A touch of Scrooginess with some streak of wisdom (and craftiness) runs in the family

Here’s an email I received from my dad Last January 15 which he sent to some of my relatives and to the egroups of his PMA Class 71 Mistahs, another example of his good sense. I think I should learn how to do this but just reading the words ‘stock exchange’ makes me gag.

“Below   is a  summary of  my  experiences  in  earning extra  income,  past  and   present.   I  hope  they   could  be  of  help  to you and  your   family somehow.  Happy New Year! 

 Buying Insurance for Security

Last year,  I  e-mailed our  family  experience  as  flood victim.

As sequel, one month after filing insurance claim, we received P431,000 from the AFPGIC last November 2009. By the first week of December, our house was completely renovated as  planned. Damaged appliances were replaced with new ones. The above amount was sufficient to defray all the repair expenses. The cost of insurance I paid against flood for one year : P300.

While, still in the military service, I bought whole-life insurance packages which are still in effect and could be surrendered if I want to avail of the cash surrender value.

 World in Financial Crisis? Good! Go to Retail Stock Trading

I am also sharing my experience and  some lessons learned from  experimenting/attempting to be  one of more than 440,000 retail stock traders in the Phil. Stock Exchange (PSE).

Sometime in the first week of December 2008, I learned from Jun Abueg (PMA Class 74), that electronic stock trading in RP is already available; hence, one need not call up the broker to trade. With  P25,000,  one could open an account with a broker, then through computer, he may research on any firm listed at the PSE and buy or sell stocks through computer during trading hours.

That time I assumed that stock prices had gone down so low that there was no way for PSEI but to go up. I also wanted to find out if my “ways” as a government bureaucrat could be successfully applied in business. The decision on what to buy/not to buy, when to buy, what/when to sell, etc.,  is  the sole responsibility of the individual trader. I also wanted to find out if  in adversities there could be  opportunities.

I opened my account at P50,000. My “inaugural trade” was “buy” 1000 shares of PNB at P14 per share. Gradually, I increased my investment by increment of P50,000, biweekly/monthly such that after one year in December 2009, my actual investment reached P1,050,000. ( Its opportunity cost was only 5% per annum, the interest rate at AFPSLAI and PNSLAI for savings deposit.) As of December 29, 2009, the last trading day of the year, the portfolio was worth P1,583,157.04 or net market gain of more than P553,000. (As of 14 Jan 2010, the portfolio was worth more than P1.620 million). From hindsight, had I been more aggressive and invested P1 million at once, it could have more than doubled one year after to,  say, P2.0  to P2.5 million.

The two-year trend of the PSEI  shows that my initial assumption in Dec 2008 was correct (that our local stocks had nowhere to go but up which was actually more than 60% in 2009).  For 2010, I assume that the PSEI will still be on  the uptrend, barring any unusually adverse economic  condition in RP. However, the slope of the annual trend in 2010 may not be as steep as in 2009. Thus, I intend to continue with the experiment in trading but will be more selective in the firms where I could invest more.

What I may consider my “hole-in-one” was my 12,000 shares of Philex at about P5 each . In six months, for various reasons, it went up to P19. I sold everything at an average of P15; thus, gaining about P120,000  (200%) in six months. I am just glad that I had much more “birdies” than” pars” or “ bogeys” in 2009.

Knowledge an added gain. Research which is a “must”, made me more knowledgeable about the world and local economies. Such research is very cheap; I just read the newspapers, the PSE and my broker’s websites, and the Yahoo. The excitement, the pleasure and the satisfaction I got in stock trading are just similar to those in playing golf and certainly, even perhaps in the future, the agony and  sadness of an OB or triple bogey, if ever.Admittedly, however, my portfolio is much less than a “drop in the bucket”.  While my trade is only a few thousand each, others do it by the millions per trade.

Notably, I found out that many of the top 100 stockholders in each of the large corporations are our silent–you-hardly-hear-complain Chinese brothers.

 The Magic of Compounded Interest

I  only  ventured  in the  riskier stock trading in 2009.  Years ago while still in the military service, my family relied on the salary loan associations within the AFP for added income. When I learned about AFPSLAI in 1978, I started putting whatever savings we had in capital contribution. The dividend then was 20 percent per annum, tax free with unlimited deposit allowed per member. Using the formula N=72÷ interest per annum (where N is number of years to double your money), the investment at AFPSLAI’s  capital contribution would double every 3 and ½ years. It also meant that a deposit of P1,000 could become P1 million if left deposited without withdrawals for 35 years at same condition.

Without our AFPSLAI and PNSLAI accounts my retirement benefits would not be sufficient to buy a house and provide for our needs in three years before receiving monthly pension.

Finally, for almost 18 years , our Class Fund has reaped the benefits of guaranteed tax-free dividends from AFPSLAI capital account.”

My response:

“Wow great, but you still can’t beat me.  Even way back in grade school, I was already earning income without even having to work. And I have also applied mathematics in earning this income by using the ‘magic formula’ Nx3 (the formula that only applies to our family):

–       Aside from the dividend, my father tripled the amount of every cash I deposited in AFPSLAI.  The result: a fat and happy bank account!

… I only wish I could apply this formula once more…”

 And that, dear folks, was how he encouraged us to save money when we were children. But I was the only one among the three of us sibs who took this seriously.  And since I was such a clever (and sly) little kid, I kept on depositing in the bank and he tripled every deposit I made.  This stopped when I began to work but by that time my account was, well, delightfully bloated. The only time I withdrew money from this fund was when I went to America in 2006.  So thanks to my dad, “as God is my witness, I’ll never go hungry again”.

Special thanks should also go to my mom whose wily streak emerges once in a while. Some days I would just find out that she has deposited so and so amount in my bank account which I am unable to touch because she keeps my passbook.  I am then obligated to pay her back with what was supposed to be my pocket/shopping money. Bah! Humbug!

With parents like these, who needs financiers/brokers/bankers/accountants or whatever boring titled people to handle your money?

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