Cost Averaging Through BDO Equity Fund and EastWest PhilEquity Feeder Fund

The Philippine Stock market made an impressive recovery to open 2017, but who knows if we have seen the bottom already or last week is just a dead cat bounce (given the lack of volume), a technical breather and we might see some further downside in the weeks to come. Who cares?

Either way, I’m okay, and I hope you are too. Sit tight! 2016 was harsh to those in the market for the short-term, especially months after elections, while for those who have very long-term O-H-A (objectives, horizon and appetite) such as me, 2016 was a chance to buy more from the market at lower levels.

While I mostly stayed in the sidelines for 2H16 after cashing in on the post-Duterte-election rally (I’ve learned to sell you know), my regular investment plans kept on buying for me, literally, regularly — multiple times a month.

I monitor my holdings regularly as part of my personal SALN and I want to share with you how two of my regular investment plans are doing: BDO Easy Investment Plan (EIP) (PSE: BDO) and my EastWest Bank PhilEquity Feeder Fund (PSE: EW) (or rather how they were battered during the downturn last year, and what it meant to me, if any). Note, I don’t advertise these banks but I endorse these investment products, whichever bank you get it from. I have holdings with other banks too but they are not fun to graph so anyway…

BDO EQUITY FUND

OHA: Retirement fund, 35 years from now (hopefully earlier), aggressive risk appetite

So I started this way back in 2013 (together with BDO Balanced Fund) and below is how the fund performed in almost 3 years. Quite a roller coaster ride really.

Published some previous updates on this way back in 2014 (When’s the Best Day to Buy Stocks? (Based on BDO EIP)) and I decided to have a look again given the harsh 2016. If you bought in Jan2013, then you would have been up as of today, but there are very few of us who can time the market (will you go all in then?), and not sustainably at that. Anyway…

The red dots below show my buying dates, previously enrolled every 15th, but given a salary increase, decided to buy every 15th and 30th starting Aug2015 (hence the more frequent dots). If 15th or 30th falls on a weekend / holiday, then buying date is the last trading day before it.

Glad to have brought some even when the market is down, and some more while it is severely down. That’s the benefit of regular investments, aside from cost averaging, it takes away the emotions, the fear (or the greed), you just keep buying. Otherwise, many would have been spooked with the market and stopped buying while it’s going down (fear). Conversely, many would have bought more and more while the market is doing very well (greed). With a regular investment plan, just buy and buy. Likewise, you don’t need to pay attention to it, they will just buy automatically for you, whether you remember it or not. It also acts as forced savings for you, until you develop the habit to really set aside an amount per month for investing. Below shows the moving average of my buying price:

As of Jan 6 market closing, my moving average (MA) is just slightly below the market price, hence a slight gain. But look at Mar14 to Apr15 and May16 to Aug16 segments. Those paper gains would have been amazing! But then again, I don’t mind. If the market is on its way to recovery, then I’m pretty excited about the upside (such as those segments I identified), but if not yet, then more chances to buy.

EASTWEST BANK PHILEQUITY FEEDER FUND

OHA: College tuition of kids, 16 to 18 years from now, aggressive risk appetite

So EastWest bank has this tie-up with PhilEquity fund where one of EW’s UITF tracks the performance of PhilEquity’s Equity Fund. Enrolled in this last 2015, buying every 10th and 25th. Here’s how the fund performed, as expected, not spared by the 2016 downtrend.

The next two graphs show the buying dates and the moving average.

As of Jan6, I’m still at a slight paper loss given my MA is still higher than market value. But the again, I don’t mind. The fund is still meant for 16 to 18 years from now.

FOR IMPROVEMENT

Sometimes, I buy an extra tranche when I feel like the market is oversold (I guess I’ve grown numb with the paralyzing market fear), but I do this with BPI whereas I don’t do anything when the market is zooming up. I’m also a work in progress with trading the ranges and more active trading, but I do this with my smaller stocks portfolio. As for my UITF (and investment portion of VUL), they will just keep on buying and growing this 2017. Let the experts do their jobs!

