Life as an investor under the Duterte administration
To tell you the truth, no other candidate scared me more than the man who is now our president. As an investor who’s worked in the financial industry in various capacities for 12 years, the financial health of the country is tied to how I make a living-and the vagueness of Candidate Duterte’s plans for the economy was very worrying indeed. I remember listening to him address the Makati Business Club, which should’ve been the right place for a presidential candidate to present his economic agenda. Except he never did. His main talking point was still how he would fix the drug problem in this country. So late in the game, the Duterte economic platform was still a big, fat question mark.
Like any sane and watchful citizen, I remain a bit skeptical with regard to what the Duterte administration will do-though to be honest, there are issues other than the economy that I just cannot reconcile with my own worldview.
I was so worried that I considered pulling out my entire portfolio to bet on the dollar, and perhaps eke out a living as a tourist-guide-cum-writer on an island somewhere. Good thing I did not give in to that imaginary panic button in my brain because, a day after the elections, the PSEI rocketed upwards.
So hope springs eternal. When Sonny Dominguez, hotelier-slash-Secretary-of-Finance-in-waiting, delivered the Duterte adminstration’s eight-point economic agenda, it sounded eerily familiar. In fact, most of the main talking points were direct continuations of the Aquino administration’s economic platform, the same economic platform that has given us an average of six percent GDP growth every year. The very first line of that agenda is in fact to continue the macroeconomic policies of the Aquino administration. Also, ratings giant Moody’s has pegged us for growth in the next two years, which is awesome. From the looks of things, Duterte seems to be focusing on his main platform-which is criminality-and he will let old hands handle the economy for now. That might be a great thing. Davao’s main selling point was not really Duterte’s economic savvy, but his supposed crime-fi ghting skills, and from the looks of things, he will be hands-off on the economic front.
Most of the main talking points [of the Duterte adminstration’s eight-point economic agenda] were direct continuations of the Aquino administration’s economic platform, the same economic platform that has given us an average of six percent GDP growth every year.
But I nearly made the mistake of pulling out all my investments just because of gut feel and emotion, things that could get you in trouble in the long run. I was going to make a poor financial decision simply because I did not trust who was going to win the elections-and this kind of foolishness is the surest way to lose money. So this once again proves that the best all-around advice, financial and otherwise, comes from The Hitchhiker’s Guide to the Galaxy. To wit: Don’t panic.
By this I mean, stop making decisions when you’re emotional, and make prudent investments to your managed fund of choice at regular monthly or quarterly intervals. The markets will invariably swing upwards and downwards, especially given that our dear president runs his mouth every so often (and, unfortunately, the words of the president do have the power to affect the market).
But think of all these movements as using a jump rope on the way up a hill: Sometimes the rope is up, and sometimes it’s down, but take a step back and you’ll realize that it’s all moving up.
BREAK IT UP
By investing at regular intervals-let’s say you put in P2,000 in monthly or quarterly installments-you also get to take advantage of a concept called peso cost averaging.
By investing at regular intervals-let’s say you put in P2,000 in monthly or quarterly installments-you also get to take advantage of a concept called peso cost averaging. Investing everything all in one go is a poor way of making financial decisions, simply because of uncertainty. If the market suddenly crashes the next day when you make that big investment decision, it would take you much longer to break even. If you space it out instead, then those first few smaller investments are the ones that take the brunt of the damage while your latter investments are in prime position to grow.
LET THE BIG BOYS TAKE CARE OF IT
Like plumbing, it’s really just easier to let the experts handle things instead of mucking about and making a mess of things.
The emphasis here is also to choose a managed fund like a unit investment trust fund or a mutual fund, which are managed by banks and investment houses, respectively; or even a variable life insurance product, which is a life insurance policy with a defined investment fund attached to it. Like plumbing, it’s really just easier to let the experts handle things instead of mucking about and making a mess of things.
Of course, you can’t blindly cede control of your investments to these experts-at a bare minimum you should understand what you are getting into. But the point here is that these people know what they are doing, and the small fee you pay them is well worth the cost.
EAT ACCORDING TO YOUR APPETITE
Generally, there are three kinds of funds that you invest in, depending on your risk appetite: 1) an equity fund; 2) a fixed income fund; and 3) a balanced fund. It all depends on how much risk you are willing to take on, how you can handle things if things go for the worse.
The brave (or foolhardy) with a bigger tolerance for risk can look at equity funds, which invest primarily in the stock market. There is more risk, but the potential for growth is much higher. A fixed income fund, on the other hand, will focus on guaranteed returns-less risk overall. A balanced fund is a mix of both an equity fund and a fixed income fund, a happy medium, if you will. The rule of thumb is that the riskier the investment, the longer you have to wait for the investment to mature. The reasoning is that the higher the risk and the higher the prospect of a loss, the more time it takes to recover from that loss (just like in life, just like in love). Also remember that you have to beat inflation, the rate at which prices increase year on year, every time. A guaranteed return which does not beat inflation is still a sure loss and is a poor choice for an investment.
In a way, the election technically pump-primed the economy and we will be seeing all around gains in the marketplace.
My personal bet is to go with equity or at least go for a balanced fund. First of all, it is still an election year, and in an election year, candidates shell out a ton of money, and that money will still be circulating around in the economy. That’s great for a consumption- driven economy like ours. In a way, the election technically pump-primed the economy and we will be seeing all around gains in the marketplace. All that cash might be inflationary in nature, too, so guaranteed returns might not give you the best yield possible to beat that infl ation. Also, the trends from previous years indicate that an economy usually responds more positively in the first two or three years of an administration.
Plus, the fundamentals that got us that stellar growth in the first place are still there. We still have a young population that has spending power and at this point, no major economic policy changes have been set in place. Of course, it still depends on your own personal preferences, but I see a lot of potential growth in the stock market, at least for the first two or three years.
The markets will invariably swing upwards and downwards, especially given that our dear president runs his mouth every so often (and, unfortunately, the words of the president do have the power to affect the market).
Like any sane and watchful citizen, I remain a bit skeptical with regard to what the Duterte administration will do-though to be honest, there are issues other than the economy that I just cannot reconcile with my own worldview. But democracy being what it is, the new president’s decisions will also affect financial performance over the longer term. That is when you re-evaluate everything again and make your own decisions for your own financial well-being. Just remember: Don’t panic.
This article originally appeared in our July 2016 issue.