INVESTMENT SCHEMES

 FOREX TRADING
Forex trading is the act of buying or selling currencies. Banks, central banks,
corporations, institutional investors and individual traders exchange foreign
currency for a variety of reasons, including balancing the markets, facilitating
international trade and tourism, or making a profit.

Currency is traded in pairs, in both spot and futures markets. The value of a
currency pair is driven by economic, political and environmental factors, such
as wars, natural disasters, or national elections.

RISKS TO CONSIDER

1. Margin
FX traded on margin means you only need to deposit a small percentage of the
overall value of the trade, known as margin. Therefore, with a smaller initial
capital outlay you have exposure to a much larger position. This means that
your gains could be multiplied if the market moves in your favour. Equally
however, your losses could be magnified in exactly the same way if the market
goes against you.
2. Volatility
Foreign exchange rates can change rapidly in response to any real-time
economic and political events. This offers great opportunities for traders to
make profits in the forex markets.
However, volatility can be a double-edged sword, and losses can accumulate
just as quickly.
MANAGING RISKS
Use stop-loss orders to manage risk

Stop loss orders are requests made by clients to close out an existing trade at a
price that is worse than the current market price to help minimise losses.
When the market reaches a stop level set by you, your trade will be closed
automatically at the best available price.
(https://wwww.cityindex.co.uk/trading-academy/forex/risks-of -forex-
trading/)
A stop-loss is an order that you place with your FX broker and CFD Broker in
order to sell a security when it reaches a particular price. A stop-loss order is
developed to reduce a trader’s loss on a position in a security.
(https://admiralmarkets.com/education/articles/forex-basics/what-is-stop-
loss-in-forex-trading-and-how-to-see-it )
1. Set stop-losses for every trade. Otherwise, failure is almost certain
2. Develop a social trading plan and always adhere to it.
3. Do not risk more than 2% of your margin per single trade.
4. Keep your emotions separate from trading.
5. Never trade to compensate for your losses.
6. Only trade when you feel it is the right moment
7. Do not be afraid of losses, every trader has them.
8. Try to achieve more profitable trades, and have less unsuccessful
trades.
Social Copy Trading
 Social trading is a fairly recent development in the forex markets
whereby traders follow and copy trades made by others direct into their
trading account.
 Social Trading may be an ideal service for traders who are interested in
the markets yet may be short of time or education, or just simply wish to
have someone else trade on their behalf
 It is cost-effective due to it not involving any performance or admin fees
being charged that can be common with fund managers in other asset
classes.
Top 5 Best Social Trading Platform 2018 (https://investingoal.com/copy-
trading-best-platforms/)
1. ZuluTrade
2. eToro
3. Darwinex
4. Ayondo
5. Tradency

Don’t over trade

 Trades should be sensibly sized and you should always ensure you have
sufficient funds in your account to cover any losses for the period that
you decide to hold open you trade.
Worldwide Forex Markets Hours

The forex has fifteen independent worldwide exchanges, open weekly from
Monday through Friday--each with unique trading hours. But from a trading
perspective, the four most important windows are as follows (times shown
represent Eastern Standard Time):

 London: 3 AM to 12 PM (noon)
 New York: 8 AM to 5 PM
 Singapore: 3 PM to 12 AM (midnight)
 Tokyo: 7 PM to 4 AM

While each exchange functions independently, they all trade the same
currencies. Consequently, when two exchanges are open, the number of traders
actively buying and selling a given currency dramatically increases. The bids
and asks in one forex market exchange immediately impact bids and asks on
all other open exchanges, reducing market spreads and increasing volatility.
This is certainly the case in the following windows:

 8 AM to 12 PM (noon) EST, with both New York and London exchanges

open
 3 PM to 5 PM, with both New York and Singapore exchanges open
 7 PM to 12 AM (midnight) EST, with both Tokyo and Sydney exchanges
open
 3 AM to 4 AM EST, with both Tokyo and London exchanges open

The most favorable trading time is the 8 AM to noon overlap, when both New
York and London exchanges are open. These two trading centers account for
more than 50% of all forex trades. On the flipside, from 5 PM to 6 PM EST,
the only operation open for business is the Singapore exchange, which
accounts for less than 10% of annual forex trading volume. But there an be
exceptions. Political or military crises that develop during this hour, could
potentially spike volatility and trading volume, making this window a
favorable time to trade.
Best Time Doesn't Always Mean Profitable

Forex traders should proceed with caution, because currency trades often
involve high leverage rates of 1000 to 1. While this ratio offers tantalizing
profit opportunities, it comes with an investor's risk of losing an entire
investment on a single trade. In fact, a 2014 Citibank study found that just 30%
of retail forex traders break even or better. But tellingly, 84% of those polled
believe they can make money in the forex market. The chief takeaway: new
forex investors should open accounts with firms that offer demo platforms, that
let them make mock forex trades and tally imaginary gains and losses, until
investors become seasoned enough to confidently trade for real.

Comparing forex against stock trading

Most financial authors say that “conservative” stock investments should
yield an average of around 5% annually, and “risky” investments in a
diversified portfolio of stocks and mutual funds should yield somewhat higher.
Of course, traditional wisdom says that the stock market rises an average of
about 10% per year, over time.

Buying equities can be highly profitable. Yet, success in stock markets

usually requires fundamental or “insider” knowledge about a specific
company. Savvy investors must know their favorite stocks well enough to spot
a bargain, and likewise be aware when their favorite funds are undervalued.

Independent investors in the stock markets soon discover that their

timing is usually one step behind the big players in the market. Large
investment funds are staffed by professional analysts tasked with studying all
fundamental and technical information available about a particular company.

