Dividend Received! P24,350.00

I just received a dividend payment:
Gross Amount (Php) : 24,350.00
Less Withholding Tax (Php) : 2,435.00
Net Amount after taxes (Php) : 21,915.00

Happy bonus day? :)

How to Open BPI Trade Account

BPI Trade is an online stock trading service offered by BPI. It allows you to buy and sell online using your BPI savings account to buy shares of companies. To me, its really convenient. I tried opening an account and here's my experience.

Steps to Open an Account

1. Fill Up Application Form
2. Print the Application form
3. Go to your nearest BPI Branch and bring 2 valid IDs. Have the IDs photocopied.
4. Wait for the email confirmation from BPI Trade.

Review

The application process is quite simple. Fill up some forms and give it to your bank. Very easy. But I think BPI Trade fell short on customer service. It took 3 weeks for my application to be processed. With me constantly nagging BPI about the update of my account application. When I finally gave up to speed up the process, they emailed me and said that it will take them 3 more days to process the application.

That's great news. I think. But after the 3rd day, I received my application confirmation email. With no clue what was my username and password in the email. It was like "Congratulations, on your BPI Trade account blah blah blah deposit money blah blah." I said to myself, "great now to login! wait... What's my username again?" I've forgotten! While reading the email again 2 inch closer to the monitor. I realized my username is not there! It has been 3 weeks since I applied and me with the attention span of a cockroach, I've forgotten my username and password. I tried logging in with what I think was my username and password and had it locked. :) I tried emailing them, but no one is replying.

So I tried calling them. Nada. All lines are busy. I waited to call at midnight. Maybe the lines will open. And it did. I talked to a customer rep. 5 minutes waiting for the customer rep to answer and have me wait 10 minutes listening to Christmas song in the background after checking if my account is in their database. She returned and told me to call again after 30 minutes because there's no one to process my request to reset the account.

I called back after 40 minutes. All lines are again busy. I spent 500 pesos worth of load and didn't even get to hear a real person on the other end for the most part of it.

P.S. This is actually my 2nd time applying for BPI trade. The first one was really frustrating and it involves customer rep again. 

P.S.S. I'm actually worried if problems arises with the account in the future. With the kind of customer service they have, I would imagine serious problems with the account will be a nightmare to deal with.

5 Reasons Why I Would Never Buy a Mutual Fund Ever Again

I began tracking my mutual fund a while back because I don't want to be logging in and out of my bank account online. To my surprise, I discovered I'm being f in the ass by mutual fund companies when the price of the mutual fund in my account and the price of the mutual fund in Philippine Mutual Fund Association does not match and decided to investigate and encashed all my shares.

Here's what I found out:

1. Management Fees

A whopping 1.5% to 5% per year. How can someone earn money by holding other people's money without adding value is beyond my understanding. Comparing other country's mutual funds like Vanguard which is a decent 0.20% per year. Mutual funds are charging too much for management fees for copying the index and underperforming.

2. Sales Load

When you invest in a mutual fund, the money you deposit gets reduced. Because you need to pay what they call sales load. Like remitting money, you need to pay a fee to place your money into the fund. The fee is not more than 1% depending on the amount of money you invest.

3. Tax Exemption is a Lie

The main selling point of mutual funds is that it is tax exempt. And it is. But its not a complete answer. The reason it is tax exempt is because so that you will not be taxed twice. You see, when you give your money to a mutual fund, the manager makes the purchase of stocks, he gets taxed. But you pay the tax using the money he got from you and from other people. So in other words, you got taxed already. So its safe to say that the money you got in your mutual fund is tax exempt. Only because you already got taxed in the transaction and to avoid double taxing.

4. No Value, Mediocre Return

Being an investor, I would like to see value for my money. But seeing how mutual fund companies invest, I come to realize that they are not adding value to the money I gave them. How hard is it to copy the composition of the index? Its publicly available, and then you charge me 5% per year just because you copied it? And if they do decide to stray away from index funds, they underperform the market.

5. Exit Commission

In trading, there's a term called spread. A spread is the difference of the real price of a currency when you buy or sell it. So for example, if you trade your PHP to USD which is 43.57 (real price) you can make a transaction for that price, but the broker will add a spread to make money. Usually 1 pip. So you pay 43.58 instead of 43.57. When I encashed my shares. Hoping to exit the fund. I realized that the real price of the fund is no where near the price I paid for the exit. They paid me P10 less than the real market price. It is a 1000 pip spread!!! This blew my mind!

Conclusion

Doing the math, if I have P1,000,000 in invested money. Put it in a mutual fund, I'll get a sales load commission, lets say 0.2% for every P30,000 / month deposit. My money will be deducted by P720 per year. Then I'll have 1.5% management fee per year that's less P15,000 / year. P55,000 / year for 5.5% management fee mutual funds. Then I got the exit depending on the size of my fund, P20,657.

And I held the fund for 5 years, at 1.5% management fee. With 40% yield for 5 years or 8% per year. Using the hypothetical P1M amount.

Let's break it down:

------------------------------
1st year: Starting Capital P1M
+ P30,000 x 12 (monthly deposit)
= 1,360,000
+ 8% mutual fund return
= 1,468,800

Expense:
- 1.5% management fee (P22,032) (compute your fund if 5.5% management fee)
= P1,446,768
- 0.2% sales load (P720)
= 1,446,048
- P20,657 (exit commission) (1000 spread)
= 1,425,391

Invested money: 1,360,000
Bottom line: P1,425,391
---------------------------------------
My net yield : 
   4.81% per year
   or 1.91% with inflation (2.9% October 2013)
---------------------------------------

A net yield of 4.81% per year once I encash the money. Just like the return of a treasury bond. Why go mutual fund if bonds are the same with virtually no risk?

