Joel Greenblatt - Modern Value Investor

Everybody knows Warren Buffett. Pffft! The old man that calls himself the Wizard of Omaha because of his uncanny ability to pick stocks and land himself on top of the richest man in the world list for years. But the thing is, value investing is not only for the wizard. Anyone who dedicate their life to this arcane magic will find themselves rich.

If it does work, why not everybody is doing it? But it does work! The good thing about it is that, it doesn't work all the time. You'll get 1 - 3 down years and then your portfolio will then skyrocket afterwards. Not many people can withstand that kind of drawdown. That is why not all people do it.

The main reason that it work is that, it doesn't work all the time.

Joel Greenblatt is the author of the book, "The Little Book That Beats the Market". He have a skill in explaining complex things like investing in companies to ordinary people. His book is actually made for his son in pre-school and was made sort of like a letter or guide for his son so when he grows up, he'll know what daddy does for a living.

I wish I had a dad that knows how to invest. I could have been traveling the world by now. But I'm not hating. I think its the journey to that million dollars is what makes it great.

Things You Should Know Before Investing in Mutual Funds

The Management Fees

Mutual fund companies (if you have read the prospectus) will charge in between 1.5% - 5% per annum for the management fee. With the current inflation rate of 3.8%, that means your money losses its value by 5.3% - 8.8% every year. So you will need to beat the benchmark by a lot in order for your money to fully work. 1.5% - 5% might not look like a lot. But if you plan to invest in the long term and saved up to P1M, that means you're giving away P80,000 per year to those managers. Who might not be even working (more on this to 2nd point)...  I personally, think that 5% is very expensive.. And to think that I have no control of my own money.

95% of Mutual Fund Managers Can't Beat The Index

The index, is the benchmark, the Philippine Composite Index. This is where all funds are compared on, to know if they did well or not. And most fund managers can't beat the index. 95% of them. So what's the reason for investing in mutual funds then? If I can buy the index itself and beat 95% of all the mutual fund managers. Best of all, I don't charge myself with 5.5% management fee every year.

So you might be thinking, "5% is good enough compensation for people who does all the work, researching companies and managing the money." Well, yeah... That is true. 5% is in fact very modest if it involves a lot of work. However, on to #3...

Copying the Index is FREE

So you want to beat 95% of all mutual fund managers. But then you don't have the knowledge like they have in choosing stocks, so you went ahead and gave them your money. The thing is, most managers are aware of the fact that they can't beat the index. So, they buy the index. But still, you get mediocre returns because you will never beat the index once the management fees took effect.

Now, you say that is a lot of work to create a portfolio that would mimic the index? How hard is googling "Philippine Composite Index"? You'll get a list of companies that's included in the index for free. All you need to to is buy all these companies and you have yourself an index fund. Without the hassle, without the management fees.

So if you think you can pick stocks better than an index, you should invest for full time. Until then, I would prefer to stay away from mutual funds. Especially if the reason to learning investing is to earn money, you only beat the purpose of the exercise, making other people handle your money.

Why You Should Think Before Listening to Experts

A friend of mine was recently introduced to finance. Me being experienced (if I may say so myself) and been investing for a couple of years. Tried to contain my excitement and laughter as he blabbers around the reason why the stock market will crash or will why it will sky rocket.

After the long monologue, I asked him. "Says who?". Who told you all this stuff? Why are you so confident on your prediction with the stock market? He said that the financial advisor in his company said so.

I don't want to speak bad words to people so I kept my mouth shut. In my point of view, if the market will crash or if it will sky rocket is irrelevant in finding great companies. Great companies will earn money whether the stock market will go down or up. Do not be tempted to think that you could make a lot of money in predicting the market. If there is one super power I would like to achieve in helping me investing, is that to have a lot of patience and sit still. Its a lot more difficult.

Dow Jones All Time High Since 2007

Its a great news. And that goes for our economy. The US and Philippine market seems to be correlated. And today, the market went up.

All Good News in the Philippine Stock Market

The news that the Philippines is going strong economically is great news. The bad news is, its late by 2 years. This kind of news should have hit mainstream media 2 years sooner. Right now, the market is just in a sideways motion.

I personally think that it will continue to go further up. Its just that, things need to go stall for a while. Especially if its going up for 2 years straight.

Are you making money in this market? You should. Its a bull market after all.

Tanduay Bought by Lucio Tan

I will have to say wow. I was invested in Tanduay because of its strong dividend payouts and consistency. But good news came and Lucio Tan bought majority of the shares, making Tanduay one of the biggest beverage conglomerate in the Philippines. My holdings went up by 400%.

But this week, they added additional shares. Which I do not like. So I went out to search for a better investment. But 400% is good for me.