Manila, Philippines

Where to Put my Christmas Bonus?

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 It is once again the Christmas Bonus and 13th Month Pay season in the Philippines. Most of the employed labor force can expect a little extra income outside the usual montlhy wages. Less deductions as well since SSS, Pag-ibig, Philhealth etc are not deducted from these bonuses. Supposedly.

Now before you ask days or weeks from now ‘where did it go?‘ just like how you did 2 to 3 years ago, read on and ask yourself NOW: ‘where should I put it?

The usual will be put it on your savings account, time deposits, invest in stocks. Or invest in your house for improvements, go travel, or buy your dream gadget or whatever item for Christmas gifts. Or start your own small business. You might have heard of these usual friendly advices. I offer two other alternatives below:

1. Special Deposit Account (SDA):  As the name connotes, this is not your usual deposit or savings account. This deposit account is offered by our central bank, BSP, and is made available via BSP-regulated banks. This deposit account earns much higher than a savings account (less than 1% per annum) and even time deposits (~2% per annum). SDAs earn as much as 4% per annum (gross rate, subject to tax). Note though that this rate also fluctuates depends on the rate set by the BSP. BUT, note as well that this rate will always be higher than savings accounts and time deposits.
It is also more flexible than a time deposit since holding period is only one month. After 30 days, you have the option to withdraw the whole amount, roll-over the principal and interest, or roll-over just the principal and payout the interest. Some banks even do call-outs every month to ask for your disposition on what to do with the proceeds once the find reaches 30-day maturity.

Not a lot of time deposits from banks offer this high rate and such a short holding period.

Minimum deposit amount is Php50,000 if you will open SDA in the bank of 7,107 islands. Not sure how much the minimum is in the bank of gold, but a foreign bank’s minimum for SDA is a million pesos. Just go to your favorite bank to inquire and process the documentations.

2. Mutual Funds: This is for those who do not have the time and know-how to study and risk in stocks, and also those who do not have enough funds to participate in bonds. Simply put, mutual funds are pooled funds from various investors, and are usually invested by banks in stocks, bonds, and even foreign currencies such as the dollar. Most funds also offer a combination of investments, such as 80% bonds and 20% stocks. 

When you get into mutual funds, you sort of just choose the general fund and investment strategy you want. Our dear fund managers make the day-to-day decisions and placements for us. And in case you invest in a fund that engages in stocks or equities of foreign currency, then there is also the risk that your invested value will go down. Bonds meanwhile are fixed-income investments but the return is not that high compared to stocks of course which carries more risk.

The main advantage though is that you only need to invest as low as Php10,000 and you can already leave it there to the fund managers’ expertise. Further, since banks offer mutual funds, of course there is the incentive for banks to make the funds grow. Otherwise, no one will invest their money in their mutual funds right?

Again, I have inquired in the bank of gold and the 7,107 islands on their mutual funds. Most have a minimum investment amount of Php10k and you can already invest in stocks/equities, bonds and dollar funds and some combinations. As to which funds and which bank performs better, it is up to you to find out.

So before you splurge your Christmas bonus this year, you might want to consider giving it opportunity to grow and multiply, with acceptable risks involved.


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 Investments For Filipinos

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