PASSIVE INCOME THROUGH MUTUAL FUNDS

Work Hard & Work Smart: Let your Money Work for You

BY TIYO PILO

Part 2 of 3:

“How to become a BIG business owner even without starting your own business.”

From: Tiyo Pilo
Cebu City, Cebu

 
(Did you miss Part #1 of 3? If you did, click this link now)

In the first lesson, you’ve discovered how to let your money work for you regardless of your background, business experience and/or your investment capital. 

Today, let’s tackle on the perfect vehicle to get you started in the journey to passive income through investing.

 
Imagine:
 
You are able to ride a plane in business class. You love how the attendants treat you. The seat is so comfortable and you feel like you are a “VIP.” 
 
And all of a sudden when you look at your seatmate..
 
..to your surprise, you see Mr. Henry Sy! 
 
 
Yes the man. The owner of SM. You are so excited and you told him..
"Uhmm.. Hello. Excuse me. Sir Henry Sy. I'm Tiyo Pilo. I'm such a big fan of yours. I have P5,000 here in my wallet now. By any chance, I would love to be business partners with you."
 
Do you know what he’ll probably say?  
"Sure! Do you know a bank called BDO? I own that. You can deposit your money there." 
 
Tehee..!
 
In the previous lesson you’ve learned about Liquid Assets and an example of which is your bank savings account
 
Now have you ever asked yourself:
 
“Where do the banks put their money?” 
 
Surely, it’s not just inside the vault as what movies seem to depict. It’s actually released as loans or reinvested to gain better interest rates or growth. 
 
 
Think about it. 
 
You deposit your money earning less than 1% interest per year. 
 
Then, the banks loan it to people at 3.5% interest per MONTH (through credit cards) – that’s 42% per year. 
 
They keep the 41%, you earn the 1%! 
 
Brilliant! 
 
But not for you. 
 
 
There’s nothing wrong with the banks (in fact, I love them for their online banking and convenience), but what is not right is our level of financial education. 
 
The bank’s purpose is for emergency funds and/or business transactions. In case of sudden financial needs, you can easily access their ATM to withdraw money. In case of business deals, you can easily issue checks instead of bringing cash with you.
 
That’s why they give as low interest rates for deposit and checking accounts because they know anytime, you can withdraw your money. 
 
 
However for your long-term savings, if you want growth in your money then it should be invested where the banks also put their money. 
 
Here comes in other liquid assets such as investments in bonds, stocks, mutual funds, insurances with cash value and the like.  
 
 
 
 
 
 
 
 
 
 
Invest in Mutual Funds
“Where do the wealthy put their money?”

I started inquiring about investments from friends, I was referred to a financial expert, attended seminars – in short, I was financially educating myself. 

And there I found out that the secret of the wealthy is that they put their hard-earned money in what we call: 

Income-Generating Assets! 

 
Now, I don’t want to bore you the technical details of what an asset is, but it simply means: 
“Something that you acquire that puts money into your bank account.” 

Example:
 
You buy a condominium unit, you rent it out and it puts money into your bank account. 
 
That’s an asset!
 
Again, you acquire “something” and that something puts money into your bank account. And that my friend, is the secret of the wealthy!
 
 
Moving on..
 
There are four types of income-generating assets. These are businesses, liquid assets, real estate and commodity.
 
However.. 

..among these assets, there is that one asset that is easiest to start with which requires: 
  • NO business experience, 
  • NO educational background, 
  • and heck it does not even require you too much capital! 
As long as you have CASH, you can invest in it and start letting your money work for you.
 
These are Liquid Assets! 
 
 
An example of a liquid asset is your bank savings account
 
Let say for example you have P100 and the bank interest rate is 1% per year. 

(You wish, the last time I check a bank savings account, it only grows at 0.25% per year!) 
 
But let’s just assume 1% per year for simple calculations. 
 
Meaning:
 
After 1 year, your P100 will grow to..
 
*drumroll
 
..P101! 
 
You work hard for P100, but your P100 work for you to help you earn P1! 
 
 
After next year: 
 
Your P101 will grow to..
 
*drumroll again
 
..P102.01
 
 
Notice the 0.01 cent? Your P1 together with your P100 continued to work for you. That’s how money works! 
 
It works through the power of compound interest! 
 
Albert Einstein Compound Interest
 
In simple language: 
 
“Yung interest ng pera mo, kumita ng interest din!”
 
 
Now enough with this nose-bleeding Math (Hehe I know a lot of you hate calculations). 
 
Instead, let me show you one liquid asset that generated 25.50% interest yielding P55,010.40 in growth.
 
Mutual Funds Gain
 
That my friend is the power of letting your money work for you. 
 
 
Thus..
 
Regardless of your educational background or business experience..
 
..you can let your money work for you as long as you put it in a vehicle that earns interest rates. 
 
The next question is:

“What and where are these investment vehicles?”

In the next lesson, let me share to you how you can become a business owner of big companies like: 

  • SM
  • Ayala
  • BDO
  • Jollibee

For as low as P5,000 (latest I’ve heard is as low as P1,000 now!) And nope, it’s NOT franchising.

See you in the next lesson.

Tiyo Pilo

| Passive Income Seeker

Work Hard & Work Smart:

Let your Money Work for You

(Part 2 of 3)

“Compounding Interest: The Secret of Money Working for You”
From: Tiyo Pilo
Cebu City, Cebu
 
This email is gonna be boring..

O oh!

Because I’ll be answering this question in a more or less technical way. (I’ll try to explain it as simple as possible though. Hehe).


