacy, that’s why I admire the likes of Topax Colayco, Joey Conception, as well as others who continuously educate Filipinos on financial matters.
Beating Inflation
As a wise citizen, one should always look for ways on how to keep your hard earned-money. We have savings account, time deposits, T-Bills (treasury bills), stock market, mutual funds, bonds, insurance of different kinds, so on and so forth; each has its own advantages and disadvantages depending on the preference of the person. On this point lies the problem. An average Filipino will tend to save their money on savings account given by banks not knowing that they’re actually losing money contrary to the comment notion that “you grow money by putting your money on banks.” Allow me to elaborate. A normal bank will give you a 0.75% interest per quarter (more or less depending on the bank) while you have inflation rates in 8-fold. Stats again.
(Average Inflation Rate in the Country)
Year 2003 3.5%
2004 6.0%
2005 7.6%
2006 5.9%
2007 2.8%
2008 6.9% (Jan to May)
Clearly, everyone should strive using an investment instrument that would beat the inflation or you might as well use it to start-up a business (which would be not a very good idea according to many since most small and medium business ends up bankrupt before they reach their 5th year of operation.)
OFWs as Local Investors, Why Not?
“Value turnover climbed to Php2.33Bil from Php1.51Bil on Wednesday. Total cross transactions totaled Php.525.10Mil. Foreigners were net sellers as they liquidated Php52.83Mil worth of shares. This was lower than the Php93.53 worth of shares sold in the past trading day.” (Thursday May 29 2008,COL)
“Value turnover rose to Php5.40Bil from 2.33Bil on Thursday. Total cross transactions reached Php.2.12Bil. Foreigners were net buyers as they accumulated Php97.43Mil worth of shares. This was a reversal from the Php.52.83Mil worth of shares sold in the past sessions.” (Friday May 30 2008,COL)
Well, what did you noticed? Does this ring a bell? “Foreigners were net sellers…”, “Foreigners were net buyers…” There it is. The Philippine Stock Market is dependent on foreign investors every single trading day. This is the main reason why the market stumbles in an instant whenever there’s a political instability in the country. JJ is correct in saying that “An influx of local investors, who are less fickle-minded than foreigners when investing on Philippine stocks, would also expand our publicly-listed companies” Why? Because compared to foreigners, who more often than not relies on CNN or BBC or what have you, Filipinos knows what’s happening here, and they’re more resilient knowing that political instability is just normal in our country. I’m not saying that local would suddenly become the more dominant investors, it will take years but still this is one way of making our market more stable.
Philippine Market: Last to Go Up, First to Go Down
Foreign investors are aware that our market is indeed the last one to go up, and the first one to go down whenever financial worries come to the South East. This is also the reason why most of our Asian counterparts enjoy a more dynamic market compared to us. We’re literally helpless whenever foreigners liquidate their shares in our market, and thus bringing-out “hot money” in our country, which is actually intended for the expansion of publicly listed-companies.
Filipino Companies Should be Owned be Filipinos
We are aware that most of the blue-chip companies here are partially owned by foreigners, the rest owned by Filipino Taipans like the Ayalas, Yuchengcos, Lopezes, etc-etc. I’m not against these prominent families owning big companies, neither am I against foreigners having part in their businesses. The point is Filipinos should start owning or having stake in publicly listed corporation so that we would be helpless whenever foreigner investors suddenly decides to pull out their resources. While Singapore, China, UAE and the rest of the powerhouse countries in Asia puts their sovereign funds in the West, I think Filipinos should start taking part in our own market; And OFWs are in good position to take the lead.
Kagawad Lee Angelo,
Nice figures. At least can say that my assertions in my post is indeed not merely an assumption.
I think you should join The Philippine Issues Writing Project and elaborate on your ideas on OFWs’ need to have better financial literacy.
I saw an article last Friday in Business World (if I’m not mistaken) PSE is doing seminars regarding Stocks for men in uniform, particularly the AFP. I hope our soldiers would grab this opportuniy.
I am an OFW currently residing in the US. In a small way, I think I already have some investments in the Philippines thru some of my Vanguard and Fidelity international mutual funds. I hope to invest directly in the future as soon I get to know more about the good investment opportunities in the Philippines.
