Singapore Savings Bond (SSB) updates 2022

 

As you can see from the statistic and chart above, you will notice the overall interest rate SSB offered has risen significantly since Dec 21 and has maintained moderate increase over the next few month. This was also supported by the strong takeup volume since Dec 21 due to higher interest offered. (For the Mar takeup volume, it will only be release on Mar. However do expect the takeup volume to be the highest as compared to previous months due to higher interest offered in the March issue.) Based on the analysis, interest rate seems to be on an uptrend in the coming months as MAS is tightening monetary policy to fight inflation. 

If you have idling cash lying around, do take advantage of the Mar SSB issuance and subscribe for it as is giving 0.59% for 1st year and 1.35% for the 2nd year. (Although the interest offered does not match inflation but it can help you cushion some inflation impact.) 

SSB can be withdrawn at anytime on a given day of the month and you still get to earn accrued interest! Do find out more about how to apply for SSB on the link found below:

http://kfgw-investing.blogspot.com/p/bond.html

Last updated 6 Feb 2022

Market updates 2022

 

Few days back, you might have heard of MAS is going to tighten its monetary policy. Well basically MAS has set a range of how much SGD can appreciate or depreciate before they take action to buy SGD if it falls below the range and vice versa. By tightening monetary policy means allowing SGD to appreciate and fluctuate towards the higher side of the range which result in our currency strengthening. With SGD strengthening will result in foreign goods to be cheaper, thus consumers would want to spend more. However this will result in a decrease in investment and savings as consumers would want to spend more to take advantage of cheaper goods. Foreign investment will also decrease as it will be costlier to invest in Singapore given SGD strengthening. In time to come, FED will likely to increase their interest rate. As SGD interest rate is closely pegged to USD interest rate, SGD interest will likely to increase as well. 

With interest rate rising coupled with SGD appreciating will cause a negative impact in Singapore equity market going forward.

*Last updated 31 Jan 2022

DBS Multiplier Account

DBS has recently revamped their multiplier account on 1st Nov to reclaim their share in the deposit market. By lowering the minimum threshold for the total eligible transactions from $7,500 to $2,000, this enable more young adults to qualify for higher interest rate on their account balance with no minimum salary crediting amount and no minimum credit card spend. Let's explore in details how we can qualify for the bonus interest!

Basically there are 5 transaction components that add up to the total eligible transaction for the month. Here are the 5 transaction components:

1) Salary crediting

2) Credit card spending 

3) Home loan

4) Insurance

5) Investment 

There is no minimum spending criteria on each on the component but Salary crediting is a compulsory component in order to qualify for the bonus interest. There are different tiers of interest bonus based on the total transaction amount and number of transaction components. The minimum 1.55% interest can easily be earned by having a transaction amounting to just $2,000 by combining salary crediting with another component. Let's explore in the below case studies of how individual benefit from this account at different stages of their life.

Scenario 1: Fresh polytechnic graduate drawing a salary of $2,200

A fresh polytechnic which has just graduated drawing a salary of $2,200 & crediting his net salary of $1,760 in the multiplier account after CPF deduction. Taking in consideration applying a credit requires an annual income of $30k, the credit card spending is not applicable. Home loan is also not applicable in this case. This left the individual to take up either insurance or investment with the bank to top up the transaction amount to $2,000 to qualify for the bonus interest. This will result the account earning interest between 1.55% to 1.8%.

Scenario 2: Fresh University graduate drawing a salary of $3,000

A fresh University graduate drawing a salary of $3,000 & crediting his net salary of $2,400 in the multiplier account after CPF deduction. Home loan is not applicable in this case. Individual will most likely apply a credit card at this stage and spend an average of $300 every month. On top of that individual will consider to do some insurance or investment with the bank with the excess income. This will result the account earning interest between 1.85% to 2%.

Scenario 3: Married adult that has been in the workforce for a few years drawing a salary of $5,000

A married adult who has been in the workforce for some time drawing a salary of $5,000 & crediting his net salary of $4,000 in the multiplier account after CPF deduction. Home loan is applicable in this case which add up $1,200 to the total transaction amount. Coupled with the credit card spending, this will result the account earning the next tier interest which is 2.2%.

In conclusion, as we move along different stages of life, our total transaction amount increases as well which result in greater interest!

Peer comparison

The closest savings account comparison against DBS multiplier account would be OCBC 360 and UOB 1 account. Since the all the 3 accounts have common component of salary crediting and credit card spending in their bonus interest calculation, we shall take the minimum amount for interest calculation. Based on the above table, DBS multiplier account stand out against its competitor netting the highest interest of 1.85%.

The cons?

