The tag line BDO uses is “Don’t Just Save, Invest.” If you read my previous blog about personal finance, you’ll notice that some paragraphs bear a similar message. That’s because the interest rate for an ordinary savings account has already gone down so much it might even be better to just keep those bills and coins inside a bamboo stalk instead of driving all the way to your bank to deposit or withdraw.

BDO Trust Launches the BDO Easy Investment Plan

The minimum investment scheme for the BDO Easy Investment Plan (EIP) is 1,000 Pesos per month contribution at a minimum frequency of once a month. For a minimum wage earner fresh out of college, it’s something to consider doing than spending it all on the latest gadget. Heck! If not for yourself, do it for your your future love-interest and your half-dozen kids! Obviously, the more you contribute, the more you earn. The frequency of contribution is either once or twice a month. Of course, you have to open a BDO account where the bank debits the specified amount and transfer that into your EIP. Once your contributions reach 10,000 Pesos, this amount will be spun off and be treated as a regular Unit Investment Trust Fund (UITF) of BDO, documented by a Confirmation of Participation (COP). Each UITF is established, administered and maintained in accordance with a written trust agreement or “plan” drawn by the trust entity (that’s you), approved by BDO’s Board of Directors, and finally approved by the Bangko Sentral ng Pilipinas (BSP or Central Bank of the Philippines). This cycle of spinning off 10,000 Peso increments continue for as long as you are enrolled in the EIP program.

Where will your contributions be spun off? There are three ways of to invest in BDO’s EIP program, sequentially arranged according to the risk (low, medium and high) of the trust fund:

1. Peso Fixed Income Fund
2. Peso Balanced Fund
3. Equity Fund

Peso Fixed Income Fund

This type of savings provides a fixed income on your investment, in a combination of short to long-term fixed income securities. Simply put, the returns on your investment come in the form of fixed periodic payments and the eventual return of principal at maturity, or in this case when you decide to pull out everything, including the principal amount. Unlike a variable-income security, where payments change based on some underlying measure such as short-term interest rates, the payments of a fixed-income security are known in advance.

An example of a fixed-income security would be a 5 percent fixed-rate government bond where a 10,000 Peso investment would result in an annual 500 Peso payment until maturity when you would receive the 10,000 Peso back. Generally, this type of trust fund offers a lower return on investment because they guarantee income.

Peso Balanced Fund

Some people would call this a hybrid fund because it combines a stock component, a bond component and, sometimes, a money market component, in a single portfolio. BDO describes their Peso Balanced Fund as a fund to be invested in equities and, to some extent, fixed income securities, where the allocation shall be determined by the Trustee depending on market conditions. This fund reflects either a moderate (higher equity component) or conservative (higher fixed-income component) orientation.

A balanced fund is geared toward investors who are looking for a mixture of safety, income and modest capital appreciation. The amounts that such a BDO Trustee invests into each asset class usually must remain within a set minimum and maximum. Balanced fund portfolios do not materially change their asset mix.

Equity Fund

For risk-taking investors, an equity fund is the best way to invest your money especially at a younger age where the amount of time you have in your life is longer and, therefore, any ups and downs within that long period balances each other out. BDO aims to grow your equity fund over the medium to long-term by investing in a selection of exchange-listed equities. This is sometimes called a “stock fund.”

Equity funds are principally categorized according to company size, the investment style of the holdings in the portfolio and geography: size is determined by a company’s market capitalization, while the investment style, reflected in the fund’s stock holdings, is used to categorize equity mutual funds. It can target specific sectors like healthcare, commodities and real estate.

Choose the Type of EIP Fund That Fits Your Lifestyle

I’m not a finance guy, never did learn the ropes of the many financial instruments one can use to invest. That’s why I attend seminars like what Randell delivers. To simply the rule to use when investing your savings is to choose the type of risk you’d like to use. As I listed and described above the EIP plans from lowest to highest risk-taking, I think it’s best to put risk-taking in perspective. And to do that means how much time do you have before you’d like to start using or withdraw your investment:

The younger you are, the more time you have to take calculated risks.

