Jan

How to Invest in Retail Treasury Bonds in the Philippines – Interests and Fees

Last October, I wrote a story on how my wife and I were able to invest in Retail Treasury Bonds (RTBs) in the Philippines. We’ve practically forgotten about it until we received a letter from the bank informing us that they have already credited our settlement account with Bank of the Philippine Islands (BPI) Capital Corporation. We just received our first quarterly interest!

Here’s a picture of the interest payment we received.

The net amount is just as we expected. Our total investment amounted to PhP 200K with a tenor of 7 years at 7% annual interest. This would translate to an annual interest amount of PhP 14K per year or PhP 3,500 per quarter before-tax. Note that the Gross Amount indicated in the above picture is the same as our computed quarterly interest of PhP 3,500. This amount is taxed at 20% (or PhP 700) which further reduces it down to PhP 2,800. This is the net amount after taxes. This is the amount we expected to receive every quarter for 7 years. Not very exciting but certainly beats the interest on savings accounts.

There’s one thing I didn’t expect though — fees. Included in the letter are 2 debit transactions which I missed in the fine-print. One is a PhP 7.25 Custody Fee and the other one a PhP 25 Transactional Fee-Security Deposit.

I’m guessing we were assessed with these 2 fees because we purchased the RTBs from a bank, which is basically, a secondary-market. Unfortunately, it looks like these two fees will also be deducted every quarter.

In effect, the PhP 2,800 interest is (again) deducted a total of PhP 32.25 fee which brings down the amount we will receive every quarter to PhP 2,767.75.

Anyone experienced the same thing or know how these two fees are computed?

Things I learned while investing in RTBs:

1) Invest now.

If we waited until we had ALL the answers, we would still be wondering today how to invest in RTBs. Yes, we were assessed a PhP 32.25 fee that we didn’t expect but the net amount is still better than interest from a savings account or even time deposits.

2) Read the fine print.

If we’ve read the fine print, we would not have been surprised by these fees. Yes, it may be tedious to go through every form and double check all information indicated in each form, but a 5-minute checking on the fine-prints can save you time (and money) in the future.

3) Don’t be afraid to fail.

We’ve known RTBs for quite some time, but only decided to invest a few months back. We were afraid to fail and lose money. We were content to leave our money sitting idly in the bank via savings or time deposit accounts. Now, our money is working for us, and making us money – even for only a little amount. This money is passive income.

I know that the interest amount is small, but imagine if you’ve invested 10x the amount we invested…it would give you a quarterly “passive” income of PhP 28,000 before tax. That’s around PhP 9,000 every month. If you can live on that income for a month, then you’re practically free! (at least for the tenor of the investment:)) That’s money you did not have to work hard for. That’s money given to you whether you worked at your job or not. That’s money working for you and setting you free.

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Tags: Interest and fees, Retail Treasury Bonds, Retail Treasury Bonds in the Philippines, RTBs