I know that there are a lot of money-related sites out there but just want to share two of my favorites: http://www.freemoneyfinance.com and http://www.crown.org.
im an ofw since 1999 but im into investing. my knowledge is so basic: so this is what i have:
1. pension plan paid at PHILAM LIFE
2. real properties in the province: vacant lots
3. paid the house of my father thru NHA in manila
4. renovate the house of my mother in the province
5. currently paying SSS and pag ibig ofw program.
im proud to say that the only gadget i have is a used laptop and a low profile cellphone
Interested in bonds, stocks etc but have no idea how it works
Moe, bonds and stocks are among the best investment instruments. Bonds can be corporate bonds, or bonds issued by the government that is better known as treasury bills (this one I should say is the safest because you are guaranteed by the government). Bonds can also be traded contrary to the common belief that you just how them, so they are just like stocks but I’m not yet familiar with it. Check out this book if you want to know more about Bond Market (I’m not yet done reading it) ” How the Bond Market Works ” by Robert Zift and published by the New York Institute of Finance. As for government bonds, in my opinion Retail Treasury Bills (RT-Bills) are the more preferred ones. Usually, this ranges from 60 days to 90 days, shorter than the common T-Bills. Just like any other bonds, RTB is a way of the government to finance its spending. In return, they will give you interest for the money you lent them; rate varies depending on the time you got your issues. But the rate of interest here is definitely higher than Time Deposit Rates and the rates that are usually given to you by fund managers (Mutual funds).
As for the stock market, there’s so many books that would teach you how it works, and also articles regarding it. At any rate, I’ll try to give you an overview of the stock market.
Companies listed in the stock market are called publicly listed-corporations. The reason why corporations are listing their companies in the stock market is for them to raise funds by selling part of their ownership of the company to the public for one of these purposes: Expand their business by means of adding more stores; Expand by means of engaging in a new product line; Venture out a new business. When a corporation enters the stock market through an I.P.O.(Initial Public Offering), assuming that they were able to comply and satisfy the requirements given to them by let’s say PSE (Philippine Stock Exchange), they will give a certain price per share for their stocks. Ie. SMB @ Php8/share - this is what we call the share price. You when you buy for example, San Miguel Brewery during its IPO last June, you’re already a part owner of SMB. Take note that there’s a minimum number of stocks that should be bought in order for you to become a stockholder/part-owner - and we call it boardlot. The boardlot is dependent on the number that was set by the board of directors; in most cases its 1000, 100, or 10.
There are two ways of earning in the stock market: First is through capital appreciation. For example you bought 5000 shares of SMB stocks for the price of Php8/share, after a certain time the price goes to Php16/share. So by simple arithmetic, you were able to double your money. Ofcourse, for you to take the profit you should sell you stock position. (How to trade is a different discussion but any average person could easily understand it no doubt). Second way would be by means of dividend. Dividend as we all know is the amount a certain company pays you because you’ve kept your money with them. In most cases, dividend giving-companies are the profitable companies. This is their way of sharing the earnings of the company since you are a part-owner, and a simple way of saying ‘thank you’ to you my means of cash or stock dividend.
You can search for articles over the internet about stock market and stock investors. Hope I was able to impart something. Thanks and more blessings to you!
p.s. Investing in the Stock Market offers the highest return, but at the same time there are risks involved. Being fundamentally sound is a requirement to be a good investor. Calculated risks coupled with a game plan will be the key.
RC0, thanks for sharing those sites, especially the first one. We have someone here in Filipino Voices who maintains a similar site, check it out if in case you haven’t been there yet. http://www.fitzvillafuerte.com
Thanks again!
Lee Angelo, you’re welcome and thanks too for sharing the fitzvillafuerte site. I also visit money.cnn.com daily for financial news. On TV, I tune in CNN (Open House and Your $$$$$) and CNBC (The Suze Orman Show).
moe, you said you’re also an ofw. Are you also in the US? If you are, here are some suggestions:
1) If you’re working for a company that has a 401K plan, I suggest putting money into it. You may check out 401k.com or money.cnn.com for more info on the subject.
2) I suggest also putting some money to an IRA. My spouse and I currently contributes the maximum to our 401k and Roth IRA accounts. Check out vanguard.com for more info.
3) I have two daughters and I opened Coverdell Education Savings Accounts for them since age 0. I also contribute the maximum to these accounts every year.
3) I’m not (yet) into individual stocks and bonds but someday when I have more time, I’ll try to go into individual trading. Currently, I’m investing in mutual funds (vanguard.com).
4) Check out freemoneyfinance.com for TONS of other financial information such as the best cash-back credit cards, how to shop for new car, tithing, etc.
4) Take advantage of free financial seminar. We will be attending one tomorrow from Trump Institute. I’m sure they will be selling something but my spouse and I will attend for the nuggets of information and the free book “Think Like a Billionaire” by Donald Trump.
RC0, thanks for the info! ^_^ I’ve heard about Vanguard, one of the more popular mutual funds similar to Magellan Fidelity Fund. At first I was interested in them because it was mentioned several times in Francisco Colayco’s book - Wealth Within Your Reach. But then when you look at the scorecards of fund managers (here in the Philippines) even those from Metrobank, it didn’t even made it to 2% interest. I quite convince with the book “Motley Fool Investment Guide.” But I have nothing against mutual funds, I just have this belief that you can do better than what they’re giving.
Wow! Trump Institute! I hope you can share some of you would-be experiences there. Godbless!
