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Budgeting helps us stay on track toward reaching our financial goals. With the rise of digital banks, people have become more conscious of their finances. 

While many focus on the high-interest rates provided, budgeting through digital banks can also be a big help. 

Creating a Budgeting System

The first step in creating a budgeting system is figuring out how much you will set aside for different expenses. There are a lot of alternatives here with no definite best way to budget for expenses. Some people prefer going with the 20/30/50 rule to make things simple, where 50% of their money is for necessities, 30% is for wants, and 20% is for savings and investments. Others prefer putting great detail into how they budget, with each expense planned to the dot.

While each way has its ups and downs, the more important question is how you’ll be able to execute the plans laid out. The common problem is that people tend to overspend. Usually, this is due to failing to keep track of how much was spent on non-essentials. 

Budgeting through digital banks can keep you on track

Aside from high-interest rates, something digital banks usually boast is the ease of opening an account. Nowadays, it usually takes less than 30 minutes to open a digital bank account. The only documents needed would often be a government ID and proof of address.

Being able to quickly and easily open multiple accounts can be a big help in sticking to your budget. By creating multiple accounts, you can designate each one with a specific purpose. For example, one digital bank can be used solely for the purpose of holding your savings. Another can be used for your bills and necessities such as food, rent, etc. Then a different digital bank account can be used for non-essentials. 

Instead of having one big amount of money where you still need to remember how much is allotted for something, you can just allocate money to different accounts from the start. By budgeting through digital banks, you don’t need to put in the effort to remember your budget every day while also making it near impossible to overspend.

Which digital banks should I use?

There’s a multitude of digital banks right now, with each one having unique offers along with its own interest-rate promos. For example, Maya has a case for being one of the easiest to use among the different digital banks. Most establishments accept payments from Maya, where you’d only need to use a QR code to finish the transaction. You can send Pag-IBIG contributions through your Maya account, and you can also claim your own Maya debit card. Cashing in is also free if you’re transferring funds from certain banks. These make Maya a solid choice to use for bills or expenses. The digital bank also offers different promotions to increase your interest rate, but it’s unclear how long they can keep running high-interest rate promotions.

There are also others like Seabank which offer 15 free transactions across any bank every week. On top of that, they also offer a 5% interest rate for balances below P250,000. Then there’s Tonik which offers a group stash feature – handy for groups that tend to save up together for trips or even for Paluwagan. 

You can check out our list of digital banks if you want to look at and compare the different features and promotions each one offers. As for which ones to use for what, it mostly depends on what’s easiest for you. For example, you can set up your budgeting system so that your Maya account serves as your necessities account for the ability to pay using QR. A Seabank account could be for the bills, while you use GCash for wants.

On a Final Note

It might seem troublesome at first to set up a system like this. But, once it’s up and running budgeting should become an easier task to do every month. Just remember to always keep your pins and passwords safe to protect yourself from phishing!

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Being able to save money is the very first step you need to take if you want to improve your financial situation. Here are five saving tips you shouldn’t miss out on!

1. Keep track of your money

Among the different saving tips, this is the most important. No matter how good you think you are at keeping track of things mentally, you still need to list down your savings and expenses somewhere. Often times people who don’t keep track of their money tend to overestimate their financial standing. Furthermore, these are the people who are usually unable to save. Since expenses aren’t being tracked, they can often eat away at the money supposedly set aside for savings. 

By regularly monitoring your savings and expenses, you’ll be more aware of how you currently stand financially. In fact, this will also help you better understand your own money habits. You’ll be able to figure out why you usually spend more than you should, and how you can make an adjustment. Always remember that you can’t improve what you don’t keep track of.

2. Start even with just a small amount

Starting to save even with a small amount at first can have a big impact. Of the different saving tips, this can be one of the easiest to start. It can help you establish the habit of saving and can let you become more responsible financially. When you make the conscious effort to save even a small portion, you begin to develop financial discipline. The amount might be small at first, but as time goes on the discipline you gain will help prepare you for when you are able to earn more per month.

3. Use the 3-day rule

Have you ever made a purchase before, only to realize you really didn’t need it? This is where the 3-day rule comes in. This is when you intentionally wait for three days before making a purchase, especially for non-essentials. This strategy works by helping you avoid impulsive purchases. 

