My First Experience with Amazon Free Shipping to the Philippines

Online Shopping

I have ordered from Amazon a number of times in the past four years for direct shipping to the Philippines. For orders to the Philippines amounting to less than USD 200, there are generally no import duties, and for not-so-heavy items, the shipping costs are reasonable. For my first couple of orders, Amazon used UPS to ship the items. A recent order in August 2022 was shipped using Aramex. For all orders I selected AmazonGlobal Expedited Shipping except for one order where I selected AmazonGlobal Priority Shipping. Orders generally arrived in one to two weeks.

Recently, Amazon began offering free shipping to the Philippines. While this offer is does not apply to the entire Amazon catalog, there is a good number of items that are eligible, including some of the items that I have previously ordered. Free shipping for eligible items will be triggered once the order amount reaches USD 49.

So I went and ordered some items eligible for free shipping on October 2. The free shipping option was displayed as FREE AmazonGlobal Standard Shipping and promised delivery by October 19. The non-free option was labeled AmazonGlobal Priority Shipping which promised delivery three days earlier. Here is my order summary:

The package was shipped out on October 4, and tracking information indicated that it will be delivered by Ninja Van. Package was delivered on October 10, nine days earlier than promised.

The package came in the usual plastic wrapper used by motorcycle couriers.

It is good to know that that the Amazon free shipping offer does not mean that it will be slower. The last time I ordered with paid shipping took longer because it sat for about two days at the Aramex facility. So my first experience with Amazon free shipping went smoothly and this makes Amazon a competitive place to shop, particularly when the USD-PHP exchange rate starts to go down.

BAD NEWS: Schwab to restrict Philippine accounts starting 06 December 2022

Stocks,

I just received an email from Schwab with the subject line “Your account(s) will be restricted“.

Here’s the text of the email:

Accounts for clients located in the Philippines will be restricted. Read below to learn more.

After a recent review, we have decided that, starting 06 December 2022, all accounts for clients residing in the Philippines will be restricted.

What this means for you.

We will place your accounts in a restricted, liquidations-only status. This means that you will be limited to closing existing positions, and you will not be able to open new positions or deposit new funds.

Your next steps.

You may liquidate or transfer your account assets to another firm.* Here is how:

  • To liquidate your investment positions and request a wire transfer, contact us at one of the numbers listed below.
  • To transfer your account(s) to another firm, request an account transfer form from the receiving firm. Once you have initiated a request, contact us at one of the numbers listed below, and we can help the receiving firm facilitate the transfer.

You can maintain your account(s) if you reside in a non-restricted country or have a U.S. Military & Diplomatic mailing address (APO/DPO/FPO). Contact us to update your address.

We regret any inconvenience this change may cause you. If you have questions or need help, please reach out to our Global Investing Services Team at 800-992-4685, 5:30 p.m. ET Sunday to 5:30 p.m. ET Friday. Clients of Charles Schwab, Hong Kong, Ltd., call +852‐2101‐0500. For others outside the U.S., contact us at +1-415-667-8400.

As you can see, no explanation for this action is given. Needless to say, this is very unfortunate and inconvenient and I will have 60 days to find another brokerage to transfer to.

Using my Schwab card at an HSBC Philippines ATM in 2022

Personal Finance,

I haven’t used my Schwab Visa debit card to take out cash from an HSBC Philippines ATM since December 2019 (when the USD-PHP exchange rate was around PHP 50.82 to USD 1) until last Friday. Since end-2019 we’ve had a global pandemic, the USD-PHP exchange rate reached a low of around 47.53 and, in recent weeks, the rate reached a record high of around 56.54, and my usual go-to HSBC Ortigas Center branch moved from its ADB Avenue location to the nearby Shangri-La Plaza mall.

Anyway, last Friday, I decided to take out some cash to take advantage of the high exchange rate and also to see whether HSBC still does not charge any fee for using a Schwab ATM/debit card and whether the applied exchange rate is still competitive.

On one of the screens, the ATM warns that some fee may be charged by my card issuer (Schwab), but the HSBC ATM itself still did not add any explicit fee to my PHP 25,000 withdrawal. One screen that I don’t remember seeing before is an offer by the HSBC ATM to apply the HSBC exchange rate with enough warning that a 3% mark-up is included in the rate.