***

BDO data is from BDO website. EWB PEFF data is from uitf.com.ph. Again, not endorsing either banks, check with your preferred banks about their investment products. I have exposures in BPI and Security Bank too (in the spirit of disclosure).

Subscribe to our email newsletter by clicking below button:

Follow us on Facebook, Instagram and Twitter to learn more about various investment vehicles for every Juan. Join me in Truly Rich Club as well to have spiritual and financial abundance.

May you have a richer life!

2017 Investment Options to Consider

To say that 2016 was rough for market investors (stocks and managed funds alike) is an understatement but despite the volatility throughout the year, PSEi is just down 1.6% from 2015 closing. Hence the constant need for diversification and in 2017, we should look forward to doing more of diversification. As follows are some of the investment options I want you to consider for next year:

CROWDFUNDING

Something new. This sector is relatively young in our country and I believe SEC (and other governing bodies) are still trying to firm up regulations about these entities. Basically this is pooled funds from various retail investors, funds that will be invested, this time not necessarily in managed funds (unlike UITF / Mutual Funds) but in actual businesses. While we have many cooperatives in the country which act basically the same way, as follows are 3 of the relatively new entrants which capitalized on internet presence to reach prospective investors (and new breed of young investors).

Note that for 2016, we observed and followed these crowdfunding groups but we do not have actual exposures yet as we want to see their stability and let them iron out their operational kinks first. Which you as a prospective investor should do as well. Due diligence. As they say, “aral muna bago invest.” We also wanted to see the initial public reception on these new investment channels. For 2017, barring negative investor feedback, etc., we are seriously considering putting actual money to one or more of these groups. Another thing to check will be the ease of withdrawing your money if need be. Caveat emptor. If you have other crowdfunding alternatives you want to consider, let us know!

• Philcrowd: Registered as a cooperative, Philcrowd pools money from investors and allows investors to choose which business to fund, ranging from cacao or mushroom farms, Andok’s lechon manok franchises, 7-11, Potato Corner and a whole lot more. Advantage here is that Juan does not have to put up a big amount to have a stake in these best-selling franchises. But of course Juan is also reliant on how Philcrowd will manage the business on behalf of the retail investors hence very limited control. Members can also choose the plain vanilla membership in the cooperative and rely returns on investments through the overall growth of the cooperative. Visit their website to know more.

• Cropital: This crowdfunding platform is focused on various farms throughout the country, with short-term and long-term investment options. I would say investor take up this year is very brisk, as the newly posted farms for funding (3 to 4 batches this year) get fully funded in just a matter of hours or a few days. The additional benefit compared to traditional farming is that their farms have crop insurance in case of environmental / weather hazards. If you want to invest and help in growing our agricultural industry, this might be for you. Visit their website to know more.

• FarmOn PH: Another crowdfunding platform assisting our farmers up North (Isabela and Quirino) to find capital for their farms, assist them in improving their farming practices through technology, as well as in marketing and selling the harvest produce. Likewise, supply of capital for their farms is brisk, which I hope bodes well for the future of farming in the country. Visit their website to know more.

STOCKS

Something tried and tested. Less than 1% of Filipinos are in the stock market so work smarter than the 99%. Of course, this will always be an option, especially now that market did not move as much from 2015. Some would say that this is not the time to buy since the market is going down (and it might go down further). But if your investment OHA allows you a long-term investment, then slowly buying quality names can prove worthwhile in the future and you don’t necessarily have to time the market because only few gifted ones can (and not sustainably at that). Click here to start investing in stocks online.

Market volatility will always be there and in 2017, it remains to be seen how the PH economy will grow as we have a longer experience of the Du30 administration and his economic managers. Global trade needs to be assessed as well, on how the interactions of various economies, commodities and currencies will play out, plus the upcoming Trump US administration.

PREFERRED SHARES / BONDS

More of this. A move we prioritized in 2016 that proved fortunate in hindsight was to invest aggressively in preferred shares and bonds. We started the year with the goal of diversifying to fixed income money market instruments. Given the downward direction of our stocks and managed funds investments, the passive income from preferred shares / bonds helped provide growth and stability in our portfolio. We expect more of the same in 2017 as many companies are still lining up their offerings, just have to choose the quality companies.

