18 years for OFW to save P3 Million!

I read an article stating that it will take 18 years for an OFW to save P3 Million so that he could return home for good? Assuming that he save part of his monthly salary alone or with the spouse is worth P13,800.00. Do you think it is only worth P 3 Million? Let us compute to prove this argument.

So Let us Multiply P13,800.00 by 12 months to get a yearly saving.

Yearly saving is P165,600.00

For 18 years, we will multiply P165,600.00 by 18 years.

In 18 years we have P2,980,800.00

Wow, it will take 18 years to earn that money and you lost that 18 years away from home. Would you wait that long to earn P3,000,00.00?

For me, I don't think so!

There are many ways to grow your money like building a small store, doing part time jobs and investing. Yes, you heard me, investing.

With regards to small business, don't be discouraged because although it is a small business but I think it will add more income to you and you can save more money. After all, millions started from cents or perhaps P1.00.

The problem of being an OFW is that it is hard to start a business without our presence. Most of the time it will go bankrupt due to mismanagement and etc. Real Estate is also a good investment depending on location. Real Estate is all about location, location, and location.

The best option for me is to invest in stock market. Although almost all gurus will say that there is no guarantee that you will earn income from it since the stock market is fluctuating. Many will tell you to stay away from stock market. Leave it to the expert. But base in history and it is really proven that in the long run, this investment will earn more interest than real estate. If you read the American stock graph and even in the Philippines, long term stock investment will beat inflation and other forms of investment. But of course, you have to diversify your investment too. As the saying goes, don't put your eggs in one basket.

I would suggest that you have to invest in stock market but if you are not that savvy on the stock, it is better to invest in the mutual fund just like me. Balance Fund which is has bond fund and equity fund will increase 15% average yearly but if you invest in equity which is stock market using the mutual fund, it will have a yearly average of 20%.

I myself invest in a mutual fund but purely equity. Of course, I experience up and down. But I am  okay because I understand that it is normal for the stock market to move up and down for awhile but really, the direction is going up in the long run.

Why I invest in Mutual Fund instead of Stock Market? It is because I feel safe in it. Mutual Fund is composed of many companies that represent stocks. So if one company or stock is down or bankrupt, there are still other company to counter-balance it so the losses are minimized. If you invest in companies and it will close, all your money is gone. So that is the difference.

Back to the main topic why would I spend 18 years in abroad when I can grow my money faster by investing? Don't put your money in the bank, they will just laugh at your back. The bank will invest your money and they will get the high interest and you get the 1.5% interest yearly minus the 20% withholding tax on the interest so in reality, you will receive a 1.2% lol.

Here is the formula to compute your money if you up to work for 18 years abroad while investing the P13,800.00 monthly assuming a 15% since you invest it in mutual funds.

 

FV= Future Value of your Money
C= yearly money value invested or the money you save and invest yearly
I= Interest yearly
N= Number of years

So assuming C=P165,600.00 yearly invested
I= 15% interest yearly
N=18 years

We have

FV=165,600.00 X (1+.15)Exp 18-1)/ .15 X 1.15
FV=165,600.00 X 11.375453/ .15 X1.15
FV= 165,600.00 X 87.211
FV= P14,442, 275.00

You see your money will grow up to P14,442,275, not P3 Million Only!

The secret is investing and by doing so your money is compounded every year with 15% interest. This is just conservative computation.

Hope you find this article informative and good luck.

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5 Tips on how to Save and Invest for OFWs

Many Filipinos left their love ones to earn money abroad even if they don't want to leave. They do this because they have no choice. There is no job opportunities in the Philippines. Right now millions of Filipinos are in Middle East, United States of America and other countries to work. They are not there as tourist.

 I felt sad for some of these Filipinos who became victims of abuses and some of them even died without a fight. Maltreatment from their bosses and loneliness make them pathetic. I think it is just right that they should know where to put their money for savings and investments. Most of the OFWs went home without money and even poorer after many years working abroad because they don't know how to invest and start a business.

 For OFWs, the need to invest smartly is particularly urgent since your opportunity to raise funds is linked to the length of your contract. Once your contract of work is over, it is possible that you would find yourself without having a source of income, until you find a contract again. For this reason, you need to come up with the right investment choices that match your circumstances and make your money work harder for you. Essentially, OFWs should be guided by the same investment principles as Filipinos who are working and based at home, save for a few considerations to reflect your circumstances, in particular not being in the country.

