Author: Investa

Fixed income assets are financial instruments that help provide a steady stream of passive income to investors. They usually involve loans or debt obligations issued by governments, corporations, or other entities. In return for the debt, a fixed interest rate is given to the lender.

Fixed income assets can be a big help in letting you reach financial freedom. While stocks and mutual funds can have bigger returns, they tend to be volatile. Fixed income assets can serve as the safety net of your portfolio. Even as the market is in a downturn, they can still help you get a return for your investments.

Here are some examples, and how you can gain access to them!

1. Government Bonds and T-Bills

Government bonds, also known as treasury bonds, are debt securities issued by governments to raise funds. These fixed income assets usually have fixed interest rates and a set maturity date. They are often touted as one of the safest investments available, but the catch here is that returns are often lower due to the smaller risk involved. Treasury bills (or t-bills) are similar in many aspects, just that they have a maturity date of less than 1 year whereas treasury bonds mature after more than a year.

Some common examples are the RTB25 and the Premyo Bonds. The RTB25 provides a 2.375% interest rate per annum where interest payments are made every quarter. The bond matures after 3 years. The Premyo Bonds are bonds with a gimmick added in. Aside from receiving a 1.25% interest rate with a 1-year maturity, Premyo Bond investors receive raffle entries! The prizes include brand new cars and cash for the lucky winners.

Usually, investors would need to get in touch with their local bank of choice to set-up investments in government bonds or t-bills. However, the process is easier now thanks to BONDS.PH. A platform from UnionBank, it aims to make investing in treasury bonds and bills easier by making it possible to do so just from your mobile phone.

2. Corporate Bonds

Corporate bonds are fixed income assets that help companies raise capital. They are also debt instruments similar to government bonds, but are perceived as riskier assets. Corporate bonds also have fixed interest rates (paid regularly) and predetermined maturity dates. They usually feature higher interest rates than government bonds and bills given the increased perceived risk.

Choosing which corporate bond to invest in comes down to your due diligence. Similar to investing in stocks, try to figure out if the company offering corporate bonds is one that will stand for a long time and if the debt will be put to good use. 

As for purchasing them, the experience differs per broker. The process is somewhat similar for different banks and brokers – fill up the forms and go through the usual registration processes. Once you’ve got an account up and funded, you then have to figure out what your broker will let you do. Some brokers will only allow the purchase of newly issued bonds through primary offerings. Others, like Security Bank, allow for the purchase of “2nd hand” bonds through the market. The ability to purchase bonds from the market is a BIG convenience, especially if you plan to invest periodically. Companies don’t issue new bonds everyday, so your money might get stuck for a while if you have to wait for new primary offerings.

3. Time Deposits

Time deposits are financial products usually offered by banks. By agreeing to keep your funds with the institution for a specific period, you’ll receive a bigger interest rate compared to the usual savings rates. 

Usually, you’ll find time deposit options that span through 30, 60, 90 days and onwards. Rates can sometimes range from 0.5% up to 1.5% per annum, but largely differs based on the bank offering them and the amount to be deposited. If you’re looking for bigger rates, digital banks have started to offer time deposits themselves. The likes of UnionDigital Bank are offering time deposits with rates up to 6.75% for 1 year, while others such as Tonik offer similar time deposit options with more flexibility at a rate of 6%.

If you want to invest in time deposits, it would be best to first figure out which digital bank offers the best options suited for you. Once you create an account with the one you like, just look for the time deposits section and the process should be straightforward from there. 

4. Pag-IBIG MP2

The Pag-IBIG MP2 is a special mention in this list. No, it’s not a fixed-income asset, but it is definitely something finance savvy Filipinos should know about. The Pag-IBIG MP2 is a voluntary savings program that any Pag-IBIG member can join. The minimum remittance for the MP2 program is PHP500. 

The most attractive feature here is the solid track record of the fund. Throughout the past years the fund has delivered returns of 6% or more! Dividends even reached as high as 8.11% back in 2017. While this isn’t as eye-catching as some promos from digital banks, you have to consider that the MP2’s returns aren’t just a promo – their rates have been high for multiple years now, and will most likely continue to range at least above 5% per year.

Investing in the MP2 should be easy now given that Pag-IBIG launched the Virtual Pag-IBIG platform. All you have to do is go to this link and proceed to create your savings account. From there you’re good to go.

