Showing posts with label Interest Rate. Show all posts
Showing posts with label Interest Rate. Show all posts
UITF Performance as of October 2010 (3rd Quarter)
Do you hold Unit Investment Trust Funds (UITF) in your portfolio? Then you would be interested how your choices compare with other UITFs in the market. Personally, I have been investing more in Mutual Funds but I do have UITFs in my portfolio as well. I'll tell you all about them after the jump. Here are the year-to-date returns of the different UITFs as of October 2010.
PinoyMoneyTalk has summarized everything for us so I won't be repeating the data here again. Instead, I would just highlight the top performers for each category and add a few of my comments as well. I love PinoyMoneyTalk, it's a very informative site. You should subscribe to it as well. ^^ Click on this link to read the post from PinoyMoneyTalk.
Here are the highlights!
PESO EQUITY FUNDS
(Primarily invested in Peso securities)
1. Unionbank Large Cap Equity Philippine Equity - 78.91%
2. UCPB United Equity Fund - 60.99%
3. ING Philippine High Conviction Equity Fund - 60.30%
Note: Included in PinoyMoneyTalk's list are the BPI Global Equity Fund and the ING Asia Pacific High Dividend Equity Fund. These funds are not Peso funds but actually are US Dollar funds. That's why they have lower returns compared to Peso Equity Funds (International markets have not been performing as good as the Philippine Stock Market). If you are looking to diversify into Global Equity markets but you don't know how to invest in those markets directly, these 2 funds would be a good way to get exposure in those markets.
Updated year-to-date returns for these 2 funds are as follows:
ING Asia Pacific High Dividend Equity Fund - 11.32% (as of Oct. 7, 2010)
BPI Global Equity Fund - 5.55% (as of Oct. 8, 2010)
If you noticed, they have considerably increased compared to the returns published at PinoyMoneyTalk. This is because for the past couple of weeks, the US market and Asian markets have been performing well. Being Equity-based funds, these tend to be very volatile.
PESO BALANCED FUNDS
(Invested in both debt and equity securities)
1. BDO Peso Balanced Fund - 35.79%
2. UCPB United Balanced Fund - 33.15%
3. BPI Balanced Fund - 28.96%
PESO BOND FUNDS
A. Long term funds (More than 5 years)
1. UBP Long Term Current Income Portfolio - 8.80%
2. RCBC Rizal Peso Bond Fund - 6.50%
3. Landbank GS-FI Fund - 4.22%
B. Medium term funds (up to 5 years)
1. ING Peso Bond Fund - 9.81%
2. UBP Philippine Peso Bond Portfolio - 9.53%
3. BDO Fixed Income Fund - 8.51%
C. Intermediate term funds (up to 3 years)
1. UBP Current Income Portfolio (T-Bills 91) - 8.84%
2. UBP Infinity Prime Fund - 7.40%
3. BDO Peso Bond Fund - 6.80%
In these times when the dollar is skyrocketing down against the Peso, it might be better to hold on to them and wait for the rate to go up before exchanging. We don't have the comparative year-to-date returns for the different Dollar-based funds but we can give you two of our personal choices - the ALFM Dollar Bond Fund and the ING Philippine Dollar Bond Fund.
DOLLAR-BASED FIXED INCOME FUNDS
(Year-to-date returns as of Oct. 8, 2010)
ALFM Dollar Bond Fund - 6.68%
ING Philippine Dollar Bond Fund (PDBF) - 17.42%
The ING PDBF is performing impressively! For a dollar-based fund to give a double digit return is simply amazing. Regular dollar time deposit rates are only at around 1-3%. We have been invested in it for 3 years already and so far total return is around 34%. That's at least a return of 10% a year. We are very grateful.
Lastly, please note that the ALFM Dollar Bond Fund is a Mutual Fund and not a UITF. Read about Mutual Funds and UITFs here.
Happy investing Money Magnets! And keep on attracting money. ^^ Have you been singing our theme song? We certainly have!
