Tuesday, October 2, 2012

Is Special Deposit Account of BSP safe?

Last week I put some of my money in Bangko Sentral ng Pilipinas' Special Deposit Account (BSP SDA) through BPI. SDA started in 1998. It's a product of BSP aimed to mop excess liquidity in the financial system which is said to be bad for the economy (I haven't dug that deep yet). It offers higher interest rate compared to other low risk investments like time deposit.

The rates now are lower compared to previous years, it seems that BSP is starting to control the in flow of money to this product. Even with the lowered interest rates, it's still much better than any bank's time deposit (TD) and, of course, way better than just putting your unused money in a savings account.

Like any other investments, it comes with risks, but upon research, the risk is said to be minimal since it's backed by BSP, the entity who creates our money! Also note that this is not insured by PDIC, however, to reiterate, it's covered by BSP!  Do you see the logic why the risk is low?

Many said it's virtually risk-free, and many are putting large amounts of money in this product of BSP through banks, heck even banks themselves are putting money here! It is said that 70% of the money in SDA are from the major banks, which increases my confidence in putting my money here.

For this investment, I chose BPI since it offers the lowest minimum required to invest in SDA. BPI only requires a minimum of 50,000 PhP as compared to 1M-10M in other banks (as of writing). Just open an account in BPI and ask their customer service or one of the staff in the Trust department how to start investing in the special deposit account of BSP. I asked what's the current interest rate, the rep said it's 2.66% net. I'm not sure yet how "net" this is and if it already includes the fees. It's not spectacular, I know, but still performs better than TD which is less than 2% (excluding tax).

It's renewed monthly, and you have the option to automatically enroll the principal only or principal + interest which is really convenient. I chose the automatic enrollment of principal + interest to take advantage of compounded interest. Should you decide to terminate this type of investment, you can only do so by notifying the bank at least one day before the end of the investment period which is one month. It doesn't have a pre-termination fee (yey!).

I will be monitoring this one especially since BSP is recently doing stuff to decelerate the growth of SDA, one of which is lowering the interest rates.

It might be a good idea to take advantage of this type of investment while BSP is still offering it. I find it flexible since it's on a monthly basis unlike other investment options which require several months or even years before you can touch your money.

I won't advise putting all your money here though since your money is still on hold for a month. What I'm doing is put emergency money in a savings account for liquidity, then invest some in SDA (can be relatively large since it's relatively safe), and invest some in other options that yield higher returns, but have higher risks.  So for example I have 1M in my savings account, I'd probably invest 400K to SDA, 200K to medium risks and 100K to stocks (high risk) and leave the 300K in my savings account for liquidity, but that's just me. Happy investing! :)

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  • bpi sda 2012
  • bsp special deposit account interest

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