Perhaps the only con of this account would be having to maintain a daily average balance of $3,000 per month if not a hefty $5 fall-below fee would be deducted every month. (Most account only charge a $2 monthly fall-below fee) If you have a trouble maintaining a minimum saving of $3,000 every month in your account, you might want to give this account a miss.

Conclusion

I would say that the revamped DBS multiplier account launched would be a big blow to its competitors. DBS not only able to gain deposit market share of those earning less than $2,500 but also attracting young working adults that have been using OCBC or UOB accounts to consider a switch given the better interest bonus. 

In terms of marketing their products, DBS have successfully introduce additional components such as investment, insurance and home loan in their bonus interest calculation. This would encourage consumers to take up these products with the bank to earn higher interest.  

If you have been using OCBC 360 account or UOB 1 account for some time, it's probably time for you to switch to DBS multiplier account to take advantage of its higher interest!

DBS Be Your Own Boss (BYOB) + Save As You Earn (SAYE) account

DBS BYOB+SAYE account is targeted to fresh graduates that have just started working. Account holder can earn up to 4% for their savings! Let’s explore in detail how this can be achieved from this account.

Account Pre-requisites

This account is obviously targeting young working adult with age requirement from 18 to 30 years old. Prior to that, you must not have salary crediting arrangement with DBS/POSB between 1 September 2016 and 28 February 2017. (Sadly, the bank does not reward their loyal customers and aim to acquire new customers instead.)

How it works

1)     You must have a saving account opened with DBS/POSB

2)     Credit your monthly salary to your saving account

3)     You must open a SAYE account (This is a separate saving account where you set aside monthly saving amount deducted from your current saving account)

4)     The savings in your SAYE account earn monthly interest of 2% p.a. (Interest credited yearly to SAYE account)

5)     On top of that, by using DBS/POSB card for at least 5 transactions a month earn you another 2% p.a. for the balances in your SAYE account (interest credited monthly to your PayLah! Account)

Interest breakdown calculation

The above table is taken from DBS BYOB website. This table illustrate very well how interest is calculated.

To qualify for the additional interest 2% p.a. (Interest compounded monthly but credited yearly to SAYE account) and the bonus interest 2% p.a. (Interest credited monthly to PayLah! Account):

·        Monthly salary crediting to current DBS/POSB account

·        Do not make any withdrawal from SAYE account

·        Ensure monthly contribution to SAYE account is met

·        At least 5 transactions made by POSB/DBS card monthly (Applicable to bonus interest only)

Additional points to note:

·        If you make any withdrawal from SAYE account at any given month, additional interest will be forfeited from month 1 to that given month you made withdrawal while bonus interest will be forfeited for that month

·        Additional interest will not be forfeited if at any given month, there is no salary crediting or monthly contribution to SAYE account (likely to happen if you are in job transition)

·        Bonus interest will be forfeited for that month if 1 of the above criteria is not met

Case study

The above table is taken from DBS BYOB website. This table illustrate very well how much interest you can earn by the end of 2 years with respective monthly contribution.

Scenario 1: A fresh polytechnic graduate that has just started working drawing a monthly salary of $2,200 and a take home pay of $1,760 after CPF deduction. He decided to set aside $700 which is 40% of his take home pay to be contributed monthly to his SAYE account. Assuming all criteria are met, he would have earned a net interest of $735.29 and an accumulated saving of $17,535.29 by the end of 2 years. That accumulated savings can be used to finance further education into University.

Scenario 2: A fresh university graduate that has just started working drawing a monthly salary of $3,000 and a take home pay of $2,400 after CPF deduction. He decided to set aside $1,000 which is 40% of his take home pay to be contributed monthly to his SAYE account. Assuming all criteria are met, he would have earned a net interest of $1,062.93 and an accumulated saving of $25,062.93 by the end of 2 years. That accumulated savings can be used to finance future marriage expenses.

How can you maximise the return you can get from this account

·        Set a realistic saving amount to be contributed to SAYE account monthly (Setting aside too little will result in return not fully utilised while setting aside too much will result in withdrawal from SAYE account which will forfeit the interest earned)

·        Do not ever make withdrawal from your SAYE account! The objective of this account is to enforced discipline in saving. If any withdrawal is made from SAYE account, interest will be forfeited and return from this account will be affected greatly.

·        Park any excess savings from your DBS/POSB saving account into higher interest account such as CIMB FastSaver account. (Refer to saving account tab above to find out more about this account) As you can’t make an additional deposit to your SAYE account aside from the monthly contribution to SAYE account, you might have some excess savings lying around in your current DBS/POSB account. On top of that, probably on certain month, you might end up spending lesser and left with excess savings as well. It’s best to park these excess savings to higher interest account.

