Dear Investor Juan,
I was also second guessing myself about retirement savings. Most of my retirement funds are in stocks. I was already thinking about transferring it to BDO Equity UITF and wasn't really sure if that's the way to go. Is it?
How exactly do I do this? Since the value of stocks that I have is about 850. Do I take out 50 per month and transfer that to the UITF? and how about the monthly savings that I have? (around 35/month)
Sorry po kung maraming tanong. >_< I am just confuzzled now. I really thought that going into the stock market was the best way to earn make my money grow.
Ning
Dear Ning.
When you say that your retirement funds are mostly in stocks, how many stocks exactly? If your funds are spread across ten or more stocks, then your portfolio may already be sufficiently diversified (within the equity asset class) and you can choose to keep your funds in those stocks. To improve your portfolio's level of diversification, just invest future savings in an equity UITF.
If your funds are invested only in a handful of stocks, then you have significant exposure to unsystematic risk. To lower your risk exposure, sell some of your holdings and either invest in many other different stocks or in an equity UITF. How you do it--"one time, big time" or in installments--is arbitrary since there's no indisputable proof that "dollar cost averaging" is a superior strategy, contrary to popular opinion.
Finally, there's no reason to be "confuzzled." You're right, "going into the stock market" is arguably the best way to make your money grow. "Stocks" are the same as "equities"--investing in an equity fund is basically the same as holding a basket of individual stocks. The only difference is that if you invest in a few stocks you needlessly expose yourself to risk that can easily be eliminated with diversification. Again, I emphasize that for retirement savings, investing in a low-cost equity fund in the long term (20 to 30 years) is the way to go.
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Dear Investor Juan,
Thank you very much for a very informative blog.
I started investing only last year with a reputable global insurance company, so what i have is an insurance link investment. lately, i have been hearing a lot about mf and uitf, and my curiosity is awakened. thanks for blogs like yours and tv shows which explain everything, i now understand the pros and cons of these better.
I have been trying to do a mock computation of yields through bdo online, and i noticed that if i put my money, say 500k, from Jan. 2 - May 31, 2013 (method a), my gain would be more or less 68k. but, if i invest from Jan. for 30 days (method b), take it out, then reinvest it again for another 30 days, and so on until May 31, my gain would be about 82k.
what is your take on that?
thank you so much. may God bless you in your advocacy. more power!
Anonymous
Dear Anonymous,
I'm not sure where the problem is, but you should earn the same returns with the two strategies since in Method B, whenever you reenter the fund you would be buying at the same NAVPU as when you last exited. Actually, if you're talking about an equity fund, then you should earn less with Method B because of early redemption charges.