My Mutual Fund - First Metro Save and Learn Equity Fund - 3

It's been long since I last posted. I am now in Japan so I haven't made any transactions with First Metro.

Anyway, stocks are getting a beating nowadays, so I was doing my 'strategizing' (in my newbie kind of way) on what to during these low times. Finally, after some thought, I decided to just stick it out and 'forget' about my investment. Yes. Forget. For the time being.

Why? Well, the logic here is really very simple. Humans are born emotional, and when it comes with their hard-earned money, the emotions spikes up to double, triple, or even a hundred fold! And guess what's bad for your investment? Yep. Emotions.

So, as what most couples do to heal themselves during a break-ups, they forget, or at least try to forget. Then, after some time, when everything has settled, life becomes pink again.

I'd like to think of my relationship with investing as such. No rash actions. I just have to calm my thoughts and wait patiently until I make my next move.

----

By the way, First Metro has a new website up and running. Their old site (www.fami.com.ph) has a dead link, I thing. Here's the new site: http://www.firstmetrofunds.com.ph

The Rule of 72: What is it?

I learned this when I was 25 years old.

This rule was never taught in elementary, or even highschool math. Yet, this very useful tool is so easy to understand.

Simply put, the Rule of 72 should determine how long it would take for an investment to double its amount given a fixed annual interest .

For example, Php 100 invested at 10% would take 7.2 years to become Php200. Easy, right?

Here's the Formula: No. of years = rate / 72.

So now, how do we use this rule?

Here, look. Let's say you put that extra hundred in your pocket in a regular savings account. If you let it sit there and forget about it, will take you approximately 72 years for your hundred to turn into Php200! (I'm assuming savings gives us 1% rate of return.) That's a long, long, long, time.

But here's what I learned in Investopedia.com. Apparently, the Rule of 72 is only fairly accurate for low rates of return. As the rate gets higher, the rule gets less precise.

But then again, we can always use the future value formula if we want accuracy.

My Mutual Fund - First Metro Save and Learn Equity Fund - 2

Today, I added some more shares for my FAMI SALEF but it will not be credited until maybe tomorrow. I usually just scan my investment form and deposit slip and send it thru email but their DSL connection is not running yet so they won't be able to receive it. I guess I'll have to send it thru courier.

Recently, the FAMI office moved from 20F GT Tower to 18F PSBank Center.

For those who are interested to visit their office, here's the new address:

First Metro Asset Management Inc.,
18th Floor PSBank Center,
777 Paseo de Roxas Ave., cor. Sedeno St.,
Legaspi Village, Makati City.

Their phone number changed too: (632)891-2860 to 65, but they retained their old fax number: (632)816-0467.

The market is down...

... and I think it's time for me to buy some more of my equity fund shares.

Our company's special bonus arrived two weeks ago and another one will be credited next week.

Scarred with my recent losses, I have decided it's time for me to add to my FAMI SALEF shares. Although I don't really follow a pattern with my investing, like monthly or quarterly, this way, I am sort of doing cost averaging.

So there.

Monday, next week, I will make a trip to the bank. :-)

Battling emotions - conquering the investment world

We have this active yahoogroups moderated by Efren Ll. Cruz, RFP. He regularly shares with us articles he finds, facts, and other financial advices.

Recently, he shared this article by Jason Zweig. I think this would be timely.

-------------
8 ways to tame your brain

The investing world is full of traps and our brains are wired to lead us into them.

By Jason Zweig, Money Magazine senior writer/columnist
August 23 2007: 4:05 PM EDT

(Money Magazine) -- Most investors think too much and end up making the wrong moves. Follow these 8 guidelines and make the right ones.

Avoid the "sure thing"

Your "seeking system" is especially turned on by the prospect of a big score, and that in turn will hinder your ability to calculate realistic odds for the success of an investment.
Be on your guard against any sales rep who tries to lure you with jackpot jargon like "can't miss," "double your money" or "the sky's the limit."

Remember: lightning seldom strikes twice

If you've ever had the taste of a big gain, you'll likely be tempted to try to get that feeling back. So be especially wary of investing in stocks or mutual funds that remind you of the one you made a killing on long ago; chances are, any similarities to another investment, living or dead, are purely coincidental.

