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Monday! Since I still have a long – as in
a loooong – way to go towards my personal financial freedom (and I have been
behaving really badly lately! I have been
spending a lot on Speculoos Cookie Butters and Lotus Biscuit butters, a lot of
those “boxes” – Glamourbox, Salad Box, BDJ Box, and heck, you wouldn’t want to
hear of those buying sprees I have been into lately. I need to be rehabilitated. Seriously.), I don’t think I am the right authority
(right now lang naman. I have been good for practically the whole
year. I am not a lost cause, Santa! The
tide can turn over, like, after Christmas? Just a minor backslide – and I am trying to
convince myself that this too shall pass) to write about handling your
finances. That is why I am posting
another of J3’s articles in Stock Market for Pinoys. By the way, he discusses the more general
world of money over at www.GameOfWealthOnline.com. You may want to check it out and be
& Disclaimer: This is a rage post. So in the event that you find yourself
doing one or more of the things in this list, don’t get offended. Just laugh at
yourself for doing it! Hopefully, once you read this post (if you are doing any
of the things listed below), you’ll be proud that you now know better than to…
far the most popular “investment” in the Philippines is the lotto. And what
really gets on my nerves is how some people call it an “investment”. Others
even say “ilang taon ko na inaalagaan yung mga
numero ko (I’ve
been taking care of my lotto numbers for years!)” As if “taking care” of those
numbers will increase their chances of winning. So, just for fun, I’ll evaluate
the lotto based on general investment criterion to show you how stupid the
lotto is as an investment.
you put in the investment will still be there when it’s time to collect. With
the lotto, there’s a 99.99981% chance of that NOT happening. Try
claiming the cost of your lotto ticket with your losing set of numbers. This
alone makes the lotto one of the worst investments in history.
considerable amount of risk (and you should believe that a 99.99% risk of
capital loss is fairly considerable), it is usually offset with management
control. For instance, if banks lend money to individuals, they usually screen
them first based on projected capability to pay back the loan. All intelligent
investors want this so that they can make sure things go the way it’s supposed
to go. Now, after you “invest” in the lotto you absolutely have no control on
what your return will be. Heck, you aren’t even allowed to be the one to read
out the numbers during the draw!
lotto really is just a game. The smart thing to do here is to treat it as a
game. Play it for fun, and not as if your livelihood depended on it.
Although…as a game, the lotto is also really bad! I would have more fun
trying to swallow my tongue than playing in the lotto! And I can even do it for
free (Trying to swallow your tongue! It’s one of the funniest things you can do
when you’re bored).
as I’m writing this, I just realized that the lotto fails not only as an
investment but also as a game. So I guess the lotto isn’t just one of the
dumbest things you can do with your money… It really is one of the dumbest
things you can do.
good thing with this is that it’s a lot smarter than putting your money in the
lotto. The bad part is, it’s still a pretty dumb and pitiful thing to do.
the bank, the most that your money can earn is 1-2% per year. However,
inflation averages at 5% per year. This means the money that you’re putting in
the bank is losing its purchasing power by at least 3% per year. In simple
terms, every year the amount of stuff you can buy with your retirement account
is getting lower. Effectively, just imagine that life is deducting 3% of
your bank account balance every year. How would you feel about that?
the end of 20 years, the purchasing power of your retirement fund would have
already decreased by 43%. This is why I feel sorry for those who do this. After
20 years of sacrificing and disciplined saving, they still lost 43% of their
it comes to retirement funds, putting your money in the bank gives the most
predictable long-term behavior: it’s one of the surest ways of losing it. If
you are someone who’s doing this, you have my sympathy. Please put your money
elsewhere, not in time-deposits. Put your money in bonds, or in the stock
market. But beware! Because it’s also stupid to…
you think it’s a bit ironic how this website is named StockMarketforPinoys.com (Note: this is a re-blog from StockMarketforPinoys.com) and yet I’m saying that putting all your money in the stock market is a dumb
thing to do? The keyword here is ALL your money. Let me explain.
biggest problem you’ll have in the stock market (or any investment for that
matter) is when you’re suddenly forced to cash in on your investment. This
happens when you or people you’re taking care of get into an accident, or get
sick. You see, when the market is down, you can just normally wait it out.
Whatever your loss is, it’s just on paper. In due time, markets will jump back
again (and usually higher). But, when you’re met with an accident, you might be
forced to take out your money at a time when the market is down. This
translates a paper loss into a real loss.
prevent this from happening, you can do two things. (I recommend you do both).
These are the alternative places where you should be putting your extra money,
aside from the stock market.
- Build an
emergency fund. This is a shield for your investments when something bad
happens. Usually, this is 3-6 months’ worth of your cost of living.
- Buy insurance.
Insure your house, your cars, your businesses, and of course your health.
This way, when something bad happens, it will be the insurance companies
that will take care of the expenses.
the only kind of money you should put in the stock market is money which you
won’t be using for the next 15-20 years. This is one of the most convenient
(but not the safest) ways to make sure you’re not forced to take a loss with
becoming a good investor, there are things which you have to learn, and there
are things which you have to unlearn. This article enumerates the latter. I
hope that you avoid doing these things (if you aren’t), and that you stop doing
these things (if you are).
investing in lotto. Stop relying on bank time-deposits for your retirement. And
stop putting all your money in the stock market. If you‘re successful in
unlearning these, you’ll have more space in your mind and in your wallet to do
the things which an intelligent investor would do.
sis, the stock market is not an enigma.
You can check out J3’s free online seminar series called: Take the Leap, Invest Within the Week. Within 5 training videos, you’ll be ready to
invest safely, conveniently and profitably in the stock market.
J3, I am being mentored by Bo Sanchez of the Truly Rich Club. You can be part of this wonderful club and be
on your way to financial freedom by joining here.)