Today I got an interesting question by reader Kah in response to my article comparing ETFs tracking the Singapore Straits Times Index. Kah asked me whether it makes sense to POSB Invest Saver Plan and how fees matter in this case. Read on for the full analysis!
Update October 2016: Please note that this article is outdated. Standard Chartered has now introduced a minimum commission which makes the POSB Invest Saver the better choice, hands down.
Kah asked:
“I found this option (Nikko STI ETF) under the POSB Monthly Investment Plan and planned to have this investment over a 5 Year period with monthly input of $100 (60mths x $100), and sell it at end of the 5th year mainly to benefit from its capital appreciation. Would the Expense ratio be a cause for concern in my case?”
My assessment:
Over the total 5 years life of the investment Kah will pay SGD 64.05 in expenses to the Nikko STI ETF since it has an expense ratio of 0.42% per year. If the expense ratio were cheaper, let’s say 0.30% which is offered by the SPDR® Straits Times Index ETF Kah would only pay SGD 45.75.
The difference is rather small in the case of the expenses.
Sales charge:
Currently the POSB Invest Saver Plan charges a 1% sales charge. This means that Kah will pay exactly SGD 60 in commissions to POSB for buying the funds for him. If they would buy them directly using Standard Chartered’s online trading tool he would only pay a commission of 0.20325% or SGD 12.2.
Total cost overview for Kah’s scenario
| POSB Invest Saver Plan | Buy SPDR® Straits Times Index ETF directly | Buy Nikko AM Singapore STI ETF directly | |
| Total cost over 5 years | SGD 124.05 | SGD 57.95 | SGD 76.25 |
Why I still recommend the POSB Invest Saver Plan in this case
Yes, paying 1% sales charge seems quite costly, but given the small monthly investment of SGD 100 buying regular lots of the ETFs directly would be very troublesome and Kah would only be able to buy once every quarter making them more vulnerable for market fluctuations.
The POSB Invest Saver Plan is a great “set it and forget it” solution and is especially suitable lower monthly investments. At the time of writing there are “no exit or redemption charges”. Comparing this with the outrageous fees of some unit trusts the POSB Invest Saver Plan is fairly priced.
The POSB Invest Saver Plan gives people an easy option to participate in the Singaporean stock market and ensures regular investment through automatic giro deduction. Overall: Thumbs up!
POSB Invest Saver Plan not recommended for high monthly investments
If you plan on investing more than SGD 400 per month in the Singapore Straits Times Index you would be better off buying the funds directly.
Hope this helps!
Hi there nice website.
I am a newbie so pardon if I make mistakes.
You mentioned if we invest more than 400 a month it’d be better to buy direct. By direct you mean with brokers yes? They have a low commission but due to their minimum fee you’d need a larger amount to even “beat” 1%.
Of course the next best way is to use SCB where there’s no minimum fee. However shares are not kept with CDP but SCB. That’s a popular discussion so really depends on the individual.
I would recommend you look at Maybank Kim Eng’s Monthly Investment Plan because you can keep shares witb CDP. You can buy SPDR STI ETF and 200 over other counters. Fee is also 1%. Better still we can buy in multiples of $10 so can manually reinvest dividends. I believe Maybank KE is also one of the proper brokers so their platforms can be good as well.
I started with POSB Invest Saver but am considering switching to Maybank KE due to the reasons above. Perhaps stop monthly investment then wait till capital gain and sell. Anyway will still get dividends. Good thing though is ABF Bonds. 0.5% charge plus Maybank KE MIP does not have that
Thanks, Felix for pointing out the Maybank KE monthly investment plan! I did not know it exists, quite an interesting option! For monthly investment below SGD 1,000 the fee is 1% and for monthly investments over SGD 1,000 it is just 0.18% (minimum commission of SGD 10 applies). This makes the Maybank KE plan very attractive. Choice of counters is very good, unfortunately some of the low cost Vanguard ETFs are not included though.
Personally I prefer SCB, but you are right that the shares are kept with SCB and not with CDP. I can live with that, but I understand that many people want their shares to be kept at CDP. Using SCB you can “beat” the 1% sales charge at about SGD 400, but for other brokers it is not possible of course.
If you do not want to use SCB the Maybank KE monthly investment plan is a fantastic choice. Definitely “wins” over the POSB Invest Saver Plan in my opinion.
Thanks for your reply!
May I ask if we buy using SCB we can only buy whole lots of 100 ya?
For Dollar Cost Averaging, the amount invested is fixed? If we fix the number of shares does it still work? I.e. buy 1 lot every month.
Lump sum investing will require timing the market yes? So far the main draw for me as a newbie with little capital is the ability to buy odd lots based on the little monthly amount I can set aside.
I shall test out MayBank KE MIP and see how it goes. Main reason would be SPDR and easier to manually reinvest dividend as investment amount is in multiples of $10. I think their platform is much better as well. Like website/apps etc.
I went to read on the Maybank KE. There is additional of the following
Clearing Fee of 0.0325% on contract value.
SGX Trading Fee of 0.0075% on contract value.
GST of 7% on each item (applicable to commission and fees)
If i remember correctly POSB Invest Saver Plan is flat 1%. But do correct me if wrong.
Yes it seems that POSB Invest Saver is a flat 1% and Maybank KE would be 1.043%. So when investing SGD 1,000 POSB would charge SGD 10 and Maybank KE would charge SGD 10.43. I might be wrong of course.