It’s important to treat oneself from time to time. We still need to enjoy life even as we work hard towards our goals. However, we can’t just spend all of our money on enjoyment. As we budget our money for non-essentials, the 3-day rule will help us make the most out of it. While you wait before making the purchase, try to think of the use case scenarios the purchase will help you with. If you feel that it will make you happy for a long time and it’s within your budget, then go for it. If not, then it might be worth holding off on the purchase. 

4. Automate how you budget

This saving tip might not be common, but it can also provide a big impact. Whenever you can, try to automate different parts of your cash flow. For example, if you have bills to pay, try to set up an automatic payment system if your debit or credit card allows for it. If your company has an auto-invest program, it might be worthwhile to enroll in it since it will help you invest hassle-free. 

Willpower is a scarce resource. While we need to put in effort to become financially responsible, it’s always better to have a system that makes things easier. Bestselling author David Bach captured this by saying that people sometimes fail to budget because “You’re too busy, and you will just get frustrated and fail.” Experiment with the different features your banks and cards have, and try to make a system that makes budgeting seamless for you.

(P.S. If your company wants to conduct an auto-invest program for its employees, feel free to reach out to us!)

5. Spend more on quality

When people try to save, looking for cheap alternatives is a common way to save more money. However, sometimes paying up a bit more for a better quality product can sometimes be the wiser financial decision. For one, higher quality products sometimes last longer than cheaper ones. A 10-peso ballpen is far cheaper than a 50-peso one. But, if the cheaper one only lasts a week while the 50-peso one lasts for a year, then the more expensive option will actually be more worth it to buy. Always remember that in order to save the most amount of money, you have to be wise with every decision.

How long will it take to reach financial freedom?

Different people have different circumstances. It’s important to remember that you should focus on yourself. The road to financial freedom might be easy for some, and hard for others. Just remember that no matter how long or hard things get, the end goal will always be worth it.

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This course is especially catered for all the newbies in the market who would like to take their trading up a notch by diving into global markets.

For those unaware, Filipinos have their own unique way of saving money. Paluwagan is an informal way of saving as a group. It works based on the trust of each member of the group, usually consisting of at least three people. The participants will pool their funds and will receive lump-sum payouts based on a set interval.

While the practice is unregulated, a financial inclusion survey from the BSP shows that 14.8% of households save their money through paluwagan. Throughout the years, it remains an easy way for Filipinos to become financially responsible while also fostering camaraderie with each other. Even though this is a very simple way to start saving, the more important thing to remember is that it helps people get started.

“Saving a small amount soon builds up to a large amount”

How Paluwagan Works

As mentioned, Paluwagan requires at least 3 people to participate. These people would need to set rules such as 

1. How much the contributions should be
2. When their contributions should be scheduled
3. Who will receive their payouts first, and lastly
4. Who will handle the funds

To give fully showcase how this works, it might be best to explain it through a story:

Jobert, Anne, and Miguel all decided that they want to make a Paluwagan group among themselves. They set that each member will contribute PHP500 every Monday. The payout will be on Fridays, with the order of recipients being Jobert, Anne, then lastly Miguel. Anne volunteers to handle the funds for the group.

With that, on the first Monday, everyone contributes PHP500 with Anne safekeeping the funds. On the first Friday, Jobert will receive PHP1,500 as his payout. Then on the second Monday, everyone will give their contributions again. This time, Anne will receive the PHP1,500 payout on the 2nd Friday. This cycle will continue until each person receives PHP1,500. At the end of the cycle, it’s up to them if they want to do another cycle or if they should stop.

Pros and Cons

One of the main benefits of paluwagan is that it is an inclusive practice. Since the participants themselves set how much contributions can be, low-income households are able to join.

Depending on how strict the group is, the practice also allows Filipinos to benefit from a framework that makes it easier to be responsible with their money. Rather than having to discipline oneself alone, paluwagan creates an accountability group between the participants. Everyone aims to push each other to save since the fault of one will adversely affect others.

