Bear-proof your Retirement Portfolio

This article is by Eric Petroff. Diversification is one of the most fundamental concepts in financial planning. I highly recommend that your read and learn. Nowadays in the information age, power belongs to the ones with the most knowledgable and open minds and to the ones who put this knowledge into action. Happy reading!

It is simply a reality that market conditions play a significant role in retirement planning for almost everyone. Generally speaking, the more diversified you are, the less impact market events will have on your retirement plans.

If you happen to retire immediately before a prolonged bull market, there really isn''t anything to worry about. However, if you end up retiring prior to a bear market, your retirement dreams could crumble if your portfolio is unprepared. Regrettably, there is no way to determine if you''ll be retiring into either a bull or bear market. With that in mind, let''s take a look at how to prepare your portfolio no matter what the market throws at you.

Rate of Spending vs. Rate of Return
To begin, keep in mind that a successful retirement portfolio is one that provides a steady and growing stream of income. To accomplish this, you must set a realistic and sustainable spending rate - the percentage of your portfolio that you remove each year to pay for living expenses. The spending rate must allow your portfolio''s growth to offset inflation. Generally speaking, most investment professionals would consider a 4-5% spending rate to be a realistic target, implying a total return needed of 6.5-7.5%, assuming 2.5% inflation.

In order to achieve this rate of return, a substantial allocation to equities is necessary; probably about 50% of your portfolio. Unfortunately, when you shift from fixed income into equities, you significantly increase your portfolio''s overall risk. This increased risk translates market value and spending volatility.

Retirement certainly isn''t a time when you want to have huge swings in your income level. Because there is no way to know in advance if you''re retiring into a market upturn or downturn, it is best to prepare your portfolio by seeking as much diversification as possible

How To Get There
Fortunately, achieving a meaningful level of diversification really isn''t all that hard as long as you keep a few fundamental ideas in mind.

1. Don't rely on individual stocks and bonds. Individual investors (and brokers) are sometimes ill-equipped to research and monitor enough individual securities to provide proper diversification. Serious investors, like colleges and foundations, hire money managers (or mutual funds) to achieve diversification. Take a lesson from them.

2. Never use a single mutual fund family regardless of how good it seems. Generally speaking, mutual fund families tend to have a consistent investment process across their products even though the names of their funds are different. Though their process may be worthwhile, having professionals with different viewpoints on investing is another essential aspect of diversification.

3. Don''t put all of your money in one style of investing such as value or growth. These investment styles will go in and out of favor depending on market conditions. Diversifying against these market trends is very important, as these trends can easily last five years or more and produce vastly different rates of return.

In addition to these diversification tips, you need to be extremely conscious of fees because they represent a structural impediment to success. For example, retail mutual funds may charge 1-2%, and brokers may charge 1-2% as well for wrap accounts. This means total fees can be between 2-4% per annum, which comes directly out of your investment performance. One great way to avoid fees is through an index fund provider or ETFs, which can generally provide a fully diversified portfolio for about 0.50%. Moreover, by investing in index funds you will achieve very broad degrees of diversification within a given asset class.

Conclusion
It is essential for investors to realize that market conditions, and timing thereof, can play a major role in their retirement plans. Since it is impossible to anticipate how markets will behave, diversifying your assets is simply the most prudent course of action. Take an active role in your portfolio, and do it by diversifying your assets and picking good mutual funds in which to invest your money. Such activities are most likely the best use of your time.

Be financially literate. Be an IMG Financial Broker/Dealer!
Use the products you offer to create a diversified portfolio for yourself and others!

My contact details can be found below...

- jelloso@gmail.com

- jay_elloso@yahoo.com

- (43-681) 10 262-546

Building Passive Income - The Key to Financial Independence

What is wealth?

The best way to define wealth as prescribed by some financial experts would be how long you can live without having to work for money. It is not defined by an absolute number or value of a currency but by the number of days you can live without having to work for money.

So if you have savings that are good for 3 months of your current lifestyle, your wealth is equivalent to 3 months.

Hence, financial independence is equated to the state of not having to work for money ever again. You are free to do the things you love to do without having to work for income.

This is determined by two important factors:

1. How much passive income you have? Passive income is income from investments like mutual funds, bonds, stocks; rental income from your properties; royalty income; etc...