Equity Funds run the risk of low and high yields as it puts your money in anticipation of producing high income on its investments. Of course, there is also the risk of bearing lower gains than the amount of money used to buy those equities. But if you began this fund in your younger years, and target to cash-out by your retirement age, the ups and downs of market fluctuations over the course of decades would have balanced out and yielding higher becomes a reality. Doing this by 50 years old and expecting to cash out by 55 is more like gambling; you’re better off in a low or medium-risk equity fund like Peso Fixed Income Fund and Peso Balanced Fund, respectively.

But, like I said, I’m not a financial whiz. This is my layman’s head speaking to you and how I understand the investment plans BDO has put out.

Is It the Perfect Opportunity?

In a nutshell, it is. For 1,000 Pesos a month, BDO is extending itself below the rich, wealthy and famous, ordinary folks like us who not-in-a-million-years would have imagined getting a fund manager like BDO and making our money earn more money.

Unlike private and government pension funds, and pre-need and insurance funds which can only be withdrawn or distributed only upon retirement, disability or death, BDO’s EIP can be used for a variety of your life’s needs like college education, family vacations, personal emergencies and retirement, to name a few.

Another thing is never having the time to learn and constantly monitor which financial instrument is best to juggle your money. Let the Trust and Investment Group (TIG) of BDO do that for you. What it actually does is to place your money in an investment pool (some call it a war chest), a large fund where BDO’s fund managers seek out financial markets where they can take advantage of economies of scale.

This is also a perfect opportunity for the overseas Filipino workers (OFW) that struggle to work outside the comforts of home and the company of their loved ones. There’s a story about OFWs who never owned a credit card before they arrived in Abu Dhabi but was recently jailed in a debtor’s prison for incurring up to $27,000 in unpaid bills. Like what was preached during a recent public seminar on personal finance, OFWs can also follow the rule of setting aside 30 percent of their total monthly savings (that’s income minus expenses) to contribute to their BDO EIP fund; this way, they allow their money to grow over the entire time they are working outside the Philippines while they continue to subsidize their cost of living and that of their loved ones.

Those who took advantage of the market ups and downs and stayed put and true to their original investment objectives and investment time horizons came out ahead!

Start Your Personal Investment Plan Now

There is much to discuss about BDO’s EIP program. For one, it can tell you exactly where it places your money, like the Peso Money Market Fund, Peso Bond Fund, Peso GS Fund, and others more. They can tell you about when your investment is computed daily, minimum holding periods, settlement periods, and so on. But to gain a better perspective on how you can invest, talk to their fund manager about your current income, monthly expenses, retirement targets and life goals so the fund manager can more specifically determine which type of EIP you should enroll, or even a combination, and how much should you start with. For those living and working outside the Philippines, you can find the nearest BDO partners in the Middle East and elsewhere in the world.

“The key to investing is time.” Funds that are invested for longer periods achieve higher returns; those invested for shorter periods yield lower returns – but there still are returns! However, keep in mind that UITFs are trust products, not deposits, and are not insured by the Philippine Deposit Insurance Corporation (PDIC). It’s a trust agreement between you and BDO that the latter will use every means and way to invest your money properly and achieve the best yield.

Sources: BDO Easy Investment Plan | PDIC | Investopedia

Title photo by urbanortigas at Flickr.com

Other photos courtesy of BDO.com.ph

Disclaimer: I was not contracted by anyone to write for Banco De Oro nor have I been or will be compensated for such, in cash or kind. I met Ador Abrogena, Executive Vice President of BDO’s Trust and Investments Group, during a public seminar where he, together with Randell Tiongson, asked me and other bloggers to write about their EIP program.

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Photo by fbouly at Flickr.com

Everybody’s gotten into the social media bug. Even grandparents have asked help to be taught and grandchildren painstakingly trying their best. Moms and Dads have gone awry on the social media bug. What was once the private realm of teens and yuppies has now been invaded by their parents, Uncles and Aunts. If e-mails and websites successfully made the world a smaller place a decade ago, social media networking sites have compounded it o a two-block radius.

