“Sit back, relax, and be a millionaire.” – ECJose
We often put “planning for the future” as one of our least priorities because of the uncertainties the pandemic has caused. However, amidst all these, opportunities arise. One way we can capitalize on this economic downturn is to invest through stocks and funds, which, unfortunately, most Filipinos are still unfamiliar with. As part of the institute’s goal towards financial literacy, the Institute of Mathematical Sciences and Physics (IMSP) invited Mr. Alfonso Gonzalez III to conduct a webinar on “Successful Investing with Mutual Funds: Theory and Practice” last March 26, 2021 as part of the celebration of IMSP’s 38th Anniversary as a National Center of Excellence (NCOE) in the country.
Mr. Gonzalez earned his BS Applied Mathematics degree at the institute and graduated magna cum laude of Class 1997. Currently, he is a Fellow of the Society of Actuaries (FSA), a Chartered Financial Analyst (CFA), and a Fellow of the Actuarial Society of the Philippines (FASP). He has been working with top companies, both local and international, to develop products and financial reporting instruments and standards for life insurance, pre-need, and employee benefits.
He started investing in stocks when he won on the 90’s Battle of the Brains, a local TV show akin to “Who Wants to be a Millionaire.” At first, he did not invest the entire half million from the grand prize (which is equivalent to P1.5M today) but splurged it with his friends and family to celebrate his win. After being warned by his parents and realizing that it will eventually disappear with his “one-day millionaire” lifestyle, he decided to self-study trading through stocks and funds. He then invested the remaining P300k (P900k today) through equity mutual funds (MF) in 1997. As of 2020, his capital and earnings from the said investment is worth P4.5M, a five-fold increase in 23 years. This is far more than just beating the yearly inflation–even hurdling the 2008 financial crisis.
The main reason why he chose to invest in mutual funds is because these are generally managed by experienced and well-studied fund managers. Such managers analyze financial statements (income cash flow, equity, balance sheet, profitability, etc.) to determine “good” companies to invest in. They put their funds in these companies, regardless of its business type and nature, as long as they are deemed of good value over time. In his presentation, he compared investing through MF’s long term, specifically equity MF’s, and daily stock trading, which are often driven by instantaneous trends. According to him, the latter is detrimental to one’s health and resources, because it does not often yield positive results. He advised that one should focus on “time in the markets, not timing the markets.” Such cherry picking of days and uptrends are dangerous as there are no systems that predict if the next trend is up or down, as discussed in our math and physics classes. He also discouraged working with or hiring technical analysts as their focus is mainly to drive trading but not exactly to generate profit.
The speaker did not present rigorous mathematical computations and models, instead, he recommended financial literacy books such as Security Analysis (Graham, 1934) and A Random Walk Down Wall Street (Malkiel, 1973) for starters. He also summed up a few tips on how to start investing in equities and securing long term, if not life-long, financial security.
- Consult with a financial advisor.
- Do not risk it all.
- Never turn lost trade into an investment.
- Eliminate your debts first.
- Set aside emergency funds.
- Provide insurance for dependents as soon as you can.
- Term life insurance is preferable than variable universal life (VUL) insurance.
- Long-term equity mutual fund investment is ideal vs. daily stock trading.
- Diversify your mutual funds and wait long-term for returns.
Such a feat is not easy, to say the least, as he filtered a lot of ideas from authors of varying interpretations and experiences in investing that time. Moreover, back then, all the mobile application trading platforms are non-existent, and you still must contact your broker or fund manager for every transaction subject to higher fees. Aside from reading the books mentioned, he recommended COL Financial’s online platforms to manage your investments. Lastly, he reminded everyone to make our own programs and keep track of our own goals toward getting our free lunch, that is, investing in strategic diversification mainly with mutual funds over time.
Refer to the link below for further details presented in the talk (e.g. equities allocation guide, safe vs. risky funds, yearly earnings of his capital).
FB Live Video Link: https://fb.watch/4PckdZl2-E/