On a Final Note

With the different fixed income assets available along with the multitude of investment options, we now have a lot of tools to help us reach our financial goals. All that’s left is for us to create a plan and stick to it.

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Balancing your needs and wants is essential to achieve financial freedom because this can significantly affect your spending habits. Financial freedom requires knowing how to determine and balance between needs and satisfying our wants. This article will discuss balancing these two to attain financial freedom. 

Needs and Wants: What’s the Difference?

Differentiating between needs and wants is essential to achieve financial freedom. Needs encompass shelter, food, education, transportation, and healthcare. Basically, It is your primary need to survive for some time. On the other hand, wants are driven by leisure as comprised of non-necessity in your daily life, such as watching the cinema and buying a bracelet. 

Know Your Priorities

In achieving financial freedom, we should learn how to prioritize our expenditures. Creating a monthly spending list is a hack to classify your priorities from high to low depending on their social value. For example, you may put your monthly rental payments as the first on the list and last for a phone case that you have always wanted. Through this, you can distinguish things that matter the most and avoid splurging that don’t. 

Create a Budget Sheet

Creating a budget sheet may help us to segregate our finances effectively by allocating a significant portion of our income toward meeting essential expenses, such as shelter, food, and transportation. Through this, Individuals can lay a solid foundation for their financial well-being. It involves careful planning and disciplined spending, ensuring that money is distributed efficiently and no basic needs are disregarded.

Delaying Gratification

Delaying Gratification is the capacity to defer an impulsefor an immediate reward to receive a more favorable reward later. It is crucial to cultivate self-discipline and resist impulsive buying behaviors by practicing mindful spending and carefully evaluating the value and necessity of purchases. For example, you plan to buy an expensive headphone, but you defer your purchase to invest instead. 

Save and Invest

Saving and investing are two key strategies to achieve financial freedom. Saving involves:

• Setting aside a portion of income for future needs.
• Creating a safety net.
• Allowing for future investments.

It requires discipline and wise budgeting. Investing, on the other hand, involves putting money into assets that have the potential to grow over time, such as stocks, bonds, or real estate. Through this, Individuals can grow their wealth and create passive income streams by investing wisely. Both saving and investing work hand in hand to build wealth, make financial security, and ultimately pave the way to achieving financial freedom. 

Balancing needs and wants is an integral aspect of achieving financial freedom. It needs consistency, and an understanding of the distinction between needs, your wants, knowing your priorities, delaying Gratification, saving, and investing.

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Budgeting helps us stay on track toward reaching our financial goals. With the rise of digital banks, people have become more conscious of their finances. 

While many focus on the high-interest rates provided, budgeting through digital banks can also be a big help. 

Creating a Budgeting System

The first step in creating a budgeting system is figuring out how much you will set aside for different expenses. There are a lot of alternatives here with no definite best way to budget for expenses. Some people prefer going with the 20/30/50 rule to make things simple, where 50% of their money is for necessities, 30% is for wants, and 20% is for savings and investments. Others prefer putting great detail into how they budget, with each expense planned to the dot.

While each way has its ups and downs, the more important question is how you’ll be able to execute the plans laid out. The common problem is that people tend to overspend. Usually, this is due to failing to keep track of how much was spent on non-essentials. 

Budgeting through digital banks can keep you on track

Aside from high-interest rates, something digital banks usually boast is the ease of opening an account. Nowadays, it usually takes less than 30 minutes to open a digital bank account. The only documents needed would often be a government ID and proof of address.

Being able to quickly and easily open multiple accounts can be a big help in sticking to your budget. By creating multiple accounts, you can designate each one with a specific purpose. For example, one digital bank can be used solely for the purpose of holding your savings. Another can be used for your bills and necessities such as food, rent, etc. Then a different digital bank account can be used for non-essentials. 

Instead of having one big amount of money where you still need to remember how much is allotted for something, you can just allocate money to different accounts from the start. By budgeting through digital banks, you don’t need to put in the effort to remember your budget every day while also making it near impossible to overspend.

Which digital banks should I use?

There’s a multitude of digital banks right now, with each one having unique offers along with its own interest-rate promos. For example, Maya has a case for being one of the easiest to use among the different digital banks. Most establishments accept payments from Maya, where you’d only need to use a QR code to finish the transaction. You can send Pag-IBIG contributions through your Maya account, and you can also claim your own Maya debit card. Cashing in is also free if you’re transferring funds from certain banks. These make Maya a solid choice to use for bills or expenses. The digital bank also offers different promotions to increase your interest rate, but it’s unclear how long they can keep running high-interest rate promotions.

