Tuesday, November 14, 2017

Where To Put Your Money To Save For Better Returns?

Interest rates are so low in our bank accounts that it virtually earns close to zero interest. Gone are the days where we see higher interest in the bank account where it was once as high as  9.5% as offered by POSB in the 1980s. Now, there are other higher interest/savings account which offers 1%-3% interest but there are various criteria to meet such as paying bills, buying investment products and meeting the minimum credit card spend.

During my school days, someone approached me to do a survey and subsequently told me of a higher interest product which is known as an endowment plan. Being young that time, I was convinced that this was the better option than just putting my money in the bank account. Little did I know after 10 years, the plan is not even halfway through as it takes 25 years to mature.

I'm sure many of us have bought into similar plans in one way or another and still paying for it after many years. It seems like it’s never ending.

Saving for life goals. The Shorter Way.

While there are many savings plan out there which many people put their money in to achieve certain savings goals and at the same time compound it, 25-year term for most endowment plans is too long for short term goals such as marriage, buying a house or even saving for a child's education.

There are other guaranteed returns investment tools such as the Singapore Savings Bonds (SSB) which are capital guaranteed and pay out a fixed rate coupon to us. However, it can be hard to plan for our savings with this as we need to buy and sell the bonds and there will always be the desire to sell it for a profit. Nevertheless, it is a safe and guaranteed low risk investment option.

Apart from the SSB, I recently found out a new savings plan by the Maybank Group's Etiqa Insurance which provides relative short term plans with guaranteed interest rates. The shortest term is 6 years with 2.02% p.a. guaranteed return. They also have longer term plans which offer higher interest. The good thing about it is that it is capital guaranteed so no matter what, you will get your initial savings back and will not lose a single cent. At this point, maybe some of you may have questions on how does it work, is it risky and does it seem too good to be true? I went on to probe further and got more information as much as possible.

Before we go deeper into the details, let's take a look at the 2 plans which are offered:

eEasy Save - Guaranteed 2.02% pa for 6 years

This is the simplest of all plans which pays out guaranteed 112% upon maturity after 6 years. We only need to pay for the premiums for 2 years though. There is also death protection of 105% of total premium paid throughout policy term and additional accidental death protection at 100% of premiums paid throughout premium term.

There are other similar plans such as the one from FWD insurance which also gives 2.02% p.a. Even though the term is shorter at 3 years, it is important to note that FWD’s credit rating is BAA3 which is lower than Etiqa’s A- rating.

eEasy Savepro - Capital guaranteed and up to 4.02% pa

This seems like an enhanced version of the eEASY save with higher interest for those who want to grow their money further. To get 4.02% p,a,, we will have to go for the 15-year plan. The capital is still guaranteed for eEASY savepro plan so we are assured that we will not lose our money. The lowest is still the 6-year plan which gives 2.65% p.a., slightly higher than the eEASY save although interest is projected. The same death protection and additional accidental death protection apply.

For a summary and more details of the plans, you can refer to their websit.

Who is Etiqa?

Before putting our money into any place, it is important that we know more about the company. Some of us may know Etiqa when we buy our fire insurance for our HDB flats. They are the (only) HDB-approved Fire Insurer and have been protecting more than 300,000 homes since 2009. They also have competitive travel insurance which some of you may have bought before. Their travel insurance even has automatic flight delay notification which will send us a sms text if our flight is delayed and once we qualify for a claim, it will also be automatically be processed without the hassle of making the claims ourselves. Etiqa is 69% owned by Maybank and AGEAS, a multinational insurance company, and is regulated by MAS.

In view of the above, Etiqa is credible and is a safe place to put our money. Let's take a look at some of the life goals we can save up for.

 Life Goal 1 - Saving for Wedding

Getting married requires some savings to begin with. Maybe you're in your 20s and thinking of getting married in the near future. A 6-year savings plan can come in handy with guaranteed return and guaranteed capital. Maybe we can look at eEASY save’s $45,000, 6 year plan which will pay out a guaranteed $50,404 at maturity.

