Seeing the Fruits of our Labor

I have set up a personal fund (intended for educational fund for my future child) way back in 2009 when my salary was meager and just enough to get by. I am really happy I did because looking at the statement of account that was delivered to me last month (Yep! I just opened the mail today.) I am really delighted to see that my money produced money after 6 years.

Imagine, I started with 9Php per share and now it’s at 37Php. I am estimating an increase of 68% after 6 years. Banks could never beat that. Thank you so much PhilEquity. J

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How I/we started

If I remember correctly, the last recession was 2008 and I started investing March 2009. Frankly speaking I am not a disciplined saver that time yet and I was just adding 1000Php every time I have extra. Would you believe until 2014 I did not put a regular amount on my PhilEquity account? Silly me.

For the past couple of years we put most of our hard-earned money in FAMI-SALEF. We withdrew some shares to fund our wedding and after that we began rebuilding the fund again. As of today I can say that we are almost at the same level as before (the wedding.) It’s not yet celebration time but we know we are getting there. ^_^

For 2015, we are planning to put more money on PhilEquity since according to our review it has the best performance among other mutual fund companies. And also, this is the fund dedicated for the education of our child and children to be (if we are that blessed) so we need to beef it up.

I will try my best to put a constant amount beginning January of 2015. All I need is a little dedication and an effective plan. I’ll just need to find the balance especially because we are going to have our little angel soon.

Till then. ^_^

A New Fund to Try - Soldivo

I’ve received a text message from my Mutual Fund broker about the opening of Soldivo Funds on October 8, 2014. At first I was just thinking “Okay another fund to try.” But then it gets serious when one of my friends is willing to try it also. So we decided to place a small amount of money for the initial investment. I also plan to put additional investments monthly to take advantage of the peso cost averaging.

Anyway the fund we are going to open an account with is the SOLDIVO Strategic Growth Fund. Before deciding to put our money in it, I talked to my broker and asked questions below:

Minimum Initial Amount = P5000.00

Minimum additional = P1000.00

How much is the Entry Fee? Not more than 3.36%

How much is the Exit Fee? 1.12%

How long is the holding period? 6 Months

Partner bank for deposits or bills payment? BPI

They don’t have the online payment facility yet but I am hoping and praying and I am positive about it that they will make this improvement since it is easier for investors to just transfer funds online.

For now I am going to issue post-dated checks for my succeeding deposits. It’s much easier that way and of course this method forces me to set aside money.

For more information you can download the Prospectus of SOLDIVO Strategic Growth Fund here.

Happy Investing! J

Preparing for your Kid’s Education through Mutual Funds

Every parent aims to provide quality education for his/her kids. And of course it takes a lot of effort to produce such a huge amount if you are not going to prepare for it early on. Taking into consideration the current situation in the Philippines, the tuition fee for college students are growing steadily for the past years. Please see link here and here. 

So in order to address the ever inflating cost of education, I will show you how you can fund your child’s college education through the help of Mutual Funds. 

For example you have a child who is turning 1 this year. You decided to make monthly investment of 2000Php (24000Php/year) in an Equity Fund that earns 12% interest per year. How much would you have after 15 years?

So for the next 15 years, parents would save and invest a total of 360,000Php. Before the child’s first year in college the fund would have accumulated a total of 1,000,000Php which accounts to almost 300% gain.

Now you ask me, “Is that possible?”

Let me show you the historical performance of a Mutual Fund Company named PhilEquity Fund Inc. Click here to know more about PhilEquity.

This shows that for the past 10 years the compounded annual growth rate of the fund is at 19.49%. So the computation above is very much possible based from the past performance.

Now here’s a tip

It’s always good to prepare ahead of time. The earlier you prepare the smaller the amount you need to save and invest every month.

Let’s say for example you have a child who is now 5 years old. You would like to have at least 1Million by the time he goes to college. Question, how much should you save and invest in order to do so? Answer, that would be 43500Php per year or 3625Php per month for the next 11 years.

If you delay further, say for example you are going to prepare for your child’s education by the time he is already 10 years old, you will need to save and invest 112,000Php every year or 9345Php per month for the next 6 years.

So you can now see the importance of starting early. The earlier the better.