2. How much is your expense rate? This is determined by how much money you need to live with your current lifestyle. Do you live simply? Below or within your means? Or do you live the life of a prince with a pauper's income? Living above your means?

In mathematical terms, Financial Independence is achieved if:

Passive income = Expense rate

If you can make this happen, you can afford not to work for money ever again. Don't be a slave of money, instead let it work for you.

Build your assets. In fact buy/build assets, not liabilities. Save some money and use it to buy assets that can generate passive income (rental property or some shares of mutual funds, stocks, etc...).

What? You can't save?!? Really huh?

The reason why most people "can't" save is because they follow the equation below:

Income - Expenses = Savings/Investments

For most people, nothing is ever really left for savings. What can you do then?

Work on a budget. Cut down your costs. Save on electrical bills. Reduce watching movies from thrice a week to once a week. Eat in restaurants less often. You're making these other people rich instead. Will they pay for your medical bills when you get sick? Will they support you when you get laid off from work?

Instead do this and pay yourself first:

Income - Savings/Investments = Expenses

Come on. You know you can still survive. Once your passive income grows, things will be much easier. You will feel more secure. You don't have to be entirely dependent on your job for money.

What do you really want? You working for money? Or money working for you?

If you want to know more about this, contact me for details and attend one of our free seminars.

We will teach and enable you with our IMG Financial Strategy:

1. Increase Cash Flow - Earn additional income. Manage expenses.

2. Manage Debt - Consolidate debt. Strive to eliminate debt.

3. Create an Emergency Fund - Save at least 6 months income. Prepare for emergency expenses.

4. Ensure Proper Protection - Protect against loss of income. Protect family assets.

5. Build Long-Term Asset Accumulation - Outpace inflation. Reduce taxation.

6. Preserve your Estate - Help reduce estate taxes. Build a family legacy.

Our mission is to educate everyone about the right financial concepts. Even Bo Sanchez participates in our company's trainings.

- (43-681) 10 262-546

- jelloso@gmail.com, jay_elloso@yahoo.com

The 6 Steps to Financial Planning

How important is Financial Planning?

Years ago, the financial life of the average family was relatively uncomplicated. People worked for the same company most of their lives, lived a few years in retirement on Social Security and their pension, and passed their modest estate on to their children. However, increased longevity, changing demographics, and a more complex, dynamic financial world have changed all that.

Consider these tough financial facts:

• Many of today's retirees will live 30 years or more in retirement - requiring far more financial resources to maintain their desired lifestyle.
• Social Security and company pensions may no longer provide the majority of your retirement income.
• Tax laws change almost annually.
• Downsizing companies no longer provide "cradle-to-the-grave" benefits or job security. The average American changes jobs seven times in a lifetime, and millions are self-employed. This demands new approaches towards savings, retirement, taxes, and estate planning.
• With couples having children later in life, many couples are "sandwiched" between paying for college and helping their elderly parents, while also trying to save for their own retirement.

Here are the 6 Basic Steps to Financial Planning

(1) The financial planner clarifies the client’s present situation by collecting and assessing all relevant financial information.

This includes:

net worth statement
cash flow statement
insurance policies
tax returns
wills
powers of attorney
investment portfolio and transactions
employee benefit plans
trust agreements
pension statements
basic family information (name, age, marital status, employment history, details of the children’s birth dates and other qualitative details)
Essentially this step summarizes where the client is today. An individual’s current situation is a result of the cumulative effects of all of the financial decisions and transactions that have occurred in the past up until the current time.

(2) The financial planner helps identify both financial and personal goals and objectives as well as clarify the client’s financial and personal values and attitudes. These may include providing for children’s education, supporting elderly parents or relieving immediate financial pressures which would help maintain the client’s current lifestyle and provide for retirement. These considerations are important in determining the best financial planning strategy. Any goals established should be:

Specific. Otherwise they are not goals, they are merely dreams. “I require 5,000,000 by my 65th birthday” is an example of a specific goal. “I want to be rich when I retire” is a dream, not a goal.

Measurable. Financial goals are easily measurable since pesos and centavos can be counted.

Realistic and attainable. In order for a goal to be achieved, it must be within the realm of reason. To accumulate P10 million by age 65, if one is currently age 64, and has no savings may be attainable by winning a lottery however; this is unrealistic. Conversely, for a 25-year-old to accumulate P10 million by age 65 through saving and investing is probably both attainable and realistic.

