The Importance of Emergency Funds

I recently posted one of the use of having an emergency fund. This post will somehow dig deeper why we really need to stash away a portion of our income to build up our emergency fund.

First of all; what is an Emergency Fund? It is an account used to set aside funds to be used specifically on things which are not a usual part of our regular expenses. The purpose of this account is also to serve as a safety net in the event of personal financial crisis. The ideal emergency fund must be equivalent to three to six  months of our monthly expenses.

Building up an emergency fund is also another way to prevent us from incurring loans or debts with high interest. It must be placed in an account which should be easily accessible, such as an ATM savings account.

From my previous post, I mentioned something about the prosperity formula.  From our income, we must first subtract a portion which is to be used for savings.

Income – Savings = Expenses

Ideally, it is recommended that we set aside 20% for our savings. 30% or 40%, much better. It depends on how much we can afford to save. That 20% can be subdivided into savings, investments and emergency fund. It doesn’t really matter how much we earn, its on how much we can keep. The discipline of saving something for the rainy season must be already ingrained in our minds. The sooner we start, the better.  Let’s not wait for tomorrow to start with this habit. We must not procrastinate.

If the emergency fund was used, we need to ensure that we replenish it the soonest possible time. This is a continuous cycle. We must do this not because it is a responsibility. We must do this because this is a habit. A habit is something that we love to do repeatedly.

Happy Saving!!! 🙂

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The Stock Market is Still Going Down…. What to do Next?

For several weeks now, I saw the Philippine Stock Market on a downward spiral. Though there were a few trading days when I see the market make a rebound, I see it as an opportunity for bargain hunters to buy shares of great companies at a much cheaper price. After bargain hunting, shares plummet once again on the following days.

Others view the current downtrend in the Philippine Stock Market as political. However, based on the global news, it seems to boil down to global economy. The impending increase in the federal tax rates is being anticipated with bated breath.

To long term investors, crisis like this is a great opportunities to accumulate shares since the prices are cheap. This is the time to be greedy since a lot has been so fearful. Fearful because some entered the market when it is going up. For those who waited on the sideline when the market is up, I imagine that they are now like kids buying candies of different variants from candy store. There are lots of cheap companies left and right.

One piece of advise though my friends, always make sure that you buy shares of great companies only. You must invest your hard money on companies which will be around for the next 10, 20 years. Do not put in your hard earned money on penny stocks. Later on, you will become penniless.

Invest wisely. We invest because we think about the future. Live in the present but always plan for the future.

Have a nice day!!! 🙂

The Stock Market is Going Down….Again

I just learned today that the Dow Jones fell by 394 points at closing last Sept 9, 2016. Most of the time, the DOW serves as a barometer on how the Asian markets will perform, specifically the Philippine market which is represented by the PSEi.

The PSEi already closed out on a losing note last Sept 9, 2016 by 85 points. And with the Dow losing out big time, I won’t be surprised that the PSEi will follow suit especially that majority are foreign investors. I wish that the time will come that Filipino investors would dominate the Philippine Stock Exchange.

I mentioned in my previous that I have rejoined the Truly Rich Club. One of the main objective of the club is to teach financial education to Filipinos. The club would like to emphasize that investing in the stock market is not only for the rich. Anyone can do it as long as we obtain proper financial education and guidance.

The club has a shortlist of recommended stocks that the members could buy on a regular basis. That is regardless if the market is up or down. It doesn’t really matter. The club members celebrate when the market is down since we can buy shares of great companies at cheaper prices. We are being taught to buy on a regular or monthly basis so we can ride the volatility of the market. We are also being trained to act as Investors and not as Traders.

The role of the club now is crucial as some investors, especially the newbies tends to get carried away by their emotions. We are being reminded of the famous mantra by Warren Buffett that “We must be  fearful when the others are greedy, and greedy when the others are fearful”. Long term investors buy when there are a lot of selling going on and are on standby when stocks are getting overbought.

I used to be carried away by emotions when it comes to investments, but now, with the proper guidance and education, I know for sure that I won’t be on the wrong side of the fence ever again and I won’t miss out on greater opportunities.

My Mutual Fund Investing Experience…so far

I started out my mutual fund investing sometime 2008.  And I admit I started out on the wrong foot. Why? Because I have no idea what mutual fund is all about.  As in zero knowledge. I’m not even keen of doing investment during that time (everything’s different now though.. :)).

It so happen that a former boss invited me to a seminar regarding investments. That’s the first time I’ve heard of mutual fund. I was expecting something about stocks and I was introduced to this. You can imagine how confused I am during that time.  Talking about financial ignorance :(. So I shelled out P5000.00, opened an account from the top mutual fund company, and bought shares at P10.7/share and I am now in the world of investments.

I’ve made foolish mistakes after that transaction and would rather forget everything about it :). There were lessons learned after that.

Fast forward, I am now again an active mutual fund investor. I decided to invest in Philequity as a personal choice, based on its track record. Initially, there was a little inconvenience when it comes to mutual fund transactions, everything is done manually. Filling out forms, going to the bank to deposit funds, scanning the deposit slip and investment form, etc. For a guy who has a regular day job, I don’t enjoy such activities.

Fortunately, one of the top online stockbrokers in the Philippines, COL Financial Inc., introduced the COL Fund Source.

                        col-financial-logo-new

                        col-fund-source

A COL Fund Source is like a fund supermarket where investors can simply select every financial instruments which suits their investment appetite.  And the best thing about this is, everything is done online.  Just what I’m wishing for. 🙂 With just a simple click everyone can now have a mutual fund account.  But you have to open an online account at COL to enjoy these benefits. 🙂

One of the good thing about mutual fund investing is that in a volatile market, you are somehow protected from big losses because of diversification.  A mutual fund is the best way to do diversification on a minimal cost since the fund manager allocates the funds to different industry sector.  And your investment can buy shares up to the last centavo as compared to individual stocks which has a board lot. I’ll have a separate sharing regarding my personal direct stocks investment on future posts. 🙂

So there, as of this time, despite of the recent consolidation or correction, my fund is still doing good. It’s still in the green. Reason is I was able to purchase shares when it was still cheaper last April of May 2016. My personal strategy is to buy additional shares during market dips.

Hope you can get something positive out of this sharing.  If you have clarifications, please feel free to comment.

Thanks a lot for viewing and have a nice day. 🙂 🙂 🙂