The Lazy Way to Invest

Given the seemingly sideways movement of the stock market and the mild downgrade of the GDP , I was asked countless of times if it is still okay to invest in Philippine stocks.

As I am writing this blog, I am enjoying a cold and foggy morning in my all-time favorite hotel in Baguio.  Combined with the fresh smell of pine trees, I would say that this is what can be called as the perfect “bed weather” where all you would want to do is stay in bed and sleep off the rest of the day. Let the hotel staff go about doing their day’s long list of chores.

Wouldn’t it be great if your investments would take care of themselves while you enjoy a restful day?  The answer to that question has been staring us in the face for decades now.

Previously, fund management in the Philippines was in the realm of the Trust Department of a bank.  You could open an investment management account whereby the bank would manage your funds separate from all of their other accounts.  You could set your own investment objectives and risk parameters. Why, you could even direct them as to where to put your money.

Then banks found economies of scale in managing co-mingled funds.  Eventually, this product evolved into common trust funds where units of a fund were sold to people who bore the same investment objective and risk preference.  When marking to market came into practice, common trust funds were eventually converted to unit investment trust funds.

Just about the same time as the development of individually managed trust accounts, mutual funds hit the shores of the Philippines.  However, because of lack of regulation, the industry nearly collapsed and led to the enactment of the 1960 Investment Company Act of the Philippines.  It would be another 20 years before the Philippine mutual fund industry would undergo a rebirth and rival the growth in unit investment trust funds.

A more recent development was the birth of variable life insurance in the country, where investing was combined with insuring.  It was not easy going for variable life products at the start as they ran smack into the global financial crises of 2008.  Since then, however, the country has seen a tremendous growth in variable life policies sold, much more than sales of traditional life insurance policies.

Regardless of the type of pooled fund (i.e. unit investment trust funds, mutual funds, variable life policies), your money can be managed by experts while you spend your days relaxing.

So if you want the lazy way of investing, invest in pooled funds. There will be no need to worry about market developments as you will have professionals doing the worrying for you.  All you need is to invest in a periodic way.

(Originally written by Efren Ll. Cruz, RFP at http://www.savingstips.com.ph)