Personal Finance: Financial Seminar by BDO

I've shared about BDO's seminar previously. Lucky that a friend and I got seats so off we went last Saturday to attend. 

The speaker was Sir Efren Ll. Cruz, a registered financial planner, personal finance coach, and a bestselling author. I have read his book entitled "Pwede Na! The Complete Pinoy Guide to Personal Finance". I loved his book because it was very easy to read and understand so somehow, his name was kept somewhere in my memory. I have also heard of him from a colleague when she shared that she and her husband availed of his service as a financial planner. My friend's friend and his husband also got him as their financial planner. 

The seminar's title was "How to Break The Rules of Thumb in Personal Finance". Here are some of the things I was able to take note of.

1. 100 minus age Rule
According to this rule, the difference when you subtract your age from 100 should be the percentage of your portfolio that is invested in the stock market. However, it is still case to case. For people who just started saving for their retirement few years before they retire, they should be more aggressive in their investments.


2. Diversification Rule
As a rule of thumb, we must diversify but we also need to ensure that we don't over-diversify because in doing so, we may lose our chances of higher gains. According to Sir Efren, stock performance is 92% based on the market performance, 5% by the fund manager, 2% timing and 1% sheer luck.


3. Buy Low, Sell High
This is a little bit tricky because we only know when it is the lowest price or the highest price after the fact. The brain needs something to compare it to before it can conclude that it's the lowest or the highest.

His recommendation is to set a target and look for stocks that can return your target then sell when your target is met. Looking for stocks entails a lot of studying and analysis, he says.


4. 20:20 Retirement Rule
The rule states that if you will retire for 20 years, you should start preparing for your retirement 20 years prior your target retirement age.

On the contrary, we should start planning for our retirement as early as we can so that we can take advantage of time and also the years that we don't have much responsibilities and bills to pay yet. At 20 years prior target retirement age, you may already have started a family so there are more expenses to pay and saving for retirement may become the least priority. So it's better to start as early as you can.


5. Buy Your Own Home Instead of Renting
While there are more affordable properties in the market now, you should really assess first if you are ready to transition to home ownership. You should consider all additional costs that it entails. If you think you are ready, then go ahead. Otherwise, there is nothing wrong with renting while you are saving up for the budget needed for home ownership.

After presenting the above rules, his next question was, "Are you all S.E.T?" where SET was used as an acronym for:

• S - size of fund
• E - expertise in investing
• T - time available in investing

For us to be successful direct investors, we need to have a sizable fund, we need to be experts in investing and to be an experts, it is a full time job, and we should have the time to learn the ropes, do a lot of research, and come up with our own investing strategies.

However, most of us are not really S.E.T. So his recommendation was to hire professionals to do the investing for us. In doing so, we take advantage of the skills of the fund managers for a minimal fee. If we go this route, we can choose from Mutual Funds (MFs, offered by Mutual Fund companies), Unit Investment Trust Funds (UITFs, offered by the Trust arm of banks), or VULs (offered by insurance companies). I won't elaborate on each of the options as there are a lot of resources available online for the differences of the 3 and which companies offer what.

His parting lines were:

• Focus on the life events you want to achieve, not the money. 
• Strongest currency is FAITH.

A speaker from BDO was next and he presented the available UITF options that their bank offers.

Personal note:

Others may or may not agree and that's fine. After all, personal finance is still really just that...PERSONAL. As for me, I am thankful for opportunities such as this. Nothing beats learning for free. With J.Co donuts and coffee for snacks pa. San ka pa. Thanks, BDO! :)