Here's the benefit illustration which I managed to get from Etiqa:

It's that simple, just pay the premiums for 2 years and get 2.02% p.a. guaranteed return on your money in 6 years’ time. The premiums will be $30,000 for first year and $15,000 (half of first year premium) for second year. It may be quite hard though if you do not have that much savings in the first place. If you have some savings already, it will be good to park it somewhere to use for your marriage later. At the same time, you can earn some guaranteed interest on your money.

Some may say the returns are quite low which I agree to a certain extent. However, I will think it is good to save our money which is critical for future use. This will be a good financial planning consideration where our money is assured to be safe and is not left in the bank earning close to no interest. A normal savings account only earn us about 0.05% interest which is exceptionally low.

Life Goal 2 - Saving For Child's Education

Another important life goal is saving for your child's education. Some of us may have bought endowment plans for this purpose as well. However, we will realise by now that endowment plans are not capital guaranteed and the investment returns are not high too.

Many times, we will be locking our money for 25 years and getting only about 3% projected returns. I've checked Etiqa's eEASY savepro 15-year plan, which we can get 4.02% p.a.. The investment return is projected only but your capital will be guaranteed.

Looking at the $50,000 plan, here's the benefit illustration:

This can be slightly complicated so let me summarise. For the plan, we will pay $5,000 every year for 10 years. The plan will mature at the end of 15 years. The maturity yield is listed on their website as 4.02% p.a. which is a projected value. The maturity value is the amount we see under the "projected at 4.75% investment return", S$76,091. 4.75% investment return here refers to the investment return on the participating fund while 4.02% p.a. is the projected return to the customer.  The maturity value is also calculated using compound interest of the projected 4.02% p.a. interest.

They have other plans with policy terms of 6, 7, 9, 11, 13 and 15 years and premium sizes of $5,000, $10,000, $30,000, $50,000, $80,000 and $100,000. It is quite flexible to plan for our life goals with some certainty that we will not lose our money.

How are returns generated?

By now, some of us may be concerned of whether the plans can deliver its projected returns. This applies for the eEASY savepro plan. I managed to get some information on Etiqa’s overall participating fund's asset mix where 65.6% is invested in bonds, 21.4% in equities, 11.3% in cash & deposits and 1.7% in loans and others. While eEASY savepro is part of this participating fund, this asset mix is not representative of eEASY savepro’s specific portfolio as premiums paid are pooled with those of other participating policies offered by Etiqa.

The top 5 equity holdings is in OCBC (12%), DBS (10.6%), UOB (10.1%), Singtel (5.8%) and Keppel Corporation (4%). For bonds, the top few are the Singapore Government bond, Australia & New Zealand bank bonds and also Dai-ichi Life. In 2016, the fund generated a return of 3.97%.  

Guaranteed savings for life goals

I am still a firm believer in investing my own money but at the same time a portion of it should also be in a safe place for any future goals. Better returns with capital protection is a safe way to save for our life goals. We do not want to end up losing money and jeopardising our future and the future of the people around us.

Currently, for eEASY savepro, they are giving out vouchers based on 1.5%  of the 1st year premium size, and up to $1,500 worth of Takashimaya vouchers. While, for eEASY save, the deal involves up to $1,300 worth of Takashimaya vouchers which will increase the interest rate to 2.18% p.a. from 2.02% p.a. instantly.. Each of these deals are limited to 5 coupons per day. Just head over to their website to grab the coupons.

If you like to take a closer look at the plans above, you can refer to their website . The good thing is you can do everything online and get immediate approval so it saves the time and hassle of meeting an agent and possibly overbuying on plans which you do not really need.

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This article is written in collaboration with Etiqa Insurance. All ideas portrayed are independent by SG Young Investment. 

