1st of two parts
JEDDAH, 25 June 2007 — Entrepreneur and financial adviser Francisco J. Colayco, better known for his best-selling books on money, is inviting Filipinos in the Kingdom to join the first investment cooperative in the Philippines, which his foundation manages.
Founded in 2004, the Kapatiran sa Kasaganaan Service & Multipurpose Cooperative or KsKSMP Coop is currently made up mostly of Filipinos working in Hong Kong and families of Overseas Filipino Workers (OFWs) in the Philippines.
During a series of “Financial Literary” seminars attended by hundreds of Filipinos in key cities of the Kingdom from June 11 to 18, Colayco and his team explained that KsKSMP Co-op is different from credit co-ops in that it does not lend to its members.
“For those who plan to invest in some business but are unsure of which market to go into, we’re inviting them to consider becoming a member of KsKSMP Coop,” Colayco told Arab News in an interview after conducting the last of his seminars in Jeddah.
His main message in the seminars were consistent with what he had been advocating in his books: learning how to plan effectively, save efficiently, spend wisely and invest properly.
OFWs, he said, work very hard but most of them do not work as hard to save their earnings. “The common problem is that many experience a change in lifestyle. A Chinaman gets $100 and live off $50, while a Filipino spends the entire $100, or even beyond that. We’re lifestyle-oriented. We don’t earn to keep and to grow. We tend to overspend. It’s as if we don’t think of the future,” he said.
In one of the seminars attended by this writer at the Ramada Hotel in Jeddah, participants laughed at themselves in agreement as Colayco faulted Filipinos in general for the habit of rushing to buy the latest models of cell phones and other gadgets or appliances even if what they have are still functioning well.
“Tayo nga ‘yon. Totoo ang sinasabi n’ya (That’s us. He is speaking the truth),” a woman, who identified herself only as a nurse at Baksh Hospital, was overheard telling her seatmates.
One worker said he realized that his practice of buying corned beef in the Kingdom and shipping them home was a big waste of money.
Another said he was even more stupid because he bought a used airconditioner from a departing colleague and shipped it to the Philippines, not realizing that he could have easily bought a cheaper and better one in Manila.
Colayco also hit the nail on the head when he said many end up holding an empty bag because of their “get rich quick mentality.” Many Filipinos in the Kingdom and elsewhere are known to have lost money by joining pyramid schemes, yet there are those who have not learned their lessons.
Colayco also said the practice of OFWs of giving everything to their children, family or relatives out of love is misguided.
“You have to save now to make yourself financially well off so that you can share more with your children later because you cannot share what you don’t have,” he said, citing the flight attendant’s instruction for mothers to attend to themselves first before attending to their babies in case of emergency.
Common Sense
Knowing where to put one’s money is quite tricky, and that’s where financial literacy comes into play.
For those starting from zero, it all starts by saving. Saving one’s earnings is not really difficult to do, Colayco said. To do that, he said, it’s a good habit to follow the 80-20 rule. “Live within 80 percent of what you earn. Always save at least 20 percent. You can do that by distinguishing between needs and wants. If you want to have something that you don’t really need, it is ‘wants.’ Avoid buying it, save the money and let it grow,” he said.
Smokers, he said, should start quitting now because they are losing badly, not just in terms of savings but in terms of their health.
He said it’s a must to buy insurance (protection investment) for one’s dependents. Those who have children should also buy education plans.
It’s also important to build a six-month emergency fund, build a home, and then plan investments.
Colayco said it is not a good idea to borrow money to invest in something. “Invest only what you have, that’s why you have to keep saving and avoid getting into indebtedness,” he said.
“One should not invest in something unless he knows how to get out. Know the risks. Ask yourself whether you can take it if you lose.
He also warned that incurring loses or losing in an investment is guaranteed, but if one has a mindset to bounce back and to learn from one’s failure, success would not be farfetched.
It’s also not a good idea to speculate on lands or condominiums, known as asset wealth. He said there are only a few who make money out of buying real estate, such as those who are lucky enough to have bought lots near a site intended for another Shoe Mart branch.
“Buy a house not as an investment but as a home, unless you’re into buy-and-sell,” he said.
Types of Investments
He said one may opt to put one’s savings in a time deposit, which is guaranteed to earn interest. However, the interest earnings from time deposits have become very low.
An area of investment that is now attracting many investors in the Philippines is the mutual fund, which is popular in the United States, Canada and Europe.
There are four types of mutual funds in the Philippines: stock (also called equity), balanced, bond and money market.
Bond funds, such as treasury notes issued by the government and commercial papers issued by reputable companies, yield returns higher than interest rates in time deposits and are considered risk-free. Money market fund investments also are risk-free but are shorter in maturity, such as one year or less.
Equity funds, which are invested primarily in shares of stocks issued by corporations, could have higher returns than bond funds but entail big risks.
While bond funds and money markets are risk-free, they are not easily accessible to individuals because of the minimum investments required which are often beyond reach. On the other hand, investing in the stock market is no child’s play considering the risks involved. Even the savvy ones often lose badly.
But one can go into these through the mutual funds, which are defined by the Investment Company Association of the Philippines (ICAP) as investment companies that pool the funds of many individuals and institutional investors to form a massive asset base. While the lowest amount offered for treasury bills is P50,000, the minimum initial investment amount for mutual funds is only P5,000 and a minimum additional investments of P1,000.
The assets are entrusted to a full time professional fund manager who develops and maintains a diversified portfolio of security investments.
Mutual fund managers usually opt for the balanced fund, in which they place their shareholders’ money in both the fixed-income instruments (bonds and money market) and equity investments (stocks).
Which Mutual Fund?
ICAP’s website, http://www.icap.com, lists a total of 22 mutual funds in the Philippines, six of which are bond funds, five equity funds, 10 balanced funds, and one money market fund. Among the easily remembered names engaged in balanced fund are the GSIS Mutual fund, Inc., Philam Fund, Inc., and Sun Life Prosperity Balanced Fund, Inc.
Armand Bengco, chief executive officer of KsKSMP Coop, said the group is different from these mutual fund companies in that it is an investment cooperative and registered with the Philippine Cooperatives Development Agency (CDA).
It is also different from the regular co-ops in that it does not lend to its members. He cited records of the CDA showing that 40 percent of credit co-ops in the Philippines have failed largely due to a big number of members failing to pay their loans.
On the other hand, he said, the properly managed co-ops have flourished and some of them have impressive capital. The biggest in terms of assets is that co-op of Meralco employees, which has a capital of P2 billion. Another big one is the San Dionisio Credit Coop of Parañaque, which has 20,000 members and assets exceeding P1.2 billion.
Both are said to lend to reputable companies, and that is what KsKSMP is going to do as an “investment co-op.”
The co-op also intends to buy an existing bank, which will be managed independently. “We’re looking at one of four rural banks based in Bulacan. The good thing is that rural banks in the Philippines can now own branches in other provinces,’ he explained.
KsKSMP has also invested in National University in Manila, which is now being remodeled. People from the Asian Institute of Management(AIM) are being tapped to run the school academic-wise. On the financial side, it will be run by the Colayco Foundation for Education.
This is in line with the increasing trend the Philippines, in which Taipans are buying into schools.
For instance, the University of the East is now owned by Lucio Tan, Far Eastern University by the Montinolas, and Centro Escolar University by Emilio Yap of Manila Bulletin Publishing Corp., among others.
The foundation’s other plans include buying franchises and putting up its own mutual fund later.