Time bound. All goals should be time bound in order to track progress towards the goal’s completion and to provide feedback. Corrections should be made in the action plan therefore maximizing the probability of success. If goals are determined to be unattainable and/or unrealistic, the individual can do one or more of the following to get back on track:

reduce discretionary expenditures,
increase income,
choose more aggressive investments, with potentially higher investment returns,
increase the time-frame over which to obtain the goal, or
reduce the peso value of the goal.

(3) The financial planner identifies financial problems that create barriers to achieving financial independence. Problem areas can include too little or too much insurance coverage, or a high tax burden. The client’s cash flow may be inadequate, or the current investments may not be winning the battle with changing economic times. These possible problem areas must be identified before solutions can be found.

(4) The financial planner provides written recommendations and alternative solutions. The length of the recommendations will vary with the complexity of one’s individual situation, but they should always be structured to meet the client’s needs without undue emphasis on purchasing certain investment products.

(5) The financial planner should assist in either actually executing the recommendations, or in coordinating their execution with other knowledgeable professionals. A financial plan is only helpful if the recommendations are put into action. Implementing the right strategy will help to reach the desired goals and objectives.

(6) The financial planner provides periodic review and revision of the plan to assure that the goals are achieved. Your financial situation should be re-assessed at least once a year to account for changes in life and current economic conditions.

The preliminary assessment should include determining the current financial situation, income and spending patterns, family obligations, and goals and objectives. In reality, although the adviser may be dealing primarily with one individual, he or she represents an entire household. The financial adviser should ensure that all concepts introduced are fully understood.

Privacy issues, which are paramount to some, should be addressed at this stage to ensure that the planner is able to obtain enough information to develop the financial plan.

The initial planning stages normally involve a meeting with the client to discuss the most important issues. Often, a questionnaire is used to quantify cash flow, current financial position, and goals. The development of a financial plan also involves an assessment of future expenses, obligations, earning or income prospects, and financial risk. Any constraints are noted at this time in order to facilitate the plan.

Unlike institutional investment, and with the exception of registered retirement savings plans, individual investment is not governed by legislation as to the type and mix of an investment portfolio. Individual investors can and do hold a variety of investments, some considerably less conservative than others. However, constraints of the non-legislated type are more likely to be encountered. Types and sources of constraints that a financial planner may encounter include:

liquidity;
taxation;
time horizon;
risk tolerance (either perceived or actual);
age, health, and personal financial situation;
previous investing experience; and
client’s income (source and magnitude, similar to the concept of “human capital”).
Once a draft version of the financial plan has been produced, it is discussed for final agreement. Any concepts that remain unclear to the client should be explained clearly. If it appears to meet the needs and objectives, it may be implemented.

Interested in how I can help you?

Get in touch....
(43-681) 10 262-546
jelloso@gmail.com
jay_elloso@yahoo.com

The Secrets of the Rich - Accumulating Wealth

They say, it's not how much you earn but how much you keep. This applies to individuals, companies, and even countries.

What does that mean exactly? Let me explain.

It is said that there are USD 38 trillion being exchanged in transactions at any given point in time. There will always be money being exchanged between parties. Businessmen with all their creativity, device systems so that they can capture some of this money floating around. They do this in such a way that the net exchange will be favorable to them. These systems are called businesses.

As a consumer, you pay like P65 for a P35 burger to let's say Mcjollibug. The net exchange is that Mcjollibug earns P30 from the consumer. As you can see businesses are like money magnets attracting money from consumers!

In all this, there will be winner and a loser. One who earns from the net exchange of money and one who loses. Looking at the bigger picture, and when you really look at it, it is the consumer (who doesn't keep/save/invest) any money that loses. The income he gets from his employers, just passes through him and into the hands of another business.

Then let's look at investors. Businesses need to expand. For what reason? More money of course. They need to expand, gain market share, etc.. and to do that you need some money money to spend for their operations. If a business doesn't have money, it will look for investors willing to earn from the business expansion. So in this exchange, the investors earn from the earnings of this business. Want an example? Let's look at stocks. When you buy shares of stocks of a company, you become like an owner of that company. If the company earns, the price shares also increase. When you sell the shares, you as the the investor then earns. Hope that's clear.

