Transcript of “Bringing global investment tools, strategies to PH” | The Final Word with Rico Hizon — Friday, March 31, 2023
~ Saturday, April 1, 2023 Blog Post ~
The global investment landscape has a wealth of tools and strategies that remain untapped in the Philippines. What are some of the best practices that Filipino investors can use? Joining us is Angie Pacis, CEO of AIA Investment Management and Trust Corporation.
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RICO HIZON (RH):
The global investment landscape has a wealth of tools and strategies that remain untapped in the Philippines. What are some of the best practices that Filipino investors can use?
Joining us is Angie Pacis, CEO of AIA Investment Management and Trust Corporation. With inflation rising globally, is this the right time to invest?
ANGIE PACIS (AP):
Inflation actually forces the issue of investing; meaning if you did not invest, and you stayed that saved money market instruments, what will happen is inflation will just erode the value of whatever money you have and the cost of the goals that you want to finance, especially if those goals are further out in the future, will just be beyond your reach if you do not invest.
RH:
So now is really the time to invest. But, of course, when you compare the Philippines with other countries mainly in the Asia-Pacific region, how does the country’s economic performance fare and how does it stack up with its Asian peers?
AP:
If we measure economic development in terms of gross domestic product or GDP, then the Philippines is actually looking very good. If you look at the projected GDP for 2023 to 2024 until 2025, the Philippines will grow by an average of 5 1/2 percent which is above its current long-term growth rate, and that actually stacks up very well with the growth rate of ASEAN, which should be around 4 1/2 to 5, and it is actually even better than the growth rates of China.
So, for the first time in 20 years, the Philippines is going to grow faster than China. Now what does that mean essentially if you look at the movement of the Philippine Stock Exchange Index from 2000 to 2017? It’s been a general uptrend and during that period, the growth rate of the Philippines was actually above trend. So the above-trend growth rate is a very good indicator for prospects of Philippine assets going forward.
RH:
So, it is, indeed, wise to invest in the Philippines, given its growth pattern this year and going forward. You’ve recently launched some new products recently. Tell us more about that.
AP:
Those are essentially stewardship products. So, it’s the usual money market fund, fixed income fund, and equity fund. But what’s with that is instead of offering it on a standalone basis to our policy holders, we offer to put it together in a “fund of funds” concept. And what that will do is free our policy holders from the burden of deciding when to put a little more in cash, when to put a little more in bonds, and when to put a little more in equities.
So, we do actually the combination for them within the risk tolerance, and what we hope to do is actually generate better returns by being able to move more swiftly to take advantage of market opportunities.
RH:
Indeed, that’s the end goal for any investment: Make money on your returns. How can Filipinos really make the most out of their investments?
AP:
I will actually refer to a very popular investment guru who is Warren Buffett — somebody most investors will know.
RH:
The Oracle of Omaha as they call him.
AP:
The Oracle of Omaha — and he’s coined what they call “The Noah Rule.” So, it’s not about predicting the rain. It’s about building the arc. So that the best investment returns is really not about picking particular investments or timing the market. It’s really about crafting together a sound financial plan.
So, it’s like looking at your goals, translating those goals into pesos and cents, determining when those pesos and cents will come due, and then from where you are towards that time horizon, putting together the appropriate combination of different asset classes that will get you to that target endpoint.
It sounds simple, actually, but that’s really the more foolproof way to ensure that your goals are met.
RH:
I’m sure many of our Filipino investors have questions about investing in funds. Basically, what is the benefit of being invested in funds in the long term?
AP:
Diversification is a very, very important technique for successful investing. So what investing in funds will do is allow you to participate in a very diversified pool of investments for very, very small amounts.
Think about it. You have 10,000 pesos and invested it on your own, how many kinds of investments will you be able to access? Probably just one. But if you invested it in that pool, that pool will easily have a minimum of seven investment outlets for that very little amount and that actually provides you instant diversification.
And more importantly, because the vehicle is actually like an institutional investor, the transaction cost is typically much lower when you invest via funds as opposed to investing yourself.
RH:
And it is also very important for Filipinos to understand where they’re putting their money. They have to be educated on the risks and rewards of their investments because what they’re putting in their investments is really their blood, sweat, and tears — their hard-earned savings.
AP:
Yes, absolutely. What most investors don’t understand is that risk actually drives returns. So, you cannot have your cake and eat it, too. When you’re actually trying to avoid risk, you’re also trying to avoid the returns.
Unfortunately, low risk can sometimes also be a risky proposition. Why? Because you find yourself unable to finance your goals. So the critical thing is really for investors to understand what their risk tolerance is, and to be able to maximize that risk budget, so to speak.
Typically, time is your friend. If you start investing early, you give yourself a long investment runway. Then, it gives you the leeway to ride out that volatility and at the end of the time horizon, you find yourself exactly where you programmed yourself to be.
RH:
Where can our viewers and potential investors learn more about AIA Investment Management and Trust Corporation’s investment products?
AP:
We have our website. Because our investment products are actually accessed only through our variable unit-linked policies, but apart from the AIA website, they do have their advisors who will be ready to answer their questions and provide them with the materials for the investment products of AIA Investment Management.
RH:
Thank you so much for joining us on the Final Word.
Sources and references:
https://www.inc.com/marcel-schwantes/warren-buffett-rule-measure-success.html