HSBC ATM offers to apply its own exchange rate

Every savvy traveler should know that these conversion rate offers should generally be avoided, especially if one is using a card that does not have any forex surcharges/fees. Depending on how one calculates the mark-up (x*1.03 or x/0.97), the implied rate without markup would have ranged between 56.018 and 56.069. The entire range is lower than the rate quoted by Google at the time which was 56.33:

Google USD-PHP Exchange Rate on 22 July 2022

After a couple of days, the withdrawal posted and $443.74 was debited from my account for an equivalent USD-PHP exchange rate of 56.339, which is slightly better than the Google rate, and obviously better than HSBC’s rate with or without mark-up.

Key Points

  • Using a Schwab ATM/debit card at an HSBC Philippines ATM is still fee-free.
  • Don’t use HSBC’s own conversion rate to take advantage of Schwab’s competitive rate.

US ETFs: Direct Investment vs Feeder Funds

Stocks,

An investor from the Philippines who wants to put money in U.S. ETFs can either choose from a limited menu of locally available feeder funds with U.S. ETF target funds, or directly open an international brokerage account and buy ETF shares directly. Down below is a simple calculator to determine whether it would be worth going through the hassle of opening an international brokerage account to directly invest in U.S. ETFs.

Continue reading US ETFs: Direct Investment vs Feeder Funds →

Can non-US residents trade US options?

Stocks, ,

The short answer

Yes!

What are options?

First off, this post is not the right place to learn all about options. Options trading is not for everyone as options are riskier than stocks. Nevertheless, here are the basics: A call option is a contract that allows you to buy 100 shares of stock of a company at a particular strike price. For example, Ford Motor Company shares are currently prices at $8.10. A call option for Ford with a strike price of $10 and expiration date of September 18, 2020 can be purchased for a premium of $0.13 (x 100 shares = $13). The break-even price is the sum of the strike price and the premium:$10.13. Since Ford’s current price is below the option’s strike price, the option is said to be out-of–the-money (OTM). If Ford’s stock price goes above the $10 strike price, then the option is said to be in-the-money (ITM).

The option premium can move up and down with the price of the stock, as it goes closer or farther to being ITM. Option premiums are also generally higher for volatile stocks. You can sell the option before the expiration date at a profit or loss. If you hold the option until the expiration date and it is OTM, then the option will simply expire and you lose the premium you paid. If you hold the option until the expiration date and it is ITM, then may execute the option and actually buy 100 shares of ford for $10 each (x100 = $1,000). If, for example, Ford’s price at expiration $11 and you execute the call option and sell the stocks right away, then your total profit is $100-$13 (premium) = $87 or a more than 600% gain. If you used the same $13 to buy 1.60 shares of Ford (at $8.10 each) assuming fractional shares area allowed), then you only gain $4.60 if Ford’s price increased to $11.

This illustrates the leveraged nature of options: for the same amount of money, you can potentially have much higher gains buying options than buying stocks. The counterpoint is you can LOSE the entire premium if the bet does not go your way (e.g. the option expires OTM). On the other hand, if you simply bought Ford stock, then at least you can continue holding those shares until it hits your target.

The second type of option is the put option. This is a contract that allows you to sell 100 shares of stock of a company at a particular strike price. Many of the things I discussed about call options apply except in the “opposite” manner. ITM put option means share price is below the strike price. OTM option means share price is above the strike price. The break-even price is the strike price minus the premium paid. You can buy put options if you are betting that the stock price will go down. You can also use put options to hedge against a downward move in the stocks that you own.

How to get started with options trading

When opening a brokerage account with the likes of Charles Schwab or Interactive Brokers, you are typically only given stock trading privileges by default. During the application process, you would have to explicitly ask for options trading capabilities to be enabled in your account. Since options are generally riskier than stocks and offer a variety of trading strategies with increasing levels of risk, brokers typically want to make sure that you are aware of such risks involved.

When I initially applied for my Charles Schwab account, I indicated that I wanted to have options trading enabled in my account. They then sent me an email asking me to call about my options trading application. I was too lazy to make that call so when my brokerage account was finally approved, options trading was not enabled. At that time, I still had my Robinhood account where I can trade options as well. A few months later, I again lodged my application for options trading with Charles Schwab. In the application, they ask for your options trading knowledge level (None, Limited, Good, Extensive), experience (how many years), number of trades per year, and amount per transaction.