 Here’s a simple five-step guide to help you in making your investment decisions: 

 1. Consider liquid and professionally managed investments. Shop for investment products that are easy to purchase and dispose off even if you are not in the Philippines. The nice thing with today’s technology is you can scan online, start by looking at the individual websites of financial institutions.

Your choices include the following:

Mutual funds – These are pooled funds invested in different types of assets to match your desired time frame and level of risk. Some may have the potential for high gains but will also come with higher risk. These are available to retail investors for a beginning account of as low as P5,000. ·

Unitary investment trust funds – These are also pooled funds invested in various assets to match your risk profile and investment horizon. These are available to retail investors for a beginning account of as low as P5,000.

Insurance-linked investments – This is an insurance product combined with an investment fund, fulfilling your need for protection and capital gains. Your monthly payment would depend on the amount of coverage you purchased, as well as the type of asset you chose to invest in.

Equities – These shares represent shareholdings in a company. You profit from the trading of these shares in the stock market. Online brokerages can facilitate your trades, with some of them requiring an opening balance beginning at P10,000.

Bonds – These represent debt taken by either the Philippine government or companies. They usually have a fixed return and are therefore safer. They may be purchased through most banks for as low as P5,000.

 2. Keep your papers in order. Ensure that you have proper documentation to open and maintain these accounts, either while you are visiting the Philippines, or from abroad. Download their online forms, then mail a clear copy of your required IDs. Before sending these documents over, it may be helpful to personally contact the financial institution through their emails so that they can review your signed forms and requirements before you send these. This will save you a lot of time and effort.

 3. Use safe and direct channels for sending money. Find a secure and cost-effective way to put money into your investment from where you are. Online banking services, which are now available to those with accounts in local banks, are among the safest channels you can use. You can also use bank-to-bank transfers. If you wish to go through remittance channels, consider companies with long track records and recommended for customer service if something should go wrong. Unsafe ways of sending money are physically through people, no matter how much you trust them; through other people’s bank accounts; or by sending the money in the mail.

 4. Make your payments or remittances regularly. If you send money to the Philippines, it would be good to do so following a schedule, so that you and your loved ones back home can plan your cash flows better. Have the discipline to send money on schedule so that your loved ones can make payments on time, letting you avoid penalties in the process. Luckily, major financial institutions all allow you to make payments or transfers online.

 5. Ensure the legality and integrity of your planned investment. OFWs are often the target of investment scams. Check out the site of the Commission of Filipinoshttp://www.cfo.gov.ph/to read the latest news and updates on legitimate and illegitimate business deals. You may also have relatives luring you into get-rich-schemes that offer nothing but false promises. While you may trust your loved ones, it is but prudent to check out everything about the proposed investment deal before you turn over your hard-earned money.

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Pros and Cons of Mutual Fund Investment

Mutual funds have often seemed like a golden investment because what can be a relatively small amount of money ends up being greatly diversified. The core idea of this kind of investment goes back to the basic rule of, don’t put all your eggs in one basket.

 In recent years it has become more apparent that there is no such thing as a guaranteed investment. Companies that appear to be solid from all angles can quickly fall apart no matter how big they are. Because of this you would never want to invest all of your money in one or two companies because no matter how good the investment may seem, anything can happen tomorrow; however, when you invest in hundreds of companies that each look like they will have positive returns then even if a high amount of them fail the others should inevitably make up the difference.

Mutual Funds

 Since so many of us can not afford to build such a diverse portfolio on our own, a mutual fund is a great idea. That alone is perhaps the best pro a mutual fund has over things like stock by stock investments. Of course it is important to know that, even over a long period of time, there is never a guarantee your initial investment will pay off. Mutual funds are by no means immune to mistakes and their chosen stocks are by no means immune to failure.

Put simply, a mutual fund is a pool of money provided by individual investors, companies, and other organizations. A fund manager is hired to invest the cash the investors have contributed. The goal of the manager depends upon the type of fund; a fixed-income fund manager, for example, would strive to provide the highest yield at the lowest risk.

 Advantages 

 1. Mutual Funds Offer Diversification 
The beauty of a mutual fund is that you can buy a mutual fund and obtain instant access to a hundreds of individual stocks or bonds. Otherwise, in order to diversify your portfolio, you might have to buy individual securities, which exposes you to more potential volatility.

 2. Mutual Funds are Professionally Managed 
Many investors don’t have the resources or the time to buy individual stocks. Investing in individual securities, such as stocks, not only takes resources, but a considerable amount of time. By contrast, mutual fund managers and analysts wake up each morning dedicating their professional lives to researching and analyzing current and potential holdings for their mutual fund.

