Smart SIM only plan: the best and cheapest postpaid plan ever

I have been a long time Sun user. I used to have the SUN 350 pesos plan which gives me unlimited sun to sun call and text, and 250 free texts to all network. For the longest time, I thought this was the cheapest postpaid plan in the Philippines.

6 months ago, I started to have major problems with my sun line. It was not easy for me to call even if the signal was full and most of the time, I didn't have signal where I live. My friends who are using Sun complained about the same thing.



This is the reason why I decided to change my plan. I looked in directly to Smart because my wife's primary plan is from them. I found this online: the Smart SIM only 250 pesos plan!

This plan gives UNLIMITED texts to all network + 180 minutes call to Smart and Sun + 100 Mb of data.

Since I'm not a heavy caller, I find 180 minutes more than sufficient. In case you need to call many more Smart, Sun and Globe subscribers, you may add Flexibundles that will allow you to save money by buying a bundle of time.

Same goes with the internet in case you are a heavy mobile data consumer.

All in all, I used to pay at least 350 pesos per month on my Sun plan. I believe it's gonna cost me much less now.

You won't receive a free phone with this plan but if you already have your own, this is the best plan ever.

It's hard to time the market. Don't even try.

Here's my experience with the recent Black Monday and how investing in stocks sometimes hurt big time.

I saw my stock portfolio depreciating little by little for one month already. I had some money saved and thought I'd buy more stocks while it's still low. That was Monday morning 9 AM. I entered my buy order on my favorite online broker then let it be.

2 hours later, I wanted to check if my order pushed through. That's when I saw the sea of red numbers all over my screen. Not only it was red, it went down really low. -5% at that time.

I checked again this morning and my portfolio went almost 8% down. All in all, my savings stock profits went almost down since 2 months ago.

I realized that it's so hard to time the market. I thought it was low already and didn't think it could go much lower than that.

I still believe in my financial strategy: buy and hold. I still believe that after a huge market correction like the one we just got, we'll experience a bull run that will lead to new record highs. That's what I experienced with the 2008 market crash. 7 years after, the stocks have reached records highs. I hope we'll experience the same thing again.

As of today, the Philippine Stock Exchange Index is at 6,791 down from a 8,128 back in April. That's roughly a 16% decrease.

I'll review this post next year and compare how the stock market will perform from this point.

Stocks are going down for a big correction, just breathe, don't look and don't stress out

Once in a while, stocks suffer from a major correction. The industry expects this every 5 years.

If you look at it, the major correction was in 2008, 7 years ago. This correction is 2 years overdue.

My advice: don't look at your portfolio, don't panic, don't stress out and DON'T SELL!

Actually, YOU SHOULD BUY!

You need to know that stocks go up and down. Some "experts" will tell you it's because of China if the market gets depressed. They will tell you that China is on a steep decline. The funny thing is, the same experts said the complete opposite last year. They said China is on a steep climb while the US and Europe was doing bad. Can we trust these experts? No.

But they are the reason of these corrections or crash. They just buy and sell based on some news and they always change their mind! They can't keep a good strategy because buying and selling is what they do. It's part of their job. A financial analyst who doesn't advise to buy and sell is an analyst who doesn't make money. So, for any little reason, they'll buy and sell. Remember they make money each time their client make a transaction...

Do you think the company you invested in like Jollibee, BPI and Ayala are being affected by China or Greece's economic performance? NO! They are not so why are
these stocks going down also? Because people don't know what they are doing or they are very greedy...

Let's be smarter than them. Let's stick to our strategy which is buy and hold for a long time so we can finance our retirement.

Look at your portfolio now, take note of it. Check it one year from now and see the difference. I bet you already forgot this correction because stocks go higher and faster after one.

COLfinancial is now selling Mutual funds

Good news for us investors, our favorite Philippine online broker is now offering mutual funds.

Most people don't know what's a mutual fund and what it's used for.

