Monday, January 2, 2012

New Year 2012 Mailbag: Global and US Dollar Funds


I spent the last week of 2011 with some friends in Negros Occidental and Guimaras, so I did not have much time to check my email and reply to some comments on the website. My flight back to Hong Kong is still a few hours off, so I'll use this time to answer some of your questions.

Dear Investor Juan,

Your posts are very informative. I have tried investing with BDO Equity, BPI Odyssey High Conviction, and BPI Odyssey Philippine Equity funds and these were able to give me 10 to 13% in 2 months. I already redeemed my investments and bought dollars at 43.50 to 43.65. I am planning to try BPI Odyssey Asia Pacific High Dividend Equity Fund and BPI Global Equity Fund since the NAVPUs are now below par. Seeking your advice. Thanks in advance.


Dear Sandy,

Congratulations for being able to earn very high returns on your funds in the short term; I hope you would be able to earn as much or even higher returns on your future investments.

One important benefit in investing in the global funds that you mentioned is geographical diversification, which minimizes risk that is specific to any one country. Of course, this benefit come at a cost: since gains by high performing stocks in one country may be substantially pulled down by underperforming stocks in another country, don't be surprised if you earn lower average returns than a Philippine equity fund. Whether this cost is worth paying is all up to you.


Dear Investor Juan,

What would be a good combination of investments for dollar and peso. For dollar, I can put in about USD 3000 and for peso, about P50,000.00.

I hold most of my savings in two BDO dollar accounts. Given the downward trend of the dollar, is it better to convert it now? What proportion do I retain in dollar?



Dear Anonymous,

Looking at BSP's historical forex data, I'm not so sure if there is a downward trend for the dollar; even if there is, I'm not very certain whether this trend will persist in the indefinite future.

That said, in my opinion there are no hard fast rules in allocating your capital to specific currencies, so your proposed dollar-peso mix should be as good as any. What I do recommend is for you to just invest in the currency that you earn since changing back and forth between currencies in the short term involve fees/spreads (i.e., the bank or money changer's markup) that could easily wipe out any gains from one currency's appreciation or depreciation.


Dear Investor Juan,

Just asking where to put my dollar investment with low risk of losing the principal amount?



Dear Ed,

Money market US dollar funds offer the least risk of losing principal since these are mostly (often, exclusively) in "safe" instruments like short-term deposits, and Philippine and non-Philippine government securities.

In my opinion, however, US dollar bond funds are also worth considering since they offer substantially better returns without significantly compromising safety.

You can check out this past post about US dollar UITFs for a detailed comparison of available funds from major banks.

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