Hi, could you advise how you calculate the amount of expenses paid to Nikko AM STI-ETF over 5 years to be SGD 64.05? I can’t get this figure. would you be able to reply me via my email instead? Thank you.
Hi Patsy thanks for your question! I used Excel to calculate the total expenses in my scenario. Details: http://singvestor.com/ere/nikko-am-expense.png
Hi, I am so sorry but i still did not understand this calculation. Moreover, I have a question. When banks say the charge is 1% or 0.48% for example for every $100 do the mean the charge would be $1 & $.048? I am very very vanilla to this and trying to learn and absorb as much as i can from experts like yourselves.
Thank you for your help.
Hi, I’m new to shares and will plan to start my first investment with POSB invest savers. How can I estimate the amount I will receive at the end of 25 years inclusive of the expenses for the sales charges. Assume I put $100 every month for the next 25 years, using conservative calculations on dividends and market prices.
Thank you!
Hi HY! Congrats on getting started! I would recommend you create an Excel sheet to do this calculation. If you do not have Excel you can create a free Google Sheet or download Libre Office for free. You can then estimate the performance of your investment in various scenarios (growth of 3-8 percent per year). Don’t forget to factor in the 1% sales charge!
Hi, i’m looking to get into a monthly investment plan and I’ve just opened an account with Maybank Kim Eng, although it is still being processed and no funds have been put into it yet. I am serving NS and I would like to put my idle money to work in this 2 years by buying about $400 in SPDR/Nikko AM every month ($2000-3000 initial investment).
I’ve read from various sources including your website that SC is the best platform to use to purchase shares due to their no minimum fee scheme. However on their website, it states that this scheme is now only available to priority bank members which i do not qualify for. Therefore, as a young man with little time nor capital, is the Maybank KE route the best for me right now?
Thanks!
Hi Lionel, first of all congratulations for getting started so early! I wish I had it figured out when I was your age… You are right, Standard Chartered has introduced minimum commissions now and therefore using the monthly saving plan is the way to go! I am not a professional advisor, but I think the Maybank KE monthly plan would be great for you. Did you also look into the POSB Save as you Serve program? I have not researched it in-depth, but it seems to offer 2% interest, which is nice.
Hi I would like to apply under the DCA – dollar cost averaging program, having a monthly investment of $100 (for example), so can I say there will be a monthly fee on the $200 each month? Would dividends be paid back to my savings account and how would I get notified? Thanks
Hi I would like to ask if i purchased the sti etf under the POSB invest saver would the shares be kept under CDP or POSB. Thanks.
Dear Bryan, the answer is hidden in the official terms & conditions on page 3. The shares will be held in a custodian account by POSB, not in the CDP account. Link: https://www.posb.com.sg/personal/landing/invest-saver/downloads/Terms_and_Conditions.pdf
So does this mean i would be unable to transfer my shares to the CDP account?
Depending on how much you want to invest each month it might be better to buy the STI ETF directly with a broker who puts them into the CDP instead of the custodian account.
Hi thanks for the reply. If possible, could you please answer one last question? if I plan to invest $100-200 a month, would you recommend POSB Invest Saver, OCBC Blue Chip Investment Plan, Phillip Capital Shares Builder Plan or Maybank KE Monthly Investment Plan? Thank you.
If I were you I would choose the plans from POSB or Maybank KE. If you invest SGD 200 in the STI ETF via these plans it seems from my quick research that you would pay these fees:
Maybank: SGD 1
POSB: SGD 2
Philip Capital: SGD 6
OCBC: SGD 5
Since your monthly investment amount is not too high I would choose one of the cheaper 2 options, as otherwise fees eat into your return. Having said that, I am just a random guy with a blog and not a financial expert, so you should carefully compare the plans and then decide which fits you best. Making an Excel sheet to simulate the costs might help.
Hi, I’ve got a quick question. I’ve been investing in the posb STI ETF at $100 per month for the last 2 years, if I were to withdraw from it now, how would you calculate my loss be? Up till now when I receive my monthly statement, I have no clue on what the numbers mean, and no matter how much I read up, I still don’t get it. Many thanks!
The Straits Times index has rebounded strongly in the recent months. I strongly doubt that you made a loss.
Good article and well researched!
Enjoy reading …. good work.
Hello，Im new to invest.
If I can invest 650 per month, is POSB invest saver still a good idea to invest?
But SPDR STI ETF seems popular than Nikko am.. Or should I try POEMS which also have Share Builders Plan or SCB if I not only interested just STI ETF/ABF , but also S&P 500, reit, US etf , maybe blue chip stock when I am affordable.
Is regular saving plans good if I only intend to use it max 2/3 years as I think the plan’s market is quite small…
Most of the saving plans are good, the most important is to get started. Investing SGD 650 per month is not bad. You should however hold the investment at least for 8-10 years. If you are looking for short term savings (2-5) years then you might be better off with Singapore Saving Bonds.
Hi Singvestor, I would like to ask why do you feel that if one were to invest more than $400 a month, the POSB plan is no longer the best? I was under the impression that for any sum which is less than $1000, it would make sense to go with the POSB Plan as opposed to the rest of the other banks because some banks factor in selling fee too like OCBC’s for example. While MayBank’s investment plan is only viable when you factor in larger investment sums of more than a $1000 each month.
So if I were to invest $500 monthly, wouldn’t POSB be the best one to go with?