So, it’s usually quite difficult for small traders to earn more than a few
percentage points in annual gains with stocks.

Worse, since few stock-fund money managers ever consistently achieve

more than 20% in annual gains, probably very few retail investors could do
better. But, instead of accepting ho-hum returns in the stock markets, investors
have turned to forex trading instead.
WHICH IS BEST FOR BEGINNERS?

Most financial advisors say it's not a matter of skill level so much as
personality and goals that determines whether you should invest in forex or
stocks. Certainly, if you are more inclined to "invest and forget" – i.e.,
investing money toward retirement – and are interested in gradual, long-term
growth, then stocks are a better choice. However, if you crave a more active,
hands-on trading experience and enjoy the excitement of a fast-moving trading
market, then forex may be the best fit for you.

FOREX IS BETTER THAN STOCK TRADING

Forex trading offers plenty of advantages over stock trading –
Superior liquidity. With more than $2 trillion in transactions each day, forex
offers the best liquidity. Buy and sell orders are filled instantly, which means less
“slippage” and better profits.
“Paper trading” forex offers an accurate test. Many traders begin by first
“paper trading” or mock trading a demo account. However, trading stocks in a demo
account is far different from real trading, because of the delayed order execution
times and reduced liquidity in real stock markets. So, beginners may fail through
flawed strategies.
In contrast, because of the lightning-quick executions and deep liquidity in forex
markets, “paper trading” in a forex demo is generally an accurate simulation of real-
world results.
24-7 trading. Forex trading platforms are open 24 hours per day, five-and-a-
half days per week. On the other hand, stocks are often illiquid after daytime trading
sessions close.
Forex can’t be controlled by large players. Banks and financial institutions,
investment funds and high-net-worth individuals can all influence the movements of
stock prices, whether up or down. Unfortunately, major stock market players
generally scoop up most of the price gains during such rises, and leave independent
stock traders with most of the losses during price drops.
In contrast, the enormous volume in foreign currencies traded each day means that
nobody, including central banks and heavyweight investors, could manipulate the
forex market.
 Leverage. Although leverage in stock accounts is typically limited to a ratio
of 2:1, forex offers as much as 200:1 leverage.
No restrictions on selling short. Stock markets enforce an “uptick rule” so that short-
sales must be entered when a stock’s price is moving upward. This negates most
profit-making opportunities. On the other hand, forex positions can be entered either
long or short, without restrictions.

 TIME DEPOSIT

Time deposits are among the best investments for beginners who are afraid of risks
yet want to earn higher interest than a traditional savings account. Most savings
accounts have interest rates of less than 1%, while time deposits earn up to more
than 4%.

Let say you put PHP 100,000 in a time deposit account with an interest rate of
3.70% per annum. After a year, you’ll get PHP 103,700.

Here are the top-performing one-year time deposits with the best rates as of
January 2019:

Best Time Deposits in the Philippines Annual Interest

Minimum Placement
2019 Rate
Security Bank 1-Year Peso Time
3.70% to 4% PHP 100,000
Deposit
EastWest 1-Year Peso Time Deposit 2.55% to 4.50% PHP 10,000
1.625% to
RCBC 1-Year Peso Time Deposit PHP 5,000
2.625%
PBCOM 1-Year Peso Time Deposit 1.50% to 2.88% PHP 1,000
PSBank 1-Year Peso Time Deposit 0.75% to 3.50% PHP 10,000
  MONEY MARKET FUNDS

Money market funds are ideal for newbie and conservative investors who want to
earn a little higher than time deposits. They’re the best investments for capital
preservation in one year or less. The funds are invested in corporate bonds,
government treasury bills, and other risk-free, short-term securities.

Here are the top-performing money market funds with the highest ROIs as of
January 2019:

Best UITF Money-Market Funds in the Philippines

ROI
(January 2, 2018 to January 2, 2019)

UCPB Cash Management Fund 2.7077%

AB Capital Short-Term Fund 2.4029%

PSBank Money Market Fund 2.3365%

ATRAM Peso Money Market Fund 2.2591%

PBCOM Signature Trust Fund 1.1377%

  BALANCED FUNDS

Balanced funds are composed of both conservative (bonds) and high-risk (stocks)
holdings. They’re the best investments for conservative and moderately aggressive
investors who are willing to keep their money invested for three to five years.

Here are the top-performing balanced funds over a five-year period as of January
2019:

Best Balanced Funds in the Philippines

ROI
(January 2, 2014 to January 2, 2019)

BPI Balanced Fund 16.5832%

China Bank Balanced Fund 15.9127%

Rizal Balanced Fund 10.6523%

AB Capital Balanced Fund 10.1086%

Metro Balanced Fund 9.1521%

 EQUITY UITFS

For the more aggressive medium-term investors, equity UITFs (unit investment
trust funds) are the best investments to make. Equity-based funds are made up of
100% stocks, making them high-risk yet high-yield investments.

Investing in equity UITFs is different from investing directly in the stock market.
When you invest in stocks, you buy stocks individually at the Philippine Stock
Exchange and create your investment portfolio on your own. But when you invest
in equity UITFs, fund managers are the ones who manage your pool of stocks.
Here are the top-performing equity funds over a five-year period as of January
2019:

Best Equity UITFs in the Philippines (January 2, 2014

ROI
to January 2, 2019)

China Bank Equity Fund 29.2734%

BPI Equity Value Fund 26.3471%

SB Peso Equity Fund 25.879%

BPI Philippine High Dividend Equity Fund 25.6814%

BPI Philippine Equity Index Fund 24.7079%