There are also others like Seabank which offer 15 free transactions across any bank every week. On top of that, they also offer a 5% interest rate for balances below P250,000. Then there’s Tonik which offers a group stash feature – handy for groups that tend to save up together for trips or even for Paluwagan. 

You can check out our list of digital banks if you want to look at and compare the different features and promotions each one offers. As for which ones to use for what, it mostly depends on what’s easiest for you. For example, you can set up your budgeting system so that your Maya account serves as your necessities account for the ability to pay using QR. A Seabank account could be for the bills, while you use GCash for wants.

On a Final Note

It might seem troublesome at first to set up a system like this. But, once it’s up and running budgeting should become an easier task to do every month. Just remember to always keep your pins and passwords safe to protect yourself from phishing!

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Being able to save money is the very first step you need to take if you want to improve your financial situation. Here are five saving tips you shouldn’t miss out on!

1. Keep track of your money

Among the different saving tips, this is the most important. No matter how good you think you are at keeping track of things mentally, you still need to list down your savings and expenses somewhere. Often times people who don’t keep track of their money tend to overestimate their financial standing. Furthermore, these are the people who are usually unable to save. Since expenses aren’t being tracked, they can often eat away at the money supposedly set aside for savings. 

By regularly monitoring your savings and expenses, you’ll be more aware of how you currently stand financially. In fact, this will also help you better understand your own money habits. You’ll be able to figure out why you usually spend more than you should, and how you can make an adjustment. Always remember that you can’t improve what you don’t keep track of.

2. Start even with just a small amount

Starting to save even with a small amount at first can have a big impact. Of the different saving tips, this can be one of the easiest to start. It can help you establish the habit of saving and can let you become more responsible financially. When you make the conscious effort to save even a small portion, you begin to develop financial discipline. The amount might be small at first, but as time goes on the discipline you gain will help prepare you for when you are able to earn more per month.

3. Use the 3-day rule

Have you ever made a purchase before, only to realize you really didn’t need it? This is where the 3-day rule comes in. This is when you intentionally wait for three days before making a purchase, especially for non-essentials. This strategy works by helping you avoid impulsive purchases. 

It’s important to treat oneself from time to time. We still need to enjoy life even as we work hard towards our goals. However, we can’t just spend all of our money on enjoyment. As we budget our money for non-essentials, the 3-day rule will help us make the most out of it. While you wait before making the purchase, try to think of the use case scenarios the purchase will help you with. If you feel that it will make you happy for a long time and it’s within your budget, then go for it. If not, then it might be worth holding off on the purchase. 

4. Automate how you budget

This saving tip might not be common, but it can also provide a big impact. Whenever you can, try to automate different parts of your cash flow. For example, if you have bills to pay, try to set up an automatic payment system if your debit or credit card allows for it. If your company has an auto-invest program, it might be worthwhile to enroll in it since it will help you invest hassle-free. 

Willpower is a scarce resource. While we need to put in effort to become financially responsible, it’s always better to have a system that makes things easier. Bestselling author David Bach captured this by saying that people sometimes fail to budget because “You’re too busy, and you will just get frustrated and fail.” Experiment with the different features your banks and cards have, and try to make a system that makes budgeting seamless for you.

(P.S. If your company wants to conduct an auto-invest program for its employees, feel free to reach out to us!)

5. Spend more on quality

When people try to save, looking for cheap alternatives is a common way to save more money. However, sometimes paying up a bit more for a better quality product can sometimes be the wiser financial decision. For one, higher quality products sometimes last longer than cheaper ones. A 10-peso ballpen is far cheaper than a 50-peso one. But, if the cheaper one only lasts a week while the 50-peso one lasts for a year, then the more expensive option will actually be more worth it to buy. Always remember that in order to save the most amount of money, you have to be wise with every decision.

How long will it take to reach financial freedom?

Different people have different circumstances. It’s important to remember that you should focus on yourself. The road to financial freedom might be easy for some, and hard for others. Just remember that no matter how long or hard things get, the end goal will always be worth it.

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For those unaware, Filipinos have their own unique way of saving money. Paluwagan is an informal way of saving as a group. It works based on the trust of each member of the group, usually consisting of at least three people. The participants will pool their funds and will receive lump-sum payouts based on a set interval.

