Investing with the Phl government

Tuesday, April 11, 2017

Investing with the Phl government



Aside from Private institutions, did you know that our own government has various investment products as well? Many may think that we don’t need give more money to government due to corruption or we already do that by paying taxes to BIR; but the government also needs to raise funds to support various projects that needs to be completed. Also, investing into government can be an additional hedge in your overall investment portfolio.

An example of this is what you call “Government Securities” (GS). GS are debt instruments issued by the Republic of the Philippines or any of its instrumentalities to finance public expenditures. These Government Securities are scripless securities and are registered under the Registry of Scripless Securities (RoSS) System of the Bureau of the Treasury.

These are the safest investment instrument in the market, because they are backed by the full taxing power of the government, thus are practically default “risk-free”. GS are an attractive investment vehicle since the safety of your principal is assured.

The Philippine Government issues two kinds of government securities (GS): Treasury Bills and Treasury Bonds, so-called because it is the Bureau of the Treasury which originates their sale to the investing public through a network of licensed dealers.

Treasury Bills
Treasury Bills are government securities which mature in less than a year. There are three tenors of Treasury Bills: (1) 91 day (2) 182-day (3) 364-day Bills. The number of days are based on the universal practice around the world of ensuring that the bills mature on a business day. Treasury Bills are quoted either by their yield rate, which is the discount, or by their price based on 100 points per unit. Treasury Bills which mature in less than 91-days are called Cash Management Bills (e.g. 35-day, 42-day).

Treasury Bonds
Treasury Bonds are government securities which mature beyond one year. At present there are five maturities of bonds (1) 2- year (2) 5 – year (3) 7 – year 4) 10 – year and (5) 20-year. These are sold at its face value on origination. The yield is represented by the coupons, expressed as a percentage of the face value on per annum basis, payable semi-annually.

Right now, there is a public offer from the Bureau of Treasury for Retail Treasury Bonds from March 28-April 6, 2017. Investment amount in 3-yr RTBs is for a minimum of P5,000.00 and in integral multiples thereof with a forecasted per annum return of about 4.25 percent. Contact your local bank for more information!

Other Investment Programs
The government just recently soft-launched the Personal Equity and Retirement Account (PERA) Law which is our own version of USA’s 401k although ours is not mandatory. The PERA Law is a personal and voluntary retirement savings plan (with tax credit feature) that will be provided to all Filipinos who want to participate.

SSS has its own optional funds such as the SSS Flexi-Fund which is an additional provident fund for OFWs which is based on 91-day treasury bill rates. Another lesser known program is the Pag-ibig Fund 2 which is also an additional option of your current Pag-ibig contributions (invested into a government mutual fund) with a total investment term of 5 years with a 5.5 percent - 6.5 percent average return per annum.

What are you waiting for?

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The writer is an RFP® - registered financial planner of RFP PH, Licensed Real Estate Broker and Director of CERTA, Inc., a family estate planning and investment advisory firm. To know more, please visit www.certa.ph
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Originally Published in Philstar - The Freeman Newspaper last April 4, 2017.

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