POSB invest saver

POSB/DBS has just launched a new investing scheme (POSB invest savers) where investors can invest from as low as $100 per month in Nikko AM Singapore STI Exchange Traded Fund ("ETF").


For more about the nikko STI ETF
http://www.nikkoam.com.sg/nikko-am-singapore-sti-etf/fundprofile

Fees
There is a 1% sales charge each month for your new investment amount.
There are no fees for selling the units. However this is subjected to change.

My thoughts:
There are other similar products available. Let's compare the charges here
A) Poems share builder plan
Poems share builder plan allows you to invest in a smaller fixed amount as well. There is a wider selection of stocks available. Of which, there is an STI ETF as well. This STI ETF is similar to the Nikko STI ETF. Both tracks the STI index.

For amounts lesser than $1000 and having 2 or less counters, the sales charge is $6.42. Depending on the amount you invest monthly, this option can be cheaper or more expensive than POSB invest savers

B) Buying under the Standard charted brokerage account
Stanchart is known for its low brokerage fees. There is no minimum brokerage fees imposed. You only need to pay a 0.25% brokerage fee. In addition to this, GST is being charged.

Investors can choose to buy the Nikko STI ETF directly from the open market as well. However, they need to buy in full lots of 100 units. The commission will work out a lot cheaper than the POSB invest savers.



Other product information
1) Starting the POSB invest-savers
This can be done via the ATM machine under the "Regular savings plan for Exhange Traded Fund (RSP ETF)" option.

My thoughts: It will be more convenient if the subscription can be done over internet banking


2) Buying the units
The purchase price will be based on the average transacted price on the day of purchase. The units are calculated based on your monthly investment amount minus the sales charge.

For example, your monthly subscription amount is $300.  1% sales charge on this amount will be $3. With the remaining $297, they will calculate the number of units based on the average transacted price on the day purchased. Let's assume it is $3.30
$297 / $/3.27 = 90.82

As only round figures are accepted, only 90 units are purchased.
The remaining 0.82 units will be refunded including its sales charge.
0.82 * $3.27 * 1.01 = $2.70

My thoughts:
By rounding down to the full units, you do not get to invest the full amount you want to. In the case of unit trusts, they round to the 2 decimal places and utilize the full amount.
But at least, POSB refunds the unused amount, including the sales charge as well.


3) Selling the units
This can be done via the ATM only.
However, do note that "Only full redemption of your total holdings in the POSB Invest-Saver is allowed. No partial redemption will be accepted."

My thoughts:
I feel that this is a big disadvantage of the product. Investors should be allowed to sell their units in chunks rather than a full redemption only. POSB can impose a minimum redemption amount to allow more flexibility. In the event that investors do not have that minimum amount, they can do a full redemption.


For more information on the product, you can visit:
http://www.posb.com.sg/sites/personal/investments/invest-saver/default.page

Conclusion
This product is good for investors who want to invest in the STI index. The fees are comparable to other similar products though there are cheaper alternatives available. I also do not like the limitation where you can only perform full redemption when you want to sell the units. I will be doing my own manual rsp on Nikko STI ETF via my stanchart brokerage account. More details on this will be provided in a later post.