TradFi or DeFi?

The world economy is entering a new normal, as we live in a world post covid with a new set of issues but in the midst of the crisis and the chaos still lies opportunity. Opportunity not just to survive but also to thrive. In this face to face conference we would talk about different opportunities to invest both from traditional investments and also from decentalized investments.

iCon was organized in the hope to further the financial and investment education of many Filipinos and it has stood out among similar conference because of quality, reach, content, roster and the like. #iCon does not only inform it’s audiences, it empowers them. Due to its success, #iCon is now running on its 10th year.

#iCon2023 continues its tradition of featuring the best minds of the industry but we are also featuring new and exciting additions this year.

It is not everyday that you will see an assembly with the best minds like this! It’s time to invest for your future. Join us this May 27, 2023 at the Samsung Hall at SM Aura, Taguig City from 9am to 6pm.

Registration is via bit.ly/3W4cw3c (with my special promo code for discounts) and if you prefer to pay via GCash, the payment link is via bit.ly/ICON2023GCASH. Check the link for our limited slots for early bird rates.

I’ve been giving talks and lectures for many, many years. Without a doubt, the question I have been asked the most would be, “what is the best investment?” This is a question that will have an answer depending on the person being asked. If you are to ask a real estate agent, he will say real estate; a stock broker will say blue chip stocks; a banker will offer the latest bank products like a time deposit or a special savings account; a mutual fund representative will say mutual funds; an insurance agent would probably quote a variable life insurance – get the drift? However, my answer has always been consistent. The best investment for me? Well, I can’t really give an answer.

Okay, I must admit that many people give me a dumb-founded look whenever I answer them “I don’t know, it depends”. For someone who claims to be a personal finance guy who has been in the financial services industry for over 3 decades and a trainer in financial planning, I am pretty clueless ain’t I? I simply can’t tell anyone what the best investment is because there’s no such thing. My answer will always be “it depends!”

I have a simple four rule guide that I recommend to people whenever they are perplexed as to where they want to bring their hard-earned money.

1) Investment Objective – What is the investment for in the first place? Where do you plan to use it? Is it for retirement, education, purchase of a house? Or is it just to park your money while you are scouting for other investments?

2) Time Frame – When do you intend to use the money you are investing? Is it short (less than a year), medium (up to 7 years) or long term (more than 7 years)? It is unwise to put money in long term investments when you will need your money in the short term – you might end up realizing capital reduction or you may be levied with steep penalties should you liquidate your investment. It is likewise unwise to invest in short term instruments when the purpose of investment is for the long term like education or retirement – you will not realize a good appreciation of your investments as short term instruments generally give lower yields. In other words, your investment would be drastically reduced by inflation and find yourself with not much funds when you need it the most.

3) Risk Tolerance – Investors are usually conservative, moderate, or aggressive. Determine your risk tolerance first. Is liquidity and capital preservation an absolute must for you? Or are you willing to risk some potential capital loss in favor of potential capital hike? Remember the golden rule in investing – the higher the yield, the higher the risks and vice-versa.

4) Acumen – There are simple products and there are complicated products. If you are investing in the stock market and you are not familiar with some form of fundamentals, you might regret ever putting money there. If you can’t distinguish a structured note from a time deposit, you might want to reconsider your decision. I have a simple advice with regard to this – never ever invest in something you don’t understand.

Before parting with your money, I highly recommend that you go through the four-step rule first.

“But divide your investments among many places, for you do not know what risks might lie ahead.” Ecclesiastes 11:2 (NLT).

What strategies should you use to invest your money?

Individual preferences create issues and choices in the way investments are managed. Two of them-active versus passive investing and use of individual securities versus mutual funds or UITFs?

An Active versus Passive Approach

Risk-return and efficient market theory says that attempting to outperform the market will not be fruitful. If you manage to do so, you are just lucky, not skilled. This thinking leads to a passive approach to investing. With a passive approach, no attempt is made to receive greater-than-market returns. Its proponents believe efforts can better be used to diversify in order to reduce risk and keep costs low. Passive investors tend to purchase index mutual funds of all types. An index fund attempts to duplicate market performance and keep costs low by using computerized programs to purchase holdings and not employing high-priced investment managers and analysts.

With the alternative, the active approach to investing, changes are made in holdings over time to take advantage of new opportunities. There are many different ways of performing active investing. However, they all have as their basis the belief that it is possible to outperform the market. Otherwise, it would be silly to make the effort.

One prominent active approach is fundamental investing. Under fundamental investing, analysis is made of overall market, industry, and company data to identify opportunities. Often the basis of this approach is the belief in mean reversion in investments with purchases made at below “true value” levels and sales made when they return to or attain correct valuations.

Individual Securities versus Mutual Funds / UITF

In establishing an investment portfolio, a decision should be made about whether to use individual securities or mutual funds. Individual securities purchased by the household involve no fund-overhead expenses and offer a greater ability to buy and sell for tax planning purposes instead of typical annual taxable capital gains for mutual funds. With individual securities, there also can be the emotional “high” of watching a stock in your portfolio do well.

Mutual funds and/or UITFs offer professional advice at reasonable cost, the ability to delegate the investment management and record-keeping function, and simple diversification with low investment minimums by specialists in a wide variety of types of securities, geographic areas, and styles of investing. One of the risks in these investments is that it can underperform the market at certain times.

Given the lack of expertise in many households, the lack of desire to monitor their investments, a sometimes-emotional response to buy and sell decisions, and a desire for lower volatility, the majority of financial planners recommend implementing through pooled funds such as mutual funds our UITFs.

There are no perfect investment strategy just are there are no best investments. Do not forget to diversify and always be prudent with your investments.