I’ve written more than once in this journal about some strangely structured and ill-advised investment schemes (scams?) in the Philippines. Sadly some of them were even heavily touted by fellow expats, and I’ve lost friends over the issue as well.
One huge scheme, the Legacy Group Rural Bank fiasco is still playing out in many levels of the Philippine government. A number of banks have been closed, many people have been accused of crimes, some have been formally charged and fortunately for the depositors involved, the Philippine Deposit Insurance Corporation (PDIC) is in the process of paying claims of depositors. Will everyone get back every penny they invested? I surely don’t know, I hope so, but it surely can’t leave a very good taste in the mouths of anyone involved. I think it’s better to make investments that you don’t need ‘scoundrel insurance’ for.
The reason I smelled a rat long ago and the reason the Legacy Group house of cards tumbled, in simple terms, is greed and an unsound business plan. If you ask people to invest, guarantee to pay them a certain high rate of interest and then have no suitable investment vehicle bringing money in to pay the interest going out, it doesn’t matter if you are Bernie Madoff or if your heart is pure as the driven snow … the scheme can’t survive.
On the other hand, I myself surely hate having money in the bank earning little or no interest. My US-based credit union proudly touts 5 Year certificates of deposit paying a whopping 3.0% per annum … fully subject to income tax, of course.
Or the old safe and secure standby, US Savings Bonds .. buy some today while the simply astounding rate of return is a whopping 0.70% PA. (That’s not a misprint, I went and looked it up and had to clean my glasses to make sure I wasn’t misreading the information at the official government site. Pretty unattractive in my book
For those of us who live in the Philippines and have a bank account here there is an interesting alternative. Before reading further, do bear in mind that:
- An investment advisor advisor I am not. Invest in any thing at your own risk and if you think you need professional guidance, get it.
- I have no interest in these investment vehicles at all. I do not sell them, get any commission or anything else of value and only mention this as an item that interests me and may thus interest you.
That out of the way, I’m talking about Government of the Philippines Retail Treasury Bonds. Here’s some information regarding these investment instruments along with a link to an excellent source of financial data here in the Philippines:
First, what is a Retail Treasury Bond?
The Philippine Retail Treasury Bond (RTB) is a direct and unconditional obligation of the Philippine government generally considered a safe and liquid investment opportunity. The RTB, issued by the Bureau of Treasury (hence the name), is one way for the government to raise needed funds.
It is safe because it is fully backed by the government and rarely does a government, including the Philippines, defaults on a debt security such as this. It is liquid because it can be traded in the secondary market prior to maturity.
It is called Retail because at Php5,000 (US$112) minimum investment, even individuals can invest here … learn much more about TRB’s and other finances at the excellent Pinoy Money Talk
9% before taxes sounds pretty good to me. I’m on my bank manager’s list for a couple hundred thousand Pesos’ worth … if the bonds get offered later this summer. Last year there was no offering because the government was meeting its income goals and didn’t need to borrow, this year we will see what we will see.
Regardless of what you think of the bonds … or if they even get offered this year, I highly recommend a regular read of Pinoy Money Talk … an excellent resource to learn what’s going on here in the Philippines financially, written at a level we non-financier types can easily understand