Allianz Guru Series by Henry Yang: How to hire an investment expert to invest for you

There are many tasks that we outsource to experts and professionals: car maintenance, house renovation, tax filing, and even something as simple as getting a haircut. If we order from a restaurant (most likely take-out nowadays) we’re outsourcing our cooking tasks. The reason we struggle to learn and invest on our own lies in what I just said above about outsourcing.

And we struggle with how to invest on our own because the stakes are higher. If your barber gives you a bad haircut, your hair will grow back eventually. But if your investments tank due to an ill-fitting position, it may jeopardize a goal tied to your money, such as a vacation, a house purchase, or worse, your retirement.

However, like any trade or skill, investment management is something that requires years of practice. Investment managers typically have backgrounds in economics, human behavior, financial markets, and history. Not only does it require the study of these concepts, but also the keeping track of market developments and how investors change their narratives. To be properly diversified, an investor needs to have spread positions across regions, asset classes, and currencies. All this can be too much for a single person.

With that in mind, there are two ways that you can hire an investment expert, or to be accurate, an investment team. If the amount of money you’re investing is Php1million or higher, you can go to your preferred bank and open an Investment Management Account (IMA). Ideally, there would be a detailed discussion on what your goals and restrictions are for the money and they will invest it for you according to your customization. Another way, which doesn’t require that much amount of savings (one can now invest for as low as P50!), is investing through pooled funds.

Pooled funds, as you would have guessed from its name, pools the money from a group of people and invests it accordingly. Unlike the IMA which is customized, the way the fund is managed and invested is dependent on the specific fund that you get. You can think of IMA as getting a tailored suit while a pooled fund is like buying an off-the-rack suit. Fortunately (or unfortunately) it is 2021, and there are now a lot of choices for pooled funds!

Choices? Oh no. How do I choose? The problem that we have now is how to choose since there’s an overwhelming number of alternatives. I made the guide below to help you navigate.

How are your defenses?

I talked about what you need to do before you invest , where we tackled in detail the establishment of your defenses via an 1) Emergency Fund and 2) A Plan for Life’s What ifs, which can be broken down into Health Insurance, and for those with dependents, Life Insurance.

If you don’t have an emergency fund established yet, I advise either adding more into your dedicated savings account or limiting yourself to Money Market Funds. Money Market Funds typically invest in bonds – debt that pays interest – that are shorter than one year so their risks are generally low. Don’t expect sky-high returns because we’re prioritizing safety and liquidity here  (how fast can you turn your investments back to cash). That’s one of the reasons why you should be wary of deposits that are able to give you high returns, as mentioned in my previous article “Are you investing or unknowingly gambling”.

If you don’t have health insurance yet; I advise getting a policy first before investing. It doesn’t sound as cool or sexy but the last thing you want to experience is being forced to sell your investment positions when they are down because you have a huge hospital bill.

If you have dependents – anyone who relies on your income to continue their lifestyle like a child or retired parents—then check out if your life insurance is enough. One way to check is counting how many months of expenses will your life insurance coverage provide – it’s up to you to assess if that time is enough for them to transition to a new breadwinner. If it’s not enough, you can either get more direct life insurance or invest via Variable Unit-Linked Insurance (VULs). Aside from being invested, VULs have an insurance portion attached to them that can help increase your coverage for your loved ones.

My defenses are ok. Help me understand where to invest.

Aside from those that have established their defenses, this applies as well to investing in VULs. 

I know, the “Can I sleep at night?” column sounds like I'm trying to be funny, but believe me, I'm being honest. The more you understand what you’re investing in, the more comfortable you will be in accepting that losses are a part of the game (just like any game). I just elaborated it so that your expectations are properly set.

The guide above generalizes. Performance may vary from fund to fund depending on the range of allowed investments, fund manager skill, and the level of fund fees charged to clients. The tricky part in making this guide is elaborating who these funds are for. Like I always say, it's all about spreading your bets (#diversification). It means, all these funds and asset classes are for everyone. When I said that Equity funds are for investors with long time horizons (typically the younger ones), I didn’t mean that the retirees shouldn’t have equities. In fact, with the low interest rates we have now, retirees need to have a certain portion of equities in their portfolio. Think of it this way, will you really use this money for your living expenses or whatever other reason? If you won’t within the next 5 years, then that money has a long time horizon. 

To summarize:

Managing your funds is a matter of understanding your personal circumstances and making sure you are flexible enough to take any losses should any of your placements fail to meet expectations.  Yes, you can be a high-risk high-reward type of investor and put all your eggs in one basket, but be prepared to accept that all the eggs can break should something go wrong. Wouldn't you rather just risk breaking a few eggs instead of all of them?


IMPORTANT NOTICE: This document is for general information purposes only. It is not an investment advice and does not constitute any offer, or a solicitation to buy or sell any investment product. Further, any opinion stated by the author does not necessarily reflect the position of Allianz PNB Life.

Head of Investments

Henry is a graduate of University of the Philippines for Electrical Engineering - the first few years of his career are in building maintenance, electrical design and installations for construction projects and even teaching engineering to the next generation. Afterwards he took his Masters in Business Management also from UP Los Banos and worked at various investment-related roles from a top local bank, a US-based investment company and a global insurance competitor. He is also a CFA Charterholder. 

Currently, he is the Allianz PNB Life Head of Investments.