To simplify things, mutual funds pool money in order to buy a basket of stocks. A manager chooses and buys stocks he believes to be most profitable. By investing in a mutual fund, you buy a little bit of all the stocks included in the basket.

Thanks to COL financial, you can now access a list of dozen mutual funds.

I own some mutual funds in my portfolio but there are pros and cons of it.

PRO:

- they are safer because they are more diversified
- they are supposed to be managed by successful portfolio manager

CONS:

- they charge a fee
- you don't have control of what stocks the fund holds
- badly managed funds costs more money to operate
- many studies shows that mutual funds don't outperform the financial market

As you can see, there are more cons than pros but it doesn't mean it's a bad investment. I particularly advise it for beginner investors.

My concerns are more with the fees they charge and how successful is the manager.

Fees range from 1.5 to 3 percents annually. Which means that every year, you must pay the fund 3% of your money which can greatly impact your profitability.

Many studies show that funds underperform compared to the stock market. Mostly because the fees they charge negatively affects the returns on the investment.

I'd advise you to invest in low fee type of funds. They are also called index funds. An index fund is not actively managed so the fund company will charge a lower fee.

The XALSIF is an index fund operated by BPI that invests in the same companies listed in the Philippine Stock Exchange index (PSEi). It's a great way to start investing.

The minimum investment is 5,000 pesos.

Financial scams part 2: Ponzi scheme

I just wanted to comment on an other type of common scheme: the Ponzi scheme.

This one is more difficult to spot by people with limited financial knowledge.

The Ponzi scheme offers an attractive return on the initial investment.

Let's take the example of an investor giving 1 million to a crooked "financial adviser". The latter will promise a 10% return let's say every month.

Each month, the investor gets a check worth of 100,000 pesos. Seems good, no?

Well no. The truth is that the 100,000 check is coming from your own 1 million you gave him. It means that no money has been created to produce that interest.

Financial scams part 1: pyramid schemes and network marketing

Few days ago, one of my friend asked my opinion about this "investment" opportunity that was given to him.

The deal is as follow: Invest 5,000 pesos and get 22,500 after 3 weeks.

Waw, that's an investment that give a 450% return. You must be stupid if you don't sign for it.

Even if it looks nice, I started to ask him questions.

Me: How can they promise such a huge return?

Him: they invest it in gold.

Me: How is that possible, gold has been going down since a 2014 and I showed him a graph showing the price of gold is going down.

Him: ...

Then I started searching about the gold company that offers 450% return. Here's what I found:

• It banks/capitalizes/earns on the appreciation value of gold through a "swap program" where the product is bought by means of an "order table" comprised of 15 people spread across 4 LEVELS.
• New members/gold traders enter the order table's lowest level (Level 4) composed of 8 people. 
• Above them are 4 people (who came before them) in Level 3. 
• Above these 4 people are 2 people (who came before the 4) in Level 2.
• On top of the table is that sole person (who came before all of them) in Level 1.
• The person on Level 1 is the "graduating" member/gold trader who will "EXIT" the table or "graduate" (internally called a "pay out") as soon as all (15) boxes/slots are filled.
• This person on Level 1 will receive either a 15 grams 14K gold pendant or its cash equivalent of P25,000 -- whichever he/she prefers.

What surprised me there are those words: LEVELS, GRADUATING MEMBER and EXIT.

This is a pyramid scheme!

What is a pyramid scheme:

DIY Investing vs let the bank manage your money

I've come across an article about investing in UITFs. The article's called Philippine UITFs you can invest in from 1000 and up and posted on www.imoney.ph website.

 Here's the link: http://www.imoney.ph/articles/philippine-uitf/

UITF stand for Unit Investment Trust Fund. It sounds complicated but it just means that the bank will pool money from their participating clients into a fund. That fund will be used to buy stocks chosen by their financial experts.

In my opinion, saving money into a fund is better than not saving at all. My only concern is that the bank and their financial experts need to be paid. They will charge you 1 to 2 percents each year. If your account is making money or not, they'll get their fee anyway. If you're losing money that year, they'll just blame the economy but they'll still get their fee.