MANAGED FUNDS

Retain monthly investments. If you don’t have this yet, then don’t let 2017 pass without having investments to managed funds, especially regular monthly investments. Sign-up with your favorite bank for UITFs or fund managers for mutual funds. COL Financial also allows you to buy funds online. Or if you have VUL insurance, then you also have exposures to managed funds. For half of 2016, the markets have been going down but we kept on buying as we have auto-debit enrollments that allow us to invest regularly and capitalize on cost-averaging. While I wasn’t so active in buying stocks for my personal fund during the downtrend, the various enrollments and VULs kept buying and buying on this short-term sale. Incurred paper losses for sure, but I can more than handle it and I’m actually excited for the potential growth once market rebounds.

PERA

Something new for the young and old. Stands for Personal Equity and Retirement Account. Simply because you and I want to retire more comfortably. We should have more knowledge and options by next year to enable us to shop for the best PERA administrator. ‘Nuff said. For more details, read our previous article: Open PERA, Grow Your Money, Retire Comfortably.

***

Subscribe to our email newsletter to get updates like this straight to your mailbox. Just click button below:

Join us in Facebook, Instagram and Twitter. Be guided in your stock market investments by joining Truly Rich Club.

In 2017, may all Pinoys have richer lives!

Open a PERA, Grow Your Money, Retire Comfortably

Note: Caveat emptor. I’m not in anyway endorsing the banks and entities mentioned herein. Definitely, there are and will be other providers. Just so happened that they are the first few to come out and their websites were accessible in showing their newest PERA offerings.

Good news. Last week, major banks launched their PERA UITFs, namely that of BPI (PSE: BPI) and BDO (PSE: BDO). Haven’t gotten the chance to check other banks who might be offering as well, but wanted to let you know of the good news as soon as possible so we can all review, conduct due diligence and consider this investment. You may view our previous post on PERA here: Magkaka-PERA na Tayo!

To recap, PERA (Personal Equity and Retirement Account) is voluntary and as the name suggests, is meant for retirement, as such this is a very long term investment vehicle. Withdrawals are generally not allowed, except for specific circumstances allowed by the law. Other withdrawals will incur many penalties and some tax incentives may be removed as well. Therefore, be very careful in considering this investment option to make sure that you save up a good amount for retirement, without sacrificing your present cash flows.

In a nutshell, Juan who opts to open a PERA will contribute regularly (much like SSS/GSIS) and this money shall be pooled and invested in various vehicles (most common of which is UITF / Mutual Funds. Other investment options are stocks, insurance etc.

REQUIREMENTS

Juan who wants to open a PERA should have a TIN (Tax Identification Number) and in a fit state to enter into contracts. Not yet clear though in the FAQs we’ve gone through whether employed individuals will contribute via salary deduction (similar to SSS) or deposit money to administrators on their own. Most likely it is the former. We’ll find out soon enough.

ENTITIES

The major entities involved in PERA are:

• Contributor: YOU, should you decide to invest and boost your SSS / GSIS retirement benefits (which honestly, really need a big boost)
• Administrator: Accredited by BSP, SEC or IC and BIR to administer and oversee the PERA of Contributor. (Should only be one Admin per person)
• Custodian: Accredited by BSP, separate unrelated entity to Administrator, which will take custody (safekeeping) of PERA assets (classified as Cash or Securities Custodian)
• Product Provider: Provides and sells accredited PERA investment products, where you money may be invested by the Administrator
• Investment Manager (Optional): Accredited entity, authorized by Contributor to make investment decisions on behalf of Contributor with regards to his/her PERA

PERA UITFs

As of this writing, BDO and BPI are already offering UITFs for PERA, most of which were released just last week up to yesterday. I’m sure other banks (and qualified entities) will soon follow suit to offer every Juan various PERA options.