News: Credit Card Interest Rates
In the news today, the Senate committee on banks, financial institutions and currencies, headed by Senator Francis Escudero, sponsored a bill called "Credit Card and Other Access Device of 2009" aiming to put a cap on the monthly interest rate credit card companies may charge its costumers.
Under the bill, the maximum interest rate that may be imposed on credit card users will be one percent (1%) a month. This is a big jump from current interest rates ranging around 3-4%. The good senator said that he wanted the bill passed to ease the burden of credit card holders caused by high interest rates charged by banks / credit card companies.
Aside from the cap on the monthly interest rate, the bill also prohibits credit card companies from compounding the interest charged on their customers. It will also require credit card companies to remind customers in the billing statements that paying only the minimum payable amount, and not the entire amount of credit, would result in higher interest payment.
Under the bill, the maximum interest rate that may be imposed on credit card users will be one percent (1%) a month. This is a big jump from current interest rates ranging around 3-4%. The good senator said that he wanted the bill passed to ease the burden of credit card holders caused by high interest rates charged by banks / credit card companies.
Aside from the cap on the monthly interest rate, the bill also prohibits credit card companies from compounding the interest charged on their customers. It will also require credit card companies to remind customers in the billing statements that paying only the minimum payable amount, and not the entire amount of credit, would result in higher interest payment.
This is certainly good news for credit card holders. However, an interest rate of 1% per month is still big. I hope none of you will fall into the trap and think otherwise. Remember to spend wisely and pay all your debts as soon as possible.
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Your Money and the Inflation Rate in 2009
I am a Money Magnet! We are Money Magnets!
How is your money fairing with the Inflation rate?
To simplify matters, personal finance coaches would simply say that your money should be invested in instruments that would give you higher yields than the inflation rate. This way the purchasing power of your money is preserved. However, this statement is incomplete and lack some details that you might be interested in. Read on to find out what I found out.
Sometimes knowing more can be truly depressing. This case is of no exception. While studying economics, my professor made me realize that Inflation rate is an index and as such only depicts an average value. This means that the published inflation rates may not necessarily apply to us who consume things that are not generally part of the average consumer's basket. Like especially for money magnets like us who have the privilege of being connected online, the chances are, only a portion of what we regularly consume is part of the items being considered in computing for the inflation rate. Things like personal computers, laptops, a cup of specially brewed coffee, your favorite pastries and cakes, are not part of this computation. This means that inflation rate for us is way much higher than the published rates! Therefore in order for us to preserve the purchasing power of our money, we must work doubly hard.
As of June 2009, the year to date inflation rate is already at 5%. However, for July, the inflation rate is expected to be only at around 0.4%. This will bring down the year to date rate to 4.34%. That is certainly good news.
For us money magnets, aim at achieving at least 2% higher than the published rates! I think this gives us enough leeway to ensure the preservation of our money. With time deposit rates only lurking at around 3-4% p.a., they don't appear to be very wise investments as of the moment.
As a last note, knowing things like this can sometimes bring your spirit down. I say, don't be. Let it challenge you to strive more instead. Digest what you have learned and try to apply it in the future. Instead of feeling down, feel good knowing that now you know better.
Wishing all you money magnets out there more powerful ways to attract money and wealth soon.
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Reader's Request: Tax on Savings Deposit Account
I am a Money Magnet! We are Money Magnets!
" I've been working for a year already since graduating from college last year. Since then I've been saving a percentage of my monthly income and i'm proud that somehow i have saved some money already. recently, i've asked my bank for a statement of account and i was suprised to see that there were deductions to cover for withholding tax. I didn't know that there are such taxes imposed for savings account. (Medyo masama lang ang loob ko thinking that what i saved is already what is left from my net income where huge tax have already been deducted). Sir, will you enlighten me? kasi medyo na discourage ako na magsave pa thinking that it will all drain down to taxes. Can you suggest some readings regarding taxes imposed on banking and saving? "
I received the above comment from an anonymous reader a few days back. I'm happy that he's making it a habit to pay himself first. (A round of applause for this guy please.) However, he was shocked to see that taxes were withheld from the interests he earned from his savings deposit account. And he hopes to be enlightened regarding this matter. Read on to know more about the withholding tax on bank deposits.
