January 3, 2012
Are retail treasury bills a good investment?
Dear Mrs. Colayco.
I recently saw in the papers an offering for Retail Treasury Bills. I have invested in them before and found the returns quite disappointing (about 5 per cent for the five-year terms). Although I knew this going in, I consoled myself with the thought that it was money put away.
Is this the correct mindset for such an investment? Or should I be more aggressive in growing my money?
Thank you and God bless.
Mrs. Colayco replies:
Retail Treasury Bills are investments with the least risk. This is because Treasury Bills are issued by the Philippine government. In effect, when you buy Philippines T-Bills, you are lending to the Philippine government. No other entity in a country, including the Philippines, can be more secure in terms of money than the government. Of course, any country can suffer economically as we are now seeing all over the world. However, any government, through its finance agencies controls all monetary policies. If there is any problem about paying for the T-Bills upon maturity, the government can always print more money and pay for the T-Bills. No other institution can print legal money.
Of course, you might say that the printing of more money just to pay off T-Bills may mean that the value of the new money is no longer as good as the value of your investment. That could also be true especially because of inflation, but the value of the peso could also improve. The fact is that you are getting the amount of pesos that you were promised upon maturity.
Being an almost risk-free investment, Treasury Bills will definitely not give you the highest return on your investment. Remember the principle: "The higher the return, the higher the risk." In this case, because of the lower risk, the return is lower.
When you made your investment into Treasury Bills, you knew the returns you would be receiving. There can be no change in the rate of interest that you were promised. If you want more returns, you have to look for other investments.
But before you look into other investments, you should make you personal financial plan. A personal financial plan means your current Statement of Assets and Liabilities (SAL) and your Personal Income and Expense Statement (PIES). Knowing where you are financially, you can make projections into the future on your financial objectives. regularly.
Your personal financial plan depends heavily on your age and where you are today, financially. Unfortunately, there is no person in this world who will not make a mistake especially in financial matters. However, any mistake can be rectified, if you have more time. The younger you are, the more options you have to take some risks. You can take some risks because, if you make mistakes, you still have the time to correct them.
Take time out to prepare you personal financial plan. It is very important for you to be able to understand what kind of risks you can take. If you stay with T-Bills, chances are, you will beat inflation, at least even if only by a small amount. There are other opportunities like Mutual Funds and UITFs and of course, real estate and businesses but again, each depends on your plan towards the future.
The publications and seminars of Colayco Foundation for Education can teach you a lot more. Please check out www.colaycofoundation.com and www.kskcoop.com.
Mary Anne B. Colayco is a happy wife, fulfilled mother of three beautiful ladies, helpful mother-in-law of two handsome gentlemen, doting grandmother of two adorable girls and the diligent President of Colayco Foundation for Education (CFE). For over 40 years, Mabsi, short for MAB-C, was in executive-level finance-related positions, as well as general management positions in Ayala Corporation subsidiaries (then, Pure Foods and Globe Telecom among others) and also served as a Commissioner of the Energy Regulatory Commission.
She joins her husband, author-entrepreneur Francisco J. Colayco in their common advocacy of teaching financial literacy to income-earning Filipinos. Herword.com draws from Mabsis wealth of life experiences in giving advice on personal money management.
If you have any questions about personal finance, e-mail email@example.com.