While the practice is unregulated, a financial inclusion survey from the BSP shows that 14.8% of households save their money through paluwagan. Throughout the years, it remains an easy way for Filipinos to become financially responsible while also fostering camaraderie with each other. Even though this is a very simple way to start saving, the more important thing to remember is that it helps people get started.

“Saving a small amount soon builds up to a large amount”

How Paluwagan Works

As mentioned, Paluwagan requires at least 3 people to participate. These people would need to set rules such as 

1. How much the contributions should be
2. When their contributions should be scheduled
3. Who will receive their payouts first, and lastly
4. Who will handle the funds

To give fully showcase how this works, it might be best to explain it through a story:

Jobert, Anne, and Miguel all decided that they want to make a Paluwagan group among themselves. They set that each member will contribute PHP500 every Monday. The payout will be on Fridays, with the order of recipients being Jobert, Anne, then lastly Miguel. Anne volunteers to handle the funds for the group.

With that, on the first Monday, everyone contributes PHP500 with Anne safekeeping the funds. On the first Friday, Jobert will receive PHP1,500 as his payout. Then on the second Monday, everyone will give their contributions again. This time, Anne will receive the PHP1,500 payout on the 2nd Friday. This cycle will continue until each person receives PHP1,500. At the end of the cycle, it’s up to them if they want to do another cycle or if they should stop.

Pros and Cons

One of the main benefits of paluwagan is that it is an inclusive practice. Since the participants themselves set how much contributions can be, low-income households are able to join.

Depending on how strict the group is, the practice also allows Filipinos to benefit from a framework that makes it easier to be responsible with their money. Rather than having to discipline oneself alone, paluwagan creates an accountability group between the participants. Everyone aims to push each other to save since the fault of one will adversely affect others.

On the other hand, the main disadvantage of paluwagan is that fraudulence could happen. Especially if the group isn’t tight-knit, some members could suddenly disappear the moment they receive their share. Since this is just done informally and usually with no written agreements, money could be lost if some members aren’t trustworthy.

Also, since the money is circulated between members, interest isn’t earned. However, some banks have already started providing group-savings accounts that could help with this. The participants would just need to talk about how they will manage the account, and the money that comes in.

Final Thoughts

For those seeking to enhance their finances, Paluwagan can be an appealing option. However, it’s important to take precautions and make wise choices. Making sure the members are trustworthy should be prioritized. Utilizing different tools to keep track of contributions, and even making use of what digital banks offer could be a great way of improving the experience as well.

Overall the practice should be seen as a first step towards financial freedom. Once you’ve got the habit of saving down, it’s important as well to learn how to make your money work for you.

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This week’s featured trader is @jprado as he spotted a solid trade in $PCOR! As his technical indicators started pointing upward, he was able to tell that there was an opportunity present.

Trading the ascending triangle became a viable option given that the RSI and MACD were giving bullish signs. From there, it was as simple as taking an entry, setting a TP, and making sure to set a cut loss on the break of the market structure – something @jprado clearly stated.

TECHNICALS OF THE TRADE

There were 4 main indicators present in the analysis from @jprado. He made use of the Bollinger Bands, RSI, Moving Averages, and the MACD.

Bollinger bands and moving averages are similar to each other in that they track trends. However, the former has the added function of tracking price volatility. When used together, the Bollinger band can be used as a visual indicator to see if volatility is either contracting or expanding.

It might have not been clear on the weekly chart, but if you check the daily charts, the indicator was able to show that volatility was dying down. A common sign before big moves happen.

The RSI keeps track of a stock’s underlying strength by taking into account price changes and the speed of the price change. While prices consolidated for a rather long time, momentum wasn’t dying down given that prices firmly held above 3.30. The RSI picked this up and was showing that momentum was still strong, giving constant readings above 60 on the weekly chart.

Lastly, the MACD was also used to tell if the consolidation was nearing its end. Another typical behavior of consolidations is that the MACD tends to slope downwards. Usually, big moves happens when ample time is given for profit takers to get out of the market. The indicator can sometimes be used to keep track of that by checking to see how close it has gotten back to 0.

FUNDAMENTALS OF THE TRADE

Petron Corp. is a company involved in oil refining and marketing, offering customer solutions in the energy sector and related industries. The company’s operations are categorized into various segments, namely Petroleum, Insurance, Leasing, Marketing, and Others.