 

• BDO PERA Short Term Fund
• BDO PERA Bond Index Fund
• BDO PERA Equity Index Fund
• BPI PERA Money Market Fund
• BDO PERA Equity Fund
• BPI PERA Government Bond Fund
• BPI PERA Corporate Income Fund

Click here for details on BDO PERA UITFs.  Click here for details on BPI PERA UITFs

Note that under the PERA rules, only 5 PERA may be open at a time and there should only be one Administrator (so choose your Administrator wisely!). Again, I’m not in anyway endorsing abovementioned banks and entities, just so happened that their websites showed their PERA offerings. If you come across with other entities offering PERA investments, tell us in the comments below.

BENEFITS

Aside from increasing Juan’s retirement account (the major benefit), as follows are additional benefits with having a PERA:

 

• Tax credits of 5% of annual PERA contributions (which means you can deduct this amount to the total tax you need to pay, which means lower tax payments for you)
• Tax exemption of investment income (withholding tax, capital gains, income tax)
• Your employer may choose to contribute for your PERA too on top of the amount they match for SSS. I interpret this as optional for employers, and if they do, their contributions are income tax deductible (deducted from your gross income before tax due is computed)
• Free of tax if contributor avails of retirement benefits upon reaching 55 years old and 5 annual contributions
• Allowed withdrawal in case of permanent disability or extended sickness, distribution to qualified dependents in case of death

 

WAY FORWARD

Contact you preferred administrator now! Not so fast. Study the PERA further by reading the FAQs of administrators (click here for BDO FAQ and BPI FAQ). The FAQs also contain discussions for overseas Filipinos. Approach the branches of your preferred banks and inquire more. Here’s also the PERA article from BSP: PERA Act of 2008. Likewise, since only one (1) Administrator is allowed, you may want to wait for a bit longer to have more options in case future Administrators can offer other investment vehicles aside from UITFs.

Lots of items still to be clarified (aside from the salary deduction bit above). My sense here is that at least for the UITFs, Juan may buy and sell as he wishes (or is it the Admin / Investment Manager’s call?), but s/he may not pull out / withdraw the funds easily unlike that of usual UITFs. It will just stay there in the PERA and grow (hopefully) over time.

Consider this a long term engagement, to have a financially comfortable retirement, so be very careful with your next steps. Nonetheless, make sure you start yours as soon as you are financially and emotionally ready. Investments are a must have and this is a good investment vehicle to consider. Once we learn more about PERA (and other providers), will try to share them here and keep you posted.

Follow us and be updated on investment updates. Just click the button below:Likewise, find us on Facebook, Instagram and Twitter. Checkout Truly Rich Club and join us in our journey towards attaining spiritual and financial abundance.

May we all have richer lives!

Images are from BDO and BPI Websites.

Ask Geri: I Want to Get VUL and Mutual Funds. Is it OK?

Hi Sir Geri,

I’m planning to invest in VUL. But still, I also want to invest in mutual funds simultaneously. Is it ok to do this simultaneously? Which has higher return? I’m trying to weigh how much to allocate for both given my limited budget.

– Ninia of Mapua, via Facebook page

 

 

 

---

Congratulations

First let me congratulate you for having the investment mindset. You’re now many steps closer to the lifelong goal of financial freedom.

 

VUL or Mutual Funds?

I assume you already know that VUL also has a component similar to mutual funds (MF) — an investment portion on top of protection benefits, given that you’ve already talked to an insurance agent. Now is it ok to have both simultaneously?

If your budget permits, why not!?!

 

I suggest you put an objective for each investment. Your VUL will be for what? Aside from the coverage, will it be your retirement fund? The mutual funds will be for what? Tuition of future kids? Future house and lot?

That way, you also know how long you will hold the investments, and what type of fund you will choose for both based on your OHA (Objective-Horizon-Appetite).

 

Which Has Higher Returns?

Returns depends on the funds you will choose for your VUL and MF. If you choose an equity fund, it will be higher risk but higher long turn returns. If a fund focused on bonds, lesser risk but lesser returns. If balanced fund, somewhere in between. Note that the investment portion of VUL, and your MF are not guaranteed, so returns will vary. It may even lead to losses in a bearish market.

 

Returns also depend on the performance of the fund managers handling the VUL and MF. We can’t really compare the returns of a VUL and MF as they are not apples to apples.