In the National Internal Revenue Code (as amended by the Tax Reform Act of 1997) which contains the laws governing taxation in the Philippines, interest income from bank deposits is considered as a form of "passive income." Therefore it is subject to a final tax of 20% which is withheld at the source (bank). Exceptions to these are interests earned from deposits held in foreign currency units which are only subject to a final tax rate of 7.5%. Also, long-term investments of over five years are exempt from the tax.
You've probably seen bank time deposit instruments that requires you to place your deposit for at least 5 years for it to be tax free. If you have availed of this type of investment, in case you withdraw your deposit before the 5 year limit, your interest income will be taxed depending on the remaining time to maturity.
If held less than 3 years - 20% tax
3 to 4 years - 12%
4 to 5 years - 5%
I hope everyone will not be discouraged to invest or to save because of these taxes. Generally, all forms of income are really taxable. Whether you invest your money in the bank, the stocks, UITFs, Mutual Funds, and even on your own business, if it earns and generates a considerable amount of income for you, it will be taxable.
It seems like most of our income really just goes to government. A majority of our population though is very much dependent on our government for basic social services. And believe it or not, our taxes (although maybe only a portion of it) do reach these groups of people. Let's just think that by paying our taxes we are helping these groups of people indirectly. It makes paying taxes not so much a burden. Let's also be grateful that we are paying taxes because that means we are earning a considerable amount of money. (^o^)/
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Saving Money Video Presentation
"I am a Money Magnet! We are Money Magnets!"
Last week, I came across Fitz Villafuerte's site and got introduced to www.commoncraft.com. Here's a video entitled "Saving Money in Plain English" from Common Craft. This video explains in simple terms how your money in the bank can grow due to compound interest.
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Time Value of Money related to CAP Education Plan Options
In a recent post from pinoymoneytalk.com, a member of the forum holding an education plan ECU-A from CAP (College Assurance Plan) was offered the following options for her plan:
Option 1: Tuition Fee Reimbursement
These options can actually be considered as an annuity or a series of payments that you would receive in regular intervals. Computing for the present value of this annuity using the Time value of money will allow you to compare the amounts as if you have them in your hands at this very moment.
The present value of an annuity is computed using the following formulas:
where PVA = Present Value of an Annuity
PMT = The payments received
PVIFA = Present Value interest Factor for an annuity
i or K = Interest rate
n = number of periods
Using these equations to the different options, assuming a 5% interest rate, we would actually get a present value of 153,717 for Option 1 (assuming the maximum amount of 19,759 is received) and a present value of 151,550 for Option 2. In order for the present values to be equal, Option 1's payments must equal to 19,480 pesos.
What does this mean?
This means that you only have a small margin of around 279 pesos (19759 - 19480) for both options to be equal in value. Therefore, if you're not sure how much the college tuition will be, I think it would be wiser to choose Option 2. This holds true specially if the beneficiary is not scheduled to enter college in the near future.
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An interest rate of 5% per annum is quite reasonable as investors can currently avail of time deposits at this rate. The higher the interest rate, the smaller the margin becomes. Let's say you can invest your money in an instrument earning 10% per annum, the margin would be lessened to 245 pesos.
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Computation guidelines / data:
Option 1:
PMT = 19.759
i = 0.05 / 8
n = 8
PVIFA = 7.568
Option 2:
PMT = 7,778
i = 0.05 / 20
n = 20
PVIFA = 18.987
Option 1: Tuition Fee Reimbursement
- Maximum reimbursement per semester = P19,759
- Total receivable amount for 4 college years = P158,072
- Check release takes 1-2 months processing
- Check release every 3 months = P7,778
- Total of 20 payments for 5 years
- Total Receivable amount for 5 years = P155,560
These options can actually be considered as an annuity or a series of payments that you would receive in regular intervals. Computing for the present value of this annuity using the Time value of money will allow you to compare the amounts as if you have them in your hands at this very moment.