Of course, they have this expertise that makes them better than us. But are they really much better than us?

I'm wondering this because they are choosing stocks from the same pool of stocks we choose from. If we buy more or less the same stocks they do, we can get the same performance but with no fee at all.

That's why I want to compare their performance vs mine. Here's the table:

As you see, my performance is not the best, it's only the second to the best! Not bad for someone with little financial expertise. But the other difference is that I don't have any fee to pay each year. I just do it myself. I perform more or less the same as the other funds but I don't have to pay anyone for my performance :)

Even worse, most other fund are performing worst than me but still, they'll make you pay for their "bad" performance. You might really want to think about doing it yourself.

So this is my advice. Start your online trading account and choose 5 to 10 stocks to purchase. These should be well established companies in different industries. These companies must sell something that everyone need. Then buy more of the same stocks every month with the money you have saved. If the stock goes up or down, still buy. That's the secret.

If you do it yourself, you don't have to pay anyone every year and the performance is more or less the same or even better than the banks.

Do you know how much you're worth?

I know, it's a catchy title that might offend some of you. I know you're worth much more than the amount of money you have in your account.

But, do you know how much asset you have? Do you know your net worth?

Your net worth is simply your assets minus your liabilities. Knowing it is good to know but the most important thing is to know the trend of it.

Is your net worth increase or decrease over the years?

This is really important. If you read my previous article http://pinoyfinancialcoach.blogspot.com/2015/05/middle-class-vs-rich-people.html I mentioned that rich people collect assets. In that case better if you know if your assets or net worth increase over the years.

Start a new Excel document where you state all your assets:

- House
- Bank accounts
- Saving accounts
- Stocks
- Bonds
- Cars
- Jewelry

Total the amount and subtract that total with your total liabilities.

Liabilities are:

- House mortgage
- Car loan
- Student loan
- Money you owe
- etc.

The result is your net worth.

Then do this exercise each year and calculate how much does your net worth increase or decrease over the years.

Better, set a goal of increasing your net worth by let's say 5% every year and use your Excel sheet to see if you reached your goal.

How to save money on a car. Part 2.

In the previous post, we learned that buying a second hand car is a financially wise choice since depreciation in the five first years of a brand new car will cost you 565,000 php while it will only cost you 160,000 pesos if you buy a five year old car and keep it for five years.

Depreciation is the biggest cost of ownership. The second one being the cost of financing.

It is estimated the bank charges you 42,000 pesos a year for getting a loan. If you add this up, it's 210,000 for your 5 years loan.

I hope you'll realize now that your 965,000 Mazda 3 will cost you 1,175,000 by taking a loan.

Let's recap for a while:

Your Mazda 3 purchase price = 965,000 pesos
Bank financing = 210,000 pesos
Total: 1,175,000 pesos

After 5 years, you'll only sell your car for 400,000.

1,175,000 - 400,000 = 775,000 pesos!

By taking a loan and by buying a brand new car will cost you 775,000 pesos if you sell it after 5 years!

My advice: don't buy a brand new car and don't take a loan.

Just buy a car that you can afford cash. If you only have 100,000 pesos, buy a car sold for that price. If you don't have enough cash for buying the car you want, just save for it. Don't take a loan!

I usually buy a car that is between 200,000 and 300,000. I pay it cash.

Let's say you sell your 200,000 car after 5 years for 100,000. The depreciation will only be of 100,000 or 20,000 per year. Since you didn't take a loan, there's no bank financing charges. It's still much cheaper to lose 100,000 in 5 years than 775,000 for the same amount of time.

I know that a second hand car will need maintenance and fixing. On my 200,000 car example, I estimate to spend around 100,000 pesos on maintenance.

I'm not saying that you shouldn't buy brand new car. I'm sure there's no other best feeling than driving a brand new one. At least, with these simple mathematic computation, you'll know how much it will cost you and you can compare it to other options like buying second hand.

