Interest Rates Could Stay 'Glued' to the Floor, Admits Bank's Chief Economist

Photo: CHRISTOPHER PLEDGER

Interest Rates Remain Glued to the Floor – Andy Haldane-Chief Economist

Reports have come in from the Bank of England’s chief economist, that the interest rates would remain glued to the floor for the instant future. It has been stated by Andy Haldane who sits on the Bank’s committee of interest rate setter that inspite of strong attempts in dislodging them; rates tend to remain stuck at unprecedentedly low levels across major economies.Presently the financial markets are speculating that the UK rates would rise from their lows of 0.5pc to around 2,5pc ten years from now which according to Mr Haldane implies an extraordinarily slow pace of monetary tightening at least by historical standards.

He suggested that policymakers, in trying too hard to raise rates would make the situation even worse, but on the contrary with in due course, they could come free of their own accord. He further stated that it is one reason why the glue holding interest rates to their floor has stayed so strong and feels no immediate need to loosen that glue.Mr Haldane has earlier considered himself as one of the Bank’s most dovish interest rate setters, indicated that he would prefer rates to be lower, instead of being higher. He comments that the Bank should be prepared to cut interest rates if it looks like low inflation and tends to become entrenched in the UK.

Interpreted Downward Drift as Evidence of Secular Stagnation

He has said that the glue holding rates low is remarkably resilient and could have been aggravated by deficient western investment together with additional savings in the east. While in conversation with Milton Keynes, Haldane has stated that `some have interpreted their downward drift as evidence of secular stagnation’, which is a concept that economies tend will grow slowly than in the past and this fear is an echo of concerns raised after the Great Depression. Consumers and businesses now are concerned that what is a reasonable recovery may not be permanent. Consumers are pleased that their glass is now less than half empty but they are no more willing to drink it and this cautious behaviour is to a degree, mirrored also among companies’.

Wage Growth Causing Fluttering 

Inspite of encouraging signs of wage growth during the year right up to April, together with rise in pay with its fastest pace from the time of the crisis, Mr Haldane had cautioned using the phrase `one swallow does not a summer make’. Analysts had informed that the pay growth could be even stronger after accounting changes in the UK’s workforce like the changing mix of employee ages, occupation and job tenures.

However, Mr Haldane has criticized the idea stating that `the wage growth is causing some fluttering though not in this dovecote’. It is now a matter of time to wait and watch for the outcome of the prevailing scenario on the interest rates in the near future.

Sales and Discounts To Your Life

Now is The Great Singapore Sale! Have you grabbed your discounted items?

Sales is a common tactic by retailers, and it comes with different forms. It can be bundle sales, flash sales, location-based sales and others. Marketing experts can tell you more. It usually trigger our greed to ride on the "rare" occasion to purchase materials at a lower price (Is it really that rare? I saw the same sales every day). If you over purchased or spend more resources (travelling, time spent) than the actual "saving", it is a wastage.



We spend our precious life away earning money. If we are using our hard earned money on items that we don’t need or want, literally, we are spending our life away. We earn money so that we can live our life, not to spend it. To put it bluntly, any unnecessary spending is allowing the merchants to take your time (money) away, not only the time spent on shopping (I know, you going to tell me there is such an experience called, retail therapy).

Every day, there are tons of people cracking their brains on how to take your money away from you. How to prevent it? Most of the merchants are incredibly intelligent, the "sales" actually hit you without you realising it? You mean faster than the superhero, Flash?

I think the best way to prevent from falling to sales tactics is to understand your needs and wants. Also, you need to understand the market prices, or at least use logical analysis. A piece of shirt can't cost you more than 10 dollars right? After you add in the rental cost, manpower cost, utility cost and other cost, yes, the shirt is sold to you at 40 dollars. Is 40 dollars the market price? That, you have to do your homework and thinking.

There is a difference between needs and wants. We, human, do need to have wants too. I make sure my wants are truly making me happy and I could well afforded it within my budget. Spending on my wants will be a deliberate and well thought through action.