The present value of an annuity is computed using the following formulas:
where PVA = Present Value of an AnnuityPMT = The payments received
PVIFA = Present Value interest Factor for an annuity
i or K = Interest rate
n = number of periods
Using these equations to the different options, assuming a 5% interest rate, we would actually get a present value of 153,717 for Option 1 (assuming the maximum amount of 19,759 is received) and a present value of 151,550 for Option 2. In order for the present values to be equal, Option 1's payments must equal to 19,480 pesos.
What does this mean?
This means that you only have a small margin of around 279 pesos (19759 - 19480) for both options to be equal in value. Therefore, if you're not sure how much the college tuition will be, I think it would be wiser to choose Option 2. This holds true specially if the beneficiary is not scheduled to enter college in the near future.
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An interest rate of 5% per annum is quite reasonable as investors can currently avail of time deposits at this rate. The higher the interest rate, the smaller the margin becomes. Let's say you can invest your money in an instrument earning 10% per annum, the margin would be lessened to 245 pesos.
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Computation guidelines / data:
Option 1:
PMT = 19.759
i = 0.05 / 8
n = 8
PVIFA = 7.568
Option 2:
PMT = 7,778
i = 0.05 / 20
n = 20
PVIFA = 18.987
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Evaluating Borrowing Cost
Are you capable of Borrowing?
When it comes to borrowing money, it is best to keep these simple reminders to mind. ^^
- Remember that it is not bad to borrow if you can pay. Just remember not to borrow for your "wants." Instead, borrow for your "needs" only if you really have to.
- Remember that borrowing requires you to have cash to pay for interest and principal in the future. In deciding whether to borrow or not, it is safer not to assume that whatever steady income you are receiving from your current job will still be present in the future.
- As a rule of thumb, when you are using more than 30 percent of your regular income for debt payment, that means you are borrowing too much already.
- When borrowing, it is important to understand how to compute for the Effective Interest Rate. With the different borrowing schemes, one might be led to think that you are borrowing at a lower interest rate when in fact you are actually paying more. Learning how to compute for the Effective interest rate will allow you to compare them on an even scale.
Understanding the Effective Interest Rate
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Investment Principles Everyone Should Know: No. 1 Time Value of Money
This series will present fundamental principles everyone, especially the young, should know when it comes to personal finance.
The Time Value of Money
Money received and invested today is not the same value as that of money, with the same face value, received in the future.
Most would think that a hundred pesos received today is the same as that of a hundred pesos to be received next year. This assumption is wrong simply because of all the ways you can make the money grow during that gap. Just by putting the 100 pesos you received today in a savings account, you'll at least earn interest on it, thereby increasing its future value.
Here's a simple formula to determine the future value of funds compounded annually given a specific interest rate:
FV = Future Value
PV = Present Value
i = interest rate
n = number of years
Example:
If I have 69,500 pesos and I allow it to compound for 31 years at an annual interest of 9% per annum, the future value of my money would be
FV = 69,500 (1+.09)^31
FV = 1,005,092 pesos!
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Achieving 10 Million by Age 60
In order for me to get 10 million by the age of 60, I'll have to invest at least 62,000 every year starting at the age of 30. The requirement is to have it compound at a per annum rate of 9% net. If I start at age 40, I'll have to invest 162,000 a year just to get to the same amount! It really pays to plan ahead and start early!
Watch the video here in Salve Duplito's blog. Don't forget to read about the "Important things to remember" per age bracket when it comes to financial planning.
Here's the list by Salve Duplito for those in their 20's and 30's.