Wednesday, November 8, 2017

A New High Interest Savings Account To Multiply Your Money – The New DBS Multiplier Account

I've been constantly sourcing for a high interest savings account to park my savings as I always believe in making my money work harder for me. Many of my friends have done it too and transferred their savings to OCBC 360, UOB One, Standard Chartered or even CIMB. I opened a few accounts too just to ensure my savings earn a higher interest.

Where did I transfer my savings from? The answer is POSB/DBS. I have been using a POSB/DBS savings account for a very long time since I was a child. As they have the most ATM machines in Singapore, most people have a POSB/DBS account as their basic savings account. And for the longest time, I've been trying to find out if POSB/DBS has a high interest savings account so that I could consolidate all my money in one bank.

Finally, the time has come!

They have joined the competition to provide a high interest account in the market right now with the revamp of the DBS Multiplier account. This is definitely a game-changer! It is attractive, flexible, easy to use and most important of all, many of us would already have a DBS/POSB savings account which makes it easier to integrate.

The much awaited higher interest account - New DBS Multiplier Account (up to 3.5% pa)

Removing the pain points to get higher interest

The new DBS multiplier account is quite different from the other banks as they have removed most of the pain points to getting higher interest. This is also different from their previous multiplier account which is not that attractive.

Most of us would know that you need a minimum salary credit of at least $2000, pay 3 different bills, meet a minimum credit card spend just to get higher interest from banks such as OCBC, UOB etc. Now, all these will change with the new DBS multiplier account.

DBS allows you to earn higher interest with NO minimum salary credit, NO requirement to pay any bills and NO minimum credit card spend. The minimum interest you can get is 1.55% p.a. just by fulfilling 2 simple requirements with total eligible transactions at $2000 or more per month. You can get up to 3.50% p.a. too by fulfilling more conditions.

Let's see how it works:

1) Basic Requirement - Salary Credit

The first thing you need to do is to have your salary credited into any DBS or POSB savings account. This means if you already have your salary credited to your existing DBS/POSB savings account, you don't have to make additional changes to it.

Remember there is no minimum salary credit to enjoy higher interest.

2) Salary Credit + Additional 1 Other Requirement - Enjoy min 1.55% p.a. and up to 2.08% p.a.

Once you have your salary credited to any DBS or POSB savings account, you just have to meet any one of the following additional requirement:

  • Credit card spend
  • Investments
  • Insurance
  • Housing loan

As long as your salary credit and 1 other requirement meets a minimum of $2000, you will enjoy higher bonus interest on the first $50,000 balance.

  • For credit card spend, it is applicable to any DBS/POSB credit cards (not applicable to debit cards).
  • For investments, it is applicable to unit trusts (including POSB invest saver), online equity trades etc.
  • For insurance, it is applicable to any purchase of insurance with DBS/POSB.
  • For housing loan, it is applicable to any monthly instalment payment for housing loan with DBS/POSB.

*For insurance and investments (unit trusts lump sum/RSP/invest saver only), it is only applicable to new purchase after opening of DBS multiplier account

These are the different tiers for you to enjoy higher interest for salary credit + additional 1 other requirement:

For example, if you have a salary credit of S$2400 with any DBS/POSB savings account and you have some spending on your DBS/POSB credit card, you'll be eligible for the 1.55% p.a. interest. Even a $1 credit card spend will allow you to earn that higher interest.

If you have a higher salary credit plus credit card spend adding up to S$2,500 and above, you will get even higher interest at 1.85% p.a.

3) Salary Credit + Additional 2 Other Requirements - Enjoy min 1.80% p.a. and up to 3.50% p.a.

If you have salary credit + additional any 2 other requirements (as above), this will be the different tiers for you to earn higher interest:
For example, if you have a salary credit on any POSB/DBS savings account and some spending on any DBS/POSB credit cards plus you have either monthly investments on POSB invest saver or monthly home loan instalments with DBS/POSB, you will get at least 1.80% p.a. For this segment, I believe if we have a salary credit + additional 2 other requirements, we can easily get more than 2% p.a. Not too difficult to have a total transactions above S$2,500 for this.

