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Wealth creation 101: 3 expert tips for short to long-term investing

MANILA, Philippines — “Maintaining wealth is a lifelong project.”

Such was the gist of the recent investing talk of Smith Chua, Chief Investment Officer, Bank of the Philippine Islands (BPI) Asset Management, in Ikea showroom, Pasay City.

According to him, one’s funds should be allocated into three parts: short-term, medium-term, and long-term needs.

For short-term needs:

  1. Setup a fund for regular household and necessities expenses.
  2. Allocate an emergency or sudden need fund – for the “rainy days.”

For medium-term fund:

“You add your life’s aspirations, perhaps, your life’s dreams in the future. Maybe you wish to raise a family, buy a house… and even travel is a necessity,” explained Chua.

For long-term fund: Retirement

3 investing tips to fulfill short-to-long-term fund goals:

1. Create a discipline of paying yourself first 

“It means that out of your regular salary or income, you want to regularly set aside an amount that would be put for your living and long-term fund,” Chua said.

“If you started working at 20 years old, you should start creating your wealth fund as early as now.”

According to him, one should start investing early because “Out of the income that we could generate in the next 30 or 40 years, the income that will come from your investment, 30 to 50% will come from the money that you set aside when you were 23 to 30 years old.”

He said that based on their studies, “accumulated income from the last years of your working life, which is 51 to 60 years old, the amount that would contribute to your accumulated income will only be about 10%.” 

Thus, he said that “the longer time it takes your money to be in the market to be invested will give you that higher potential of having that income later on and the impact is substantial, 30 to 40% of your total life’s income.”

2. Invest regularly

“Everybody loves a bull market. And everybody feels like a winner during a bull market,” Chua observed.

During a bear market, people are usually very fearful to invest because the equity market, for example, could go down by 30%. In fact, during the global financial crisis of 2008 and the pandemic, markets went down by over 30%, he said.

But when one encounters a bear market, the attitude, he said, should be “Hug the bear” – buy stocks or funds at a sale.

“Remember when you go to e-commerce sites during double digit days for sales? There’s no difference when it comes to investing – when you’re buying company shares during a bear market, you’re actually buying more units or shares for the same amount of money that you regularly set aside,” Chua elucidated.

“If the market is 20 to 30% lower, you’ll probably be able to buy 20% more shares or units than you could during a bull market.” 

But since the “sale” season from a bear market is generational, he advised setting aside some money for this in over the next 20 to 30 years because buying stocks when they are on-sale makes one profit a lot when these stocks appreciate in price during a bull market – and that’s why Chua recommended investing even more during a bear market.

For instance, he said that stocks sold during the 2008 to 2001 financial crisis in the United States went up to 400% after the crisis.

3. Invest with your mind and heart

In buying stocks or shares, Chua advised to invest in companies that produce products and services toward society improvement such as helping the poor, addressing global warming or environmental concerns, and promoting renewable energy.

“The geopolitical problems that we see today from the Russia and Ukraine conflict has really put energy front and center of our problems,” he said. “It has created inflation in other areas like food production, where energy is needed.”

Thus, when you invest in companies that promote sustainability, you would not only reap benefits like clean energy – you would also be making a big difference and impact.

As Maria Theresa Marcial, BPI Asset Management President and Chief Executive Officer, put it, investing does not only involve personal finance, but also the overall well-being of future generations.

Thus, during sale seasons like the recent 9.9 (September 9), Marcial encouraged everyone to shift their money mentality from spending to investing.

“Leading a sustainable life means investing in health, future and relationships,” she said in a speech prior to Chua’s talk. “A sustainable lifestyle is key to our overall success and secure and better future.”

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