Hop on the BOND Wagon
Efren Ll. Cruz, RFP®

There are three basic asset classes for investing: cash, bonds and stocks. In the Philippines, retail investors are predominantly into cash. Loosely defined, cash investing focuses on just fixed income investments with maturities no longer than one year. This preference persists because many Filipino retail investors are not accustomed to taking significant risks with their money.

In the Philippines, stock investing has been around since the late 1950’s. However, many Filipinos are also wary of the huge volatility in stocks even though high risk can deliver potentially much higher returns. This is where bond investing comes in.

Through the Philippine Dealing & Exchange Corp. or PDEx and the support of regulators, bonds are now within easy reach of the retail investor. Bonds are in between cash and stocks in terms of their level of return and risk. The retail investor has the option of riding out volatilities in the bond market by holding his bond up to maturity. This is called passive investing. Or, the retail investor can trade his bonds on the bond exchange and perhaps reap extra profits before maturity date. Government securities, the investment with the least risk, trade actively on the bond exchange. Bonds issued by corporations are also traded.

While bonds are traded on the PDEx, retail investors still need to trade through PDEx-accredited and SEC-registered fixed income brokers. The list of brokers can be found on the PDEx’s web site at www.pdex.com.ph. Most banks have licenses as fixed income brokers. So if your favorite bank is a licensed broker, you may not need to go very far to buy or sell bonds.

Trading bonds is a bit complicated though. When interest rates move up, prices of old bonds tend to go down. Why? Because old bonds that are paying lower interest rates will be less attractive vs. bonds that are just being offered at the current high level of interest rates. On the other hand, when interest rates move down, prices of old bonds tend to move up. This is because old bonds that are paying higher interest rates now become more attractive vs. bonds that are just being offered at the current low level of interest rates.

Compared to cash and stocks, bonds have the added benefit of being tax-exempt provided they have a maturity of at least five years on issuance. While the law applies only to bonds that are issued by banks, investing through an investment management account or living trust with the trust department of a bank can get you the tax exemption even if the bond you are buying was issued by an entity other than a bank.

You can ask your broker for more information about bond trading. Better yet, why not attend one of EnRich training programs or inquire about the investment advisory services of the Personal Finance Advisers Philippines Corporation (PFA). Just visit www.personalfinance.ph for more details. You may also e-mail info@personalfinance.ph, call (63-2) 216-1541 or SMS (63-917) 505-0709.

Happy investing.

Efren Ll. Cruz is a registered financial planner with the RFPI USA. He is author of the bestselling books, “Pwede Na! The Complete Pinoy Guide to Personal Finance” and “Pwede Na! The Complete Pinoy Guide to Retirement & Estate Planning.” He is Chairman and CEO of Personal Finance Advisers Philippines Corporation. Questions about the article may be emailed to efren@personalfinance.ph. Efren may be reached at the same e-mail address for the scheduling of consultations and personal finance seminars or at (+632-216-1541 / +63917-505-0709). This article does not constitute nor forms part of any offer or solicitation of an offer to buy or sell any securities. The opinion and views expressed herein are solely those of the author’s and do not necessarily reflect those of the Personal Finance Advisers Philippines Corporation.

EASY MONEY>CLICK

Financial Calculators

There are literally hundreds of personal finance blogs worldwide. For this list, we borrowed from the “Top 100+ Personal Finance Blogs” list of Wisebread.com, which ranked more than 200 blogs based on traffic – a pretty good measure of popularity. We got the top seven and here’s what we think.

1. Dinkytown.net

www.dinkytown.net

What’s good: More than 350 financial calculators, that’s what! There’s a reason it’s the first link for financial calculators that appears on Google. It covers all the calculators you need for mortgage, credit cards, loans, taxes, retirement, insurance, savings, investments, and even business. The interface is super-friendly, with text input and ability to drag bars for instant results. The Java-based calculators can be purchased for Web sites (which is why it seems quite familiar since it’s everywhere).

What’s bad: The charts are a little Excel 2000-ish.

Interesting calculator: Human Life Value (your economic value based on your future earnings)

Recommendation: Bookmark it

2. BankRate

www.bankrate.com/brm/rate/calc_home.asp

What’s good: With 87 plus calculators covering auto, mortgage, retirement, tax, insurance, credit card, debt, savings, college finance, etc., BankRate’s calculators are comprehensive and even a little quirky.

What’s bad: A little stingy on charts.

Interesting calculator: Celebrity Spending Power (shows how ordinary purchases affect the bank accounts of Hollywood stars compared to a regular Joe, e.g. if you chose J-Lo, a $20,000 car to you is just like spending $50 for her, given her $12 million income)

Recommendation: Bookmark it

3. TCalc

www.timevalue.com/tcalc.aspx

What’s good: Since it licenses its calculators to other Web sites, it’s widely used. It includes home financing, investing, retirement, leasing, and general personal finance.

What’s bad: Not a lot of calculators, so options are limited, and the interface is very basic.

Interesting calculator: How Can I Save a Million Dollars?

Recommendation: Skip it

4. CalcXML

www.calcxml.com

What’s good: Found on popular sites like Yahoo! Finance and AOL, CalcXML delivers its calculators via an XML Web service for full integration. The selection covers 12 categories. Instead of some fancy financial term, the titles of calculators here are expressed in simple questions like “Should I consolidate my outstanding debt?” and “How long will my current life insurance proceeds last?” The charts are pretty too, plus you can save the results in PDF.

What’s bad: Not much really.

Interesting calculator: What Are My Needs for Burial and Final Expenses?

