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How Fresh Graduates Can Invest Smart
Sean: Welcome back to Leadership Stack. We’re going to have a very special night because we have Mr. JC Del Rosario of Juan Carlo Catering as a guest on the show. And we also have Mr. Marvin Germo, the investor, our national investor.
Marvin: Friend of Sean Si.
Sean: We have questions tonight. The first one is, what are the top five investments for new graduates or fresh grads to invest in and to start to accumulate?
Marvin: If I’m a fresh grad, I’d still do stocks and I’d still go into business. That’s it. I don’t know if I’ll do bonds if I’m a fresh grad. I don’t know if I’ll do it. Anything that has maybe a high degree of risk, I will try it earlier on. So I think that’s how I will look at it. Anything that they understand that will give them larger upsides since they are still young, I think that would be better for them. So I suggest that they study. Look for investments that make sense for them, and then what they understand, what they think they can grow with, and then what they think will work for them. That’s what they should focus on.
But for me, I always tell them, start businesses as early as they can. And then when the businesses start making money, put them on the stock market. And then when the stocks make money, buy preferred shares, buy REITs, buy bonds, or later on, they can also buy real estate. So any of those.
JC: Actually, it was funny because my cousin asked me the same question. He asked me if he had a hundred thousand, where would he spend it. For me, coming from the background of business, I’d really go with business. But he has a full-time job and he needs job security and he can’t focus on it. And then I told him to just look at the different opportunities. Like Marvin said, what makes sense for you? So you want something passive. I taught him some of the investments I invested with like P2P lending. And then there are also other businesses that I can’t, that I have NDAs with some of them. So I just talked to him, I just told him, and then looked at different real estate properties, how much it is. And then I went through the numbers with him, to try to calculate.
Honestly, it depends per person of what opportunities you see, what is allowed for you. My situation is different from Marvin. My situation is different from my cousin. So It depends. You just have to honestly compare the different investments. A lot of the challenges with young people that I see, they keep talking about it. They don’t actually put in the time and try, oh, how much is it going to cost me to buy a single family home? How much is it going to cost me to, how do I compute the tax for that? How do I find out the HOA – homeowners association- fees? All of that. If you don’t put in the time to actually try to even check if it makes sense, then you’re never going to start. But for me, based on my background, I’d really go with business.
Marvin: Business is really amazing. If I didn’t do stocks, I’d really do business because that’s one of the best ways to do it. Businesses will add money to you while with stocks, it helps you multiply it. Here’s the difference between business and stock. With business, when you go home, you also take home the headache, especially if it’s a person you’re having problems with. But in stocks, there is none. When the market is close, there is nothing you can do with it. But if you are a business operator, for example when you collect money from your clients but they don’t pay you, you bring that with you and sometimes there’s even a feeling of resentment to it. Things like that. You bounced a check, or an employee steals from you, or how do you increase sales also, or you have other competitors.
So there’s so many factors that you can’t control. Unlike when you go into the stock market, after trading hours, that’s it, you’re done. You’re done. So I think that’s the difference. And I think it’s nice that when you’re still young, you start early for you to know what will work for you and why it also works for you. So that’s it. That’s just my take on it, I guess.
JC: For me, I just wanted to add. Because if you’re a fresh grad, and this person is, like usually you have more time. Like today, I have to even taste the food quality later, right after this podcast. So until midnight, I’m in our commissary. I’m in duty in the morning till five o’clock. And then eight o’clock usually till midnight, I’m in our kitchen handling the operations. So that’s why what Marvin said is true. It’s like, it’s not just like a job that from eight to five, you clock in and out. It’s not. Because I run 24/7 services right now.
Marvin: Also, that’s what other people don’t understand about business. In business, there are no holidays even if people say, no, there should be work-life balance. What will you tell your clients, for example, there’s someone who got food poisoned? Just putting it in the perspective of JC. In a wedding, the bride got food poisoned. That could have happened or that could have happened several times, or it has not happened yet, but as the owner, you take responsibility for that because it’s your name that’s on the line.
JC: It’s the important day of their life. The wedding is only a once in a lifetime experience, then you humiliated them to their guests. You really have to fix that.
Marvin: One more thing, if that happened when JC is in Europe taking his vacation, he will have to set aside whatever tour he’s on to take whatever call that’s happening. That’s the difference of being an employee and a business person. It’s true that you get to do what you want. But the flip side to that is, you also don’t get to do what you want.
There are also cons in the stock market. The cons in the stock market is you don’t control it. In business, you can control it. Right? You can control it.
Marvin: For example, I can’t take in 15 customers. I can only take 10 customers, so I’ll really just take those 10. Like that. You control your destiny somehow. In stocks, you can’t. So I think that, the more control you have, the bigger your chance to earn. The lesser control you have when someone’s doing it for you, the lesser your earnings also.