I am not attracted by sales or discounts. I buy most of the consumable and objects on needs basis. I make an effort to plan what to buy, where to buy and when to stock up (taking into consideration of expiration dates and sales). Wait, you saw the word sales? Yes, I do love sales and discounts, only if I happened to need to buy that thing.

Sales and discounts is actually a good news, if you can curb your desire for overconsumption or unnecessary purchases. This will prevent buyer's remorse. What? You don't feel remorse buying things that you don't need? Good, live life without regret.

Have you discounted your life away to the merchants?

Frugal Daddy

Investing Patience is a Virtue in More Ways than One

Each year at the end of June the Russell indexes rebalance, making sure that the mix of stocks each index owns continues to represent the slice of the market it was designed to represent.  While the list of companies being added and subtracted was announced earlier this month, on Friday the additions and subtractions to the Russell indexes took place.

This delay between the announcement of the changes and the actual changes themselves can be a bit of a problem for index funds, since they need to sell the stocks that leave their index and buy the ones that come in on the same day.  Meanwhile, traders know that there are going to be huge sales of some stocks and huge buys of others, and they know exactly which stocks will go through those trades and on exactly what day, so they can load up on the ones that will be in demand and go short on the ones that will be losers on rebalancing day.

It hasn't been a huge problem, but one that can add up over a lifetime of investing.  Now large brokerage firms are putting more pressure in traditional index funds as well.  According to a Reuter's article from Thursday, many have cut discounts that they make available to index funds because too many other institutional and retail investors are front-running the index rebalancing.

Unfortunately, the Reuter's article incorrectly lumps Dimensional Funds Advisors in with the major index fund companies as being affected by this.  In fact, one of the reasons we like using DFA funds is that they DO NOT strictly follow any one index, and weren't forced to buy or sell any stocks on Friday.  This flexible approach has added real value to portfolios, but it can be hard to explain how value can be added without any market predictions or stock forecasts.  As a friend of mine said:

"Telling the Dimensional story can be difficult because they don’t fit the traditional active management model since they don’t rely on forecasting to attempt delivering market beating returns. And they aren't like an index fund because they do not outsource their investment decisions to a benchmark that delivers its stated objective on the day of reconstitution only to immediately drift from its target because prices change daily."

We've posted a short video to our website explaining some of the differences between traditional index fund trading and DFA's flexible approach to investing - it's worth the three-minutes to watch it.

How Crowdfunding is Exposing Bad Professional Investors

Crowdfunding Platform – Exposes Business

Crowdfunding is getting popular in the present world as an innovative method in which companies could generate funds and presently North America market is far advanced followed by the European market. Crowdfunding is the concept which comprises of funding a project or a business done through a number of individuals who tend to invest small amounts generally through a web-based platform.

Presence on a crowdfunding platform enables people to expose their business ideas to a large number of potential investors as well as business professionals. Fully funded crowdfund indicates that the group of investors and business professionals have faith in an idea and not just one investor. There is Equity Crowdfunding which involves a company offering equity share capital in return for the funding of cash which is not different with that of a Public Limited Company having share issue.

 But Private Limited Companies do not have access to Stock Market and the cost of going Public in most cases will be prohibitive for smaller or new companies. Crowdfunding thus, enables private companies with the benefit of raising capital from a number of investors through a share issue, minus the cost, regulations as well as reporting implications of being a Private Limited Company.

Google Search – Rise of Crowdfunding

Loan Crowdfunding on the other hand does not need any issue of shares by the company wherein one can just apply for a loan from investors at the agreed rates and the repayment terms. Instead of an individual or a fund provide offering the total amount of the loan needed, the business receives loads of small loans which could have various interest rates.In recent years, Google search has provided some data supporting the rise of crowdfunding and one that stems out from a study done by the World Bank, indicates that the global crowdfunding market would touch between $90 and $96 billion towards 2025.