How Much Interest Can You Typically Earn?

I think this new multiplier account from DBS really makes it easier to earn higher interest. Its easier and more flexible than the other existing products out there in the market. Let's do some scenarios and see how much interest can one typically earn?

Scenario 1 - Fresh Graduate with $2000 salary credit + credit card spend

Most fresh graduates are likely to have at least a $2,000 salary credited into their bank. Some might even earn more. For an additional 1 other requirement, the easiest will be the credit card spend. As the new DBS multiplier account doesn't require any minimum salary credit or spending, once you have $2,000 salary credited, you've already fulfilled the minimum criteria.

For the credit card spend, there is no pressure to spend a minimum just to meet the criteria to get a higher interest. Let's just assume that the spending is just $100 and total eligible transactions will be $2,100 which enables one to earn an interest of 1.55% p.a. For a savings of $10,000, total interest earned will be S$153.30 annually.

If this fresh graduate spends more and chalks up $500 in credit card spending per month, total eligible transactions will be $2500, which enables one to earn an interest of 1.85% p.a. For the same savings of $10,000, the interest earned will be S$182.50 annually.

*Note: Most credit cards application require annual gross income of $30,000. If you still hold a student credit card, it is eligible for higher interest criteria as well. 

Scenario 2 - Young Working Adult with $4900 salary credit + credit card spend

For a young working adult, he would have rose up the corporate ladder and gotten a higher salary by now. Assuming he has a salary credit with DBS of $4900 and $500 credit card spend, total eligible transactions will be $5400,  which translates to an interest of 1.90% p.a. For savings of $30,000, the interest earned will be S$569.40 annually.

Scenario 3 - Fresh Graduate with $2500 salary credit + credit card spend + Investment

Now, if a fresh graduate also makes monthly investments with either DBS or POSB apart from salary credit and credit card spend, he or she will be able to get min 1.80% p.a. For investments, it includes any trading/purchase of stocks done on DBS vickers account or any monthly investments with POSB Invest Saver.

If this fresh graduate has a salary credit of $2500, a credit card spend of $200 and an investment of $100 with DBS/POSB, he or she will get 2.00% p.a. This is higher than most other bank accounts out there currently.

Comparing to other high interest bank accounts

Now, the most important thing is whether the new DBS multiplier account is the best in the market?

I've looked through the account and various interest rate tiers which they have and concluded that they offer the highest interest in the market currently. Just 2 criteria and you will get a minimum of 1.55% p.a.

Let's look at some scenarios to compare against what they would get from other bank accounts such as the OCBC 360, UOB one, BOC smart saver, SCB bonus saver and Maybank SaveUp account:

Scenario 1 - First Jobber with S$2,700 salary credit + $500 credit card spend

For scenario 1, the interest earned on DBS multiplier account is 1.85%. The only bank that match up to this rate is BOC. However, for BOC, the minimum salary credit is $2000 and minimum credit card spend is $500 which is quite restrictive. For DBS, there is no minimum salary credit or credit card spend. Only need to meet above $2000 to get higher interest.

It seems like even the more popular ones like OCBC and UOB does not match up.

Account balanceDBSOCBCUOBBOCSCBMaybank

Scenario 2 - Young working adult with S$4,900 salary credit + $550 credit card spend

For scenario 2, the interest earned on the DBS multiplier account is 1.90%. All the other banks fall behind with only SCB being the closest at 1.88%. 

Account balanceDBSOCBCUOBBOCSCBMaybank

Scenario 3 - Lower waged worker with S$1,800 salary credit + $200 credit card spend

For scenario 3, the other bank accounts clearly does not benefit anyone with less than $2000 salary credit but for DBS, they still give higher interest as long as you can meet a combined eligible transactions of S$2,000 per month. This is a life saver for those who could not qualify for higher interest from other banks due to their salary. 