I asked the once-dominant Friendster people, a lot of who I talked to belong to the call center industry, if they had a Facebook account. “Of course, I have” was the common answer, succeeded by “Who doesn’t?” But the answer to my next question surprised me. When I asked which social media website were they spending more time interacting, and not playing games, they blushingly quipped “Friendster.” Why is that, I asked. “Because Mom and Dad are in Facebook!” came their funny reply. However, others also mentioned that they already created a great network in Friendster and it would just take too much time building the same network in Facebook. Yet, a resounding reason were the pictures – tons of it uploaded through the years that many have no idea how to move or copy it to Facebook that doesn’t require too much time and effort; not to mention the testimonials. Kids! Haha!

Of course, I only talked to a few who represents a few hundred thousand or so people working in the industry (versus 92 million population figure) whose “investment” of time and effort in perfecting their profile pages, posting their hundreds of pictures and keeping intact their (inbox) messages with Friendster is tantamount to building and maintaining a three story house through the years – you can’t easily sell and transfer all your treasured belongings to a new abode overnight. I looked at Merriam-Webster for the synonyms of investment and I found beleaguerment, leaguer, siege, baptism, inaugural, inauguration, induction, initiation, installment (also instalment) and investiture. I also found related words such as containment, confinement, segregation, enlistment and enrollment. So much for the dictionary.

As we invest money in our home and family, transportation, career, probably our own business, education of the kids and more, so have we also started to invest time and effort in our preferred social media websites. I’m talking about our personal knowledgebase of interests, notes, shared items like links and pictures, likes, messages and comments, social groups and many more in Facebook. If you began building your Facebook social profile in 2006 like I did, you must have accumulated close to 5 years of so much “stuff” (and I can’t find any better word to describe it) inside that now-popular online community. You dread moving out of it and into a different one because it will take so much of your time or the next big thing in social media networking is something so enticing you can’t resist just moving into it and just leaving everything in Facebook.

Here’s my million Dollar yet generally-speaking observation to social media investment of my friends, family and acquaintances: the way they invest their time and effort into Facebook is almost the same way they value money and how they invest it. Think about it – If you’re a miser, you probably don’t have that much friends in your online social network and are cautious posting and sharing stuff. If you’re a spendthrift or worse, a squanderer, chances are you have tons of friends in Facebook and post, play games so much and share stuff without thinking about future repercussions. Though “character” also flows naturally in the way you use Facebook – who you are in real life or imagine yourself to be in real life is who you personify in Facebook – but that’s another story. (In fact, character is the main reason why some of you are not even using Facebook – LOL!.) What I’m expressing is putting financial investment and social media investment in a similar or equal reaction to how you conduct yourself with one and the other.

Photo by dborman2 at Flickr.com

Now, I wrote “generally speaking.” The paragraph above is not an absolute statement. There are exceptions to my generalization like celebrities, politicians, and every person who is widely known to a mid-sized or large community or the general public, and are always much talked about. There are always exceptions to many rules in life and this is one of them in my topic.

But it’s funny to note the parallelism of investing your money and investing your stuff in Facebook; and notice I only touched on the extremes: the miser and the spendthrift. I know many of us consider ourselves in the middle – not a cheapskate or extravagant. Just about right. If that’s the case, then good for you! You may be doing a good job in both your personal finance and your investment in Facebook without going to the extreme of things. And if your character is about as good as the good cop on television goes, then that added factor makes you use Facebook more wisely than many others. Lucky you!

“What’s the point in all these?” Simply, realize it; then, adjust and change the way you do things to your liking. Plan how you’re going to use Facebook the way you plan (or want to plan) to use your money. If impulse buying is a hard habit to break, then impulse posting, impulse sharing, impulse uploading of photos and everything else you do in Facebook follows your style when you go shopping. If you spend too much money on big ticket items that you can’t even afford, chances are you’re spending too much time on Facebook, too; time that has been allotted and should be devoted to your profession and your family. It’s “sky’s the limit” on many other parallelisms to how you invest your money and the same way you use Facebook.

