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is it a good idea to set up a CD ladder in another country?

d0min0 931 185 September 1, 2016 at 02:26 AM
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i go to this other country quite often and plan to retire there in the future. i have found out that they offer CD accounts at 5-7%. they are not small banks, these are the biggest 3 banks in the country. they offer 1,2,3,4,5,6,7,8,9,10,11,12,18,24 and 36 month CD's. the shortest i'm willing to wait is 1 month and the longest i'm willing to wait is 12 months. i'm thinking about setting up a CD ladder with 100-200k. was wondering what you guys thoughts are on this?

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killroy was here
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#2
there are countries where you can get 10%. i was looking into it but never did. my concern was the stability of banks, taxes and arbitrage. last thing i wanted was my interest getting gobbled up by tax penalties or the principle disappearing because i was a foreigner and there was a rule change. plus you have to worry about arbitrage since you are dealing in 2 currencies.
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#3
Quote from d0min0 View Post :
i go to this other country quite often and plan to retire there in the future. i have found out that they offer CD accounts at 5-7%. they are not small banks, these are the biggest 3 banks in the country. they offer 1,2,3,4,5,6,7,8,9,10,11,12,18,24 and 36 month CD's. the shortest i'm willing to wait is 1 month and the longest i'm willing to wait is 12 months. i'm thinking about setting up a CD ladder with 100-200k. was wondering what you guys thoughts are on this?
Depends on a lot of things but could be worthwhile. Just make sure to report any income you make over there on your tax return Smilie
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#4
Do they pay 7% in US dollars? I doubt it. There are plenty of countries where you can get CDs (or even savings accounts) paying 10%, but when their currency loses 9% every year relative to the dollar......
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Quote from dukeblue219 View Post :
Do they pay 7% in US dollars? I doubt it. There are plenty of countries where you can get CDs (or even savings accounts) paying 10%, but when their currency loses 9% every year relative to the dollar......
I'm not sure which country loses 9% a year but the country I'm interested in has been relatively stable for the years I've visited. and no it's not USD, you'll have to change to their local currency before you open the CD
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#6
Quote from d0min0 View Post :
I'm not sure which country loses 9% a year but the country I'm interested in has been relatively stable for the years I've visited. and no it's not USD, you'll have to change to their local currency before you open the CD
There are a lot of countries that have done worse than 9%. Can we ask which country you have in mind?

The most common examples of this plan I've seen involved Indian banks. As you said about your situation, these are not fly-by-night operations but legitimate banks making legitimate offers. But, it's just hard to compare interest rates directly when you also have foreign currency involved -- the ~10% inflation in India completely kills your 9-10% return when you try to get it back into dollars.

It's all about REAL RETURN. How much are you beating inflation with your investment? In the US you'll just about break even with CDs. In many other countries, with stable politics and stable banking systems, you can make a similar expectation. So, that 10% return is often "too good to be true" for one reason or another.
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#7
No..this is a terrible idea.

CD's are mostly a joke anymore. If you want low returns just stick your money in a savings account that generates 1%. Your money is not locked up.

Anyone who is a smart investor will stick with low expense index funds. Following the simple 3 fund vanguard portfolio will work for 99% of everyone.
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#8
Quote from d0min0 View Post :
I'm not sure which country loses 9% a year but the country I'm interested in has been relatively stable for the years I've visited. and no it's not USD, you'll have to change to their local currency before you open the CD
the exchange rate might not change but inflation may increase the local cost of goods. which was his point, i think. this was the site i used when i was looking at it before. http://www.deposits.org/world-deposit-rates.html it provides inflation rates too. i don't know how accurate it is though.

unless countries have huge economic growth, the inflation rate is going to be close to the interest rate.

if you are going to be moving permanently and relocating your funds. i guess you don't really have to worry about arbitrage eating up your margin.
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Quote from dukeblue219 View Post :
There are a lot of countries that have done worse than 9%. Can we ask which country you have in mind?

The most common examples of this plan I've seen involved Indian banks. As you said about your situation, these are not fly-by-night operations but legitimate banks making legitimate offers. But, it's just hard to compare interest rates directly when you also have foreign currency involved -- the ~10% inflation in India completely kills your 9-10% return when you try to get it back into dollars.

It's all about REAL RETURN. How much are you beating inflation with your investment? In the US you'll just about break even with CDs. In many other countries, with stable politics and stable banking systems, you can make a similar expectation. So, that 10% return is often "too good to be true" for one reason or another.
the country is vietnam. i bought a 2 bedroom condo out there so i'll be retiring out there for sure.
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another thing is its easy to get money into vietnam but its hard to get it out.

Quote from dayv View Post :
the exchange rate might not change but inflation may increase the local cost of goods. which was his point, i think. this was the site i used when i was looking at it before. http://www.deposits.org/world-deposit-rates.html it provides inflation rates too. i don't know how accurate it is though.

unless countries have huge economic growth, the inflation rate is going to be close to the interest rate.

if you are going to be moving permanently and relocating your funds. i guess you don't really have to worry about arbitrage eating up your margin.
thank you for the link.

Vietnam

Inflation rate: 18.9%

Interest rate: 7.00%

what does this mean? sorry i'm not so sure?
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Last edited by d0min0 September 2, 2016 at 01:23 PM
Joined Jul 2005
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Quote from d0min0 View Post :
another thing is its easy to get money into vietnam but its hard to get it out.



thank you for the link.

Vietnam

Inflation rate: 18.9%

Interest rate: 7.00%

what does this mean? sorry i'm not so sure?
it means the prices there are increasing faster than the interest rate
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#12
Quote from d0min0 View Post :
another thing is its easy to get money into vietnam but its hard to get it out.



thank you for the link.

Vietnam

Inflation rate: 18.9%

Interest rate: 7.00%

what does this mean? sorry i'm not so sure?
It means that next year your $100k will become $107k, but a stuff that cost $100k this year will cost $118.9k next year, so effectively you lost roughly 11% of your purchasing power if you transfer it all at once.

If that is what I would face, I'd leave more of my money here invested in (the market/bonds/TIPS), and transfer it over to Vietnam every month/quarter/year depending on need.

Vietnam has a lot of inflation not just because of real economic growth, but also because there's just a lot of money pouring in. Remittances from foreign countries like the USA constitute 6-10% of the GDP, inflating the money supply.
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Quote from flyingduckie View Post :
It means that next year your $100k will become $107k, but a stuff that cost $100k this year will cost $118.9k next year, so effectively you lost roughly 11% of your purchasing power if you transfer it all at once.

If that is what I would face, I'd leave more of my money here invested in (the market/bonds/TIPS), and transfer it over to Vietnam every month/quarter/year depending on need.

Vietnam has a lot of inflation not just because of real economic growth, but also because there's just a lot of money pouring in. Remittances from foreign countries like the USA constitute 6-10% of the GDP, inflating the money supply.
thanks for the explanation. I think I will do as you said and invest my money over here in the states and send to Vietnam when I need it. thanks guys
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