Today marks the first-year anniversary of my initial (and tentative) foray into investing. That sounds rather serious and portentous (even for me), but since this is something of a personal milestone, I guess it makes sense for me to mark it with a post.
Taking my first dip
The first time I ever got truly serious about money was when I decided to leave regular employment so I could turn to freelancing for good. That was when I learned to grapple with things like “cash flow,” “receivables”, expenditures, etc. It was oddly unsettling, because it made me realize that from then on, I would be reaping the fruits/feeling the pinch of every decision/mistake I make.
A few years down the line, I began to realize keenly that if I did not change the way I was managing my finances, I was going to end up in a worse place than I had imagined. So, after considering my options and reading tons of blog posts, books, how-to guides, etc., I decided that I would have to start investing for my future (retirement) as early as I could manage. Soon. Today. In fact, yesterday (or last month, last year, 10 years ago) would have been a better choice.
UITF, mutual funds, or direct stock investment?
After paring down my options to three — mutual funds, unit investment trust funds (UITFs), or direct stock purchases — I decided to go with UITF. Why? Because, with my topsy-turvy schedule and my relative lack of knowledge about investing, this was the most convenient and affordable choice. With UITFs, I could just go the bank of my choice, open a trust account, and let the fund manager do the worrying/investing for me. It also helped that it only required a minimum amount of P10,000.
After comparing the UITF products of various banks, I opted to go with Banco de Oro (BDO) for the following reasons:
- Its fund managers have a good track record (in terms of growth and solid earnings).
- There are BDO branches practically everywhere, and that’s not even counting the SM malls (in some SM stores, there are even 2 or 3 BDO branches within the mall complex); plus they have longer banking hours and some are open during weekends.
- Their service fees (Trust fee) are lower than anybody else’s — 1% (BDO) vs. 1.5% (BPI) or 2% (Metrobank) may not seem like much, but if you are investing for the long term, that seemingly small difference is going to eat substantially into your earnings.
- It is easy to check the status of your investment if you have an online account.
Taking the plunge
For my first foray, I selected BDO Equity. If you are a neophyte, people would normally advise you to avoid high-risk products like equities, but since I was in this for the long haul and it was only for a relatively small amount (note also that I did a lot of research before I made my decision), I decided to push through with it.
A few days later, I also enrolled my BDO savings account in BDO’s Easy Investment Plan (EIP), which is basically an installment plan for small-time investors who are willing to put in a specific amount on a regular basis (monthly or bi-monthly) until the minimum amount of P10,000 is reached (which constitutes 1 unit). This time I hedged a bit and chose BDO Balanced Fund, which carries a slightly lower risk. (Note that in investing, high risk = high returns; low risk = low returns; it is just a matter of deciding how much risk you are willing to tolerate.)
A year later
Twelve months have now passed since I took the plunge, and I am glad (and mightily relieved) to report that my precipitate decision has paid off. As of the latest update, my first UITF (equity) has now grown by 15.52%, and my Balanced Fund UITF has inched up by 10.48%. It may not seem that much, but to me that small amount of profit represents some sort of a validation that I have done something worthwhile with my earnings and that I have actually taken a proactive step to make my future just a little bit more secure.
As for regrets, I guess my only regret is that it took me such a long time to take that first step and that nobody has told me about this earlier. As such, I am hoping that this post will also encourage my fellow freelancers to take stock of their situation and finally turn their own plans into reality (if they haven’t already).