Till recently, the number given on investing in start-ups and entrepreneurs was only reachable to people with deep pockets and the democratization quests is the major benefits of the rise of crowdfunding. The development of renowned platforms in the world, such as Kickstarter and Indiegogo, has provided many non-professional investors with the opportunity to back start-ups which tend to be appealing. Moreover, it could also provide a previously untapped way of capital for start-ups while acting as a competition for angel investing community and possibly also for the larger investment institutions.

Innovative Idea- A Game Changer 

Jeff Lynn, CEO of Seedrs, one of UK’s leading crowdfunding platforms had a discussion with Hot Topics on the factors behind the rise of crowdfunding, on his thoughts on professional investor as well as his advice on building a successful crowdfunding campaign.

Crowdfunding tends to be an innovative idea; however like anything which promises to be a game-changer, it also has its benefits as well as drawbacks that have to be measured. Several individuals would want to assist their colleague or neighbour in launching a new business, an idea or a product, help someone in need or pre-purchase some of the latest innovative product and crowdfunding could have the potential to do so.

Equity crowdfunding via a portal tends to expose many individuals to investments in start-up business through the internet and with crowdfunding; investors send money in exchange of intangible right without being aware of what happens to their funds invested. Recent investor survey carried out by the Ontario Securities Commission indicated that people in favour of equity crowdfunding were not aware of the risk. More disturbing was the fact that 12% of those identified as low risk tolerance were strongly interested in equity crowdfunding.

Implementation of Equity Crowdfunding Model 

Advocates recommend that the crowd would be capable of identifying fraud and weed out bad actors Experience together with research demonstrates that this is not the case; on the contrary investors tend to turn out to be victims of fraud at a shocking rate.Officials are probably proceeding in implementing an equity crowdfunding model and though the Canadian Foundation for Advancement of Investor Rights does not back an equity crowdfunding exemption individual could limit themselves to fraud and probable losses.

According to Jeff Lynn, `crowdfunding tends to be hard work and one of the issues which people always misunderstand is that you don’t just put up the listing and then wait for people to come and fund you. It is a tool for you to go into your networks and the public and get them excited about the deal’. They often inform the entrepereneurs that if they come there expecting that they will have to find the majority of the investments then a lot can be found from the network.

Crowdfunding tends to be useful in various ways, providing opportunities in fundraising for creative projects or for any start-up projects. It is a platform which enables the user to market their project, generate interest as well as receive funds. Its supporters could provide valuable feedback about a project and once the individual has settled with a stabilised support, there is no limit to the volume of projects one can fund.

Can We, Minions, Achieve Financial Independence?

Now is the minions crave. My colleague have to finish 2 McDonalds meals at 1 lunch to get 2 minions toys for his 2 children. Why is minions so popular beside they are cute and funny? I think they are popular because they signify most of our day-to-day routines as a full time employees but in a naughty way.



Can we Minions, or should we, even dream of financial independence? What so good about financial independence? Recently, some bloggers have done some fun exercises for pre/post financial independence schedules. I have did one similar earlier too.

Basically, financial independence allow you to spend your time the way you want. Even you love your job, isn't it good to have more control over your lifestyle? Sounds good?

Achieving financial independence is possible, provided you know what is enough and be discipline about your lifestyle. I am not asking you to suffer to save for the extra 1 cent. Work out what is your comfortable lifestyle and keep the expenses to the minimum. Lead a frugal life and stretch your dollars. Be happy, and double up your money.

How Minions look like when they are no longer minions? It should look something like this :

Why work for a banana, when you can plant your own banana tree or own a banana plantation?

Frugal Daddy

How Much Cash is Too Much for Your Portfolio?

Cash Position – 6% - 30% Based on Age/Risk Appetite

As per Charles Schwab Corpn’s – SCHW robo-advisor, Schwab Intelligent Portfolios, the cash position of an investor should be between 6 and 30 percent based on age and risk appetite. If one would be looking for a precise percentage, advice from financial experts will inform the individual to focus on capital allocation of 60 percent stock, 30 percent bonds and 10 percent in cash.