How to save money on a car. Part 1

Back to the study assessing the cost of car ownership, we learned that a normal sedan costs us 195,000 php a year.

The biggest chunk of this cost is:

1. Depreciation around 85,000 pesos
2. Cost of financing around 45,000 pesos

It means that if you want to reduce the cost of ownership of your future car,  you must work on one of those.

1. Depreciation:

Since depreciation is a big cost, why not buying a car that has depreciated already. Yes, it means a second hand car.

Let's study 2 cases. Let's compare buying a brand new with buying a second hand car.

I love the Mazda 3. It's a beautiful car well made and that drives really well. I'll use it for this example.

Let's buy a brand new Mazda 3 and sell it 5 years after. Let's also buy a 2010 Mazda 3 and sell it 5 years later.

The prices are based on the selling price found on www.olx.ph.

Here's the comparison:

A brand new Mazda 3 costs 965,000. If you sell it 5 years later, you can expect to sell it at 400,000. 

A 5 years old Mazda 3 costs around 400,000 and if you sell it 5 years later, you can expect to sell it 240,000.

It becomes obvious that the brand new car will depreciate at a much faster rate than the second hand car because it has already depreciated a lot.

The brand new car will lose 565,000 of its purchase price while the second hand one will only lose 160,000.

What a difference!

The difference is roughly 400,000 pesos!

In the span of 5 years, you will lose 400,000 pesos if you buy a brand new car. That's roughly 80,000 a year.

Why a car is more expensive than a house.

Yesterday, I shared with you a study estimating the cost of car ownership at 198,000 pesos a year.

I also mentioned that I keep telling people that a car is more expensive than a house. Here's my explanation:

Let's compare the cost of owning a car and the cost of a house.

Given:

1. The car's purchase price is 900,000 where a down payment of 20% is given up front, the remaining amount is loaned and with an estimated 198,000 cost per year (based on the previous study).

2. The house's purchase price is 2 millions with a 20% down payment and the remaining amount is loaned for 15 years with a 13,000 per month amortization. I give an allowance of 24,000 a year for repairs.

Here's a comparison table:

To be able to compare, let's say we sell the house and the car after the 6th year. I estimate the car selling price at 480,000 pesos (I think it might even be less than that) and the house's selling price at 2,000,000 pesos (I think it might even be more than that). 

What we see is the CAR costs you two times MORE than the house. You have spent 660,000 pesos to enjoy your car while you only spent 270,000 to enjoy your house. We can conclude that the house is LESS expensive than your car.

This is why I keep saying a car costs more than a house.

Some of you will tell me. BUT I need the car. I can't go to work without it.

Yes, I agree with you. I don't want to commute with the very very VERY poor public transport of the Philippines neither.

The purpose of this article is to make you realize that a car purchase is a very major purchase. As important as a house! I want you to realize how expensive a car is before you rush to a dealership and buy your "dream" car. 

In my next post, I'll tell you what I do to minimize the cost of owning a car.

If you have any question, please email me at pinoyfinancialcoach@gmail.com

How much does a car really cost you?

I have always been telling my friends that a car costs as much as a house. They always thought it was a joke but it's not.

I came across a study published on imoney.ph. The study shows that an average sedan costs 198,000 pesos a year!

The 3 first expenses are:

1. Depreciation: 84,000 a year.
2. Finances charge: 42,000 a year.
3. Fuel: 39,000 a year.

This doesn't even includes the purchase price of the car. Only the depreciation and the finance charges (cost of taking a loan).

You might find that the depreciation is a bit over estimated but I don't think so. A common rule of thumb says that a car loses 12% of its value every year. If your sedan costs 800,000 brand new, after one year, it will lose 86,000 pesos.

The study shows that maintenance cost is only 5,000. I don't agree with it and I would estimate it between 10,000 to 15,000 a year since the car is CASA maintained.

This is a very important study so people will realize how big is the cost of owning a car.