 

One big difference though is that for MF, what you put in will be purely market investments. With VUL, since it has death benefit and sickness protection, for the first 3 years or so, only a small portion of your premium goes to market investments since the VUL prioritizes the guaranteed benefits — sum assured, sickness benefit etc. For year 4 onwards, a bigger portion of your monthly premium goes to investments. Having said this, your investment in MF is sort of faster since it’s already 100% in the market, while for VUL, you need to wait around 3 years to have significant investment portion. But as for actual returns, we cannot tell.

 

Diversify

It is ideal that you have both VUL and MF, hopefully different fund types so you are diversified.

Actually if you plan to get more funds in the future, it’s ok to get equity for both especially if you have long term objectives anyway and your age allows for it. Issue with getting equity for both is that if the market goes south (like nowadays), both investments in VUL and MF will go south. If you are diversified, if one goes down, the other may not be down.

Cover Your A$$ First

If you don’t have insurance yet get, prioritize VUL so you and your dependents are protected, then eventually you also get investments through it. As for the amount you’ll put in, think how much death benefit your dependents will need to survive for 1 to 2 years in case you die. Then check whether you can afford the premium for that. If you have remaining budget for mutual funds, go for it too.

Hope this helps. Goodluck on your investments.

For more investment and business updates, follow us on Facebook, Instagram and Twitter.

Subscribe to us via email and get these articles straight from your inbox. No spam, just quality reads. Just encode your email below:

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Email Address:

Subscribe

For Stock Market guidance, consider Truly Rich Club or PinoyInvestor. For franchising opportunities, checkout PhilCrowd.

 

Photo: “cross_roads” (CC BY 2.0) by  PRMF 

TEL Me Where It Hurts – When Buy and Hold Hurts Your Investments

PLDT (PSE: TEL) is among the favorites of investment funds and brokerages due to its high dividend yield of almost 6% annually, very steady growth, and very profitable. Historically, it’s like getting the best of price appreciation and dividend yields.

For some, it is also an ideal buy and hold blue chip stock, for the long haul, something you can buy, don’t worry about and forget for the next 10 years. Just let it surprise you how much it has grown. Well it used to. Recently, it pulled up a different kind of market surprise. So surprising that those who invested in 2006 will be astounded and depressed as to where it is now (good thing there were regular dividends along the way as compensation).

You’ve probably heard by now the painful reporting of PLDT management (PSE: TEL) on why they posted lower income once again (lost customers, capital expenditures, wrote-off obsolete infrastructure, lower valuation of Rocket internet investment) and why they are also lowering their growth and income projections for the next 3 years — to invest heavily in new infrastructure in an attempt to turn the company around and become more at pace with the Pinoy’s use of internet and mobile data compared to traditional calling and texting.

To say that TEL’s stock price plummeted from 2250/sh to 1833/sh (as shown below, then some more the day after) is an understatement. And given their challenging 3 year outlook, analysts predict the share price will likely linger in these levels for a long time.

The drop was so steep that it went back to 2006 levels, the years when the company was making a comparable P28B annually, which is the income guidance for 2016. Strange eh? 10 years back in time. Below is the chart of TEL from 2000 to 2016.

What happened to TEL shows how Buy and Hold (Forever) can hurt Juan’s investments. Those who bought TEL in 2006, hoping to gain much from it, will be depressed to see that after 10 years, there wasn’t any capital appreciation. Wasted time. Wasted paper gains all those years. I hope not a lot of people did that. Though again, a small compensation is the dividends so in that sense, it is still a lot better off than time deposits (even if invested capital did not appreciate).

If Juan was able to sell TEL during it’s peak of 3400 in 2014, then that’s around double your money in 10 years (plus dividends on the side). But after the peak, TEL has been having a hard time delivering income growth, and admitted that with its pursuit of ever higher earnings, it sacrificed money which could have been reinvested and spent instead on infrastructure. TEL is headed towards that direction now, which means less income to be released as dividends, and more income to be retained and reinvested for growth.

