where to invest US dollars

[Monty]

Sirs ok na kaya yung Philam Dollar Bond Fund? They seem to be the best performing USD bond fund recently, 90% invested in government securities. Recent at around 7%.


Ang ayaw ko lang, hindi ata to PDIC-backed. Kasi hindi na rin naman stable yung bonds every since they became tradeable?

Meanwhile USD medium term time deposits are at around 2 - 3.++%

Badkuk, mukhang ok ang past performance. Sana ok din ang future performance. Basta diversified ka. :-)

[badkuk]

Badkuk, mukhang ok ang past performance. Sana ok din ang future performance. Basta diversified ka. :-)

i'm a little conflicted; my original intention is to keep USDs as my super-safe, all hell breaks loose investment(money market, TDs)...on the other hand sayang yung returns

Ang alam ko sa PDIC, USD deposits are insured up to equivalent of Php400,000

[Monty]

i'm a little conflicted; my original intention is to keep USDs as my super-safe, all hell breaks loose investment(money market, TDs)...on the other hand sayang yung returns

Ang alam ko sa PDIC, USD deposits are insured up to equivalent of Php400,000

It's just a matter of striking a balance (which will depend on your investment strategy) between USDs and PHPs as part of a diversified portfolio.

IIRC, the PDIC insures all depositors up to Php500k except that if it is an FCDU then the PDIC will pay out in the same currency.

[jhnkvn]

1. Past performance is not indicative of future performance.

2. That will all boil down to your portfolio strategy. You'll always need liquid cash that misses out of the market opportunity but you'll always need them liquid for short-term emergencies. Strike a balance between your long-term investment which you can sock away at long duration, medium-term investments, and short one.

3. USD time deposits shouldn't be that high seeing how the US T-bill is at a low since the Fed hasn't jacked up its rates. 1-2% is more like it.
* https://www.bdo.com.ph/personal/acco...r-time-deposit
*United States Government Bonds - Bloomberg

Take it from me that even I'm finding it very hard on where to sock away short-term money. While my core holdings remains, my short-term funds is liquid. That's because even I have no idea where to throw them in - US equities are expensive and PH equities are even more expensive. Truthfully, Hong Kong's equities are historically low though and I'm kinda drawn to that.

Regarding Philippine bonds, don't expect performance to be like those in 2009-2012 where you have very healthy +% increases YTY. In fact, forward-looking.. you should expect an underperform on PH-centric bonds. The growth in 2008-2012 was due to the Fed starting its printing machine and then kept its interest rate low to facilitate an economic recovery. This ushered in the era of low interest rates globally and obviously.. the BSP followed suit. Locally, because of the rather cheap credit, our real estate industry has tremendously boomed since they're heavily reliant on borrowings to boost project IRRs (internal rate of returns).

Once the US gains its strength (it has already stopped its printing press), expect interest rates to rise. At the very least, it'll start at 2015. Now if interest rates rise, I don't see why the BSP won't follow suit. Truthfully, it should have raised its rates this year - the economy is healthy enough.

In 2007, the BSP's effective interest rate was around 7.5%. Now it's at 4% and it reached 3.5% in 2013. Use trading economics' easy-to-read-and-understand graph (Philippines Interest Rate | 1985-2014 | Data | Chart | Calendar | Forecast). Interest rates and bond value moves inversely with each other. When interest rates rise, bonds go down. When bonds go up, interest rates fall.

The logic of this is that when you buy a bond, you're basically buying future money. When you buy a bond, you're signing up for a fixed amount of money in the future. So, if interest rates go up, and there are similar bonds out there with a better interest rate, why would anyone want to buy your bonds? They won't! Thus you'd need to discount them. That's the logic in a rough sense.

[badkuk]

Very informative post sir...

A friend recommended a certain fund from a local bank, noting that the underlying securities are near term, i.e. matures in 1-3 years. He expects short term bonds to go up, but i think he meant that it will go up *relative* to medium- or long-term bonds, that's why he picked the fund whose underlying investments are short term.

Yung logic niya is, since everybody's expecting the Fed to raise rates, medium- or long- term bonds will be less attractive, since their money will be tied up longer and won't be able to reinvest that money on new bond issues(with better rates).

But if bonds will not do well in general, maybe there are other investments we can consider? mas OK kaya mag invest in US government securities, or some kind of fund/UITF that buys US gov't securities?


i may just park it in money market for the time being ^_^

[jhnkvn]

Right now, I have three opinions -- two of them international and one local.

1. Due to the recent dip in US equities, if you're looking for a safe cash parking spot, I'd say there would be large-cap dividend paying stocks that's still cheap in the US after the dip. The slide is actually big enough that I'm back in researching some companies.

2. I will also join the popular opinion that the EU will loosen its monetary policy further. There's only so much Germany can reject further easing when its own economy is nearly dipping into recession and inflation figures continue to stagnate. Seeing the ECB wants to "save EU at all costs", even with my contrarian nature.. I think betting on a further easing is a safe option near-term.

3. For the local.. since di ko pa tinitignan equity markets natin, I'm guessing most are fairly expensive. Ayala Land seems to be fairly valued at 34 times 2014 earnings. By all metrics, dapat nga expensive -- but the expensive is somewhat justified by its insane growth lately. And in no way am I going to bet against their Vertis North project (since I'm actually waiting for it).

Based on your rationale, short-term bonds (1-3 years) is a safer option than betting on long-term. But if you value the "other investment options", I'd won't bet parin. In fact, I feel corporate bonds are safer than PH-bonds nowadays -- it's a popular option too lately for big-cap companies to raise cash via bonds too so that reinforces the general sentiment on the market.

Best return parin for beating the market? Entrepreneurship. Kahit ano gawin mo with the high inflation rates and low returns, entrepreneurship is the way to go if you're limited to local options. While I'm not a fan of franchising, a good example is that a franchise of FamilyMart has an estimated ROI of 5 years. If that's true, that's a return of 20% -- far better than what local bonds or other bank financial instruments can give you.

[baludoy]

very informative reads

as for me, naka-park sa dollar bond fund ng bpi/alfm iyong aming dollars (being meager as it is hehe). it's been there for several years now and kumikita naman

kelangan na nga ata i-top-up uli kasi i cashed out on its "unrealized profit" two years ago when i needed some greenbacks

[macsd]

US investors keen on PH bonds | Inquirer Business

This is where it's best to invest specially yung opening new bonds. About US100K worth each buying kaya dapat pag-ipunan na in time for their new offering next year.