Schwab then again asked me to call them. When I did, they asked me about my income, and what trading strategies I am pursuing. They also asked what amount of my brokerage account I will use to trade options, and how I would react if I lose that entire amount. Schwab has four option approval levels, and I applied for and was approved for Level 1.

How much does it cost to trade options?

While Schwab does not charge any commission to buy and sell stocks, it does charge $0.65 per option contract. This fee applies for both buying and selling. For example, that Ford call option with $0.13 premium describe above, will actually cost $13.65 (100*$0.13 + $0.65) to purchase.

Using my Schwab card at 7-Eleven (7-11) Japan ATMs

Personal Finance, Travel, , , , , , ,

Last time I traveled to Japan in March 2019, I use my Capital One 360 Mastercard ATM card to withdraw cash from 7-11 ATMs. Capital One 360 does not charge any foreign transaction fees and at at that time 7-11 ATMs did not charge any ATM fee. In addition to my Capital One 360 card, I now have a Charles Schwab Visa ATM card which promises to refund ATM fees. Recently, I’ve read reports that 7-11 ATMs have started charging fees to international ATM card holders. I returned to Japan last week and found out out for myself if the reports are correct.

Continue reading Using my Schwab card at 7-Eleven (7-11) Japan ATMs →

PSEi index funds vs the PSEi Total Return Index

Stocks, , , ,

In comparing returns from PSEi index funds in the Philippines, the right benchmark to use is the PSEi Total Return Index (PSEi TRI). This is particularly true considering none of the PSEi index funds distribute cash dividends. The PSEi TRI accounts for cumulative price returns and cumulative return sof dividends reinvested back into the index, while the PSEi only accounts for price returns. The PSEi TRI was only introduced in 2019, but its history was back-calculated to 2007. Since it’s pretty new, I haven’t found any freely available resource for the PSEi TRI history. I recently came across this article, And the best equity fund is …, from the Philippine Daily Inquirer. This article was written by someone who is selling financial planning products, so not surprisingly, the article did not actually identify any particular index fund. Fortunately, it did provide some numbers for the PSEi TRI.

Continue reading PSEi index funds vs the PSEi Total Return Index →

More questions on Philippine taxation of foreign capital gains and dividends

Stocks, Taxes

I’ve written a few posts on how the Philippines taxes income from capital gains and dividends from foreign stocks:

It was confusing at first but I have since come to the conclusion that since there is no law or BIR ruling that specifically provides for fixed tax rates or exempts foreign capital gains and dividends, they fall into the catch-all category of “non-business/non-profession” income that will be taxed at ordinary graduated income rates. Still, I have few more questions.

Continue reading More questions on Philippine taxation of foreign capital gains and dividends →

Home Biased: A Case for More Indexing

This interesting article from Victor Haghani and James White suggests that, given some initial assumptions about investor wealth distribution, the dominant size of the U.S. market (50%) relative to the world market coupled with U.S. home-country bias (80% invested in domestic equities) actually gives rise to higher U.S. market valuations, and lower expected long-term returns. This is the case in spite of the fact that smaller market investors exhibit relatively higher home-country bias (50% invested in domestic equities in markets 5% the size of the world market cap).

How would this apply to countries with extreme home-country bias like the Philippines? If we have a total world market worth $100, with a 50% US market with 80% home-country bias, 10 smaller 4.9% markets with 50% home bias, and a 1% Philippine market with 99% home bias, the calculation would yield that there would be an excess $0.45 demand in a Philippine market that would otherwise have been worth only $1. It would appear that extreme home-country bias in such a small market like the Philippines also has the effect of pushing market valuations higher due to increased demand.

Read Global Impact of Investor Home Country Bias for more discussion on Haghani and White’s article.

Best international broker for Philippine residents: Charles Schwab vs Interactive Brokers

Stocks, , , ,

For Philippine residents who want to venture into the international stock market, there are really just a few legitimate options available. For this matter, I don’t consider the likes of eToro and Abra as legitimate platforms for the serious investor or trader. The top three choices for Philippine residents are Charles Schwab, TD Ameritrade, and Interactive Brokers (IBKR). Since Charles Schwab is acquiring TD Ameritrade, I’m only covering Schwab and IBKR. So which one is better for Philippine residents?

(Note that if you’re a Philippine resident and also an American citizen, many of the issues raised here are not applicable to you.)

Continue reading Best international broker for Philippine residents: Charles Schwab vs Interactive Brokers →