Investors though who are more likely to take risk are the younger generations who don’t necessarily need a stable income and could have more capital allocated to stocks. Cash is king as well as trash and nowhere is cash said to be more controversial than using it by way of investment, where too much of it is considered to be a risk but how much could be `too much’?

The debate came up when Charles Schwab had launched Intelligent Portfolios which is an algorithm based platform that automatically builds and rebalances portfolios like the asset-management services of robo-advisors and his treatment of cash in platform had many eyebrows raised, leading to criticism of allocation to cash, depending on the investor’s risk profile.

How Much Cash an Investor Should Hold …?

Charles Schwab replied that there seems to be no right or wrong answer as to how much cash an investor should be holding as an investment and that it is a strategic decision. He further added saying that it is easy to question cash in the 6th year of a bull market and when the Federal Reserve is artificially suppressing interest rates, but they did not invest based on the last six years.

Investment was based on what can be expected in the future. Bull market end and interest rates increase and when they do, a little cash will feel pretty good’.The question raised was, how much should one hold in their brokerage account to which both sides seemed to agree and there was not a single answer that fits all circumstance. When people tend to discuss their investing portfolios they usually refer to the stocks, commodities, bonds and real estate that they own. Regarding cash and how much to hold in a portfolio is based on who you are and how you are investing as well as your investment perspective.

Cash Not As Asset Class – Call Option Which Can Be Priced

When Warren Edward Buffett an American business magnate, investor and philanthropist and the most successful investor of the 20th century had patiently held around $20 billion in cash, he thought of cash not as an asset class which is returning next to nothing but as `a call option which can be priced, relative to ability of cash to buy assets.’ He put in good use at the time of the financial crisis gathering deeply discounted bargains. Most of the investors, lack the discipline of Buffet.

When the market is rallying, cash in the portfolio tends to drag on performance, returning to around zero. The debate for cash in the portfolio is that it does not go down at the time of market crashes but enables the purchases of cheap assets like Buffett, at smart prices. However, investors rarely tend to buy when markets are crashing and are simple apprehensive, to take the plunge. Those who avoided the 2008 crash were stuck with too much cash in their portfolios as the markets recovered.

Do You Have a Safety Net?

Do you risk it all when you are handling your hard-earned cash? (Many will say they are not so hard up on money).



I have a safety net, which you can refer it to my post on my basic retirement plans. To summarise the link, it is actually my "bond-like" instruments such as CPF Life, Private Annuities and Insurance. I know, you are going to be sceptical again as many against the cost and performance of insurance companies. Do you know something, I recently requested my NTUC Income agent to show me matured policies and all of them, yes, all of them, performed better than the 5.25% return stated in their benefit illustrations. So far, all my policies' have bonus declared yearly on par or better than the 5.25% that they used as an example.

I do know many companies don't perform well and their insurance / annuities are more costly and hence, resulted in less return. It is best if you find some senior friends who have matured policies with the company you are looking at to at least, understand their historical performance (which is not a sure thing for future performance but served as a reference).

I am not encouraging you to invest in these, but what I did was simply to diversify my asset with annuities and insurance, since I need financial protections anyway. The key, do your homework and assess how much you need to be protected and make sure you have sufficient emergency fund and liquid fund before you commit to anything long term like insurance and annuities. The next step is to convince yourself to act and frequently, people procrastinate.

So, what I am trying to say here? Definitely not about buying insurance or private annuities. Basically, If I am going to lose every single cent in stock market (Which is highly not possible unless I dump all into 1 stock and that stock is a Lehman Brother' friend), I still can retire at 55.

