Hey, everyone! I’m back with another story—this time on how I’m trying to become more financially independent.
So, ever since I started working in late 2012, my goal was always to save up enough so that I can support both my parents and myself. I didn’t really have a clear path as to how to achieve this goal, but it was definitely a struggle trying to save money, especially with the kind of lifestyle I had (or still have). I shop occasionally, treat myself to spas and salons, spend a lot on skincare, indulge in good food, and not to mention I travel once in a while.
I’m very blessed that I still live with my parents (who pay for groceries, monthly bills, etc.) and that the Cupcake picks me up and brings me home every day to and from work—because it helps minimize my expenses on food and transportation. To give back, I just make it a point to provide my parents with a bit of my salary each month, to help with the expenses at home. But it took me a while to get to this state because for the longest time, I could hardly save money for myself.
In fact, during the first two years that I was working, I had what my friends called a “revolving credit” where my salary just paid off my existing debts to my credit card. It was an endless cycle of using my credit card to pay for things, and then using my salary to pay my credit card bill—so I would end up with barely any liquid funds.
Fortunately, after learning to cut down on expenses and budgeting wisely, I was able to start saving my money. I also got to talk to a few friends who are already into investing, and after doing my own research, it became my goal to invest my money into something that could give me higher returns in the future.
That was actually one of my New Year’s Resolutions this year, and I’m so happy to report that as of last month, I finally invested in the ALFM Peso Bond Fund, a fund managed by BPI Investment Management Inc., which is a 100% fully-owned subsidiary of BPI.
I’m sure a lot of you have questions, especially if you’re a little clueless like me, so I’m going to try my best to explain what it is and why it’s important to invest at an early age. This is something that they don’t teach in high school or college (I wish they did though!), so hopefully you’ll find some useful information here.
Let’s start with the basics. What is a mutual fund? According to the ALFM Mutual Funds website:
“A Mutual Fund is an open end investment company registered with the Securities and Exchange Commission (SEC) in which the investible cash of numerous investors are pooled in a specific fund (“fund”) with the aim of achieving a specific investment objective. The Fund is NOT a DEPOSIT product and is not an obligation of, or guaranteed, or insured by the Fund Manager, and is not insured by the Philippine Deposit Insurance Corporation (PDIC). Due to the nature of the investments, yield and potential yields cannot be guaranteed. Historical performance, when presented, is purely for reference purposes and is not a guarantee of future results.”
In addition, “mutual funds are investment opportunities that give you better returns compared to a bank’s time deposit. They can be divided into four distinct types: bond funds, equity funds, balanced funds, and money market funds. When you invest in a mutual fund, you get instant diversification for your cash. What’s more, mutual funds require only a minimal investment and the gains you get are tax-exempt.”
To simply put, they put money of different investors into a common fund, invest it in different securities, and equitably share the increase or decrease in value with all those involved. There are different types of funds depending on your profile and your objective—whether you’re saving up for a trip to Europe next year, your wedding in five years, or your kid’s tuition fee in ten years.
When I visited my preferred BPI branch, I met with Kimm Arellano, an ALFM Investment Counselor, who walked me through the different types of funds, and who did a quick profiling test to see what type of fund suited me and my objectives. My risk profile turned out to be Moderately Conservative, and the recommended type of fund for my profile is the ALFM Peso Bond Fund, which invests in fixed income securities or bonds. These securities provide higher returns than regular deposit rates, meaning I have a better chance of beating inflation (which sadly is a mistake by people who just leave their money in deposit accounts).
Also, it was nice to know that the Fund I chose is the only fund in the country that gives free group term life insurance coverage of Php 200,000 to each eligible primary individual investor. So not only am I able to enjoy the returns of my investment for myself, it gives me confidence that I’m able to secure my parents in case something happens to me (knock on wood!). In any case, this Fund definitely gives me peace of mind.
Here’s an infographic that Kimm shared with me on the ALFM Peso Bond Fund. I find it very simple and helpful.
So why am I choosing to invest, and why in this fund? Well, I’m choosing to invest now while I’m still in my late 20’s because aside from wanting a stable future for myself and my family, I want my hard-earned money to still have value 5 to 10 years from now.
It was taught to me during my high school days that inflation is the normal increase in the prices of goods and services. The inflation rate right now is at about 2% per year, and prices continue to increase annually. Thanks to my Economics subject in high school (which I’m thankful I still remember), I have to keep my money in something that is able to earn me more than the inflation rate.
For example, my next dream travel destination with the Cupcake is Europe and pretend I want to travel there in 2020. If I place my money in a savings account today, it won’t be very helpful. Instead, I presume that in 4 years, airline prices would have gone up faster than what I would have earned as interest on my deposit account, which is currently around 0.8%. This means that I would have to increase the amount I will need to set regularly or defer my travel for another year or more just to compensate! But with ALFM Peso Bond Fund earning around 2-3%, I’m positive that my money is intact when I need it and more importantly, I can go as planned!
And even if Kimm reminded me that returns are not guaranteed, I’m not worried or concerned because I have faith in them and their Fund Managers, and I intend to continue investing in my account so that I can reap the benefits of it in the future. ALFM Peso Bond Fund would not have become the largest mutual fund in the country if it hasn’t been trusted for almost 20 years by thousands of investors.
Another thing I like about ALFM Mutual Funds is that it provides investors an easy and convenient way to monitor investments through the BPI Express Online website or BPI Express Mobile App (both of which I have). Here, I can manage, subscribe, or redeem my investment (and even manage my BPI savings account and credit card) anywhere.
Kimm also talked about ALFM’s auto-invest facility, which is the Regular Subscription Plan or RSP. If you enroll in RSP, it will automatically get a minimum of Php 1,000 from your savings account and invest it in your chosen fund either monthly or quarterly depending on your nominated date. I’m definitely enrolling in RSP soon, so that I’m forced to save up for my future.
I can’t wait to tell my friends about ALFM. They even conduct seminars, and I encourage you all to attend! You can check their Facebook page (www.facebook.com/ALFMMutualFunds) for the schedule.
I hope this post somehow helps you understand how mutual funds work, and why investing is super important in this day and age.
If you want to know more about their different types of mutual funds, to take the risk profile test, or to understand how mutual funds work better, you can check out ALFM’s very easy-to-understand website here.
If you have any questions, feel free to leave a comment and I’ll try my best to answer it!