Sean: You know, Marvin, I just remembered Robert Kiyosaki’s Cash Flow Quadrant: Employee, self-employed, businessman, investor. In your case, you went straight to the investor. That’s how it’s supposed to go.
Marvin: I’m doing everything. The misconception of other people is you invest to retire. That’s not true. You invest to do what you like, if what you like makes money for you also. We’ve been brainwashed that if you’re an employee or retired, you should start your business. People think that being in a business is the end and all. Try asking JC, there are more headaches when you’re a business owner than when you’re an employee. It’s easier to be an employee than be a business person. That’s the truth. There’s more riding in your shoulders. I’ve worked harder, longer, when I was no longer an employee compared to when I was still an employee. It’s more stressful.
JC: Like in our company, we have 400 employees and families who depend on us. So the pressure is not just for yourself, but for all the people who rely on you. The challenges are very different. But it really depends on you, again, on what pushes you, on what motivates you, if this is something you like. So Marvin’s advice is right. Do what really works for you.
Sean: Your time freedom is really different when you’re an investor. But most business people, that’s their goal, to be an investor, VC, or angel. Usually, that’s the graduation from, if you look at Silicon Valley, entrepreneurs who exit, usually become investors. It’s kind of like the next step.
Speaking of, you mentioned earlier, JC, P2P lending. What is P2P lending?
JC: Like in stocks, you put your money and you invest it, you own a part of this company in a big company. Or like in mutual funds or in UITFs, you put your money and then there’s somebody who manages the funds for you. This one, the one that I do, it’s like a, it’s a loan. It’s essentially a loan with these different companies which are individual companies. It can be multinational businesses here in the Philippines or national businesses in the Philippines. And then I don’t own any portion of their business. I have no say in operating their business, but I have a fixed monthly return. That’s how my deal works, the structure. Is that P2P lending, Marv? Is that right?
Marvin: I don’t know. The gray area, I actually don’t know if it’s right to call it the gray area. If they solicit investments from people, either through debt or equity, there should be a license. I don’t know also what area they are treading on. If it’s offered only to friends, maybe it’s possible. But if it’s offered to the public already, there are certain licenses also that are needed. What’s happening, there are a lot that do it but with an app. So with other apps, you don’t know if they are already taking away the money or where the money goes.
There are certain facets that they only show that the money goes here. And then you are not aware that the money didn’t actually go there but they are just returning what they give to you. So for the people watching this, they have to know to whom they are doing that. It has to be someone who is trusted. And then, normally, the interest rates, they are higher than what you would get from banks, higher than what you would get from bonds. I haven’t tried.
I consider it risky also that maybe there’s a chance that the cash will not return to me, especially if it’s a startup business. I’d like to invest in startups as an investor if you accept the risk if the business went gone. But I haven’t tried it in debt. Because in debt, you have no say to it. But if you’re an investor, since you have equity, somehow it’s more transparent in some of the items that are not available also to everyone. That’s it. I guess you just research who is the one lending or who owns that platform also, if it’s someone who is irrefutable also especially that they’re threading in a gray area. I guess that’s what I could say about it.
JC: Definitely. Like when we invested there, actually, we had our lawyer create the contract format. So it’s definitely legal. You know, my parents, they’re in their 60s. They are already seniors, and they have been putting so much of their money completely on our catering business. And I was really advising them that they need to diversify. They need to open different avenues for income. I learned a lot, Marv. So I am telling my parents, then just evaluated the different options that I had.
And then I also invested my own cash because I am in the situation that although it is risky, cause it’s not like in mutual funds that there are so many companies. This one, it’s just one company, but I reviewed their financials. You have to do the research. You have to know who the entrepreneur is behind it. I can’t name the specific fast food that I joined. But that entrepreneur, he’s the number one franchiser in the Philippines of that fast food.
So it’s a win-win situation because I lessen her risk and then I’m also able to help her fund to go nationwide, to get all of the different branches that she wants. And also to that other business that also wanted to go nationwide, but they didn’t want to give up equity. So now they’re in every SM in the Philippines and we’re helping them. So, that’s how it works. Just helping each other.
Sean: But private investments are great, right? How about you Marvin? You have private investments, right?
Sean: I think JC, you have more private investments than stocks.
JC: I haven’t tried stocks. Not yet. Only private investments because that’s what I know. Like, I want to see the business model. I want to see if it’s sustainable. I want to look at the financials. That’s what I know. But I want to get into real estate.
Marvin: The upside of private investments are higher especially if you’re just starting. Unlike in the stock market, even if it’s IPO, it’s already high. There is a different movement in the company when it is ten million to a hundred million compared to one billion to two billion. Something like that. So ten million to a hundred million has a higher chance of growth as compared to one billion to two billion. It’s true that it’s a billion but the multipliers are smaller.
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