Conclusion

Comparing against account targeting young adults such as OCBC 360 account as well as UOB 1 account, the criteria is less stringent to qualify for bonus interest on this account. For example, both OCBC and UOB account require salary crediting of at least $2,000 monthly while DBS doesn’t have any minimum salary crediting amount. On top of that, to qualify for further bonus interest, UOB & OCBC customers are required to spend $500 monthly on their credit card while DBS only require customers to make 5 transactions monthly. (which can be easily met)

The projected return of this account is not exactly 4% p.a. because the interest earned is the monthly contribution you made to SAYE account instead of your total saving. Taking in consideration you have made a monthly contribution of $1,000 to your SAYE, you will earn $1,062.93 by the end of the 2 year which is 4.43% ($1,062.93/$24,000) and around 2.2% per year.

Although the 2.2% interest is much lesser than the projected interest, the return of this account is extremely attractive as compared to UOB and OCBC account. You can only achieve a return of around 1.5% p.a. with UOB and OCBC account.

This saving account scheme run for 2 years and after which the scheme will end and the accumulated saving & interest from SAYE account will be transferred back to DBS/POSB saving account. This scheme is extremely useful to help young working adults to kickstart saving habit as well to accumulate a substantial wealth after the 2 years. Do consider this account if you are discipline enough to set aside savings for the next 2 years and do not make any withdrawal.

You can click on this link to sign up DBS BYOB + SAYE account. On top of that there's a current ongoing promotion of $88 cash gift if you sign up before 31 Oct!

Paynow

Few weeks back (10 July 2017), Paynow was launched which allow user to receive cash through phone number or IC number. 7 participating banks have came out with various promotion deals to attract consumers to sign Paynow service with them, below are the offers offered by various banks. Basically you have 2 ways to link your paynow with a participating bank. (2 Chances of winning)

https://www.abs.org.sg/consumer-banking/pay-now

• OCBC-Chance to win grand price of $50k, $30k, $10k and weekly draw of 20 lucky winners to win $500. (Valid till 20th Aug 2017) 
• DBS-Chance to win red Iphone 7 Plus (128gb) daily (Valid till 8th Aug 2017)
• UOB-$5 for the first 5,000 customers that sign up and additional $5 when you send at least $20 through Paynow to a registered Paynow user (Valid till 30 Sept 2017)
• Citibank-$10 grab voucher for the first 5,000 customers that sign up and send $10 to a registered Paynow user (Valid till 10th Aug 2017)
• Standard Chartered-$10 for the first 20,000 customers that sign up (Valid till 10th Aug 2017) (Fully redeemed on 15th July 2017)
• HSBC-$10 Lazada e-promo code for the first 3,000 customers that sign up (Valid till 10 Oct 2017)
• Maybank-Chance to win grand price of $2,888, $1,888, $888 and daily draw to win $20 start as well as $5 grab voucher for the first 3,000 customers that sign up and $8 grab voucher for first 3,000 customers that send or receive money through paynow. (Valid till 31st Dec 2017)

Basically you have 2 chances to win the above offer. (Sign up paynow using IC number or phone number or both with the participating banks) Taking in consideration this post was released weeks after Paynow was launched and Standard Chartered offers has been fully redeemed just after 5 days, we can safely believed that the sure-win offers provided by UOB, Citibank, HSBC have all been fully redeemed by now. This leave us with OCBC, DBS and Maybank offers to consider.

Now to evaluate the 3 offers:

OCBC offer is proven to be the most attractive offer at this point of time! (Chance to win up to $50k)

DBS offer seems to be quite attractive as well if u have not been changing your phone for years!

Maybank offer will also be attractive if you are planning to register Paynow after 20th Aug 2017 (Where all the bank offers have expired or fully redeemed) 

In conclusion I would recommend to register your Paynow with OCBC at this point of time. However not everyone do have an OCBC account hence it would be alright to register with DBS as well. Singapore is transforming into a cashless country is near future and Paynow will be widely used few years down the road. Hesitate no more & take action before it's too late!

Sidenote: If you happened to be the winner of the grand price of $50k do check out my other tabs how you can allocate your excess cash efficiently :)

What is investment?

Most of us are like the farmer, spending our whole life slogging away for money and still unable to accumulate the wealth required to retire. While you are working for money, why not put your idling cash sitting in the bank to work for you. That right! I'm talking about investing right now. You could be the gentleman ridding on cash in near future!
An investment is an asset or item that is purchased with the hope it will generate passive income or capital appreciation.

E.g. 
You have bought stock A now for $100. A year later, stock A risen to $150 (Capital appreciation) and you sold off your position to make $50 profit. (Capital gain)
You have bought a bond now for $100. The bond has a coupon rate of 10% annually and you will receive $10 every year until the bond mature. (passive income)

This blog will talk about Savings account, Central Provident Fund (CPF) and Bonds which are considered to be a safer asset class and Stocks and FOREX which are considered to be a riskier asset class. Allow me to cover the steps needed to prepare yourself and to eventually kick-start your investment journey!