Good businessmen, like most of our Taipans try to keep as much money as possible. If they have an airline, the food gets served by one of his food and restaurant companies. The bookings are done by his travel agencies. Most of his businesses are insured by his own insurance company. His expansions are funded by his banks. His condos tie up miles to his airline. His malls sell his own products. His banks and franchises rents in his malls. This goes on... But you do get the picture right?

As you can see, the good businessman knows how to keep his money. In the case above, it just revolves around his group of companies. This almost never goes out. But when it does, it becomes a small percentage of what he actually earns from his businesses. See the difference in the attitude of the common Pinoy consumer and the rich businessman? I'm not really surprised why the rich get richer and the poor gets poorer.

Now what am I saying? If you want to become wealthy or something close to it, adapt this mindset. Learn to save and invest. What's that I hear? You can't afford to save? But I say, during these times everyone cannot afford not to save. More so now since the percentage of middle class is disappearing into the poverty line.

Furthermore, when a person gets old and unproductive (like most of us mortals) what next? He could only rely on what he kept. If there are none, through the money of other people (relatives, children). If you love these people, act now. Save soon and save smart. Invest soon and invest wisely.

What's next? Learn the basic financial concepts. Be smart financially! Learn the right way to invest and save. Revolve your money by being being your own financial services or real estate broker. Keep your own commissions and even reinvest them if you want. Don't let other agents from getting these commissions.

Be an IMG financial services/real estate broker/dealer today.

More notes on Asset Allocation Diversification

Hi Everyone!

Just a few more notes on diversification. This is for those who want to improve their portfolio.
Diversification is a good defense/protection strategy for those who aren't as versed quite well with the market. And I suspect, that's for most of us here. Not everybody is a seasoned stock broker. And even these professionals make some mistakes and lose a lot. If you don't have enough money to throw away, don't put all your eggs in one basket.

Diversification comes in at least the following 3 ways:

1. Diversify your risks. The following have varying degrees of risks. Generally the higher the risk, the higher the profit. That's one of the basic laws of investing.
- invest in equities (stocks), bonds, mutual funds, real estate, pension plans, time-deposits

2. Diversify your currencies. If you invest in just one, you might gain in the share prices but lose in the conversion. If you diversify, you offset your other investment (like in the relationship between the Peso and the US Dollar).
- There is the Euro, the Dollar, the Peso, etc...

3. Diversify your companies. Each company has a different fund manager, hence different investment strategies. Their strategy could spell the difference between your success adn your failure. If you're not too familiar with the fund managers, I suggest you diversify in this as well.
- Philequity, MAA, Prudential Optima, Grepalife Assets, AyalaLand, Crown Asia, etc..


In terms of diversification, I can license you to become a broker/dealer for all these diversification strategies.

Offer different investments from mutual funds, pension plans, equities, and bonds. Offer different currency investments like Euro bond funds, Dollar bond funds, and peso bond/equity funds. Offer different companies. These are competing companies. One will always try to outperform the other. But you can offer all of them. You can give only the best for yourself and your clients.

Contact me below if you want to not only get smarter financially, but gain the tools to apply what you have learned.

(43-681) 10 262-546

jelloso@gmail.com

jay_elloso@yahoo.com

How to Choose Mutual Funds

Mutual funds! How do you choose among the many options? Can you just pick them up from shelves in a store, read their labels, and put them in your basket of investments? Probably not. But in a way, you can.

I have compiled below what I have read so far about how to choose mutual funds. These come from different sources and I have weeded out what I think do not apply to to the Philippine market. Compared to learning the stock market behavior, this topic is relatively easier to absorb. So read on...

1. Read up. Keep learning. Read my blogs or any material that can carry past what you're learning here. Knowledge is power. And knowing is half the battle.

2. Settle on a suitable asset allocation. After you drew up your battle plan for investing (determined your risk tolerance, growth strategies, etc...), purchase your funds according to this strategy. It would come out pretty useless if you would just ignore this plan wouldn't it?

3. Discover the many research tools that are readily at hand. Ok we have books, magazines, newspapers, the internet. Everything is there. Look for fund performance, rankings, etc...