 3. Mutual Funds Come in Many Varieties 
A mutual fund comes in many types and styles. There are stock funds, bond funds, sector funds, target-date mutual funds, money market mutual funds and balanced funds. Mutual funds allow you to invest in the market whether you believe in active portfolio management (actively managed funds) or you prefer to buy a segment of the market with no interference from a manager (passive funds and index mutual funds). The availability of different types of mutual funds allows you to build a diversified portfolio at low cost and without much difficulty.

 4. Mutual Funds Have Low Minimums 
Many mutual fund companies allow investors to get started in a mutual fund with as little as P10,000.

5. Systematic Investing and Withdrawals with Mutual Funds 
It is simple to invest regularly in a mutual fund. Many mutual fund companies allow investors to invest an affordable amount per month directly into a mutual fund. Money can be pulled directly from a bank account and invested directly in the mutual fund. On the other hand, money can be regularly withdrawn from a mutual fund and be deposited into a bank account. There are generally no fees for this service.

 6. Mutual Funds Offer Automatic Reinvestment
An investor can easily and automatically have capital gains and dividends reinvested into their mutual fund without a sales load or extra fees.

 7. Mutual Funds Offer Transparency
Mutual fund holdings are publicly available (with some delays in reporting), which ensures that investors are getting what they pay for.

 8. Mutual Funds Are Liquid
Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time. If you want to sell your mutual fund, the proceeds from the sale are available the day after you sell the mutual fund.

 9. Mutual Funds Have Audited Track Records
A mutual fund company must maintain performance track records for each mutual fund and have them audited for accuracy, which ensures that investors can trust the mutual fund’s stated returns.

 10. Safety of Investing in Mutual Funds
If a mutual fund company goes out of business, mutual fund shareholders receive an amount of cash that equals their portion of ownership in the mutual fund. Alternatively, the mutual fund’s Board of Directors might elect a new investment advisor to manage the mutual fund.

 Disadvantages
 1. Mutual Funds Have Hidden Fees
If fees were hidden, those hidden fees would certainly be on the list of disadvantages of mutual funds. The fee is disclosed in the mutual fund prospectus and can be found on the mutual funds’ web sites. 

2. No Guarantees. 
The value of your mutual fund investment, unlike a bank deposit, could fall and be worth less than the principle initially invested. And, while a money market fund seeks a stable share price, its yield fluctuates, unlike a certificate of deposit. In addition, mutual funds are not insured or guaranteed by an agency of the U.S. government. Bond funds, unlike purchasing a bond directly, will not re-pay the principle at a set point in time.

 3. No Control
Mutual funds also offer very little control. In fact, once you have chosen a mutual fund to invest in your control of your money has pretty much come to an end. With most, of, if not all of, these funds the investor not only has no say in what companies get invested in but they can not even find out what the mutual fund’s portfolio looks like. Aside from the funds being unwilling to divulge all of this information they are also often unable to seeing as the day to day trading is so vast.

 4. Lack of Liquidity
Yes, there are a lot of different mutual funds in the investment world, but that doesn’t necessarily mean they are very liquid. With mutual funds, the final transactions aren’t complete until the end of a trading day. It’s not until the final bell when you actual know the price of trades for the fund as a whole. That creates difficulties on days when the market is a volatile time-bomb. You need instant information in order to adjust your trading strategy. Mutual funds do not offer that option.

 5. Fluctuating Returns
Mutual funds are like many other investments without a guaranteed return: there is always the possibility that the value of your mutual fund will depreciate. Unlike fixed-income products, such as bonds and Treasury bills, mutual funds experience price fluctuations along with the stocks that make up the fund. When deciding on a particular fund to buy, you need to research the risks involved – just because a professional manager is looking after the fund, that doesn’t mean the performance will be stellar.

 6. Costs
Mutual funds provide investors with professional management, but it comes at a cost. Funds will typically have a range of different fees that reduce the overall payout. In mutual funds, the fees are classified into two categories: shareholder fees and annual operating fees.

 7. Over Diversification
Although diversification is one of the keys to successful investing, many mutual fund investors tend to overdiversify. The idea of diversification is to reduce the risks associated with holding a single security; overdiversification occurs when investors acquire many funds that are highly related and so don’t get the risk reducing benefits of diversification.