Having a safety net is important, as it gives you a sense of financial security. You know nowadays, financial security is the big thing to live your life with self esteem (I know, some will say they live spiritually and money don't affect their lives). Especially if you are already a working adult, let alone being a parent. You don't want to dig your children piggy bank and appear in the advertisement, don't you? I still remembered those days when my pocket and bank was $0. This is also when you know you don't need a lot to live a fulfilling life. Zen.

I would still think steady win the race. Read Hare and the Tortoise. I take my time to invest but I am not going to procrastinate. I am merely waiting for golden opportunities and I invest based on my asset allocation strategy, which consist of bond, cash and equity.

Do you have a safety net? Why not? Trampoline is not that bad, either.

Frugal Daddy

Red flags of Investment scam



Image by EuroGamer

I am suspicious of all the things that the average people believes.”
― H.L. Mencken

History shows that a lot of people are not learning   at other people’s mistakes. We may either blind, financially innocent or not really aware of it. Modern financial engineering is not new anymore. Some of us may be one of the victims of fraud or you know someone who was victimized by a large organization which is insolvent (Not having enough money). Identifying it is just one of the ways how you can prevent yourself from being financially distress. Self- awareness can help you bring   the red flags into the light.

1.   The products are too good to be true  

When someone tells you that the investment product has no risk involve, think again and run away from it. Someone is hiding the fact or keeping the truth from you. Everything has a risk. In every aspect you either gain or lose some of it. When you think about low risk and high gain, does it sounds good?  Yes of course, but no one is offering it aside from those scammers.  There were many people who took that bite and changed the course of their financial life. Lack of investigations will not resolve the issues.

2.   They promise guaranteed returns

Many scammers are selling the end goals but they seldom explain the process and the journey of it. They intentionally hid it from you and presented what you wanted to hear to lure you with the products and services. They always highlight the   return   with minimal financial sacrifices.       Maslow’s     hierarchy of needs tells us that we need security in our lives. If we apply it in investments, having a secured return of   it   will be a more financially sound decision for a lot of people. When a scammer addresses that need it will be a monster disaster when you get in.

  

3.   Be mindful of “The Credible guy”  

All fraudsters were credible guys before their skills were exposed publicly. Before Ponzi scheme became a worldwide term he became a financial advisor of Prime Minister Benito Mussiolini. I just want to remind that financial freedom is in your hands so do your own due diligence. You know someone who has credibility but check also their qualifications like their values system. Never stop asking questions until you get the right fit. The fact that they are credible, it should also be verifiable.  Most of the time we just trust and give all the money that we have blindly, not knowing the background of that con-artist.

4.   Everyone is buying that

Without checking your goals, visions and emotions you will be trapped immediately. The problem about the herd mentality is everyone doing it, so it must be good. Big no! The quick rich scheme mentality will easily gobble you up. The power of social pressure will pull you underneath the surface. Behavioral Finance Expert Daniel Kahneman states,” that driven by emotional reactions such as greed to gain money and fear in losing funds, you normally conform to the desire to be accepted by a group”. As a result, investors were seen joining frantic purchasing of that products resulting in economic crises. Example, the CAP (College Assurance Plan).

5.   They pressure you to get the products.

Biggest scam tactic is to let you feel that this is the last ride , limited editions, phase out and the availability of the product will not be visible for the next couple of years. Creating a false sense of urgency by claiming limited supply gives you this impression. Joining the bandwagon is good but be careful. The Budol Budol gang, the Aman futures group used these strategies to lure investors. The famous Ponzi scheme even tried to do this. We use emotion when we buy, but we use logic to defend why we buy things.

6.      The Reciprocity Tactic.

Many fraudsters asked investors to attend free seminars while other legal entities are also doing the same thing. Now, how will you know who is telling the truth? This is a tricky part. Offering to do a small favor for you in return for a big favor is a classic example. They give  materials, free lunch or dinner. Without you doing some intense research about the company, products, business model and the one selling the services you are at the brink of financial disaster.

These are just red flags but not totally immediate indicators that the company is a scam. Before you invest, be cautious, be aware and investigate.