On my next post, I'd like to compare it with owning a house.

Here's the link to the full article:

http://www.imoney.ph/articles/annual-cost-owning-car-philippines-infographic/?utm_source=facebook&utm_medium=paid-content&utm_campaign=annual-cost-owning-car-philippines-infographic

When buying real estate, don't get yourself sales talked

I have been listening to a few real estate agents and you need to be careful before you sign anything.

They will always show you a low monthly amortization but don't get fooled because here's why:

photo credit: Colourful Viewpoint via photopin (license)

1. The low monthly only covers the downpayment.

Let's take an example: you are being seduced in buying a 3 millions condo. They say your monthly amortization is only 17,000 pesos a month. Wow, what a deal! But here's the truth. The 17,000 pesos are used to fund the 20% downpayment. For 3 years, you'll pay the 17,000 to cover the 600,000 downpayment. After those 3 years, you'll need to find a way to fund the 2.4 millions left to pay. They'll only give you the keys of your condo when you'll show them the big amount.

Most likely, you'll need to go to a bank and get a loan to cover the 2.4M. If no bank is willing to lend you that amount, sorry to you...

The loan financing will cost you 26,000 pesos a month for 10 years so be ready to get a salary increase to pay for your condo.

2. The low monthly will be spread in a very long period.

Let's take the example of a in house financing where you can buy a house for 5,000 a month. Wow, 5,000 only, I can afford it. Are you sure?

What they don't tell you is that as soon as you sign, you'll commit yourself to pay for 20 years. 5,000 a month x 12 = 60,000 a year x 20 years = 1.2 millions.

But the house is only worth 500,000 pesos!

So, you committed to pay a 500,000 pesos house for 1.2 millions! Was it a "wise" investment?

Also, pay attention to the different fees they are going to charge you. Those fees are big and not very clear.

Just be really careful when a real estate agent tries to sell you something because they don't care about you. They only care about their commission...

Middle class vs rich people

I was thinking about what would be the difference between rich people and people from the middle class.

Both of them are educated and some very rich people are coming from a middle class or even poor families. So what would be the difference?

photo credit: Richard Branson thumbs Shankbone 2010 NYC via photopin (license)

The first one I see is rich people have their own business. They usually started their own small business and grew it up to a very lucrative one.

The second factor I see is they collect ASSETS. Meaning that with their extra money, they bought other businesses, real estate.

The best example is Warren Buffet who is one of the richest man in the world by buying stocks.

Let's focus on this. Even if your means are smaller compared to them, you still can "collect" assets.

Rich people buy other businesses but you can too! Just buy one small part of that company. This is called... STOCKS! Buy as much as stocks you can. It's the easiest way to own one part of a big company. Have you ever dreamed owning BPI, Ayala Corp or Jollibee? Just buy their stocks and you'll own a part of these successful companies.

You can also own REAL ESTATE. Buy your own house or condo. Even better, take a loan and buy a condo you rent out to someone else. That's the beginning of a real estate business.

You don't have 3 millions to buy a condo in Makati. That's ok, buy a farm land in the province and rent it out to a farmer or start a farm yourself.

As you see, you can also "collect" assets. It's not only for the rich but you must be resourceful in order to make it big.

Rich people are not defined rich because of their salaries. They are defined rich because of their ASSETS!

Real Estate vs Stock Market

Buying a piece of real estate is everyone's most sought after goal. It was a very important step for me too.

Nevertheless, there are so many misunderstood concepts about real estate and stock market.

At a PURE investment aspect, real estate always underperforms compared to the stock market. Even if you choose the most valuable piece of property in the most booming area of the country, the stock market will make you richer compared to a house or condo.

Let me illustrate this by this example.

In 1992, Mr. and Ms Santos have 2 millions to spend in a condo unit in Manila. At that time, Makati was not yet fully developed but showed potential. I'm sure we all agree that Makati area is the best real estate investment area in the Philippines for the past 3 decades.