What is a Mutual Fund?
 
– It is a company where it pools funds from different investors.
– It i managed by professional fund managers where they will be the one who will invest the money in a diversified portfolio
– It is usually invested in the stock market, government or corporate bonds.
 
 
Too technical?
 
Okay. Here’s the simple definition: 
 
“It is vehicle where an ordinary person is able to invest money where the wealthy people are also investing.”
 
 
Think of it this way..
 
If you put your money in the bank, have you ever asked yourself:
 
“Where does the bank put our money?”
 
Surely, it is not only stored in the vault!
 
 
It is reinvested in the form of credit (bank loans) or invested in financial instruments like the stock market or mutual funds.
 
 
Imagine..
 
You are earning less than 1% interest per year (money sleeping in the banks), but they are re-investing your money earning more than 10% through credit or investments. 
 
 
No wonder the rich gets richer and the poor poorer, because they know where to put their money. 
 
That’s why I am a personal finance advocate because in the information age..
 
..it is no longer an excuse NOT to know the secret of the wealthy. 
 
 
So, how does mutual funds work?  
 
1. Mutual fund is about ownership

When you invest in mutual funds, you own shares in proportion to your investments. When the mutual fund companies earn due to their investments, you receive proportionate share of any earnings on the investments of the funds.
 
So if the MF company earns 12%, you also earn 12%. (Unlike the banks who just give you 1% interest)

So yes, you are a part-owner. 
 
 
By the way, I am NOT against banks. It’s just they also have their own different purpose. 
 
 
2. Mutual fund is about accumulation of shares
 
Have you heard the word “shareholder”?

Yes. It’s because when you invest in mutual funds, you will receive number of shares directly related with the invested amount. 
 
Example: 
 
A mutual fund having a price per share of P1.00. 
 
Then if you have P100,000 you can buy 100,000 shares of the mutual funds. 
 
– Just like buying rice, the price is per kilo. 
– For gasoline, the price is per liter. 
– And for mutual funds, the price is per share.
 
 
3. Mutual fund is about investing for the long-term.

Investing should be long-term. As the longer you stay invested, the higher the growth in value your investments will be.

Example:

Philequity Fund, Inc. (one of the top mutual funds in the Philippines)
 
The price per share last November 23, 2010 is: 
19.8651 pesos per share

As of Oct. 26, 2018: 
35.3262 pesos per share
 
 
If you invested P100,000 years ago:

Your P100K would now be: P177,830.324
 
That’s 77.83% growth in 8 years. 
Or 15.57% per year growth! 
 
How powerful is that!?
 

So now.. 
 
..how does one start investing in mutual funds? 
 
In this article, I’m going to share to you 5 easy steps to get started:
 
 
Spent 1.8M for retirement BUT still has 3.2M in his investment fund! (money working for you.)
 
 
You see.. 

..the difference between the rich and the poor is education.

But not the normal type of education that after you graduate you become (no offense) a corporate robot. Dragging your feet to work every Monday and wishing it is already Friday. 

I’m talking about Financial Education: knowing how to handle your money and knowing where to put, invest and let it grow. 

 

You see, I’ve always been a saver.

When I was in college, my daily allowance was P100.  

– I eat 5 pesos rice and 5 pesos “monggo” for breakfast. 
– And for lunch, I eat 5 pesos “puso” (hanging rice) and 5 pesos “ngohiong” (I was skinny yet handsome.)

Less my jeepney fare, I can save more than half my daily allowance. And after I graduated, I was able to save a significant sum.

 
But the more I saved.. 

..the more I realized that my money is just sleeping in the banks. After few years deposited in it, it was just growing very slowly. 

I inquired in the bank on how to receive higher interest rates, they suggested “Time Deposit.”

I was happy! 

I was getting more than what the average depositor was earning in terms of interest rates. 

 

Then it made me ask myself:

“Where do the wealthy put their money?”

I started inquiring about investments from friends, I was referred to a financial expert, attended seminars – in short, I was financially educating myself. 

And there I found out that the secret of the wealthy is that they put their hard-earned money in what we call: 

Income-Generating Assets! 

 
Now, I don’t want to bore you the technical details of what an asset is, but it simply means: 
“Something that you acquire that puts money into your bank account.” 

Example:
 
You buy a condominium unit, you rent it out and it puts money into your bank account. 
 
That’s an asset!
 
Again, you acquire “something” and that something puts money into your bank account. And that my friend, is the secret of the wealthy!
 
 
Moving on..
 
There are four types of income-generating assets. These are businesses, paper assets, real estate and commodity.
 
However.. 

..among these assets, there is that one asset that is easiest to start with which requires: 
  • NO business experience, 
  • NO educational background, 
  • and heck it does not even require you too much capital! 
As long as you have CASH, you can invest in it and start letting your money work for you.
 
These are Paper Assets! 
 
Mutual Funds Gain
 
Imagine:
 
You are able to ride a plane in business class. You love how the attendants treat you. The seat is so comfortable and you feel like you are a “VIP.” 
 
And all of a sudden when you look at your seatmate..
 
..to your surprise, you see Mr. Henry Sy! 
 
 
Yes the man. The owner of SM. You are so excited and you told him..
 
“Uhmm.. Hello. Excuse me. Sir Henry Sy. I’m Tiyo Pilo. I’m such a big fan of yours. I have P5,000 here in my wallet now. By any chance, I would love to be business partners with you.”
 
 
Do you know what he’ll probably say? 
 
“Sure! Do you know a bank called BDO? I own that. You can deposit your money there.” 
 
Tehee..!