Global Investing for Filipinos
Global Investing refers to the practice of Filipinos allocating capital to assets outside the Philippines, primarily in the United States, Europe, or the global cryptocurrency market. While local investing is essential for supporting the domestic economy, global investing is often pursued for diversification, currency hedging (holding assets in stronger currencies like USD), and access to sectors not available locally (e.g., Artificial Intelligence, Electric Vehicles, Big Tech).
Disclaimer: The content on this page is for informational purposes only and does not constitute financial advice. Investing in foreign markets involves significant risks, including currency fluctuation and complex tax liabilities. Readers must conduct their own due diligence before sending money abroad.
Why Go Global?
- Access to Giants: The PSEi is dominated by banks and real estate. To invest in technology giants like Apple, Microsoft, NVIDIA, or Tesla, one must look to the US markets (New York Stock Exchange or Nasdaq).
- Currency Hedge: Historically, the Philippine Peso has depreciated against the US Dollar over long periods. Holding assets in USD protects the investor's purchasing power from local currency devaluation.
- Performance: Over the last decade, global indices like the S&P 500 have generally outperformed the local index, delivering annualized returns of 10-12% (in USD terms).
How to Invest (The Vehicles)
Filipinos have three primary routes to access global markets, ranging from "Easy" to "Advanced."
Level 1: Feeder Funds (The "Local" Route)
Most major Philippine banks offer Unit Investment Trust Funds (UITFs) that "feed" into a global fund.
- How it works: You go to your local bank (BPI, BDO, Security Bank, etc.) and open a US Equity Feeder Fund. You give them Pesos or Dollars; they buy the US stocks for you.
- Pros: convenient; compliant with PH estate laws; no need to wire money abroad.
- Cons: High Management Fees (often 1.0% to 1.5% annually) which eat into returns over time.
Level 2: Fintech Apps (The "Retail" Route)
Newer apps allow Filipinos to buy fractional shares of US stocks easily.
- Popular Apps:
- GoTrade: A popular app regulated in Labuan (Malaysia) that allows Filipinos to buy US stocks for as little as $1. It uses a "deposit" system via local banks (BPI/UnionBank) or GCash.
- eToro: A "social trading" platform. Note that depending on the asset, you might be buying a CFD (Contract for Difference) rather than the underlying asset.
- Pros: User-friendly; low minimums; easy funding from PH banks.
- Cons: Limited selection of stocks/ETFs; regulatory protection is offshore.
Level 3: International Brokers (The "Pro" Route)
For serious investors building a retirement portfolio, direct access via established US/International brokers is the gold standard.
- Interactive Brokers (IBKR): The most recommended platform for Filipinos due to its access to Irish-Domiciled ETFs.
- Pros: Access to every stock market in the world; professional tools; safety (publicly listed company).
- Cons: Complex interface; funding requires a Wire Transfer or Wise (formerly TransferWise).
Boundary-less Assets: Cryptocurrencies
For those seeking assets not tied to any specific country's economy.
- Bitcoin / Ethereum: Often viewed as "Digital Gold."
- Stablecoins (USDT/USDC): Digital tokens pegged to the US Dollar. Many Filipinos use these to hold "Dollars" without opening a dollar bank account.
- Note: See the main article on Cryptocurrency Investing for details.
Pitfalls and "Gotchas"
Global investing carries specific risks that do not exist in the PSE.
- 1. The US Estate Tax Trap (The "40% Wipeout")
- If you invest directly in US assets (e.g., buying "VOO" or "Apple" stock via GoTrade or eToro) and you pass away, the US government charges a 40% Estate Tax on assets exceeding $60,000.
- * Example: You have $100,000 in US stocks. You die. The first $60k is free. The remaining $40k is taxed at 40%. Your heirs lose $16,000 to the IRS.
- * The Solution: Advanced investors use Interactive Brokers to buy Irish-Domiciled ETFs (like VWRA or CSPX). Ireland does not have this estate tax for non-residents.
- 2. Dividend Withholding Tax
- When a US company pays a dividend, the US IRS automatically keeps 25% (under the PH-US Tax Treaty). You only receive 75% of the dividend.
- * Note: This is higher than the 10% tax on local PH dividends.
- 3. Funding Costs
- Sending money abroad is expensive. A Wire Transfer from BDO/BPI to a US broker typically costs $25 to $35 (approx. ₱1,500 - ₱2,000) per transaction.
- * Strategy: Investors usually wait until they have a large sum (e.g., $1,000+) before sending to minimize the fee impact.
How to Protect Yourself Against Scams
The allure of "Dollar Earnings" makes this a hotspot for fraud.
- Check the Regulation:
- If using a local app, is it licensed by the BSP or SEC?
- If using a foreign broker, is it regulated by the US SEC, FINRA, or FCA (UK)?
- Avoid "Forex Agents": Legitimate brokers do not have "agents" who message you on Telegram promising 20% monthly returns. Those are scams.
- The "Signal" Scam: Scammers will ask you to deposit money into *their* platform (which looks like a trading graph). The graph is fake; it always goes up to tempt you. When you try to withdraw, they ask for a "Tax Fee." You will never get the money back.
Sources
- Interactive Brokers Global Trading
- BSP Warning on Unregistered VASPs
- US IRS Estate Tax Rules for Non-Residents