  

But those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin and destruction.  1 Timothy 6:9

David Isaiah Angway is a Financial Evangelist

New Pensions Crisis as Thousands Can’t Get At Their Own Money

Pension Crisis – Problems at Financial Firm

Problems at the financial firms have left people intending in getting access to their retirement cash under new rules which has become effective in April, blocked by companies’ lack of readiness for the this change. Investigation published in recent Daily Mail conveyed that people have been charged for withdrawals or for changing to rival companies.

To add further to the problem they are also made to wait longer for their pay-outs, in some cases to around three months. Some others state that they have been forced to pay for financial advice up to £1,000 if they say they want their own money. Pension companies in the first month of the alterations, had to handle unprecedented 1.13 million phone calls from individuals intending to take advantage of the new freedom which was an 80% increase in the usual activity leaving several with the inability in coping with the demand.

Besides this, many were caught by the speed of the introduction of the improved rules together with the uncertainties on various aspects of the freedoms leaving them unprepared in dealing with the requests.

New Rule – Individuals Aged 55 Onwards – Distinct Contribution Pension Withdrawal

The head of pension research at Hargreaves, Lansdown, Tom McPhail commented that `given the speed with which the reforms were introduced, it was always likely that some companies would struggle to be ready in time. Investors with these companies should be given the freedom to transfer their money elsewhere without having unnecessary barriers put in their way’.

He further stated that it would be unacceptable for some of the firms in charging people or put barriers to stop them in making use of the new freedoms. He said, `insisting that investors pay hefty exit penalties, use a financial adviser that some may not need or jump through bureaucratic hoops is simply not reasonable or fair’.

The new rule enables individuals aged 55 and above, with a distinct contribution pension for withdrawal if they intend to, though there are massive tax implication if they intend taking it in one go, in other words it is wise for people to get advice before rushing to get hold of their cash. FCA spokeswoman informed that they were monitoring how the firms would be implementing the changes and how it would impact consumers.

Reform Purpose – More Control on Money

Most of the people have been capable of taking advantage of the new rules without much problem thought they were talking to those firms where the problems have come up as the reforms bed in. It is in the interest of everyone to make a note that consumers utilise the new options available to them with confidence. Recently David Cameron indicated that he would be keeping a `careful eye’, on the treatment of companies to pension savers, on receiving rising complaints that the customers have been denied the new freedoms.

He informed that the purpose of the reforms was to give people more control on their money and not to have a new way to charge them and that the need for great transparency in pensions industry is essential. Pensions giant Friends Life, which is now part of Aviva, was forced to apologise recently, to around 1,300 savers who had asked to withdraw an amount of their cash and had informed them that it could not offer them this choice. On the contrary, the savers were told that they could cash in the whole amount which would leave them with a huge tax bill and use the fund to buy an annuity or transfer their money to another company. Friends Life had stated that they would be offering partial withdrawals in due time

My Personal Net Worth - June 2015

A personal net worth is the difference between your assets and liabilities: things that you own less things that you owe. If it is positive, you're on the right track. Else, you need to do something different. Tracking your net worth is a critical step towards achieving your financial freedom. The term is quite intimidating but let's make it simple anyway. 

Why Track Your Net Worth?

Net worth is being used as a tool to measure the wealth of a person. Say, Bill Gates has a net worth of $79.3 billion. It means he has more assets (cash, investments, businesses) to outweigh his liabilities (loans, mortgage, debts). The surplus of his assets than his liabilities makes him wealthy that  it doesn't require him to work anymore if he wishes not to.

The end in mind is to have a high net worth as a person. Personal assets should be higher (in value) than liabilities. 

The purpose of tracking our net worth is to ensure that our assets are continuously growing while liabilities are maintained or reduced. But in reality as income increases, liabilities do. Thus the only way to increase net worth is to accumulate more assets, not to reduce expenses. As they say, the buttonhole is proportional to the size of the button.

