The whole nation is busy with watching and discussing about politics these past few months. The election was really something that us Pinoys love to spend our time with, campaigning for our candidates and all that – a cycle we go through every 3 years (during elections). Had we been in the U.S. or some other developed nation, people will be busy talking about what’s happening at the stock market.

So what is happening to the stock market? People have discounted the market as a place to invest money into partly because of the recent world-wide financial turmoil, but largely because of financial ignorance. Here’s what you miss… in the last 12 months, our local stock market index or the Phisix has steadily been increasing. A year ago, the index was at about 2200 points. As of yesterday, the market is hovering at about 3200 points. Simply put, had you invested P 1,000.00 in May 2009, your money would have grown to about P1,500 today – a whopping 50% annual rate of return.

Our local market has been performing positively and to the few who took a risk of investing a year ago, they are smiling today. I know of a lot of people who purposely stayed away from the market because they say that during an election year, one should stay off investing.  I don’t why we torture ourselves of doom and gloom scenarios every time we elect our leaders anyway. For those who were paralyzed with our periodic doom and gloom fantasies, you missed making your portfolio grow by a enormous 50% return!

Does this mean that you should go and empty your bank and head on to your stock broker? Wooah! Hold your horses. The stock market, though it gave a very good performance in the last 12 months, is still not for everyone. One should go through a process before making any investments regardless if it’s buying stocks, bonds, mutual funds, uitf, real estate or any other form of investment. Remember to be clear about a few things first: your investment objective, your risk tolerance, your time frame and your risk tolerance.  If investing in the stock market will help you achieve your financial goal, you can take the volatility of market, you are willing to leave your money for a while and you have rudimentary understanding of how the stock market works – then go! However, if you will lose a lot of sleep (and sanity) whenever the stock market moves south, don’t go there even if you can see surges in the market like 50% in a year.  Remember, an investment that can give you a 50% hike in a year can also make you lose as much in the same period. Returns will always be determined by the risks you take – always has, always will! I can’t believe there are still detestable beings preying on the innocent (or the ignorant) making them believe that what they offer is high yield but low risk. Whenever someone offers you an investment that will make your money grow with very minimal risk, he is either misrepresenting or he is scamming you.

Will the market continue on an upward trend like the last 12 months? I have no idea. All I know is that what goes up must come down at some point. However, if you are willing to be patient and will not mind the gyration of the Phisix, then go ahead and allocate part of your money but always be prudent and sensible. Do not put all your eggs in one basket and diversify. If you are not comfortable with letting go of your money, always remember that the money you do not invest will be safe but it does not mean that it will not lose value. Inflation is constant and an invisible risk we are all exposed to. Here’s a very sensible tip that I got from my good friend Efren Cruz: “Invest early, invest wisely and invest regularly”.

“After a long time the master of those servants returned and settled accounts with them.  The man who had received the five talents brought the other five. ‘Master,’ he said, ‘you entrusted me with five talents. See, I have gained five more.'”His master replied, ‘Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness!’”

-– Matthew 29:19-21, NIV

Appears in my column at Business Mirror, 05.03.2010

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Sometime last year, the show Shop Talk at ANC invited my daughter Billie as its guest. The show invited children of finance personalities they often invite as guests in the show. It was nice to listen to young people talk about finances and how they deal with the issues involved.

One of the guests was a young boy, barely in his teens, but was talking confidently about managing his portfolio. The host of the show was amazed at this wonder boy and how he was doing what he was talking about. I found out later that he had brothers who were all financially savvy. In my curiosity, I spoke to their father to find out more about them.

They are the Fausto brothers —Martin, Enrique and Anton—sons of Marvin and Rose Fausto. Marvin used to be the Head of Trust of Equitable PCI Bank; he is now the Head of Investments of Banco De Oro. Rose, prior to becoming a full-time homemaker, was also an investment banker.

Martin, the oldest, is 19 years old and an incoming junior taking up Management at the Ateneo de Manila University. Enrique, the second, turned 17 last month, an incoming high-school senior in Xavier School. Anton, the youngest, is 13. He graduated with honors from the Ateneo Grade School in March. His ambition is to be the country’s youngest billionaire. The boys are well-rounded, with passions involving sports, music and dance.

The brothers have been exposed to financial literacy very early in life. When they were still babies, their parents opened their individual savings accounts. They have since been saving from their allowance, cash gifts and occasional earnings from different endeavors. They were also gifted a few shares of stocks of companies that they could easily understand when they were still very young. Today, they buy their own stocks with their own money. Since last year, their parents have transferred to them the responsibility of updating their individual balance sheets on a quarterly basis.

These boys can put many adults to shame. In fact, I can say they are even wealthier than most married people I know! As young as they are, I know they have a great future ahead of them.

What sets these boys apart from many kids out there? Their parents decided early to impart very important values to them, especially financial literacy.

Unfortunately, the Fausto family is a very rare breed and the Fausto brothers are really exceptions to the rule. Many parents often teach their children the wrong values; they put too much emphasis on academic excellence and forget to teach the their children the realities of life—like financial principles. While it is definitely important, academic education is often incomplete, limited and at times even irrelevant. As parents, we should also teach our children values and principles that will hone their character and practical education that will shape their future like finance and entrepreneurship.

It is a fact that parents are the best teachers. Yet we leave the complete education of our children to educational institutions. Isn’t it time we examined how our children are being educated? Let us take part in this very important stage in their lives…that is the best thing we can do for them. “Train a child in the way he should go, and when he is old he will not turn from it.”—Proverbs 22:6, NIV.

Victory Greenhills, in cooperation with the Registered Financial Planner Institute, brings you BLUE CHIP: Financial Literacy Program for the Youth. This is a two-day learning session on practical finance for high-school and college students (ages 13 to 20) and will be on May 13 and 14 at the Victory Center, Upper Level, Promenade Greenhills. For inquiries on BLUE CHIP, please get in touch with Sheryn Alvarez at 744-8121 or 0917-5117796.

This time, it’s for the next generation… the Youth!