Buy and hold is an often suggested strategy for new investors. But it carries a lot of footnotes, so Juan shouldn’t do it blindly. How do avoid being hurt by this TEL scenario? Below are some tricks:

Diversification

Buy and hold doesn’t mean one stock only. If Juan was able to diversify, then the growth of other shares who did not fall to 10-year lows will cushion this fall in TEL. Likewise, if Juan invested in index tracking funds, then the index is definitely better now than in 2006. Another option is not to go 100% in stocks or stocks funds. There are balanced or bond funds that Juan should also consider. The trick is not to put all your eggs in one basket.

Time Horizon

The longer time horizon, the better. If Juan is retiring in 10 years time, the he should slowly veer away from risky investments as his retirement approaches. Likewise, if Juan is preparing for his retirement only 10 years in advance, then that is actually a short time to be fully invested in stocks, much more to be fully invested in TEL only. Juan should prepare for his retirement as soon as he gets his first paycheck from his first job. If not, as far away as possible from targeted retirement age, as early as possible in Juan’s financially productive years. In case of TEL, at 10-year horizon, not much changed, but at a 16-year horizon, there is still some gains. Always link this time horizon to your investment OHA (Objective-Horizon-Appetite).

More Frequent Buy and Sell

All stocks do not move in a straight line, there are ups and downs, but quality companies will always go up in general and given time. The peaks and troughs actually give us windows of opportunity to buy some and sell some. Here’s where fundamental analysis and technical analysis come in, the former in choosing quality and undervalued companies, the latter to signal whether it’s time to buy and sell. TEL’s Jan2014 to Sep2014 run was a good opportunity to have bought and sold. Juan does not need to detect the exact highs and lows, but being able to buy after lows and sell before highs can still provide sizable gains.

Buy and Monitor, Don’t Forget; Buy and Hold But Not for Too Long

Juan need not monitor his investments daily, but ideally on a regular basis, depending on the available time he has. Checking on your investments quarterly or annually will give you a good grasp of how they are performing, and whether the gains you have so far are worth cashing-in already. If Juan bought an investment 10 years ago and it’s only now that he’s checking on it, then he better be ready for both good and bad surprises.

Fund Manager

If Juan does not have the time (or interest) to learn trading on his own or the time to monitor his investments regularly, then having fund managers can do the trick. Investing in UITF or Mutual funds or VUL insurance allows Juan to invest in stocks managed by fund managers, and these fund managers can definitely buy on highs and sell on lows for you, and react faster in case they foresee that investments are going south.

Who knows, 10 years from now, where TEL will be? Or any other stock for that matter? For optimists like me, this can in fact be an opportunity to own TEL at 2006 prices, an opportunity that’s not always available, especially to those who got left behind by the 2006 run. And a lower than 6% dividend yield will still beat most dividend paying companies out there.

I wouldn’t go all in either, since I prefer to diversify, and wait further before investing to see how TEL’s going turn around it’s income growth.

Follow us on Facebook, Instagram and Twitter. Don’t forget to subscribe to our email base. Join us in Truly Rich Club.

Photos: Charts from COL Financial, PLDT logo from PLDT website

BSP Allows Unit-paying UITFs

Good news for UITF investors and soon to be investors.

By virtue of BSP Circular 876, BSP has amended the UITF regulations wherein UITFs can now be income-paying, similar to dividends in stocks, without necessarily selling the units owned by the investor.

Currently, Juan can only realize the gains of his UITF investments by selling the units he owns, or for more aggressive investors, a buy-and-sell of UITF strategy.

With this development, soon there will be UITFs that provide passive income via dividends, without the need for Juan to redeem his investment principal. So Juan can just hold on to his principal, enjoy the capital appreciation, while reaping the unit-payment income on the side. Passive income.

Of course this will take time to materialize as BSP-regulated banks that offer UITF try to design their respective products. Here’s another text from BSP as to objectives of this new UITF feature.

Visit this link for more information on UITFs.

Like us on Facebook and follow us on Instagram and Twitter!

Ask Geri: OFW Prepared for Death Expenses, Now How to Live?