As the pandemic saw motorists travel less, the company saw some hardships. However, as the economy continues to recover, Petron is poised to bounce back. Revenues have already started to recover strongly, with net income expected to follow suit in the future.

Check this out if you want to learn more about Petron. 

WHAT SHOULD BE MY NEXT MOVE

Currently, $PCOR has already rallied well above breakout levels. While there’s still some upside remaining, the risk-reward for traders just looking to get into the stock isn’t great. It would be best to wait for a new consolidation. The best case would be if prices consolidate after testing the 5 peso resistance, since a breakout from there would indicate that prices could head towards a farther target price. 

Once again, KUDOS to @jprados for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.

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We’ve covered the basics of technical analysis previously, and we’ve even discussed how to use some indicators. As you progress in your trading journey, you’ll undoubtedly learn more indicators along the way. This begs the question, how do use the knowledge you gained to improve your trades?

Usually, people depict professional trading as using a big slew of indicators. Price charts filled to the brim with oscillators, bars, and others. However, something you’ll learn through experience is that you don’t need to know each one. You don’t even need to use all of the technical indicators you know. The more important aspect is your EFFICACY when using technical indicators.

“I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.”

– Bruce Lee

What are indicators and what’s their purpose?

Trading indicators are tools used to analyze the price movement of assets. They are based on calculations based on how prices behave. What’s important to note here is that they are always derived from price action. They mainly serve as heuristics for traders to understand price movements faster. 

As such, using technical indicators is bound to how you analyze price action. If you use momentum indicators, you should have a good grasp of how momentum plays out in the markets to make full use of the indicators. Otherwise, you’re no longer trading the stock’s chart. You’re already trading the indicator itself which could lead to worse performance. 

Deep diving into some technical indicators

MACD

The MACD is a popular technical indicator that keeps track of momentum. What many don’t know is that the MACD itself is only one line. 

The other things that commonly load with the MACD are the signal line and the bars. While it has become a popular strategy to buy and sell whenever the MACD crosses above or below the signal line, this doesn’t fully encapsulate the use of the MACD.

In essence, the technical indicator works by tracking the distance between two moving averages of different time frames. When momentum is strong, short-term moving averages tend to rise faster than long-term moving averages. The MACD captures this by rising as well. On the other hand, when prices consolidate after a strong rally, the moving averages tend to coil together. This often signifies that profit takers are exiting the market. The MACD tends to slope downward closer to zero when it happens.

The MACD buy/sell signal can be a viable strategy. However, it doesn’t do the indicator justice if it’s only used in that way, especially if the underlying market dynamic behind the signal isn’t understood. There are many ways to use the MACD as a tool to keep track of momentum. All you have to do is to try and understand how it tries to encapsulate certain market behaviors.

RSI

The RSI is another popular technical indicator among traders. Like the MACD, it keeps track of momentum. The difference is that it bases readings on the speed and change of price action. It does so by creating a ratio between the average gains and losses for a certain period, then turning it into a scale from 1 to 100. 

One common way to use this is to identify readings above 70 as overbought and below 30 as oversold. While this holds true, only using the RSI for this purpose would be a crude way of using it. You need to understand that during uptrends, the RSI will tend to go and sometimes stay at overbought levels. On the flip side, the RSI will also tend to stay at oversold levels during downtrends.

The key thing to remember when studying the RSI is that it keeps track of the speed and change of price action. The market tends to move in waves. When there’s a disruption in how strong prices are going in one direction, this can be inferred as a very early signal that the tides may turn. Hence, the use of RSI divergences for reversal plays. 

Likewise, RSI consistently at high or low levels signifies the dominance of either buyers or sellers. Many professional traders tend to use this as a tool to screen for trades. Since the trend is your friend, it makes sense that you’d buy those that don’t have low RSI readings.

Different indicators have different nuances. There is usually more than one way to use an indicator other than what is commonly taught. By extensively studying how a technical indicator is derived, you can get a better understanding of how an indicator can help you analyze the markets.

Moving forward

If you want to get better at using indicators, make sure to focus on QUALITY OVER QUANTITY. Focus first on getting a better grasp of market behaviors. Then, try to understand deeply how indicators work and how they can be used in tandem with your price action analysis. 

Check out our different lessons. From educational videos to articles, we provide knowledge applicable to traders of different levels. All it takes to get better as a trader is to put in the work and do so with fervor. 

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