Think twice

Making a financial decision while you're inflamed by the prospects of a big gain - or a huge paper loss - is a terrible idea.
Calm yourself down (if you don't have kids to distract you, take a walk around the block or go to the gym) and reconsider when the heat of the moment has passed.

Get away from the herd

If you are part of an investment organization, appoint an internal sniper whose job is to shoot down ideas everyone likes. (Rotate this role to prevent one person from becoming universally disliked.)
Similarly, if you're at a barbecue and your friends are talking up a seemingly great opportunity, speak to someone you respect who isn't part of the group before you jump in.

Lock up your "mad money"

Put at least 90% of your stock money into a low-cost, diversified index fund that owns everything in the market. Put 10%, tops, at risk on speculative trades. Be sure this "mad money" resides in a separate account from your long-term investments; never mingle them. Never add more money to the speculative account. (It's especially important to resist that temptation when your trades have been doing well.)
If you get wiped out, close out the account.

Control your cues

The stock market generates signals that can goad you into trading. Try watching CNBC with the sound off so that none of the hullabaloo about what the market is doing this second can distract you.
If you walk past the local brokerage firm every day so you can sneak a peek at the electronic ticker, take a different route. If you obsessively check a stock's price, use the "history" window on your browser to count how many times you've updated the price that day. The number may shock you.

Use your words

While vivid sights and sounds - say, red down arrows and scenes of mayhem on the exchange floor - fire up your emotions, the more complex cues of language activate analytical areas of your brain.
To prevent your feelings from overwhelming the facts and leading you to sell in a panic, ask yourself:
- Other than price, what's changed?
- Are my original reasons to invest still valid?
- Shouldn't I like this investment even more now that it's cheaper?

Track your feelings

Many of the world's best investors have learned to treat their own feelings as reverse indicators: Excitement becomes a cue that it's time to consider selling; fear tells them they should be thinking about buying.
I once asked renowned fund manager Brian Posner of Fidelity and Legg Mason how he sensed whether a stock would be a moneymaker. "If it makes me feel like I want to throw up," he answered, "I can be pretty sure it's a great investment."

My Mutual Fund - First Metro Save and Learn Balanced Fund

July 20, 2007.

I bought some shares of First Metro's Balanced Fund. At that time, the NAV was pegged at 0.9995 per share. However, First Metro doesn't sell below Php1.00 per share so I bought at 1 peso.

Php40,000.00 less 2% (sales load) got me 39,200 shares.

Market is really really shaky because of the subprime lending scare. So now, I have losses in both of my FAMI accounts. As of last Friday, my balanced fund has a NAVPS of 0.881.

Now let me see. My shares worth has shrunk to Php34535.20. The current market situation ate a huge 13.662% of my initial investment. Yikes!

I must admit, I am a bit worried, but during trying times, common sense is my best friend.

I told myself, "Stick to your plan, stick to your shares, your journey is just about to begin."

Yeah I'd like to think of this as the first speed bump in my journey into the world of investing.

Stocks Slides Down, and so?

'Stocks continue to slide" <--- www.inquirer.net Business section headline

---------------------------

And so are my mutual funds. What do I do?

An investor overcome by emotion loses. I have incurred paper losses, yes, but common sense, of course, tells me not to sell.

Why? Because, if I do, I would convert my paper losses into real monetary losses. Yikes!

Generally, I was not affected by the stock market scare last week. I am not a trader but a long term investor. So as long as I have decent returns when it's ripe for me to redeem my shares then I will be fine.

Yep. Optimism really helps. :-)

My Mutual Fund - Prudential Optima Fixed Income Fund

My first ever mutual fund was with the Prudential Optima Fixed Income Fund.

For my first investment, I shelled out Php10,000 (min. investment is Php5,000). 2% was taken out as sales load so I was left with Php9,800 to purchase the shares at 1.2133 equivalent to 8,077.14 shares.

So let me see, as of July 20, last Friday, Prudential Optima was worth 1.4041 per share. My Php10,000 is now worth Php11,341.11. That's around 13.4% return in 14 months. :-)

Im happy.

------

Important:
Contents of this post is personal and does not endorse Prudential Optima. For information about their products you may visit their website at http://optima.prudentialife.com.

