Use a dollar-cost averaging while reducing your commission fee. What is there not to like?
Just a year ago, investing in blue chip stocks listed on the Singapore Exchange (SGX) seems like a rich man’s game not meant for everyone. That was because board lot sizes were only available for purchase in multiples of 1,000. In those days, it was difficult for retail investors to invest in all companies, since some stocks such as OCBC would cost roughly S$10,000 per lot.
Since then, minimum lot size have been reduced significantly to 100 units allowing your favourite blue chip counter to be within reach.
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While the above mentioned is helpful for investors who would like to get started without a sizable capital, it poses yet another problem, and that is, the high commission cost that one incurs when buying stocks in small units. Frequently, retail investors still have to pay a minimum fee of about $25 per transaction regardless of the value of the stocks that they are purchasing.
Some stock brokerage houses have introduced monthly investment plans as a way to help offset the problem of incurring significant commission cost. As the name suggests, these investment plans allow you to invest a fixed amount of funds each month into buying the stocks of your choice.
They provide an affordable and hassle-free way for those who want a relatively easy way to invest. In addition, investors are also able to effectively take advantage of “dollar-cost averaging” thus benefitting those who do not have the time or the patience to be monitoring the stock market regularly and react accordingly to fluctuations.
Where to go for Monthly Investment Plans
There are currently 4 major players offering monthly investment plans namely: POSB Invest-Saver, OCBC Blue Chip Investment Plan, POEMS Share Builders Plan and Maybank Kim Eng Monthly Investment Plan. Since all of them allow investors to kickstart investing with as little as $100 a month, we will do a minor comparison of the other features with the chart below to understand the differences and similarities.
| POSB | OCBC | Poems | Maybank Kim Eng | |
| Share counters available | ABF Singapore Bond Index Fund & Nikko AM Singapore STI ETF | 18 local share counters & Nikko AM STI ETF | 19 local share counters | 225 share counters across 5 markets (Singapore, USA, Hong Kong, Malaysia and Thailand) |
| Fees | 0.5% sales charge per transaction for the ABF Singapore Bond Index Fund | 0.30% of the total investment amount OR S$5 per counter, whichever is higher | ≤ 2 share counters: $6 for inv. of $1,000 and below, the higher of 0.2% or $10 for inv. above $1,000 | 1% sales charge for inv. < S$1,000 |
| 1% sales charge per transaction for the Nikko AM Singapore STI ETF | ≥ 3 share counters: $10 for inv. of $1,000 and below, the higher of 0.2% or $10 for inv. above $1,000 | 0.18% sales charge for inv. ≥ S$1,000; subject to min. of S$10 | ||
| Dividends | Cash credited to DBS/POSB debiting account | Cash dividends credited to OCBC account; Stock dividends or bonuses safe-kept with OCBC Securities | Dividends are being reinvested but charged 1% on net dividend capped at $50 | Dividends are credited into the Maybank Kim Eng account directly. |
At first glance, POSB and Maybank Kim Eng stood out from the rest in the “Share counters available” category. The former is able to put forward the opportunity to diversify into bonds while the latter has more than 10 times of the counters as compared to OCBC and POEMS. In fact, being a newcomer to this market, Maybank Kim Eng is now offering zero commission for the period from 1 March 2015 to 31 August 2015!
As for the fees, assuming we invest S$1,000 monthly in just the Singapore STI ETF, OCBC turns up as the winner for its fees of S$5, equivalent to only 0.5% charge. Then again, considering a quantum of S$200 monthly, POSB and Maybank Kim Eng turn out to be better options due to their standard 1% sales charge; which would translate into S$2 as compared to S$5 and S$6 for OCBC and Poems respectively.
Last but not least, the dividends are usually credited to each bank’s own account except for POEMS, which would reinvest it back back with a 1% charge on the net dividends (after tax if any).
Conclusion
Monthly investment plans are a relatively new approach to investing which is suitable for people who would like to adopt a long-term view in investing due to the beauty behind dollar-cost averaging.
Do you think a monthly investment plan will help you better invest in stocks? Discuss it with us on Facebook.
Article was first published on K.I.S.S Investing, a website aiming to keep stock investing simple.
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