Recommendation: Bookmark it

4. LeadFusion

www.leadfusion.com/products/financialcalculators

What’s good: Covering everything from autos to stocks, the calculators feature inputs on the left and results on the right, resulting in a clean user interface. You’ll also find some unique calculators like “How do exchange rates affect my foreign stock?”and “How much do fees affect my fund’s rate of return?” Great-looking tables and charts too.

What’s bad: Unlike Dinkytown.net, results don’t automatically change in real-time as you manipulate the date; it takes a number of seconds to see the results.

Interesting calculator: Which is better: flight card or low rate card?

Recommendation: Browse it

5. Investopedia

www.investopedia.com/calculator/

What’s good: Designed for investors, you’ll find esoteric calculators like “Macaulay Duration” and “Present Value Annuity Due” along with more run-of-the-mill ones like “Saving For a Child’s Education.”

What’s bad: Very limited calculators.

Interesting calculator: Salary Per Day, Hour, Minute and Second

Recommendation: Browse it

6. SmartMoney.com

www.smartmoney.com/tools/worksheets/

What’s good: SmartMoney’s calculators start with an introductory explanation of why a particular worksheet or calculator can help you solve a conundrum. The helpful design continues in the calculators themselves – a question mark besides certain fields provides a useful explanation. Best, you can save the information you inputted in your computer.

What’s bad: Although the interface is neat, there’s little visual interest without charts.

Interesting calculator: Deductible Alimony Calculator

Recommendation: Browse it

7. MSN Money

moneycentral.msn.com/help/tools.asp

What’s good: Has a pretty okay collection of calculators mixed with fun pop quizzes.

What’s bad: Although the interface is neat, there’s little visual interest without charts.

Interesting calculator: Buy a Scooter

Recommendation: Browse it

EASY MONEY>VERSUS

Mutual Funds Vs. UITFs

They look the same, work the same, and often perform the same. But they’re not exactly the same. Mutual funds and unit investment trust funds are both pooled investments, i.e, they pool money from various investors – big institutional ones and small retail ones – and invest the money in diversified financial instruments based on their stated fund objectives. But there are some key differences that you need to know.

For business owners keeping tabs on their operational expenses, employee payrolls, creditor disbursements, and other monetary transactions, a passbook is a necessity yet inadequate as a record book in itself because of its limited, generalized entry cells.

To simplify the process of expense monitoring and accounts reconciliation, especially for SME owners who does not employ an accountant regularly, RCBC Savings Bank (RSB) has revamped the ordinary passbook into a more convenient, more detailed and handy bookkeeper: the new RSB e.Passbook Savings Account.

Available to savings account depositors of RCBC Savings Bank (RSB), the new RSB e.Passbook has an expanded and innovative format that accommodates more transaction details. Entrepreneurs, for instance, will have other convenient details such as their account numbers, specific types of transaction (fund transfer, bills payment, etc.) branch address, and other entries. Thus, enhancing their usual deposit/withdrawal records

The RSB e.Passbook can be linked to a Checking account and perform automatic balance transfers when needed.  And it comes with an ATM card for Personal accounts. To get the RSB e.Passbook, depositors need to make an initial deposit and maintaining balance of P30,000.

Donna Kristine Marcelo, Vice President for Marketing of RCBC Saving Bank, says that the e.Passbook is the ideal tool for clients who perform a greater volume of transaction than ordinary depositors.

“With the RSB e.Passbook, clients get the financial details they need as soon as the transaction is made. It’s all recorded in one convenient form,” she said.

The RSB e.Passbook is also ideal for busy executives who need to keep track of several personal expenses, and even homemakers who want detailed bookkeeping of the family’s income flow.

To inquire about the new e.Passbook Savings Account, call tel. no. 633-6749 or visit the nearest RCBC Saving bank.

Your deposit could be your ticket to see the Northern Lights or join an Antarctic Dream Cruise. Citi is opening doors for clients to go on an unforgettable travel adventure in its latest campaign. Dubbed the Great Arctic Eco Tour promotion, Citibank Philippines and Citibank Savings depositors have the chance to win a trip for two to the Arctic region while enjoying access to world class banking products and services.

To join, simply open an account with at least P2 million from August 1 to October 31, 2008 and earn four raffle chances. Every P500,000 additional booking will entitle customers to another raffle coupon. Clients may choose to open a savings or checking account, a time deposit or invest in a special deposit account or other investment products through Citibank affiliates during the promotion period.

Existing clients are also eligible to join by bringing in fresh funds of at least P500,000, which will earn them one raffle coupon.

Two winners will be drawn from Citibank, while one winner will be picked from Citibank Savings.  At stake are two roundtrip tickets with free accommodations to the Arctic Circle. An array of Arctic tours can be selected such as: (1) Tour the Antarctic via the Antarctic Dream Cruise to see its interesting wildlife including Polar bears, Arctic Foxes, reindeers, pink-footed geese, breeding ivory gulls, and walruses; or (2) Visit Norway to experience the marvelous Aurora Borealis or Northern Lights, the breathtaking natural colored light displays visible at night in the North sky.

Aside from the chance to experience this trip of a lifetime, new Citibank Philippines and Citibank Savings depositors may also bring home a welcome gift if they open their account within August. Deposits or investments starting at P2 million will be entitled to a welcome gift of a Philips Portable DVD Player. Meanwhile, deposits or investments starting at P4 million will accord the client Citigold status and as such will be entitled to a Philips MP3 Dock with Clock Radio and FM Digital Tuning.  Citigold is the wealth management banking service of Citibank.

For more information, log on to www.citibank.com.ph or you may also visit the Citibank Philippines or Citibank Savings branch nearest you.