Dear Geri,

I’m a big fan of your website, InvestmentJuan01. You’re website is very informative for newbies like me towards the path of financial freedom (or at least enjoying the fruit of blood-sweat-tear-hard-earned money).

I’m Yuri, an OFW in KSA on a yearly-based contract. Thanks to being an OFW, I managed to clear my debts (bank personal loans and CC) although I still maintain CC for emergency purposes only. Savings-wise, I have managed to establish an account with much needed funds for monthly amortization of my car and a small farm. Then two years ago, I got a St. Peter lifeline and last year I bought a lot for my eternal resting place. At least at that level I can say I’m insured kung magkabiglaan eh handa na, hndi na mahihirapan yung mga maiiwan ko.

Having said that, I want to take step further towards financial freedom. I just entered the 30s age bracket and I felt the need to invest. Kumbaga eh dapat ko nang gawin compared to when I was in my 20s na nagiging option lang. Then I stumbled upon your website and made me think more. Then I got interested more in investing, especially in VUL and mutual funds/UITF. 

Reading your post about VUL; mas nasabi kong mas bagay ito sa akin lalo na ngaun. Since I have prior financial obligations like amortization then I prefer VUL kasi medyo magaan ang monthly payments. I want to be more educated about VUL, in and outs, pros/cons, and advantages and disadvantages. I read you’re also a financial consultant and might offering VUL. I hope I get to see your reply.

Best regards,
Yuri Gagarin, via Ask Geri email

---

Thank you for your email Yuri and apologies for just responding now. Been very busy the past 2 months, it’s Holy Week now in the Philippines and it’s just now I’m finding time to address a number of Ask Geri queries.

I must say you began with the end in mind, having established certain investments to prepare you and relatives for the day itself. As I entitled this entry, it seems you’re prepared for the inevitable death, now your concern is on how to live, live more kumbaga.

You mentioned that you feel insured already, having a availed a life plan with one of Jesus’ closest disciples (again it’s Holy Week). I would say this is a good move, and I’m also open to availing one. The plan you got (plus the lot, oh it rhymes) prepares your relatives for your ON THE DAY departure expenses.

Now VUL should assist your relatives for ON THE DAY expenses and beyond. Sure they won’t have problems with burial expenses, but if your relatives depend on your remittances, then they shall have financial challenges eventually, weeks or months after their main provider passes away, suffers critical illness, etc. One more thing, if they do depend on you, please enjoin them to learn financial literacy as well, just like you. For your and their benefit.

Popular advice says Juan must establish his / her emergency fund first, then insurance, before diving into more risky investments. I’ve written quite a number of posts on VUL, some of the links I posted below so you may back read easily.

Why Should I Get Life Insurance?
VUL Insurance or Mutual Funds
Sample VUL Computations
Goose With Golden Eggs and Money Machine
Better to Start Small and Early Than to Invest Bigger Later On
Thoughts on Death and How To Die A Millionaire, Easily

In a gist, VUL asks you to commit a monthly payment whether it is for the next 5, 7, 10 or 15 years. During this time, a portion goes to protection by guaranteeing an amount in case the owner dies, suffers disability or critical illness. Further a portion is invested in instruments that work like a Mutual Fund / UITF which grows exponentially over time. This fund is withdrawable for any use, such as eventual retirement, tuition fees, home purchase etc. 

The advantage is you quickly build up your protection arsenal since you get covered for a guaranteed lumpsum even if  you’ve just paid 3 months worth of premium. The slight disadvantage is that your monthly premium does not go 100% to investments, at least until year 3, hence the investment portion does not grow rapidly from day 1. Being on your 30s, the secret really is not how much you invested, but how much time you allowed your investments to grow. So the sooner you start, the better.

It is true that I am also a part-time Financial Consultant for one the country’s biggest insurance providers. I’m actually meeting with a client next week and he’s just 21 years old. I envy him since when I was his age, I did not have the extra money to avail of VUL. Anyway, one key requirement though for you to open a VUL is you have to be physically present here in the country to sign some documents etc.

Do let me know when you’re coming back in the country for vacation and maybe we can meet up to talk about your own VUL plan in more detail.