I therefore conclude that mutual funds are not good investments and returns are comparable to bonds. But bonds are better because it has lesser risk than a mutual fund.



With 1.91% yield, it is not an acceptable return on your investment.

Identity Crisis

Hello, my name is Juan dela Cruz and I am a/an <insert job here>.

The Job Identity

Many people associate their identity with their jobs. But as more and more jobs are being created, more and more jobs are embarrassing to tell others about. Like toiler cleaner or street sweeper or supermarket packer or call center agent. So companies, will generate awesome titles so employees would be able to wear proudly this title "Sourcing Specialist"or "Technical Support Engineer".

The Things I Own Identity

Some wise people would realize that the title is not something to identify themselves. Its just words combined with other words to make it sound awesome. So they buy stuff as a status symbol as if these things are what makes them different.

For example, a person buying the latest gadgets will earn him/her the title "Techie" or "Geek". A person buying travel tours will earn him the title "Traveller". A person buying coffee at Starbucks as "Sosyal!". A person buying all things for cars will earn him the title "Vin Diesel AWESOME". Though not explicit, it does give people the idea of what is your identity when you flaunt the things you own.

These kinds of people now associate their identity with the things they own.

The Social Media Profile Identity

On the other hand, when people don't have money, nor the job to be proud of, they get their identity by posting on social media. As if the pictures, profiles and the messages they post on facebook is they best way to present their identity.

Why we see only the good parts of their lives on facebook is proof that we care about our own identity and we like to be perceived as successful. But I think it also has to do with status symbol and to be seen as superior to other people. People loves to be appreciated and recognized and I think having a good identity will enable them to get the attention they crave.

New to Investing Where to Start?

The Clueless Newbie Investor

So you just got home from work. So tired of all the hassle you encountered in traffic today that you even have no energy to change your clothes. You say to yourself, "Just a minute of rest." Then you turn on the TV, turn to the news and realized that the stock market is doing good. Businessmen earning millions of money for just a little time at work. While you, breaking your neck to earn just a little money that's just enough to get you by.

You then realized, you can't do this forever. I mean, if you love your job then that's good. But what about the people who don't love their job? Like 90% of the people in the world. Its like hell. Torturing you everyday so that at night you could rest and torture you the next day. It has to stop.

You want to be in control of your life. Doing things you want to do anytime, anywhere. And getting a business degree now would mean giving up your work. your family might be depending on you to bring home the bacon and that's a problem. So what now?

You can not work forever...

Well, you don't have to worry. Because the true beginning of investing is realizing that you can not work forever. A few of our ancestors have realized this fact. But our parent's upbringing might have been overprotective and wants us to be safe.

What do I mean by that? If you look into the not so distant past. There have been a lot of people who became rich, financially free without having their own business or a business degree. But they learned investing. They bought companies. Our parent's just wants us to have a "safe" future and ingrained us with the knowledge that doing good work means good future that is the industrial age (where being industrious is a virtue). But that will be proven wrong as we go into information age where information is power.

Knowing that you can't work forever is the start. The enlightenment. And doing some simple math, you'll also realize that no matter how hard you work, you can not outwork money that is invested in the right place. Work therefore is useless after you have enough money to make it work for you. You then realize that time is more important than money. It is nirvana. You'll realized that time will be better spent on things that would make you happy.

Before we go into that happiness and stuff, we have to know how to invest. So where do we start? If I'm employed, depending on my paycheck, for my needs. Then I don't have much choice but to suck it up and be good at work. But the thing is you can start investing even you know nothing about it. The first option is investing in mutual funds. A Mutual Fund is a pool of money from small investors gathered together to purchase a stock. In other words, you invest in a company with other people, in which you wouldn't have been able to, if you only have your money or necessary knowledge in investing. A Mutual Fund is managed by a financial manager who does the investing for you. This is a good start in investing.

Your goal is to have control of your finances, that is, learning how to invest yourself is the best gift you could ever give yourself. Mutual fund gives you the opportunity to invest while you learn to do so.

Now you'll realize why your parents wants you on the safe side of being good at your job. If you'll notice, there's no risk involve in having a stable job. The risk is apparent in investing. You can lose money if the market or the company went under. You have to realize that investing and risk goes hand in hand. And freedom can not be attained without sacrifice. Just like our ancestors did.

Here's the thing, in the short term, investing involves more risk than a stable job. You can lose money in investing while a job continues to provide you money each month for the work you done. But in the long term, a job is riskier than investing. A person not loving his job will suffer depression. A recession can make you lose your job. But while these happen in the long term, investing on the other hand provides you with different income streams that will fill your pockets with money passively. Should recession or job layoffs come, investing will take care of  you.

Remember that investing is applied knowledge. The more you know about investing, the better your chances are at being financially free early in life. The key thing is to know what you don't know and have the courage to stare at that weakness in the face. Learn to spot what is correct and false in the knowledge you seek. Because just like a job sucks your life energy, there are a people who would also do anything, say anything to get your money, your buy out to freedom. Educate yourself and you'll be immune to those. Unknown field such as investing could be scary. But take it one step at a time.

Dividend Received P42,525

Its been a late dividend report here. Since I got some free time. Might as well post it. I received a dividend last week amounting to P42,525. I reinvested it to the company that gave the dividends.

Happy Halloween!