Lee Angelo and RCO thank you for sharing all the information that i need. It inspired me more of saving and investing. Now if i read a business page i can understand the meaning of those figures.
Im here in the mid east since i was 23 in an allied medical job. our salary here is way way behind compared to western countries. Im actually in Dubai. Im helping my spouse marketing to our kabayan its computer business. kabayans here are crazy about laptops. and would you believe.. sa dami ng nakilala ko na Filipino dito and most of them dont even pay their SSS… and investing is not in their mind or priority. Parang endorser na nga ako ng SSS. Thank you and God bless
Lee Angelo, with mutual funds, yes there are fees involved. However, for super busy people like me (full-time working mom of two little kids, no nannies/househelp) who don’t have time to research individual stocks, I leave it to the experts (fund managers) to do this. And I’d say, the returns are not disappointing at all (well at least before the US economic turmoil).
moe, are you familiar with this organization —> http://www.fccdubai.com/?
God bless to both of you and also to all of us OFWs. May God bless us with financial freedom so than we can give more of our time and talent to help improve the situations of our less fortunate kababayans.
Lee Angelo, check out CNBC’s Mad Money (Jim Cramer) if you’re into investing in individual stocks.
“Mad Money” and “The Big Idea” are two CNBC shows that I’d like to learn how to love. There are just a LOT of useful info from these shows. Sadly, at this time, the CNBC show that I can only stand to watch from start to finish is “The Suze Orman Show”.
moe, you’re welcome! Nice to know that you’re helping our kababayans there. OFWs are in danger when they don’t save and invest. Usual scenario: An OFW goes abroad and works hard. After years of hard labor in foreign land, when he comes back to our country to retire he realizes that he wasn’t able to save enough money. Instead of retiring, he once again goes back to the foreign land to continue working to sustain his family and himself. Franciso Colayco’s books are mainly intended for OFWs, I hope they get to read them.
Contrary to the common notion that investing in the stock market consumes great amount of time, it is not the case. Mutual fund has a prettier return compared to banks. Problem is, it’s difficult to make money during a rough market because your money is tied to the investment or portfolio. On a second note, I think people should engage in the market and not settle for the idea that the market is only for pros. I don’t have the stats but fund managers probably manage 250 to 300 portfolio on an average year. Question would be, how much time do they spend in checking yours? I’m sure common people have more time to take a look at their stocks and assess whether it’s a good investment or not compared to the fund manager who has an extremely hectic schedule. There are to types of investors: The Day-trader who trades as much as he likes to. And the other would be the investor, who let’s his money sit and appreciate. Moving on, investors are further classified to (a.) Long term-investor who usually holds his stocks 9 or more months before trading it again. Filipino long term-investors tend to have a shorter patience so its 6 months or more. (b.) Short term-investor who trades their stocks before 9 months, or in the case of Pinoys, less than 6 months. My take would be be a long term investor. Frequent trading is not really needed as far as the gurus are concerned. Check out Warren Buffet, currently the World’s Wealthiest Man.
In my opinion, instead of paying for the commission/fees of the “professional” fund managers, use a portion of the money to pay yourself back, another portion for re-investing, then the remaining would be for buying materials like books and cds about the ” How-To ” of Investing. I believe this is a smarter way of realizing financial freedom.
RC0, thank you for sharing the shows. I’ll check it over the internet to squeeze insights. God bless your family!
(maybe the links are the reason I can’t post, so let’s remove them)
Good thing to know there are people like RCO and moe.
Just a few thoughts on what we got from the Trump Seminar:
The “seminar” consists of two parts. The first speaker was trying to convince us to attend a 3-day comprehensive seminar about real estate. The second part is also trying to sell another 3-day seminar but it is about tax lien receipts and tax deed sale.
I was almost swayed to go to the Trump seminar but good thing husband was there to tell me that this is not yet the right time to get involved in these things. But it was not completely a waste of time since we learned new things especially with regards to the tax lien receipts. The stories shared are also quite interesting and will inspire you to think outside the box.
Correction, it’s tax lien certificates (not receipts).
RC0, thanks for sharing your experience with the Trump seminar! Speaking of Trump, I’m reading the book “Why We Want You To Be Rich?” by Donald Trump and Robert Kiyosaki. I’m still on the first few pages, but I can tell that I’ll be worth reading.
Just recently, I was able to experience playing “CashFlow” a game designed by Robert Kiyosaki himself (best known for his “Rich Dad, Poor Dad” book). I had it for free. I hope there’s a group playing it there in the States so you can also experience it. Thanks!
Lee Angelo, I’ll check out the “CashFlow” game when I get the chance. Thanks!
I’m also interested in reading “Rich Dad, Poor Dad”.
There’s just much to learn but so little time
Yeah, “Rich Dad, Poor Dad” is a must-read book in this financially challenging time. I just started reading “Increasing Your Financial I.Q.” a newly-released book of Mr. Kiyosaki.