Even though banks would offer higher deposit rates, equities, bonds, and some income-oriented investments have the potential to deliver higher long-term returns than cash. ManilaBulletin READ:
In a statement on Thursday, June 22, Manulife IM Philippines Equities Head Mark Canizares explained that, as inflation erodes the purchasing power of cash, consumers will be able to buy less with it in the future than they can today.
His calculation examines the return on cash between 2011 and 2021, as measured by the annualized return of the three-month US Treasury bill, which was recorded at 0.47 percent. In contrast, investing $100,000 in the S&P/TSX composite dividend index over the same 10-year period would have yielded a much higher return. With an inflation-adjusted annualized return of 7.22 percent, this investment would have resulted in a buying power of $200,797.37.
When adjusted for changes in the consumer price index during the same period, the real three-month time deposit annual interest rate was found to be much lower, ranging from negative 5.2 percent to 1.09 percent. Canizares said one of the main benefits of these investments is that they are managed by professionals who can help investors navigate market risks and volatility.
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