On the other hand, the main disadvantage of paluwagan is that fraudulence could happen. Especially if the group isn’t tight-knit, some members could suddenly disappear the moment they receive their share. Since this is just done informally and usually with no written agreements, money could be lost if some members aren’t trustworthy.

Also, since the money is circulated between members, interest isn’t earned. However, some banks have already started providing group-savings accounts that could help with this. The participants would just need to talk about how they will manage the account, and the money that comes in.

Final Thoughts

For those seeking to enhance their finances, Paluwagan can be an appealing option. However, it’s important to take precautions and make wise choices. Making sure the members are trustworthy should be prioritized. Utilizing different tools to keep track of contributions, and even making use of what digital banks offer could be a great way of improving the experience as well.

Overall the practice should be seen as a first step towards financial freedom. Once you’ve got the habit of saving down, it’s important as well to learn how to make your money work for you.

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This course is especially catered for all the newbies in the market who would like to take their trading up a notch by diving into global markets.

This week’s featured trader is @jprado as he spotted a solid trade in $PCOR! As his technical indicators started pointing upward, he was able to tell that there was an opportunity present.

Trading the ascending triangle became a viable option given that the RSI and MACD were giving bullish signs. From there, it was as simple as taking an entry, setting a TP, and making sure to set a cut loss on the break of the market structure – something @jprado clearly stated.

TECHNICALS OF THE TRADE

There were 4 main indicators present in the analysis from @jprado. He made use of the Bollinger Bands, RSI, Moving Averages, and the MACD.

Bollinger bands and moving averages are similar to each other in that they track trends. However, the former has the added function of tracking price volatility. When used together, the Bollinger band can be used as a visual indicator to see if volatility is either contracting or expanding.

It might have not been clear on the weekly chart, but if you check the daily charts, the indicator was able to show that volatility was dying down. A common sign before big moves happen.

The RSI keeps track of a stock’s underlying strength by taking into account price changes and the speed of the price change. While prices consolidated for a rather long time, momentum wasn’t dying down given that prices firmly held above 3.30. The RSI picked this up and was showing that momentum was still strong, giving constant readings above 60 on the weekly chart.

Lastly, the MACD was also used to tell if the consolidation was nearing its end. Another typical behavior of consolidations is that the MACD tends to slope downwards. Usually, big moves happens when ample time is given for profit takers to get out of the market. The indicator can sometimes be used to keep track of that by checking to see how close it has gotten back to 0.

FUNDAMENTALS OF THE TRADE

Petron Corp. is a company involved in oil refining and marketing, offering customer solutions in the energy sector and related industries. The company’s operations are categorized into various segments, namely Petroleum, Insurance, Leasing, Marketing, and Others.

As the pandemic saw motorists travel less, the company saw some hardships. However, as the economy continues to recover, Petron is poised to bounce back. Revenues have already started to recover strongly, with net income expected to follow suit in the future.

Check this out if you want to learn more about Petron. 

WHAT SHOULD BE MY NEXT MOVE

Currently, $PCOR has already rallied well above breakout levels. While there’s still some upside remaining, the risk-reward for traders just looking to get into the stock isn’t great. It would be best to wait for a new consolidation. The best case would be if prices consolidate after testing the 5 peso resistance, since a breakout from there would indicate that prices could head towards a farther target price. 

Once again, KUDOS to @jprados for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.

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We’ve covered the basics of technical analysis previously, and we’ve even discussed how to use some indicators. As you progress in your trading journey, you’ll undoubtedly learn more indicators along the way. This begs the question, how do use the knowledge you gained to improve your trades?

Usually, people depict professional trading as using a big slew of indicators. Price charts filled to the brim with oscillators, bars, and others. However, something you’ll learn through experience is that you don’t need to know each one. You don’t even need to use all of the technical indicators you know. The more important aspect is your EFFICACY when using technical indicators.

“I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.”

– Bruce Lee

What are indicators and what’s their purpose?

Trading indicators are tools used to analyze the price movement of assets. They are based on calculations based on how prices behave. What’s important to note here is that they are always derived from price action. They mainly serve as heuristics for traders to understand price movements faster. 

As such, using technical indicators is bound to how you analyze price action. If you use momentum indicators, you should have a good grasp of how momentum plays out in the markets to make full use of the indicators. Otherwise, you’re no longer trading the stock’s chart. You’re already trading the indicator itself which could lead to worse performance. 

