Is it okay to invest in Philippine realty and stocks at record-high prices?

Many readers who email or message me through Facebook, Twitter and Instagram ask this question: Is it still okay to invest in Philippine real estate and stocks at their present record-high prices?

Yes, I believe it is still okay to invest in Philippine real estate and stocks despite record-high prices, but I would urge all to be extremely choosy about the quality of realty in terms of location and developers (not only the big guys), and also about the quality of the stocks.

Why this optimism? I think that despite the recent stupid, unnecessary mistakes inflicted by some of our top politicians, the positive growth of the Philippine economy based on good fundamentals and good demographics will continue.

At a recent forum by East West Bank led by the Gotianun family and bank president Tony Moncupa, top stocks guru Wilson Sy of Wealth Securities advised professionals and businesspeople to invest a certain percentage of their disposable income in good stocks in order to build long-term personal wealth.

Let us heed the words of billionaire investor Warren Buffett on stocks: “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” Buy stocks of well-managed companies with good long-term prospects, regardless of stock price fluctuations.

In these days of analysts and traders all riding the stocks boom bandwagon, I want to share my favorite Buffett quote: “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”

Sir John Templeton has more wise advice for would-be speculators: “The four most dangerous words in investing are: ‘This time it’s different.’”

Buy stocks of companies with a long-term view; don’t speculate

Don’t invest in stocks swayed by the herd mentality of the general public, irrational emotions such as hope, greed and fear, or analysts’ often self-serving recommendations. Invest based solidly on logic, rely on your own basic research or on analysts with proven track records of integrity and success. Search for good-value firms and steel yourself with emotional discipline.

On choosing what stocks to buy, I recommend reading the news and using reliable Internet sources to research about the companies we plan to invest in and their industries. Where are their sales and profits going to come from? Is the bullish stock market now pricing the stock as if there is no risk of any disappointment?

At this time of rising tides when all stocks are going up, this is the best time to sell all of your inferior and cyclical stocks, but continue to hold on to the best-quality stocks to be a long-term investor.

The Philippine Economy can sustain growth despite our Politicos

I told a stock analyst that I prefer to be a contrarian: when everybody wants to buy, I actually prefer to sell and build up some cash. In a bull-market situation like that of the Philippines’ generally positive economic trends in the coming years — regardless of who is president of the republic now or in 2016 — I suggest that investors buy stocks of the best blue-chip companies that are well-managed, whether conglomerates or smaller firms. Cash in on the Philippine growth story.

I believe that the Philippine economy will sustain strong and solid growth, as long as there are no extra-legal means to remove a president via military coup or EDSA-style protests, no matter how incompetent or corrupt our national leader is or will be. 

How Real Estate investment can overcome the inflation thief

On the question of why it is still okay to invest in Philippine real estate, Megaworld Corp. suggested that I interview its senior vice president Jericho Go, who is in charge of that firm’s multi-dimensional township projects nationwide.

Go said: “Real estate is always a tried and tested hedge against inflation.  If you just put your money now in the banks, how much is the interest rate versus inflation? If the inflation rate is higher than the bank interest rate, then you should view inflation as a thief that is stealing money from you every day.  For example, my one peso can buy one piece of candy now, but next year after inflation or higher prices, my same one peso can only buy me half a candy next year.”

He continued: “Buyers of real estate should make sure their investments will appreciate in value. There are many factors to consider, such as location, quality of developer and projects.”

Go continued: “In our case in Megaworld, we want to help buyers earn with value appreciation by adding community living and pioneering the master-planned township concept, which offers advantages of security, accessibility and convenience. For example, in Eastwood City, there’s the information technology or IT park for the ‘live, work, play, learn’ idea. In our Cebu township in Mactan, there’s the additional unique feature of the beach. For our Southwoods township, you have the same ‘live, work, play, learn’ plus two championship golf courses. In Uptown, the additional feature is chill, with the biggest super club called Valkyrie. Be choosy in realty investing.”

Why there is still no real estate bubble in the Philippines

Is there a Philippine real estate bubble already of over-speculation in high prices and over-building of too many condominiums by developers? Go replied, “Not true, because we have over 10 million overseas Filipino workers (OFWs) sending foreign exchange remittances to the Philippines every month, and there is now still between three million to five million units of housing backlog … probably more.”

He added: “I think Philippine real estate and stock prices are still going to go up, because we are still a cheap buy compared to Singapore, Hong Kong and other Asian economies, so I believe there is still a big upside for the whole year 2015. In particular, Megaworld’s stock price based on price earnings ratio is still better than many others. It is still good to invest here in the Philippines now.”

Investing is key to personal wealth

My last point on why we should not let our income or savings just lie idle if we want to grow personal wealth is this quote from Robert G. Allen: “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.”

Another quote on why I love real estate comes from the great statesman Franklin D. Roosevelt, who once said: “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”

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