What is the ultimate aim of investing?

You have probably heard of many that are trying to or working towards Financial Freedom. So what the heck is financial freedom? Financial freedom is whereby passive income from your investment exceed your monthly expenses.

E.g.
You have a monthly expense of $1500 a month. Your investment generate monthly return of $2000. Therefore you have achieved financial freedom as you will have $500 extra every month to spend on your wants.

Why should you invest now!

To beat inflation

Inflation is define as the increase in general price level of goods & services. Returns from investment is needed to cover the bare minimum of the inflation to ensure current consumption = future consumption.

E.g.
Interest rate: 0.05%
Inflation rate: 3%
Investment returns: 3%

Scenario 1: Assume you leave your savings of $10,000 in bank saving account earning 0.05%. A year later, your saving did increase to $10,005. But taking inflation into account, your savings only worth $9,713.59 ($10,005/103 x 100). This is a loss of $286.41 every year you leave your money in saving account.

Scenario 2: Assume you decided to invest your saving of $10,000 earning 3%. A year later, your saving increased to $10,300. By taking inflation into account, your savings still worth $10,000 ($10,300/103 x 100). Therefore your investment is said to have beat inflation & your are still able to buy the same amount of goods in future as compared to now.

Therefore, is better off leaving your savings in investment as your money in future will still be able to buy the same amount of goods now!

Bank the ultimate winner

By leaving your savings in bank, ultimate loser will be depositors (us) while the ultimate winner will be bank. Bank pay depositors (us) a return of let say 0.05% while bank lend out money to businesses at a rate of let say 4%. Bank will eventually earn a net return of 3.95% and we as depositors earning a meager return of 0.05%. Therefore there is a huge need to park excess cash in investment!  

Risk, returns & time horizon

Starting investment early allows you to generally take more risk as your investment period is longer thus higher returns.

For E.g.

Scenario 1: A person started at age 22
Considering an individual that is of rather a young age of 22, there would not be much financial burden on the person. Let's presume the worst case scenario, where the individual has lost all his investments, he is still able to work to build back his investment fund over time. Furthermore with a longer time horizon, he is able to allocate his assets toward aggressive growth with majority percentage of assets in riskier asset class such as stocks that will provide a higher returns. If successful, the person will be able to build up a strong portfolio providing substantial passive income to achieve financial freedom.

Scenario 2: A person started investing at age 40
Considering an individual that is reaching near his or her 40s, there will be substantial financial burdens on hand such as home mortgage, family expenses, retiring funds, etc. Let's say the worst case scenario is that the person loses all his investments, he is only able to work for another few more years and with his current financial burdens, it will prevent him from building back the investment fund. Furthermore with a shorter time horizon, he is only able to allocate his assets toward a conservative manner with majority percentage of assets in safer asset class such bonds that will provide a lower returns. If successful, the person can only build up a weak portfolio providing minimal passive income and may have problem to achieve financial freedom.

In short, you are better off if you start investing earlier with a greater time buffer for your investment to grow! 

Time value of money

Taking in consideration that you will reinvest your money from capital appreciation and passive income. We will use the above compounding formula to calculate the final sum received at the end of investment.

E.g.

Assume investment annual return of 5% and investment horizon up to age 55.

Scenario 1: Started investing $10,000 at age 25.

Accumulated amount at age 55: $10,000 x (1+0.05)^30= $43,219.42

Scenario 2: Started investing $10,000 at age 35.

Accumulated amount at age 55: $10,000 x (1+0.05)^20= $26,532.98

Comparing the 2 scenarios, starting investing 10 years earlier will enable you to have $16686.44 more in your final accumulated value. 

The above scenarios might not be accurate to depict real life scenario as you may not just invest a fixed amount of money at the start and not adding more in future.

Therefore to paint a more realistic scenario, we will use the above formula to compute the final accumulated value at the end of the investment.

E.g.

Assume investment annual return of 5% and investment horizon up to age 55.

Scenario 1: Started investing $1,000 every end of year at age 25.

Accumulated amount at age 55: $1,000 x [((1+0.05)^30-1)/0.05]= $66438.85

Scenario 2: Started investing $1,000 at age 35.

Accumulated amount at age 55: $1,000 x [((1+0.05)^20-1)/0.05]= $33065.95

Comparing the 2 scenarios, starting investing 10 years earlier will enable you to have $33372.90 more in your final accumulated value.

In short, the earlier you start investing, the power of compounding take its effect and thus result in a higher final accumulated value!