Deep diving into some technical indicators

MACD

The MACD is a popular technical indicator that keeps track of momentum. What many don’t know is that the MACD itself is only one line. 

The other things that commonly load with the MACD are the signal line and the bars. While it has become a popular strategy to buy and sell whenever the MACD crosses above or below the signal line, this doesn’t fully encapsulate the use of the MACD.

In essence, the technical indicator works by tracking the distance between two moving averages of different time frames. When momentum is strong, short-term moving averages tend to rise faster than long-term moving averages. The MACD captures this by rising as well. On the other hand, when prices consolidate after a strong rally, the moving averages tend to coil together. This often signifies that profit takers are exiting the market. The MACD tends to slope downward closer to zero when it happens.

The MACD buy/sell signal can be a viable strategy. However, it doesn’t do the indicator justice if it’s only used in that way, especially if the underlying market dynamic behind the signal isn’t understood. There are many ways to use the MACD as a tool to keep track of momentum. All you have to do is to try and understand how it tries to encapsulate certain market behaviors.

RSI

The RSI is another popular technical indicator among traders. Like the MACD, it keeps track of momentum. The difference is that it bases readings on the speed and change of price action. It does so by creating a ratio between the average gains and losses for a certain period, then turning it into a scale from 1 to 100. 

One common way to use this is to identify readings above 70 as overbought and below 30 as oversold. While this holds true, only using the RSI for this purpose would be a crude way of using it. You need to understand that during uptrends, the RSI will tend to go and sometimes stay at overbought levels. On the flip side, the RSI will also tend to stay at oversold levels during downtrends.

The key thing to remember when studying the RSI is that it keeps track of the speed and change of price action. The market tends to move in waves. When there’s a disruption in how strong prices are going in one direction, this can be inferred as a very early signal that the tides may turn. Hence, the use of RSI divergences for reversal plays. 

Likewise, RSI consistently at high or low levels signifies the dominance of either buyers or sellers. Many professional traders tend to use this as a tool to screen for trades. Since the trend is your friend, it makes sense that you’d buy those that don’t have low RSI readings.

Different indicators have different nuances. There is usually more than one way to use an indicator other than what is commonly taught. By extensively studying how a technical indicator is derived, you can get a better understanding of how an indicator can help you analyze the markets.

Moving forward

If you want to get better at using indicators, make sure to focus on QUALITY OVER QUANTITY. Focus first on getting a better grasp of market behaviors. Then, try to understand deeply how indicators work and how they can be used in tandem with your price action analysis. 

Check out our different lessons. From educational videos to articles, we provide knowledge applicable to traders of different levels. All it takes to get better as a trader is to put in the work and do so with fervor. 

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This week’s featured trader is @probabilitypilot! He was able to find an accurate entry as $EEI was continuing its rally.

Elegant and simple, he was able to figure out at what point the stock was in the Elliot Wave cycle. Through confluences with the use of moving averages, a precis entry was found.

Let’s take a look at how @probabilitypilot analyzed the high-flying $EEI.

ANALYSIS FROM @probabilitypilot

During the time of his post, $EEI was one of the high-flying names in the local stock market. Prices strongly broke out of a bottom, reaching gains of 100% in only a matter of days. Given that momentum was very strong, prices only made a shallow consolidation – barely even reaching the 10-day EMA. As demand was shown to be strong, it made sense for traders to look for a momentum play in the intraday charts. 

@probabilitypilot did just that and created an intraday count in order to try and forecast the scenarios that might happen. By formulating both a bullish and bearish case, he would be ready for anything that happened to the stock. The analysis was spot-on. Based on the levels provided, traders who attempted the same trade would now have already gained more than 18%!

TECHNICALS OF THE TRADE

The most noticeable part of @probabilitypilot’s analysis has to be his Elliot Wave count of $EEI’s intraday chart. While most people usually employ wave counting to long-term charts to gauge an asset’s general movement, he used wave counting as a means to make micro decisions. Tied in with confluences using moving averages, and he got himself a solid thesis for a trade.