Nowaday, Mr. and Ms Santos 100 sqm condo unit in the center of Makati Business district (2 minutes walking to Ayala Ave.) is worth 8 millions. Wow, Mr and Ms Santos have made a good investment that made a 6 millions appreciation. 

Let's take an other couple: Mr and Ms Sy. They have no interest of showing off with a brand new condo. They also have 2 millions to invest and they chose the stock market.

In 1992, the Philippine Stock Exchange Index (PSEi index that represents the biggest stocks in the country) was roughly at 1600. With 2 millions pesos, the Sy family bought the equivalent of 1250 shares.

As of today, the PSEi is at 7,881. Mr. and Ms. Sy still have their 1250 shares x 7,881= 9,851,000.

How to get started with stocks - part 2

Now that you have opened your COL Financial account, it's time to buy stocks.

The difficult part is to choose what you will buy.

I advise that you diversify your portfolio into 5 stocks that belongs to 5 different industry.

Here are some industry examples:

- Banking
- Food
- Real Estate
- Utilities
- Technology
- Mining
- Retail
- etc...

Here are the guidelines on how to choose a good stock:

1. The company has to sell something that we need. Bank, food, housing, water, fuel, etc...

How to get started in stocks

For you to start buying stocks, you'll need a broker. In the past, you had to hire a broker and call him to buy or sell stocks.

Since he's a middle man, the fees he charged were big and he would not pay attention to you if you are a small investor. This is why people think that only the wealthy can afford buying stocks. The money you'll need to spend on a broker makes it hard for lower and middle class to afford the stock market.

Fortunately, everything changed since the internet. Nowadays, your broker will simply be a website where you'll place your order.

The advantage are the following:

- lower fees
- no holding fees
- buy and sell from your computer any time you want
- no need to have a middle man who will place your order
- the websites are very complete with lot of information that will help you decide which stocks to buy

Please be aware that each time you buy and sell stocks, the broker will get a transaction order fee. This can cost from 20 pesos to 1000 pesos depending of your broker and the amount you're buying. On top of that, the broker will charge you taxes for each transaction.

The one that I use is COL Financial (www.colfinancial.com). I like it because there are a lot of information that helps me decide which stocks to buy and the fees are minimal. Moreover, I pay only 20 pesos on average when I buy stocks for an amount of more or less 5,000 pesos.

They also conduct seminars that are really useful for people getting started in the stock market.

To start your account, you'll need to fill some application forms and provide some documents. Once you get your COL Financial account, you need to wire money on that account for you to start trading. Here's the complete process: https://www.colfinancial.com/ape/Final2/home/open_an_account.asp

I would advice you to attend one of their seminar and open an account while you're there.

Have fun starting building your wealth!

Why do we need to invest in stocks?

People think about stocks as a mean for the rich to "win" money.

It's not true.

First of all, if you are interested in stocks to win money like if it was a casino or a horse race, you will lose most of the time. Even if you study finance like I did, you'll still lose money, most of the time. It's not because you're stupid but it's because you have the wrong mindset. If you have a gambler's mindset, you'll get some wins but also lot of loss. It's just plain probabilities and mathematics.

Now, if you have an investor mindset, you'll see that the stock market is not a casino but a way to speed up your savings as long as you use strategies that make sense.

And yes, the only purpose for the stock market is to invest your savings in order to make it grow.

Why is it the best?

1. In the long run, the stock market gives the highest returns. It even beats real estate.

2. It's liquid meaning you can buy and sell instantly. Compared to real estate, it takes more time (months) to sell a property while it takes seconds to sell a stock.

3. It beats inflation. People tend to forget that a savings account in a bank returns lower than inflation. It means that each year, your money in your bank loses its value.

Just for those three reasons, the stock market is the best tool to "park" your saved money in order to make it grow.

And no, you don't need to be rich to invest in the stock market. Nowadays, thanks to the internet, you can open a brokerage account online with a minimal operation costs. Anyone can do it :)