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How a duffle bag opened the way for me to invest in mutual funds

A website tracking the performance of mutual funds 

Technically speaking, I have started investing in mutual funds when I was in my early 20's. Yes, I say "technically" since I didn't really know what I was doing at the time and I did not have the right frame of mind. It wasn't until years and years later that I have started to actively think about my future and be disciplined enough to set aside a part of my disposable income into mutual funds to take full advantage of value averaging (which I have covered in my last post). Let me tell you about my first foray into the world of mutual funds, UITFs, VULs, and similar investment instruments.

I was practically just freshly out from university and a few months into my first job when my company told its employees that we were not doing very well and that there was a very real possibility of the company closing down. I remember that feeling of panic all too well. Out of all of the job opportunities I had, why oh why did I have to choose this one. Oh don't get me wrong, it was a wonderful company that genuinely cared for its employees. I just wished they mentioned this "minor detail" during the job interview. All of the employees were asked to attend workshops about "life after work". These were actually standard training modules normally designed for employees nearing the retirement age of 60 or those that would like to avail of early retirement or those that will soon face retrenchment (very unusual for those only working for a few months). I remember the discussions revolving around how we should manage our life savings (what life savings?), on where to place your retirement money (what retirement money? I'm not even sure if I was entitled to a separation pay before I get confirmed from being a probationary employee), self assessments of how long will you last with your existing savings if suddenly you lose your job without changing your spending habits (again, what savings?), and about the common pitfalls of those that receive a big windfall (like going into business is not for everyone and you need to possess a certain skill set to be a successful entrepreneur). All of these were useful topics for sure but hardly applicable to a young employee that is just starting out. I felt that most of the things being taught were not applicable to my personal circumstances so a lot of those concepts probably went over my head.

One good thing the company did was also to invite representatives of fund management companies to further improve our knowledge of personal financial management and to talk to us about the various investment options available out there (of course they grabbed the opportunity to sell their products to us). This is the first time I have heard of mutual funds and VULs (Variable Universal Life insurance). One particular company stood out in my mind because they were giving away this cool duffle bag if you invest a minimum of PhP6,000.00. A lot of my colleagues were getting it so I thought why not? I have decided to invest for the minimum participation amount, conveniently ignoring the sensible advice of regularly setting aside some of my disposable income (above the minimum additional investment threshold) into these investments on a monthly basis as a form of forced savings (to get into the habit of saving and to benefit on cost averaging). I did not do any of that. I got the duffle bag and promptly forgot about it. Do bear in mind that it is not that I didn't have any savings. I did set aside some of my disposable income but I was more focused only on my savings account in the bank (with negligible interest rates) and placing some money on several "Savings and Loan Associations" (credit unions) which had decent historical dividend declarations year on year. At this time in my life, I really did not understand the importance of diversification. My first foray on the world of mutual funds was all but forgotten (well you can't really forget them totally since they do send these thick annual general stockholders meeting letters in the mail) and life moved on. The company did survive those trying times for a while (it did eventually close down but it was several years later). It actually took more than 13 years for me to seriously take a hard look at how I am managing my personal finances and do the appropriate optimizations.

Before I could do these changes in my personal finance management, it is important to know exactly my spending and saving habits. If there's one lesson that really stuck in my head that I have gotten from attending all those workshops long ago, it's about the importance of knowing where your money is going. I initially just used an Excel spreadsheet but eventually when it became too difficult to maintain, I switched to a proper personal financial tracking program (I have gotten used to Quicken, but there are a lot more options available out there with varying degrees of complexity depending on your need). Call me crazy and obsessed but I love looking at pie charts of my spending pattern month on month and would make mock financial presentations in my head and trying to explain any sudden variances (I have worked as a technical audit engineer and benchmarking advisor in my various roles in the company so I guess it felt natural). I remember my sister would make fun of me when she wakes up in the middle of the night and hears an all too familiar "kaching-kaching" sound whenever I input a new line on Quicken. I will be in my room looking closely at a bunch of receipts that I have accumulated in my wallet. I realized that I may be too obsessed about the whole thing that whenever I encounter an unusual situation such as a friend borrowing money, the first thought in my mind is "hmm how should I declare that in my financial tracking?" I do honestly believe that being a little bit obsessive-compulsive on certain things is good for you. Nowadays I'm not that super obsessed but I do maintain the same personal financial tracking data file all these years (carried over to newer versions of the software of course). I got a little lax on really looking at an accurate representation of my cash flow and would sometimes "catch up" keying in the information in the software for several months worth of data (which also meant that my wallets suffered over-stuffing abuse from still refusing to throw away "unreconciled" receipts. I think my priorities have slightly changed also since I have in a way "graduated" from knowing exactly where my money is going to being content with a rough idea of my spending habits (as long as there are no sudden deviations to the norm). It is a logical progression I guess. You advance in your career, and soon you are less concerned with paying bills and paying off debts and become more concerned about where to optimally place your savings.

Fast forward to 13 years later and I have since had drastically diversified and optimized my modest portfolio. At this point in time, I started looking at other investment instruments and have sustained the habit of regularly setting aside a portion of my disposable income to a diverse portfolio. I would like to think that I have come a long way from that clueless young man just starting his career and only wanting a cool duffel bag but I acknowledge that there is still a lot to learn.

3 comments:

  1. Do you still have the MF that came with the duffel bag?
    I started with UITFs really, really late and they haven't fared very well in the past 5 years or so that I got them. Good thing I don't need them (yet).

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    Replies
    1. Unfortunately that duffel bag is now long gone :(

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