Here’s another tip

For instance you would like to prepare for your child’s education early on but would only want to save for 5 years. Your target amount is the same 1Million pesos. Simple analysis would tell us that because we would only want to save for 5 years for the college fund, we should increase the amount to be saved and invested per month.

Table above shows that you need to save and invest 46,000Php per year or 3850Php per month in order to do so.

For complete list of Mutual Fund companies, please click here.

Please note:  Past performance is not indicative of future performance. Mutual Fund investing involves risks.

The Real REAL score between VUL vs Term + Mutual Fund

My officemate approached me one day and consulted about VULs. Fact #1: Most people don’t know how to analyze when it comes to insurance coverage.

Tip # 1: if you want to finish RICH, take charge of your finances.

Financial life is not all about saving, it’s also about investing.

I asked her if she has the illustration of benefits and she showed me the PDF emailed to her by the agent. I studied the file and came up with my own excel sheet.

Disclaimer: Some of the details of the given illustration of benefits were hidden for the protection of the seller. If you find something similar to this, that may have only been a coincidence.

Assumptions and Considerations:

•       The Proposed Plan Holder is a 34 years old non smoker.
•       Policy Premium is P24,000.00
•       Although the VUL involved should be paid until age 99, I only considered until age 65.
•       Only the Living Benefit was compared.
•       Interest rate used for the VUL was that of illustrated. The interest rate in Term + Mutual Fund is at 10% (same as that of the illustrated in VUL.) Fact #2: VULs and any other investment companies DO NOT guarantee returns. This is for illustration purposes ONLY.

VUL				Term + Mutual Fund
Age	Premium	Living Benefit		Insurance	MF	Living Benefit
35	24000	35		4,813	19,187	21,106
36	24000	74		6,651	17,349	42,300
37	24000	11,984		6,651	17,349	65,614
38	24000	29,176		6,651	17,349	91,259
39	24000	49,938		6,651	17,349	119,469
40	24000	74,589		6,651	17,349	150,500
41	24000	101,280		10,017	13,983	180,931
42	24000	130,116		10,017	13,983	214,406
43	24000	161,333		10,017	13,983	251,228
44	24000	195,091		10,017	13,983	291,732
45	24000	231,625		10,017	13,983	336,286
46	24000	271,134		14,854	9,146	379,975
47	24000	313,898		14,854	9,146	428,034
48	24000	360,182		14,854	9,146	480,898
49	24000	410,302		14,854	9,146	539,048
50	24000	464,562		14,854	9,146	603,013
51	24000	523,299		22,971	1029	664,447
52	24000	586,807		22,971	1029	732,023
53	24000	655,427		22,971	1029	806,357
54	24000	729,495		22,971	1029	888,125
55	24000					976,937
56	24000					1,074,631
57	24000					1,182,094
58	24000					1,300,304
59	24000					1,430,334
60	24000	1,313,714				1,573,367
61	24000					1,730,704
62	24000					1,903,775
63	24000					2,094,152
64	24000					2,303,567
65	24000	2,048,849				2,533,924.03

Comparison:

1.       Comparing the living benefit, it is EVIDENT that all throughout, my officemate will get better returns if she combines the Term Insurance with a Mutual Fund.
2.      On the VUL, my officemate will still continue to pay even after age 55 but will still get lower return. On the other hand, even if my officemate will stop paying for the insurance [Please NOTE: I don’t believe that a person needs a WHOLE LIFE insurance.] the Mutual Fund will still keep accumulating still beating the return of the VUL. Please refer to the Living Benefit at the age of 65.
3.       Even if the insurance cost increases for the Term (Age 51-54) please note that the living benefit STILL beats that of the VUL.

My opinion and recommendation to my friend:

1.        Finance is all about the numbers game. If you are lazy to compute and compare, you might be losing millions in a span of “how-many” years.
2.       This is just for illustration purposes only. I just presented here the facts that I know. And I don’t believe that a person needs whole life insurance. 
3.       The insurance component is an actual product.
4.       A 35 year-old should be able to save Php24,000.00 a year provided that he/she is working. That is equivalent to 1 month pay.
5.       With all the expenses in the family, how can I afford to save P24,000.00 a year? Simple. Your 13^th month pay will suffice.
6.         Hassle on claiming? Hmm. Not for me. J

Disclaimer: This is not rocket science. 

Till next time. ^_^