Monthly Archives: December 2019

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.

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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.)

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Is BPI Invest Global Equity Fund-of-Funds UITF really outperforming its MSCI World benchmark?

Stocks

In my post on avoiding home-country bias in the Philippines, I mentioned the BPI Invest Global Equity Fund-of-Funds UITF (BPIGLBL:PM) as one of the options in diversifying into international stocks. This fund aims to “provide excess return” over its benchmark, the MSCI World Index, which covers international developed markets.

In June 2019, a number of news articles came out saying that the BPI fund has exceeded $100M in assets, and is now the largest of its kind in the Philippines:

These articles also mention BPI’s claims that its fund has consistently outperformed the benchmark MSCI World Index: “It overtook the returns registered by MSCI World Index – comprised of large and mid-cap equities of 23 developed markets such as United States of America, United Kingdom, Japan, Hong Kong, and Singapore – by 0.94% (year-to-date)to 2.58% (two-years) as of the first quarter of 2019.” This is a pretty bold and impressive claim. But is it true?

Continue reading Is BPI Invest Global Equity Fund-of-Funds UITF really outperforming its MSCI World benchmark? →