15% pa Return On Investment - Is This Correct ?

[newbie123]

Currently Term Deposit in Vietnam is 15% pa at most bank in Vietnam including citibank vietnam, HSBC vietnam, ANZ vietnam etc...

Since July 2006 the Vietnamese Dong VND lost almost 45% of it value
against the Australia dollar

http://www.google.com//finance?chdn...NCY:VNDCHF&cmptdms=0&q=CURRENCY:VNDAUD&ntsp=0

Depost in term deposit VND account
Start July 2006
Year 1 -July 2007 - 15% return - Run total Return 15%
Year 2 - July 2008 - 15% return - Run total Return 30%
Year 3 - July 2009 - 15% return - Run total Return 45%
Year 4 - July 2010 - 15% return - Run total Return 55%
Year 5 - July 2011 - 15% return - Run total Return 90%

So if in 2006 I put my money in VND account and earn 15% return
And if I took the money out now and buy back Australia dollar today I still make 30% return.

How?

So with term deposit in VND account I earn 15% return
3 year of 15% return which equal to 45% return which break even with the
VND Dong depreciate against the Australian AUD

Year 4 15% and year 5 15% the return is all mine.
Which I make 30% on my investment.

profit 30% divide by 5 year investment which turn out to be 6% return a year.

This calculation base on history data which say since 2006 to now VND loss 45% of value

Now Going forward.

Australian dollar is at all time high against the dong VND

If I put in my money in now from AUD to VND and base on 5 year from now.
if history repeat I still on top earn 30% after 5 years.

However unlikely that VND will drop another 45% when I take the money out.

What are the pros and cons Base on this calculation?
Is there some thing wrong with this calculation that I did not see?

 

[Aaron_C]

You are wrong. I'll show you why:

Say you buy 1,000 VND for 100 AUD. If you compound the interest at 15% over 5 years, you will end up with 2,011 VND. But since the VND has fallen 45% after 5 years, you actually only can convert the VND into 110 AUD, a return of only 10% over 5 years, which is less than 2% per year.

No one knows that the VND will do 5 years from now but it's not as easy as it seems.

 

[truong]

Currency trading is risky let alone trading in a currency as volatile as the VND.

There are huge forces in play in Vietnam beyond any individual’s control eg acute shortage of US$ reserves, large budget deficits, whimsical government restrictions and rampant black market.

Too much risk for so little return.

By the way, if you're aiming for 30% return after 5 years, why don't you invest in an Australian term deposit? You'll get it risk free

 

[tom32]

I jumped in here when I saw the thread title, 15% p.a. returns.

I have looked for such an animal ever since I set up an excell spreadsheet in 1999 assuming future ASX growth would be 15% p.a. with dividends reinvested as it had been over the previous few years...

Typically as others have outlined a currencies yield is relative to the inflation rate within said economy.

If the two get out of kilter in an economy the currency appreciates or depreciates quickly. Pay too much interest v inflation and everyone wants a piece of your currency value increases, pay not enough like the US dollar these days and no one wants a piece of it.

The dong is notorious for being a high inflation currency or was when I was there in 2008, so it is interesting it is slowing down now but the 15% yield is still available?

If they get inflation under control and then interest rates, if you were allowed to buy a home there without marrying a local I would be. Actually if I was not already married I would have no issue marrying a local either and then buying a house there.

 

[vaughan]

Actually if I was not already married I would have no issue marrying a local...

Woud you really marry somebody with an inflated dong?

 

[Spades]

Lol.......

 

[tom32]

I was scratching my head last night for a fitting comeback but everything I came up with involved dragging this further into the gutter but vaughns post was pretty funny.

I guess the upshot of all this I don't want to end up holding inflated dongs.

 

[Bon]

Pffft.

It's not a good idea to bet against the AUD right now with our increasing exports and high interest rates relative to other developed economies. Keep your cash and investments in AUD.

 

[james_w]

Currently Term Deposit in Vietnam is 15% pa at most bank in Vietnam including citibank vietnam, HSBC vietnam, ANZ vietnam etc...

Since July 2006 the Vietnamese Dong VND lost almost 45% of it value
against the Australia dollar

http://www.google.com//finance?chdn...NCY:VNDCHF&cmptdms=0&q=CURRENCY:VNDAUD&ntsp=0

Depost in term deposit VND account
Start July 2006
Year 1 -July 2007 - 15% return - Run total Return 15%
Year 2 - July 2008 - 15% return - Run total Return 30%
Year 3 - July 2009 - 15% return - Run total Return 45%
Year 4 - July 2010 - 15% return - Run total Return 55%
Year 5 - July 2011 - 15% return - Run total Return 90%

So if in 2006 I put my money in VND account and earn 15% return
And if I took the money out now and buy back Australia dollar today I still make 30% return.

How?

So with term deposit in VND account I earn 15% return
3 year of 15% return which equal to 45% return which break even with the
VND Dong depreciate against the Australian AUD

Year 4 15% and year 5 15% the return is all mine.
Which I make 30% on my investment.

profit 30% divide by 5 year investment which turn out to be 6% return a year.

This calculation base on history data which say since 2006 to now VND loss 45% of value

Now Going forward.

Australian dollar is at all time high against the dong VND

If I put in my money in now from AUD to VND and base on 5 year from now.
if history repeat I still on top earn 30% after 5 years.

However unlikely that VND will drop another 45% when I take the money out.

What are the pros and cons Base on this calculation?
Is there some thing wrong with this calculation that I did not see?

you can get close to 15% returns in regional mining areas more if you rent by room or throw on an extra caravan in the back yard etc lot of bowen basin regions now allow 2dwellings on a 800sqm block.

 

[Elizabeth L]

Having lived in Vietnam for nearly 5 years, there's no chance I would be investing funds there.
Cheers
Elizabeth