Account balanceDBSOCBCUOBBOCSCBMaybank


The new DBS multiplier account clearly distinct itself among the competition of higher interest bank accounts. This will cater to new groups of people who prefer flexibility and avoid the trouble of having to meet minimum credit card spending or pay 3 bills etc.

This will also cater to those who have not been able to meet the minimum salary credit or the pay 3 bills or minimum credit card spending requirements from other banks. Its time to let this group of people earn higher interest too.

For existing POSB/DBS account holders, you just need to open a new multiplier account and put your savings into it to start earning higher interest. You do not have to change your salary crediting arrangements if your salary is already credited to any of your existing POSB/DBS account. It will automatically be detected subjected to T&Cs of eligible salary credit.

To find out more about the new DBS multiplier account click here.

This article is written in collaboration with DBS. All ideas portrayed are independent by SG Young Investment. 

Monday, October 30, 2017

Earnings Season - CMT and FCT Financial Results

Its earnings season again which means time for more dividends. I've owned Reits for a long time now where I can get stable and recurring income from these investments. Shopping mall Reits are attractive in Singapore and 2 of the most popular ones are Capitaland Mall Trust (CMT) and Frasers Centrepoint Trust (FCT).

CMT and FCT both reported their financial results just a few days ago and I must say shopping malls in Singapore are still quite resilient. The management of the malls is quite important as I personally saw a few malls become dead because of incompetent management. CMT and FCT are not the incompetent ones.

CMT financial results

For CMT, its 3Q financial results is nothing spectacular. DPU came in flat at only +0.3% year on year. The closure of Funan for redevelopment has affected its DPU as rental income decreased without Funan in its portfolio. Fo other malls, net property income remain largely unchanged.

Its NAV is currently at $1.95 and share price trading at $2.03. Its still a stable Reit to hold for the long term where I bought it back at $1.88-$1.90. I will still be holding this stock for its dividends. Dividend yield is about 5.5% base on current price.

FCT financial results

Frasers centrepoint trust is another resilient shopping mall reit which I have in my portfolio. It reported strong 4Q17 results where DPU rose 5.5% as compared to last FY quarter. Its portfolio occupancy rose to 92% from 89.4% and rental reversion was +8.3%. FCT has delivered 11 years of consecutive DPU growth. It is quite impressive to be so resilient and still has some steady growth.

Artist impression of the new Northpoint city.
Adapted from http://www.fraserscentrepoint.com.sg/mega-development-northpoint-city-set-welcome-shoppers-q4-mall-track-soft-opening-close-90-leased/

For its portfolio, the higher income came mainly from the following:

Causeway Point
This is the shopping mall at Woodlands. There were renewed and new leases signed which contributed to a 2.5% increase in rental rate.

Northpoint City
The shopping mall at Yishun has been going through AEI works for quite some time now. The enhancements are progressively completed so there is higher occupancy and rent from the new tenants. There is also additional revenue from Yishun 10 retail podium which was acquired on 16 November 2016. This improved the revenue by 27.4% year on year

Changi City Point
The shopping mall right beside Expo MRT is doing well too. Higher rental rate from renewed and new leases signed, and improved occupancy contributed to an increase of 13.6% in revenue.

The only lagging mall in FCT portfolio is Bedok point which saw a drop of 26.4% in revenue. However, it is only 2.8% of all of FCT's NPI so it isn't much of a concern. The largest contributor comes from causeway point at 50.6% of FCT's NPI. Causeway point occupancy rate is still impressive at 99.5%. Northpoint city will be the next major contributor as AEI works are progressively completed. Occupancy rate stands at 81.6% currently so there is lots of room to continue growing.

FCT has provided me dividend income of about 6% p.a. Dividend yield is about 5.4% at current prices. It is trading at a price to book ratio of 1.08x which is slightly above its net asset value. I wouldn't consider accumulating more at this point but will continue to hold this for dividend income.

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