 8. Misleading Advertisements
The misleading advertisements of different funds can guide investors down the wrong path. Some funds may be incorrectly labeled as growth funds, while others are classified as small-cap or income. 

9. Investment style fluctuations
An investor who wants to maintain a certain asset allocation has to rely on the manager of the fund that he or she selects not to deviate from their stated investment styles. Any changes in priorities or investment styles could override and defeat the investor’s asset allocation.

 10. Panic selling 
 During sharp market downturns, investors often have a tendency to panic. When this happens, they look to sell their fund shares. Since the fund managers must redeem the shares, they have no choice but to sell the underlying securities at a time when there are few, if any, buyers. If not for the flood of redemptions, the fund manager would likely not sell the underlying securities. Thus, the professional manager’s expertise, judgment, and objectives are upset and overridden by the actions of the fund’s investors.

 11. No Insurance 
 Mutual funds, although regulated by the government, are not insured against losses.

Conclussion

 When you buy any investment, it’s important to understand both the good and bad points. If the advantages that the investment offers outweigh its disadvantages, it’s quite possible that mutual funds are something to consider. Whether you decide in favor or against mutual funds, the probability of a successful portfolio increases dramatically when you do your homework.

 All of this being said, mutual funds are a diverse investment that allows you to buy in with limited money. Perhaps their best perk is that your money ends up being professionally managed by people who are often amongst the best in the business.

 List of Leading Mutual Fund Companies in the Philippines

 ATR- Kim Eng Equity Opportunity Fund – www.mutualfund.com.ph
 DWS Deutsche Philippine Equity Fund, Inc.
 First Metro Save and Learn Equity Fund – www.fami.com.ph
 Philam Strategic Growth Fund, Inc. – www.philamfunds.com
 Philequity Fund, Inc. – www.philequity.net
 Philequity PSE Index Fund Inc.
 Sun Life Prosperity Phil. Equity Fund, Inc. – www.sunlifefunds.com
 United Fund, Inc.

sources: mutualfunds.about.com, open-ira.com, nasdaq.com, etf.about.com, finweb.com, pinoymoneytalk.com

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What is Mutual Fund?

A mutual fund is a type of professionally managed investment fund that pools money from many investors to purchase securities.[1] While there is no legal definition of the term "mutual fund", it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as "investment companies" or "registered investment companies". Hedge funds are not mutual funds, primarily because they cannot be sold to the general public.

In the United States, mutual funds must be registered with the U.S. Securities and Exchange Commission, overseen by a board of directors or board of trustees, and managed by a Registered Investment Advisor. Mutual funds are also subject to an extensive and detailed regulatory regime set forth in the Investment Company Act of 1940. Mutual funds are not taxed on their income and profits if they comply with certain requirements under the U.S. Internal Revenue Code.

Mutual funds have both advantages and disadvantages compared to direct investing in individual securities. Today they play an important role in household finances, most notably in retirement planning.

There are three types of U.S. mutual funds—open-end funds, unit investment trusts, and closed-end funds. The most common type, open-end funds, must be willing to buy back shares from investors every business day. Exchange-traded funds (ETFs) are open-end funds or unit investment trusts that trade on an exchange. Non-exchange traded open-end funds are most common, but ETFs have been gaining in popularity.

Mutual funds are generally classified by their principal investments. The four main categories of funds are money market funds, bond or fixed income funds, stock or equity funds, and hybrid funds. Funds may also be categorized as index (or passively managed) or actively managed.

Advantages and disadvantages

Mutual funds have advantages over investing directly in individual securities:

Increased diversification: A fund normally holds many securities; diversification decreases risk.

Daily liquidity: Shareholders of open-end funds and unit investment trusts may sell their holdings back to the fund at the close of every trading day at a price equal to the closing net asset value of the fund's holdings.

Professional investment management: Open-and closed-end funds hire portfolio managers to supervise the fund's investments.

Ability to participate in investments that may be available only to larger investors. For example, individual investors often find it difficult to invest directly in foreign markets.

Service and convenience: Funds often provide services such as check writing.

Government oversight: Mutual funds are regulated by the SEC

Ease of comparison: All mutual funds are required to report the same information to investors, which makes them easy to compare.

