There are two stages in the financial life of man: Man working for Money and Money working for Man.

There are two stages in the financial life of man: Man working for Money and Money working for Man.

The goal is to eventually reach a stage where you have enough investments to support your chosen lifestyle. I am not saying you resign tomorrow and then start a business or investment. No! Your work is great because it is an instant source of cashflow. It is readily available capital not only in terms of money but experience, training and connections. The idea is to create other sources of money to create more money while we are still working. I know many people who have retired from corporate work in their 40’s because their businesses had expanded enough and can now give them more than what they need to support their lifestyle. I like what Dean Pax Lapid of Asian Institute of Management said that when he reached 42 and started full time in his businesses, he had “self-retrenched” himself. Wow! That’s what you call being in total control.

We can reach the Money working for Man stage through the following: paper assets, real estate and entrepreneurship.

Entrepreneurship and real estate requires bigger capital and time and as employees these are something which we cannot instantly start. For a business to reach its breakeven point, it will take time. For real estate, we have got to be careful. Buying a house and lot and living in it is not a source of passive income. It may even take away money from your pocket because your property will need insurance, refurbishments, appliances etc. Passive income through real estate is building an apartment for rent or buying a condo or house and lot and selling them afterwards for a nice profit.

Paper assets are by far the easiest source of passive income that you can start today.

Paper assets include investing in the stock market and mutual funds. You can buy shares of great companies owned by Henry Sy, John Gokongwei, the Ayala Brothers and Lucio Tan. By investing in their companies, you act as partner in their businesses that will qualify you to receive a portion of their profits in the form of dividends.

Just to remind you. Do not make the mistake of investing today in the stock market and expecting it to earn tomorrow, next week or the following month. Stock market investing does not work that way. Because the stock or equity market is very volatile, your investment could be down 20% this year or 20% next year. If you are investing in the stock market, you have to be willing to put your money there for the next 10 or 20 years. Yes it will go down but there will be periods when it will also go up. Based on studies, from 1989 to 2009, money invested in blue chip companies in the Philippines will give you an average return of 14% per year. Note that 2009 was the worst period during the last recession where most of the companies went flat. I wonder if they had included 2010 in their equation where most of the companies posted an average annual growth of 40%-80%, the average value would have been a lot higher.

So invest only in the stock market if your risk appetite is strong enough to ignore the volatility. I personally believe that if you would keep on buying great companies for example Ayala Land over the next 10 years every month, it will give you an average return of 15% per year. I always tell people that I am coaching in the stock market to invest only money that they will need after say maybe 10 or 20 years. I do not recommend investing your children’s tuition next school year or the full amount of your retirement if you are in your 60’s. What I am also saying is, if you are a beginner, just invest a little portion of your money and build it up from there as your confidence and investing acumen grows.

Let me know if you have further questions or if you require an investment advice, you may email me at anselmreyes@yahoo.com and I would be happy to guide you.

Thank you for reading my post and please share it with your friends.

 Happy New Year!!!!

Anselm Reyes

For more blogs about financial literacy and investing, visit my blogsite at http://investingphilippines.blogspot.com/