The good changes you do in the way you invest and use your money will most definitely trickle down to the way you invest and use your time – and stuff – in your online social networking. If you need to schedule your expenses, then so must you schedule using and the way you use Facebook. Real life and virtual life do mix a lot today, and they’re one and the same – like it or not. It’s your life; and with your God-given “free will” and your faith in Him and your family’s support, you can “realize it and change it.”

Money and Facebook – how we (generally) use one is (usually) the same for the other.

Whoda thunk it?

It’s been weeks since I attended Randell Tiongson’s “No Nonsense Seminar on Financial Planning,” more often referred to as a personal finance seminar. I met Randell after having e-mailed him a few times and asked if we could meet – I had a web project then that needed writers of his stature for enticing the North American market to come to the Philippines besides vacationing. This involved not only retiring in the country but more towards investing and hiring (or outsourcing), to name a few. The only thing we had in common was our high school alma mater.

Several months later, I attended his first free seminar and wrote about it. I probably jotted down more things about the event than the content of his free seminar. My inkling was to mark some role in the growing blogging community as “one of the guys,” so to speak. Still, months later, Randell came out with his first “not free” seminar but I wasn’t able to attend because of some pressing commitment I had to do. When he announced that he was going for a repeat, I made sure I’d attend.

Using Randell’s term for the one-afternoon session filled with alien jargon on finance, it was a “nosebleed!” However, it wasn’t much about the swirls of financial terminologies that silently drove me nuts – it was the realization that I should have done what Randell was telling me (and the others who attended) to do early on in my life, not in my mid-forties. During the session, my mind floated out to people I know who are still climbing into the prime of their lives and would love to convince them to attend Randell’s eye-opener seminar as young professionals, and not in their maturing years where the time to make mistakes isn’t anymore a luxury.

Here’s my “blinding glimpse of the obvious,” as a phrase I keep borrowing from the infamous book “Barbarian at the Gates”: all my life, someone took care of my personal finance. As a young professional, my parents were my personal finance advisers and accountants. Even if I would earn my keep at work, I would still end up losing my recent salary on useless spending sprees. Ever the generous parents of a middle-income household, they would oblige to continue giving me extra money, use their car, eat their food, live in their house, and have my clothes washed and cleaned – a practical dependent to parents who should have already started to think about their retirement. When I got married, my dear wife took care of our household expenses and, in that respect, my personal finance and accounting matters. When we hit some rough financial times, she managed our family expenses and balanced our personal financial needs until I came out swinging again – and she was good at it!

When I went back to the Philippines from Canada and ventured into entrepreneurship with friends, I relied on one of these people to take care of my personal finance. I had no personal accounting on revenue or expenses, even if I probably tried a hundred times. I could teach people how to create profit and loss presentations for businesses but I would fail doing one for myself.

My two-cents of practical advise to those in their mid-twenties to as late as the mid-thirties – start managing your personal finance today. The key word here is “personal.” It’s not about family finance, not company finance nor is it someone else’s personal finance. This is managing what you earn, what you spend and where to invest the extra money you save, the latter of which is something many Filipinos procrastinate about. It’s not being selfish – it’s being prudent. You can share information with your parents, spouse or life partner but you need to learn how to manage your money today. Randell’s seminar, though short as it was only an afternoon session, gave the attendees a glimpse at what one should start doing today. (The implicit pun is what you should have started doing a long time ago.) If you are already investing, is it a wise investment carefully planned, assessed and executed, or are you just like many of us being lured by the promise of extravagant rewards coming from friends and peers (worse, family members)? That’s the thing about personal finance – it’s a three-way street: income, expense and savings. A better word for the latter is “investments.”

Randell Tiongson and me

Randell  is a Registered Financial Planner (RFP) in the Philippines and does his seminars out of the goodness of his heart. He’s an active parishioner of the Victory Christian Fellowship (VCF), an ardent advocate of personal finance management, a loving husband (you should read his Facebook dedications to his wife) and a good father (his daughter kept shooting photos during the seminar). After getting to know and talk to Randell more, we started tallying-up common friends. Randell went to the City of Smiles (that’s Bacolod City) to run the same seminar. However, I do hope he could conduct a three-peat in Manila as I’d love to invite people whose faces crossed my mind when it wandered while listening to Randell will attend the third event.