4. Check on no-load. These so-called loads, only mean commissions. There is one no load mutual fund I know in the Philippines and that is the Prosperity Money Market Fund. Performance-wise though, I see no growth there. 3.88% on the 3 Yr. Investment Return makes almost no difference to a time-deposit.

5. Look for funds with low annual expenses. You really have to check this out. This could be eating up your profits. Please make sure your fund performs well enough to cover the expenses and outperform the index fund over a long period of time.

6. Look for fund managers who have been in place for at least 5 years. Managed funds are run by people not computers, and you have to know who these people are. When the top stock picker leaves, so does the talent that goes with him/her. Or make sure the team left is well-trained by these investment wizards. Team-managed funds are normally managed by a real shot caller. This person must be identified at all costs. Hehe. Stick with funds whose lead managers are specifically identified.

7. Look for superior prior performance. Previous good records aren't predictive themselves. But this is an indication that the manager is good. Your quarry is always the manager not a particular fund.

8. Compare the fund with its peer group. The fund should outperform its peer group as well as a general market average.

9. Check for consistency of investment style. Style is defined by the kind of stocks or investments it invests in. You want them consistent. What they say in the prospectus should always be what they should do in the real world.

10. Consider the Fund's Size. It's size should be congruent with its investment goals. Managers sometimes announce that they're going to close their funds. That's no time to buy. It simply means the fund has attracted more new money than it can handle, which means performance might fall off.

11. Check the fund's performance in down markets. Some funds drop further than the general market average, then spring back - growth funds. Others go down less but may not turn up fast - value funds. Are you daring? Conservative? Choose the funds that makes you happier.

12. Check the minimum investment. Here in the Philippines. Some start at Php 500. Others at Php 10,000. Choose your pick. Be practical. What can you realistically afford? Additional investments you want to purchase can then vary per fund.

That wraps it up for now. Contact me for discussions.

Carpe diem!

(43-681) 10 262-546

jelloso@gmail.com

jay_elloso@yahoo.com

The Millionaire Next Door

The Millionaire Next Door by Thomas J. Stanley

My review

rating: 3 of 5 stars
I learned that there are seven characteristics or common denominators among millionaires in America.

They are:

1.They live well below their means - They are frugal,frugal, frugal. They make more than they can spend. Pretty cool.

2.They allocate their time, energy, and money efficiently, in ways conducive to building wealth - How else did they get there right? Well this goes for those millionaires who didn't inherit their wealth.

3.They believe that financial independence is more important than displaying high social status - Practical. You can display high social status all you want, but if you're still dependent on active income then you're one very vulnerable fella.

4.Their parents did not provide economic outpatient care - Pretty good training ground, don't you think? They train their kids to be survivors and in the end, to be winners. This is the best legacy they can leave to their children.

5.Their adult children are economically self-sufficient -Pass on the buck right? That's why the rich get richer and the poor get poorer.

6.They are proficient in targeting market opportunities - Now this is one handy skill I want to get my hands on.

7.They chose the right occupation - Right! To wake up everyday itching so badly to get yourself to do the things you love. Ain't that a ball!

Learn from this. The lessons and ideas may seem repetitive, but the author is really trying so hard to drive home a point. We need to learn the lessons. He want us to. Well, we ought to. =)

(43-681) 10 262-546

jelloso@gmail.com

jay_elloso@yahoo.com

How to Keep a Trading Journal

This is a must for serious traders out there...

Here are a few basic notes you should put in when doing your trades. Document your trading activities...

1. Market Conditions - volatility, trends, etc...

2. Entry Reason, Time and Price - without a reason, you shouldn't be in that trade.

3. Exit Reason, Time and Price - same

4. Long or Short Trade - mostly this is long for the Philippine Stock Exchange. we don't do short trading.

5. Conditions during the Trade - What happened to the market during the trade... was it favorable or not to your trade...

6. Money Management - position sizing, etc..

7. Chart Attachment - Attach the charts you used when you made the decisions.

8. Day's Weaknesses - Recognize the patterns in the day that made things hard for you. Where there a lot of distractions that kep you from trading properly?

9. Day's Strengths - Recognize the patterns that made things work for you. What made you focus etc.. that made you do well.

10. Any other thoughts - anything you feel worth noting.

(43-681) 10 262-546

jelloso@gmail.com

jay_elloso@yahoo.com