Are US dol­lars still good in­vest­ments?


Cebu Daily News - - OPINION -

Ques­tion: I am an OFW and I want to know if hold­ing on to US Dol­lars and maybe in­vest­ing them is a smart thing to do? – asked at “Ask a friend, ask Efren” free ser­vice avail­able at www.per­son­al­fi­ and Face­book.

An­swer: You are work­ing abroad to pro­vide bet­ter op­por­tu­ni­ties for your fam­ily, chiefly through higher earn­ings. Earn­ing in US dol­lars is a bonus pro­vided you man­age your fi­nances well. What do I mean?

You can be likened to an ex­pen­sive sports car. You are ca­pa­ble of earn­ing enor­mous in­come, called hu­man cap­i­tal over your pro­duc­tive years as a sports car is ca­pa­ble of tremen­dous speed. How­ever, if you merely spend your hu­man cap­i­tal in­stead of in­vest­ing even a por­tion of it for your fu­ture so that you in­crease your earn­ing po­ten­tial, you are noth­ing but a sports car rac­ing al­ways in first gear.

Put an­other way, your hard work can be likened to run­ning on a tread­mill; no mat­ter how hard you run, you are still in the same spot.

There­fore, just hold­ing on to US dol­lars by keep­ing them in a “safe” sav­ings ac­count will not suf­fice. Of course, the old way of think­ing is that the peso will eter­nally be weak ver­sus the US dol­lar. But re­cent his­tory has shown that the peso can ap­pre­ci­ate ver­sus the US dol­lar. And with global growth not any­more be­ing cen­tered on the United States, com­bined with the ro­bust growth of the Philip­pine econ­omy, there is a good chance that the peso will once more ap­pre­ci­ate against the US green­back.

The rule of in­vest­ing is that the higher the risk, the higher the po­ten­tial re­turn. His­tor­i­cally as well, in­vest­ing in an emerg­ing mar­ket like the Philip­pines comes with higher risk than in­vest­ing in a highly de­vel­oped econ­omy such as the US. Such a sit­u­a­tion will per­sist in the fore­see­able fu­ture. There­fore, re­turns on Philip­pine in­vest­ment se­cu­ri­ties should be po­ten­tially higher than those in the US.

So, is the con­clu­sion to just con­vert your US dol­lars and in­vest ev­ery­thing in Philip­pine pe­sos? Not nec­es­sar­ily.

As I al­ways say to peo­ple who ask about the best in­vest­ment around, the an­swer will de­pend on your goals and risk pref­er­ence. If you want to earn for a goal that will re­quire a high re­turn and where the fund will en­tirely be spent even­tu­ally in pe­sos, then by all means con­vert ev­ery­thing to pe­sos and in­vest lo­cally. This way, you will avoid the cur­rency risk that comes with in­vest­ing in US dol­lars but even­tu­ally spend­ing in pe­sos.

So, when should you in­vest in US dol­lars? If you can stom­ach the risk of cross cur­rency in­vest­ing, you may want to keep a part of your money in US dol­lars for in­vest­ment glob­ally, es­pe­cially in other emerg­ing mar­kets where in­vest­ing is ini­tially re­quired in US cur­rency. Or you may keep in US dol­lars that por­tion of your funds that you will be spend­ing also in US dol­lars, thus lim­it­ing your risk to just in­vest­ment risk.

One last thing though, you may want to keep your money in pe­sos and in­vest it lo­cally for what is called pa­tri­otic in­vest­ing. If more and more Filipinos send money back home, the stronger will be the cur­rency, the more money will there be for com­pa­nies to use to grow their busi­nesses, the more em­ploy­ment will there be, and the brighter the fu­ture will be for Filipinos.

(Efren Ll. Cruz is a sea­soned in­vest­ment ad­viser and Reg­is­tered Fi­nan­cial Plan­ner of RFP® Philip­pines. He can be reached at (0917) 505-0709 and at efren@per­son­al­fi­ To know more about per­sonal fi­nance, please visit www.per­son­al­fi­ To be­come a true fi­nan­cial plan­ner, at­tend our three-day train­ing from Au­gust 17-19, 2017 in Cebu City. De­tails are avail­able at www.per­son­al­fi­­train­ing.html.)

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