Investment professional Alijeffty Gonzales has a simple idea for Filipinos working overseas who want, at the very least, to protect their capital and still get their feet wet in the equities market at the same time.
In his blog post here, he says any OFW can do this by putting at least P13,699 in Landbank’s long-term negotiable certificate of deposit and investing P6,301 for any equities fund of his choice and voila – you have an equity-linked note or ELN. Sounds highfaluting, eh? 
An ELN basically combines a zero-coupon note with an instrument that invests in more volatile (exciting) securities like stocks. As the zero-coupon returns 100% of the face value at maturity, any residual value of the stock portfolio becomes “gravy” at the concurrent reckoning date.
Here’s Jeff’s math:
Scenario 1: On the fifth year, stock market drops to ZERO
Scenario 2 : the stock market is flat (zero growth)
Scenario 3 : The stock market grows by an average of 8.00%
Jeff says:
Looking at the extremes, this portfolio will return 100% of your capital at the worst case scenario and enhance your return to 8.42% at a modest stock market growth, this could be a great opportunity for OFWs who are contemplating to invest in the stock market for the first time.
Here’s MoneySmart’s take: Good for investment beginners, which means most Filipinos, not just OFWs. If you are saving for something that will be happening 5.5 years from now, say you are sending your son or daughter to a university overseas or you will be needing a downpayment for a car or a small house — and you are positive that if you don’t set aside money NOW, there’s a chance you won’t be able to shell it out in the future, then lock in your money Jeff’s way. A 7% return is low but still much better than those offered by some pre-need companies and current time deposit rates.
Plus, I would rather put my money in a government bank that is less likely to fold up than some little-known investment company offering the moon and the stars. Hello PIPC, heh.
(In case you’re wondering, no I don’t have a deposit account in Landbank that will mysteriously grow sinfully big in the near future. Nope, this is not a paid advertisement.)
May 5th, 2008 at 1:52 pm
From what I understand, the May 16 deadline is for the initial public offering. After that you can still buy at the prevailing market rate at the time which means could be higher/lower than the IPO price. Also after the initial trading, the product becomes open to everybody not just the OFWs.
It seems the only way to apply for this Landbank promo is thru Landbank and HSBC (am not sure if HSBC overseas will accept). I just don’t understand why Landbank missed the obvious - that the OFWs are based overseas and may need to transact from (gasp!) overseas. Online application/transaction hello!
May 5th, 2008 at 11:43 am
Thanks guys for the advice! ‘Wag kayong magsasawa at makukulitan =)
@alijeffty- i will definitely visit your blogspot.
@don2x- good question!
“where are they going to invest your money to guarantee a specified return after 8 or 26 years.”
@ACN- yup the cashflow is generally an issue with a breadwinner like me.
@Salve- keep posting! You’re surely doing a great job.
May 5th, 2008 at 7:58 am
people have different time frames when to use money ie., buy car,house, education etc. that makes lending and borrowing money more dynamic.but projecting the cost of money, interest rate as well as inflation for making investment decisions is not that easy for longer periods.investment a with 8-yr waiting period may have different cost of money than investment b having periodic payment for 26 years.for all we know the present values of both scenarios are equal and the deciding factor is just the syncronization of timeline you planned to spend your money plus earnings.using roi by just dividing future value with initial figure is too simplistic since it does not consider the time value of money.maybe a good question to ask is where are they going to invest your money to guarantee a specified return after 8 or 26 years.
May 5th, 2008 at 6:09 am
Hi Tserilu,
i noticed that both options you are considering are “insurance related” proposals? as it is, i would assume that your objective at the moment is to buy protection and if possible combine some investment related benefits?
an alternative approach would be what planners call “buy term-invest the difference”, this is a DIY insurance/investment package, for illustration purposes i have taken the liberty of using some of the data you have provided in a “projection” to show the possible outcome of this approach.
it basically requires that you set aside Php 35K for 11 years, you get covered for Php 1M for 20 years, and if you outlive your 20-year cover, you get Php 1M in cash!
the projection table is posted in my blog: http://www.acgadvisors.blogspot.com
thanks,
May 5th, 2008 at 4:51 am
i like the offer but i do.t have an account in land bank.
please emial me for more emfo.
thanks