Important things to remember:
- Automate your savings
- Start with saving at least 10 percent of your income and increase from there
- Start setting up an emergency fund up to six months of your living expenses
- Invest unexpected windfalls instead of spending them on gadgets or gimmicks
- Try mutual funds
- Inquire about your company’s retirement plan package
- Invest in stocks if you have the stomach for the roller coaster ride in the market. Over long periods, stocks have gone up much more than they have gone down
- Consider bonds if you are a conservative investor
- How much to invest for the long-haul? A rule of thumb says you should subtract your age from 100 and then add a percentage sign
- Just say no to debt other than a home mortgage
- If you can’t live without plastic, pay the entire balance each month
- If you have debt and have savings, take out your money from the bank and pay your debt. Paying off a loan can be one of the biggest investments you can make
- Review your health benefits at work to make sure you have the coverage you need
- Even if you are just renting an apartment, be sure you have insurance on the contents
- You do not need life insurance if you have no dependents. Once you have children (or if your parents are now dependent on you), you will probably need more than at any later time in life
- No-frills term insurance is usually the simplest and lowest cost option
- Think carefully about buying a house versus renting. Since the fees can be steep, buy a home only if you are going to live in it and do not need to relocate in a few years
- Buy only a house you can afford. A lot of people end up getting strapped for cash because of the tendency to stretch themselves to buy the biggest house they can
- Start thinking about writing a will
PSBank Time Deposit Rate
PSBank's Time Deposit Rates
Rates are on a per annum basis and net of documentary stamp taxes.
Deposit Amount 30 days 90 days 180 days 1 year
100,000-499,999 3.750 3.750 3.875 4.250
500,000-999,999 4.0 4.0 4.125 4.50
1M - 4.99M 4.750 4.750 4.875 5.250
5.0M and up 5.0 5.0 5.125 5.50
Premium Time Deposit Interest rate is at 6.5% p.a. net of documentary stamp tax and 20% witholding tax.
Minimum amount for individual account is P50,000, holding period 5 years.
Member PDIC. Maximum deposit insurance for each Depositor is P250,000.
Visit there site at www.psbank.com.ph
LBC Bank Royal Earner Special Savings
LBC Bank Royal Earner Special Savings Rates
Deposits start at P10,000 only.
If you have low risk-tolerance and is looking for an investment vehicle where you can safely put your hard earned money then this investment might be for you.
Term Interest Rate
2 years 7.750 %
3 years 8.500 %
4 years 8.750 %
5 years 9.000 % (Tax Free if maintained for 5 years)
Email: time.deposit@lbcbank.ph for more inquiries.
Domestic toll-free number: 1-800-1-888-86-86
Metro Manila: (02) 899-86-86
Member of PDIC. Deposits insured up to P250,000 per depositor.
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Sample computations:
For 2 years:
Php : 10,000.00
Term : 30 days
Interest : 7.75%
Tax : 20% Monthly Interest before Tax =
[10,000.00 x 7.75% x 30 (days)] / 360 days = Php64.58
= Php64.58 x 20%
= 12.92
= Php64.58 – Php12.92
= Php51.67 (interest monthly)For 5 years (tax free):
Php : 10,000.00
Term : 30 days
Interest : 9.00%
Tax : FREE
[10,000.00 x 9.00% x 30 (days)] / 360 days = Php75.00
Total Interest after 5 years =
= Php75.00 x 60 (months)
= Php4,500.00 (earn interest for 5 years)
Commandment no. 6: Trust the power of Compound Interest
Personal finance by Francisco Colayco. Let us learn from him and bring us to financial freedom.
TRUST THE POWER OF COMPOUND INTEREST!
LEAVE YOUR EARNINGS TO EARN COMPOUND INTEREST!
When we save, do not be tempted to use your earnings for personal use right away. Instead leave the earnings, learn to roll it, let it earn through compounding.Read more about compounding here.
Double your savings! (Rule of 72)
Do you know when your savings will double? Follow the rule of 72. Here's the formula:
years to double = 72 / interest rate
This is just an estimate by the way, but a very good one. Example: If your bank is offering 6% interest per annum then it would take exactly 12 (72/6) to double your money. You can use the formula backwards to compute for the interest rate given a particular no. of years. Like say you want your money to double in 10 years, then you would have to look for an institution offering 7.2% interest.
Want to know how this formula was derived? Read more here.
Want to know how this formula was derived? Read more here.
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