Low Investment Threshold: Since the portfolio is diversified with a no-load fund, investors may have to pay little or no sales charges to own mutual funds[4]

Mutual funds have disadvantages as well, which include:

Fees

Less control over timing of recognition of gains

Less predictable income

No opportunity to customize

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Money Tips for Expatriates or OFW

Many expatriates or OFW in particular forget to save money when they are already working abroad. In the Philippines there is a seminar from PDOS before leaving to work abroad. The main topic of the seminar is about how to save money while working away from the Philippines away from their family. But most of the expatriates return home only to realize that they are still poor and even poorer before they went abroad. One of the reasons of this is that the OFW forgot to save while away working hard in foreign land. Some were tempted to spent too much money more than what they were earning by buying unimportant things like electronics gadget, gambling, going to nightclubs and even forget their family in the Philippines and even make their own new family abroad.

If you are working abroad you will encounter many trials and hardship, loneliness that will ruin your plan and dream. My advice is to have a constant communication to your family in the Philippines. Make concrete plan and save money for your future in the Philippines.

Here are some money tips for Expatriates or OFW:

1.0 Know what your monthly income and assess if you could invest on something in your country of origin. Maybe you could buy a house or condo unit. Real Estate is a good investment because it appreciates its value faster than other form of investment. It is also a pride to have a house which is the product of your hard work.

2.0 As an ofw you will see many appliances that you could not afford before to buy. Tighten your belt and go for longer gratification by saving and investing your money. You can invest in government securities and mutual fund too. Another thing to avoid buying cars, watches that are very expensive. Just say no to these temptation.

3.0 Spend your money wisely. Always remember that you have a goal to fulfill. Do not change your lifestyle like when you are earning small amount of money when you are in the Philippines.

4.0 If you think that your wife is not a good saver then do not send all your money but just send money for their monthly budget. Do not let your dependent in the waste your hard earn money.

5.0 Tell your wife about your plan or you should update them about your present money status and your future plan so that they will understand to avoid problem.

For more money tips read Earn and Invest Money in my other blog.

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OFW Should Save and Invest

Many OFWs including myself are working hard in a far away land in order to earn more money and hope that someday we can start a new life in the Philippines with business or savings but I think only few people will realize their dream. Why is it that it is hard to do it?

When I was young it seems to me that saving money is very easy but now I have a hard time doing it. Mulling myself I realized that many things has changed since I was a toddler living in our province with simple life and simple things around. Now the world is full of many unnecessary things that are widely promoted by media. Ads are there to persuade people to buy. In short you could not save and invest because life today is about receiving salary if you are employed and buying things which are not important. If only everyone could go back to simple life, I think they can save money and start a business of their own.

As an OFW or Oversea Filipino Worker, it is hard for us to save money because there are lots of temptation like buying jewelries, electronic gadget and the pride of being an OFW that when spending a vacation, many relatives and friends are expecting us to shower a party and lend money without paying in return. But I think it is not too late not to save money today. You just need to stand and be reasonable. The hard part is when you start saving money. Many people don't save money because of many unreasonable reasons like I have a small monthly salary, I will save later, my wife is working too and she has a retirement plan and so on. My question is when are you going to start saving money?

My answer is now and stop buying those unnecessary things that you don't really need. You have to identify the asset from liabilities. What are these two things? Assets are things that when you buy they can give you more money like real estate, business and retirement plan. You need to study these things too before you buy. Liabilities are things that do not generate money for you like luxury car, expensive cellphone, laptop, very big house. These things that I mentioned in fact will need more money for maintenance.

Start saving by paying yourself first. What is this means? You have to set aside 10% of your gross monthly income. If you could not do it with 10%, start with 5% and readjust it later to higher percent value when you feel comfortable. By the way don't wait for that comfortable moment to come! It is not bad to enjoy your money because you earned it but let us not forget that you are not only living for today so you have to save and invest because as you go older you will have a hard time to cope up. Employment is shaky, it is not a secured source of income. What if you get fire? There are many younger people who can do with your job but are willing to accept low salary.

There are so many things to cover with this topic but I discussed here the basic of financial freedom. Start saving now and invest your money. Do not rely others for your future. Start today and as OFW we should save and invest.

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Earn and Invest Money: Top Ten Money Saving Tips

To all expatriates out there here is another article that I want you to read. It is about saving money tips, I am sure all of you will want to save money so that you can leave where you are now and go home for good earlier than what you expect. Saving your money by following this Earn and Invest Money: Top Ten Money Saving Tips will help you a lot. Start saving money today and invest it in your country.

There are many ways to save money and you can make a comments here and add what other way to save money. My friend retired at the age of 40 for good because he has lots of money already and able to start a lucrative in the Philippines, I myself want to follow what he is doing and I start investing in real estate.

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