Generally, Elliot Wave counting is a technique used to try and predict the price movements of stocks. The whole theory is based on the idea that prices don’t go in straight lines – they tend to move in waves. Oftentimes, there are motive waves which tells you what the general trend is. There are also corrective waves wherein prices correct or pull-back. By identifying and labeling the different waves, you can work towards a deeper understanding of what the market’s current position is. When used in conjunction with other TA tools, this can become a powerful way of finding and executing trades.

FUNDAMENTALS OF THE TRADE

EEI is local company that provides construction services and supplies manpower both domestically and internationally. Specifically, it specializes in the installation and construction of power generating facilities, oil refineries, food and beverage manufacturing facilities, assembly plants, and many more. 

While the pandemic was hard on the company as most economic activity died down, the lifting of lockdowns and revival of the economy was enough to help EEI get back on its toes. With the resurgence of its cash inflows, the company recently announced that it’s giving out a whopping 5.76% dividend for the quarter. Although bottom-line numbers have yet to turn positive, the dividends are a big sign that the company is heading towards the right direction.

WHAT SHOULD BE YOUR NEXT MOVE

Currently, $EEI prices still continue to rise. If you’re just looking to get into the stock now, it might be best to wait for the pullback. Momentum is currently strong, but as always the market moves in waves. Given that the rally has already overextended, the risk-reward for entries right now is currently low. However, if you already bought shares of the company previously, make sure to trail your stops and to follow your plans for selling closely.

Once again, KUDOS to @probabilitypilot for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access, and continue to be an inspiration to the trading community.

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Information biases can have a big impact on the performance of traders and investors. They occur when data is viewed from a distorted perspective. Given the complexity of the financial markets, many succumb to different forms of information bias. Often, without even being aware of it happening. This can lead to suboptimal decision-making, which will directly affect one’s portfolio.

Given that the internet has let people consume information at a bigger volume than ever before, being aware and mindful of information biases has never been more important.

The Common Information Biases

While there are many kinds of information biases, there are three common ones that often affect market participants. 

1. Recency Bias

As the name suggests, this bias is the tendency of people to put more weight on recent events. Even in daily life humans tend to base their decision-making off of what’s currently happening. 

In the context of the markets, people often place too much emphasis on the most recent market trends and structures. While there’s nothing wrong with paying attention to short-term trends, it should always be put into the perspective of the bigger trend. 

2. Confirmation Bias

This is when people are inclined to skew information toward their desired result. People usually favor data and information that already aligns with preconceived notions or ideas. All while disregarding or putting less weight on information that says otherwise.

In the markets, it isn’t uncommon for traders and investors to look for positive information on their favorite stock or cryptocurrency. While it’s a good start to research different investments, objectivity needs to be maintained. Succumbing to confirmation bias can lead to distorted perceptions of risk to rewards, along with the probabilities of the trade.

Sometimes, this information bias can also lead to groupthink. This is where different individuals discuss only their positive views on certain investments, creating an echo chamber that only reaffirms their initial views on the market.

3. Herding bias

Somewhat similar to groupthink, this information bias is due to people’s propensity to follow the herd. Whereas groupthink is when individuals reaffirm each other’s original ideas, the herding bias is when people blindly follow what others are doing.

The best example of this is when people buy stocks due to hype. Driven as well by the fear of missing out (FOMO), many buy a rising stock solely because others are doing so. Often this is also what causes bubbles to occur. When prices start to plummet, it’s usually the unknowing investor/trader who usually gets the end of the stick. 

Protecting Yourself and Your Portfolio

Overcoming information biases is something every trader and investor should aim for. Since they can affect the validity of the data collected and/or the interpretation of data, information biases will affect one’s portfolio. 

One key thing to remember to avoid them is to try and stay as objective as possible. The majority of biases usually stem from either letting emotions take over or failing to try and grasp the whole situation. It takes a conscious effort to do so, and sometimes information biases can get even the best of us. 

This is where portfolio tracking and backtesting can help. No matter what biases affect you, keeping tabs on how your portfolio is doing will always serve as an objective reality check. On the other hand, backtesting strategies will also help you to create a better structure for your decision-making process. By doing so, there will be fewer cracks for information biases to sneak in.

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