Thursday, March 29, 2012

The Index Fund of BPI

     Index Funds are generally an investment that are low-cost, low risk funds that track the performance of the Philippine Stock Exchange. They generally are not actively managed and have low turnover so they don't generate a lot of taxable income.
     In lay man's term the Index Fund is a mutual fund that is run virtually on autopilot. Generally stockbrokers don't recommend index funds because no commissions can be derived for them. For the first-time investors, investing a small amount of their portfolio in an index fund is a very good start.
    I will focus on one index fund offered by the Bank of the Philippine Islands (BPI) and will tackle it without the complicated finance terms for the majority of the blog readers to understand.

First, Why an Index Fund?. The primary benefits of investing in a mutual fund is that our gains are exempted from taxes based on the Comprehensive Tax Reform Program (CTRP). This was done to promote long-term savings in the country. Secondarily, over the long term index funds have outperformed other mutual funds because they charge low fees. The BPI Fund managers charged 0.75% per annum for the management and distribution fees while others charged 1.75%.  In terms of sales load, the BPI Index Fund charged 1.5% while other mutual funds charged 2% this will result on more shares for you if you choose an Index Fund.

Second, What are the Risks of an Index Fund?Mutual Funds are registered with the SEC and they are neither insured with the PDIC nor any other agency of the government, nor guaranteed by the Fund Manager. Before investing  investors are expected to understand that the Fund is not a bank deposit product and any income, or loss, shall be for the account of the investor. Investors are advised to read the Prospectus of the Fund before investing.

Third, How much do I need to Invest in an Index Fund?. The minimum investment is P5,000 if you avail of the BPI regular subscriptiion plan (RSP). The plan require you to invest minimum of P1,000 additional investment per month deducted from your BPI savings account. If you will not avail of the RSP your minimum initial investment is P10,000 and additional investment is your prerogative.

Fourth, How will I earn money in an index fund?. If the present Net Asset Value (NAV) is higher than your buying NAV you will earn money. Historically, the BPI Index Fund is earning money. 

Fifth, How will I redeem or encash my investment? Submit to your BPI bank your Purchase Order starting 9:00 a.m. to 2:30 p.m.. You will be paid in full via a Debit Authority you indicated in your  application Settlement Account you signed on the date of your application..

The 5 years annualized return  of the Philippine Index Fund is 9.79% per annum beating the inflation rate and other type of mutual fund. (see figure above).       

For my blog readers, it is time you consider investing in an Index fund.

Arnel L. Cadeliña

Monday, March 12, 2012

Top Ten Reasons Why SSS will hike their contributions

In the tradition of the great David Letterman, Here is my top ten list why our SSS will increase their contribution rate. Enjoy!
10. They want to extend the life of SSS to 35 years or up to year
       2046. As of today, the current fund will last only up to year

9. They want to increase the benefits of the SSS members but first
    you have to cough up more until your payslip net pay drops to...

8.  Our SSS contribution rate is only 10.4% of our monthly salary
     while GSIS members pay 21%.  No wonder their pension is

7. They want to lend more to SSS members and corporate sector.
    The profit will help them increase their own salaries and benefits
    while ours stagnates.

6. They can reason out that we have a low inflation rate therefore
    an increase will not be "felt' by the SSS members.

5. The 29.2 million members of SSS contributed P79 Billion pesos
    but they paid P76 billion for SSS benefits.This thin margin made
    them sleepless.

4. They are projecting a possible loss of overseas jobs which means
    lower SSS collections from the OFW.

3.  They are aware that Filipinos are adept in changing eating
     pattern in order to cope up with deductions and high prices.
     Noodles anyone?

2. In 2007, the SSS spends 11% of our contribution for their
   operating expenses while Malaysia spends only 2%.

1. They want to increase your minimum pension of P2,400 after working and contributing to them for 20 years and increased it possibly by 10%. Meaning an increase of P240 to achieve a minimum pension of.............. ( no laughing please).........P2,640.

Monday, March 05, 2012

Pretty Good ( Translation: Pwede na 'yan)

I love poetry especially related to education and economic thoughts. Here's one that you will love reading to your children, students.... well I guess for everybody. 

Thank you to Mr. Charles Osgood. 

Pretty Good ( Translation:  Pwede na 'yan)
by  Charles Osgood  (1933-)
from the Osgood File, 1986
There once was a pretty good student
   Who sat in a pretty good class
And was taught by a pretty good teacher
  Who always let pretty good pass.
He wasn’t terrific at reading,
   He wasn’t a whiz-bang at math,
But for him, education was leading
  Straight down a pretty good path.
He didn’t find school too exciting,
  But he wanted to do pretty well,
And he did have some trouble with writing
  Since nobody taught him to spell.
When doing arithmetic problems,
  Pretty good was regarded as fine.
5+5 needn’t always add up to be 10;
  A pretty good answer was 9.
The pretty good class that he sat in
  Was part of a pretty good school,
And the student was not an exception:
  On the contrary, he was the rule.
The pretty good school that he went to
  Was there in a pretty good town,
And nobody there seemed to notice
  He could not tell a verb from a noun.
The pretty good student in fact was
  Part of a pretty good mob.
And the first time he knew what he lacked was
  When he looked for a pretty good job.
It was then, when he sought a position,
  He discovered that life could be tough,
And he soon had a sneaking suspicion
  Pretty good might not be good enough.
The pretty good town in our story
  Was part of a pretty good state
Which had pretty good aspirations
  And prayed for a pretty good fate.
There once was a pretty good nation
  Pretty proud of the greatness it had,
Which learned much too late,
  If you want to be great,
Pretty good is, in fact, pretty bad.

Thursday, March 01, 2012

Short advice for the Graduating students

My Dear Graduating students:

In an era of joblessness you will be faced with a lot of challenges. My advice would be to build on your career; accept a job even if it is not your dream job and USE that experience.

The Philippine working environment are full of loop holes and you need to be OPEN to different career paths.

When you finally get your first job take on difficult projects that will allow you to DEMONSTRATE your skills.

Invest on continued learning, this separates the slick and the slack.

Remember those who value professionalism and ethics always stand out in the long run.

Do not forget that faith and reason always complement one another. Do not forget what you learned from your humanities and philosophy classes because in the workplace there are people who are full of logic but they lack the soft skills. Learn from them by taking the right path.

Good luck on your job hunting, My prayers are intended for you.

Arnel L. Cadeliña