Assets and Liabilities

Before we roll up our sleeves and do the calculation, let us classify the entries that we can add in our assets and liabilities columns.

For assets, list all of the things that you own including but not limited to cash, business, bonds, stocks, savings, retirement, emergency funds. To make it simple, I do not include physical assets like house, automobile, jewelries although you may do so if you want.

Liabilities or debts include mortgage, student loans, credit cards, personal loan, auto loans, mobile plans and all other debts that you owe including the interest rates.

My Net Worth as of June 2015

DISCLOSURE: This is not a bragging room. I am showing the actual figures (as accurate as I can) to be TRANSPARENT as much as possible, INSPIRE you to also track your net worth and SUPPORT one another in winning the game of investing. I'd be more than happy to hear your questions, comments or even strategies.

So here's the net worth calculation. Prepare a tissue, you might puke when you see this :)

ASSETS

Cash  28,802.19

Emergency Fund 10,756.00

Savings - Cooperative A 12,582.58

Savings - Cooperative B 11,660.15

Stock Market Shares 46,927.94

Life Insurance 10,800.00

Index Fund 9,965.54

TOTAL 131,494.40

DEBTS

Mobile Plan  54,000.00

Credit Card A 23,114.82

Credit Card B 1,589.00

Credit Card C 10,515.88

Friend                                 40,000.00

TOTAL 129,219.70

NET WORTH 2,274.70

A Little Background of My Assets

The cash and emergency fund that I have is taken from my monthly salary and accumulated over the years. Cash is for my primary needs: food, clothing, rent and other basic necessities. Emergency fund is only used when I am (or someone) is in "dire" need.

My two savings are automatically deducted from my monthly salary. Savings A is Php 1,000 per month (Php 500/payday) while Savings B is Php 500 per month (Php 250/payday). Auto-deduction is really a good way of saving because you don't really feel the pain since you will only spend what's left in your income. It's like "stealth" savings since you are not doing the physical deposit of money.

Stock market shares are my investment in the Philippine stock market thru ColFinancial. Although currently I am losing by 23%, I am still optimistic to earn returns in the future. Life insurance is not just an investment for my beneficiaries but an investment savings as well. My annual premium is Php 10,800 payable in 5 years. Thereafter, I have the option to withdraw my money (earning with interest) or leave it there and grow more. Nevertheless, I can withdraw it anytime I want.

My index fund is the latest investment vehicle I undertook as a result of my not-so-good performance in the stock market. What index fund does is it mimics the performance of Philippine Stock Exchange indexes. The funds (of investors) are managed by a Fund Manager and is invested equally to Top 30 public companies in the stock market.

So Why Do I Have a Net Worth of Php 2,000?

Without looking at my liabilities, you would think that I am doing very very well. Not really. That is just the tip of the iceberg.

Yes, I have a positive net worth. It is okay but not that good. Hence, don't be deceived with a big asset unless you see the liabilities (whole picture).

This is the importance of tracking your net worth, you will see your financial condition when you sell all your assets and pay all your debts. Will you still survive or you will have nothing in the end?

Evidently, the reason why I have a very small net worth is because of my debts. Here are my Action Plans to improve my net worth in the next month.

My Action Plans to Improve My Net Worth

1. Of all my debts, I need to repay my credit cards first. Here's why: credit cards impose the highest interest rates! They are sneaky and nasty! Thus, I need to pay all my credit cards above other debts.

2. Close the least needed and lowest credit limit card. Currently, I have 3 credit cards. While it is a good advantage to have multiple cards to increase your total credit limit, you will be more tempted to spend more and annual fees will eat your money out. Thus, it is convenient and economical to retain the two most important cards.

3. My friend agrees that I will pay my debt in installment basis. I'm very blessed with this person. Hence, I will pay Php 4,000 every month and pay off my debt next year :)

4. My mobile phone is not a want but a need. My old phone has been with me for 2 years and it serves me well not until 2 weeks ago when a major defect started to appear. When charging, the phone seems to increase its volume always even if you don't move anything. It's distracting especially in the office. So I had no choice but to buy a new iPhone 6 :)

CONCLUSION

Having a small (or negative) net worth is not so bad after all. The fact that you care and take action in tracking your net worth is a vital action towards improving it in the future.

