The ONE and ONLY reason why I don't invest in the Philippine stock market.

If you are an OFW, investing in the Philippine stock market may not be a good decision penny-wise. But if you desperately want to own Jollibee shares, by all means, proceed with whatever floats your boat.

The reason why I don't invest in Pinas is simple

​                                 -  Fees. And more fees.
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1. Trading  Fees

This is taken from the COLFinancial website, a popular investment platform in the Philippines.

For Buying -

Commission Fee: .25% (of gross trade amount)
Value Added Tax (VAT): 12% (of commission)
Philippine Stock Exchange Transaction Fee (PSETF): .005% (of gross trade amount)
Securities Clearing Corporation of the Philippines Fee (SCCP): .01% (of gross trade amount)


For Selling -

​Commission Fee: .25% (of gross trade amount)
Value Added Tax (VAT): 12% (of commission)
Philippine Stock Exchange Transaction Fee (PSETF): .005% (of gross trade amount)
Securities Clearing Corporation of the Philippines Fee (SCCP): .01% (of gross trade amount)
Sales Tax: .60% (of the gross selling amount)

*Note: The Commission fee has a minimum charge of P20.00 per transaction. And if you require a broker-assisted trade, the commission charge is .5% of the gross trade amount.

Example

Buying - Total fees for buying 20,000 shares of ABC at P5.00/share
Commission: P250
VAT: P30
PSE Fee: P5
SCCP: P10
Total: P295
Invested: P100295

Selling - Total fees for selling 20,000 shares of ABC at P5.20/share = P104000
Commission: P260
VAT: P31.20
PSE Fee: P5.20
SCCP: P10.40
Sales Tax: P624
Total: P930.80

Gain = P4000-P295-P930.80 = P2774.2

That's a lot of money lost. What if the stock go down and you decide to sell at a loss? 
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2. Handling Fees

Some handling charges are listed below:

• Lodgement fee (Depositing a Stock Certificate) - A Lodging fee of Php120 + VAT per stock will be charged with an additional Php20 + VAT per certificate of the same stock after the first certificate.
• Electronic Share Transfer (Broker to Broker) - Electronic transfer can take one or two days and would entail a cost to the customer of Php75.00/per stock from the issuing broker and the receiving broker.
• Upliftment fee (Request a Certificate) - Requesting a certificate would entail an Uplifting charge of Php150+VAT per stock, and could take up to a month to generate a new certificate.

3. Mutual Fund Fees

Pesolab has a detailed article about how mutual fund fees work. Click here.

​In summary, below are the fees expected if you invest on mutual funds in the Philippines.

• ​Front-end fee/Sales Load: deducted from your investment every time you open or add an instrument. The fee is dependent on the company you invest on - some companies waive the fee, others have a tiered policy (high investment, less fee or zero). This ranges from 0% to 5%.
• Exit Fee: Depending on your investment, companies require you to hold the fund for a certain period. If you pull your investment out within that time frame, you will incur an exit fee from 0.5% to 3% of the total value of your fund.
• Management Fee: payment for the daily operation of the fund and other expenses from 0.5% to 3%. In the UK, this is called, Total Expense Ratio (TER) or simply Expense Ratio.

Example

Philequity MSCI Philippine Index Fund, Inc.
Sales Load: 5%
Exit: 1%
Holding Period: 90 days
Management Fee: 3%

Brutal! I am not familiar with the brokerage firms in the Philippines, it does not interest me. But, imagine if you buy funds via a broker,  you also need to shoulder the transaction fees of buying and selling. That is too much.

In comparison, I could purchase funds in the UK with an expense ratio of just 0.06%.

I will never touch a fund whose expense ratio that is greater than .30%, yet alone 1% or 3%. Yikes!
             

4. Other fees

Although not related to investment fees per se, investing in the Philippines require you to send money regularly to top up your account, and doing so require you to pay remittance fees. On top of that, you have no control over the exchange rate between GBP to PHP or USD to PHP. You may lose from this as well.

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My head is hurting writing this article (lol). It appears to me that my beloved country is not investor friendly which is a shame especially if you want to support companies back home. Hopefully, things will change in the not so distant future. For now, the UK offers the best deals if you want to invest in the stock market. Even better in the US.


End.