My Mutual Fund - First Metro Save and Learn Equity Fund

Last year, I made my first mutual fund purchase.

It was with the First Metro Save and Learn Equity Fund (FMSALEF).

I started small, just placing a little over their minimum of Php5,000. I had saved up Php6,000 from my minimal workers salary for the first 4 months in my job. It was really teeny-tiny since after the 2% sales load, I was left with Php5,880 to invest, but I was really excited with it. Anyway, that money bought me 3,990 shares at 1.4735 NAVPS (Net Asset Value Per Share).

I have made subsequent purchases of SALEF after that. As of last Friday, June 20, the NAV for SALEF was pegged at 2.3544 per share. My Php6,000 is now worth Php9,394.05. That's 56.6% return after a year and a month. :-)

Not bad, really. Considering a time deposit would give me only 3.5%.

-----------

Important:

I am not directly affiliated with First Metro Investment Corporation. If you want to get more information about their products, you can visit their website at www.fami.com.ph.

Cheers!

What is a Contingency Fund?

A contingency fund is also called as your emergency fund or “safe and sound” money.

By definition, according to most financial planners in the US, the emergency fund should be equivalent to 3 months worth of your living expenses if you’re an employee. This amount will be higher if you’re self-employed, around 6 months worth.

Why 3 months? This time-frame is based on the average time a US employee would find employment in case he/she loses her present job, thus the name “emergency” fund. In the Philippines, we don’t know the average time a Filipino employee would take to replace a lost job but with our current unemployment rate, I assume it would be safe to save up more than 3 months worth. Maybe 6 months will be enough or higher if you want.

Next to debt payments (if you have any but better if you don’t ), building the contingency fund is the next step to financial freedom. This money should be kept in instruments where it is accessible but also pays a decent interest. Now, bear in mind that you want capital preservation for this fund so I would not recommend putting this into stocks or any high risk investment instruments. You can opt for a savings account if you want to be very liquid, but then again you can look into time deposits, T-bills, or a well-managed low risk mutual fund for example.

It is always safe to save for the rainy days, they say. Build your contingency fund so that if you fall hard, you will have a cushion to fall into.
Good luck to us!

What is a Mutual Fund?

There are a number of ways to keep your money.

Aside from the usual savings and time deposit, you may have heard (or not) of an instrument called mutual fund.

This industry is relatively young in the Philippines as compared to older economies like the United States.

I visited www.icap.com.ph, the official site of Investment Company Association of the Philippines and here is how they defined Mutual Fund.

What is a Mutual Fund?

A Mutual Fund is an investment company that pools the funds of many individual and institutional investors to form a massive asset base. The assets are then entrusted to a full time professional fund manager who develops and maintains a diversified portfolio of security investments. People who buy shares of a mutual fund are its owners or shareholders. Their purchases provide the money for a mutual fund to buy securities such as stocks and bonds. A mutual can make money from its securities investments in two ways: a security can pay dividends and interest to the fund, or a security can rise in value. The fund passes any dividends, interest or profits on the sale of its portfolio securities, less fund expenses, to shareholders in the form of distributions.

In the Philippines , there are currently four basic types of mutual funds---stock (also called equity), balanced, bond and money market funds. Bond funds invest primarily in bonds such as treasury notes issued by the Philippine government and commercial papers issued by reputable companies in the Philippines . Having a full basket of only fixed-income securities, bond funds provide capital preservation while maintaining a conservative stance in terms of asset allocation. Like bond funds, money market funds also have a conservative stance since they have a full basket of fixed income funds. The main difference lies in the term of investments of money market fund investments, which is one year or less. Equity funds invest primarily in shares of stock issued by Philippine corporations. The dominance of stock issues within the portfolio positions the fund to attain a more aggressive rate of growth. Balanced funds invest in both shares of stocks and bonds, thereby accessing the growth potential of stocks tempered with the presence of secure fixed-income instruments. Professional fund managers create value for shareholders by providing superior yields within controlled risk exposures. Certainly, expective in both security selection and asset allocation go a long way in ensuring better long-term rewards for mutual fund investors. (Source: Investment Company Association of the Philippines)