Remember, you can't improve what you can't measure. Ergo, since you already have an idea of your net worth, the next step is to improve it.

P.S. I am excited to show my net worth in the next month. Will you join me? Show me how you're doing! :)

Perception of Financial Professionals

Based on a Millennial Research Study

What is your perception about financial professionals?

(N=755 Principal financial group)

Financial professionals are stockbrokers, mutual fund representatives, insurance agents, tax preparers and financial planners are all members of this group. Financial Coaches, Estate planners and bankers may fall under this category as well. In order to conduct business with the public Advisors must carry licenses.

Engaging with financial professionals today got this common perception from millennials or generation Y today. Researchers use birth years ranging from the early 1980s to the early 2000s.

1.      Financial professionals have an expertise in financial services that I am not an expert in

Clients believe this since Advisors underwent so much financial training.  This is a must, since advisors are selling their skill set. As a knowledgeable individual, Advisors can educate you on what would be suitable to your needs. Advisors can give insights and expose blind spots that you are vulnerable in the long term.

2.      Financial professionals look out for the best interest of their client 

Part of the job is to make the client happier and achieve financial security thru different strategies for such a long time. Client centered, and not product centered is the main goal. As a client you deserve to achieve that satisfaction.

3.     Financial professionals are expensive to work with

Advisors are well trained and paid individuals, they put a lot of investment to it that’s why clients need to pay the right amount price for the service involved. We call it cost-benefit analysis. The advice and collaboration that an advisor can give is so valuable for a client to win, but somehow they think it is so expensive, that they cannot afford the service.

4.     Financial professionals are most interested in selling a product to make commissions or fee on.

Most clients get skeptical when a financial advisor shows no empathy at all with their situation. Many financial advisors focus on the product feature than emphasizing the benefits to their client. As a client they should feel right about the product and the person selling it.

5.     Financial professionals save me time           

     

One goal of a professional advisor is to assist and guide the client make a fitting and a workable decision for the client. As a client, it is understandable that you don’t know where to start. Advisors can give you a structure and help build your financial house in a timely manner. DIY project thru researching the best suitable products is great for clients but with the help of the advisor it can be excellent in reaching financial goals just in time.

6.      Financial professional provide more confidence 

Education and constant follow up is the way to build relationship. The advisor should build it brick by brick thru the course of time. The more your advisor communicates and updates you with the health of the market and coming up financial strategy, gives you the ability to make a wiser decision.

7.      Financial professionals only work with the wealthy

Many potential clients think this way because they feel that the money that they have is not enough that professional advisors will not really care too much. All financial professionals have a target market but since this is a profession and to become more effective, Advisors need to serve a specific market such wealthy families, low income and middle class individuals.

8.      Financial professionals don’t speak in terms that I can’t understand  

This is the sad truth about the advisors because some of them talk like aliens. The Advisors who communicate in a jargonized way has a deep problem understanding the client needs. Hence the reasons why most of their potential target market either run away or hide from them.

9.     Others (Theory)-  I am wiser than those financial professionals.

           Financial professionals are not ethical.

In conclusion, financial professionals should if not maintain, exceed the level of service that they are offering nowadays. There are a lot of strengths and opportunities in the financial services industry and the research shows how we can improve from it. Financial products, its just an icing on the cake since the clients needs is the main course.

Getting personal

·         What do you think about the financial services industry today?

·         What types of financial advisory group needs to improve?

·         Why do you think financial industry services should invest as well in low income families?

 

For more info about the study. Check Millennial Perceptions

If you have questions send me an email at david_angway@yahoo.com

David Isaiah Angway is a Registered Financial Planner and a Financial Evangelist