This article was written in collaboration with SGX. All views are the independent opinion of DollarsAndSense.sg
If learning how to invest is on your New Year’s resolution list for 2018, then understanding how Regular Shares Savings (RSS) plans work can help you get started on your investment journey.
What Are Regular Shares Savings Plans?
Offered by several brokerage firms in Singapore, RSS plans allow investors to start investing in the Singapore Exchange (SGX) from as little as $100 a month.
RSS plans are ideal for new investors with limited knowledge, savings and confidence. It offers an attractive alternative to investment-linked insurance policies (ILPs), as there is no minimum time commitment required, and lump sum investing, as you may not be confident in investing all your savings at one go. However, for the strategy to pay off, you need to stay vested over a long-time period.
In this article, we provide a walkthrough on how you can start investing via an RSS plan.
Step 1: Decide The Brokerage Firm You Want To Use
In Singapore, four brokerage firms currently offer RSS plans. Here are some key features of each plan that you should know.
Number of Stocks: 19 counters in Singapore market to choose from including Nikko AM STI ETF.
Fees: 0.30%, or $5 per counter, whichever is higher.
* Supplementary Retirement Scheme (SRS) eligible.
Number of Stocks: Over 230 stocks across 5 markets (Singapore, USA, Hong Kong, Malaysia & Thailand) Stocks include STI ETF, Ascendas REIT, Apple, Alphabet Inc., Alibaba and Tencent.
Less than $1,000 investment: 1% (minimum $1)
$1,000 and more: 0.18% (minimum $10) for Singapore market. 0.20% (minimum $10) for overseas market.
Number of Stocks: 2. Nikko AM STI ETF & ABF Singapore Bond Index Fund
Fees: 1% for Nikko AM STI ETF, 0.5% for ABF Singapore Bond Index Fund
Number of Stocks: 29 including SPDR STI ETF, ABF Singapore Bond Index Fund & Lion-Phillip S-REIT.
$1,000 investment or less: $6 if two counters or less. $10 if three counters or more
More than $1,000: 0.2% or $10, whichever is higher
* Phillip Share Builders plan automatically reinvests your dividends back into the investment plan.
Which Should You Use?
A common question that many new investors frequently ask is which of the four firms should they use. The answer is that it largely depends on a few key factors.
Stocks you intend to buy: Maybank Kim Eng offers, by far, the widest range of stocks that you can invest in (including overseas stocks) followed by Phillip, OCBC and then POSB, which offers just two ETFs. If your intention is to just invest in ETFs, POSB may be good enough. If you want to invest in stocks, you have to look at the other three firms. If you want overseas stocks, only Maybank Kim Eng offers it.
Your intended monthly investment: As the fees charged by each of these brokers vary slightly, your intended investment amount each month can play a part in determining which of the four firms will offer you the best rate.
The table below shows the most suitable investment amount for each firm.
Step 2: Open An Account With The Brokerage Firm
Once you have decided which firm you wish to use, you can open an investment account with the firm.
For OCBC and POSB, you can start investing in their RSS plans as long as you have an existing savings account with the bank. Simply login through your internet banking account, and click on their respective investment tabs. We managed to set up our RSS plans online with both these firms in less than five minutes.
Maybank Kim Eng MIP
#1 Open a Maybank Kim Eng KE Trade Prefunded Account
#2 Log in to your KE Trade Account
#3 Click on “e-Services” tab as shown below
Phillip Share Builders Plan
If you have an existing Phillip securities trading account, you can apply for this account online. Alternatively, you may complete an SBP Application Form, an Inter-bank GIRO form and apply for a POEMS trading account (if you do not have any).
Step 3: Ensure Sufficient Funds In Your Designated Account
The money that is used for your monthly investments will need to be withdrawn from an account.
For POSB and OCBC, this would be your savings account. If you have more than one savings account with the bank, you will be asked to designate which savings account to withdraw the funds from each month.
For Maybank Kim Eng, the money will be withdrawn from your Maybank Kim Eng prefunded account.
For Phillip, you will need to authorise a GIRO deduction.
Regardless of which firm you use, you need to ensure that there are sufficient funds in the account where money will be withdrawn. Otherwise, the transaction will not take place or be halted after a few months.
Step 4: Set Up Your Standing Instruction/Order
The final step is to set up your standing instruction. These would include the stock(s) that you wish to invest into each month and how much you intend to invest each time.
Your instruction/order will be carried out every month until you 1) change your instructions or 2) have insufficient funds in your savings/prefunded account to complete the order.
There is no lock-in period for your standing instructions. You may cancel or change your instruction any time you like and as often as you wish.
Step 5: Monitor Your Investments Regularly
It’s important that you do not forget to monitor your investments. An invest-and-forget attitude isn’t recommended for RSS plans, as the firm will continue making monthly investments on your behalf based on your standing instructions.
As you build up your investment knowledge and confidence, you may decide to invest in different stocks and may also increase your monthly investments. After a while, you may even decide to start picking stocks or trading.
Remember, with RSS plans, you will continue to retain full flexibility and control over your investment decisions even after committing to embark on it.
Dollar-Cost-Averaging with RSS
The way RSS plans are structured, investors would be utilising dollar-cost-averaging. How would you have done if you had a RSS plan investing in the Straits Times Index for the past five years?
Units purchases based on month-end prices of the Nikko AM STI ETF (Source: SGX My Gateway)
By making monthly investments of $1,000 in the STI ETF over the past 60 months, you would have generated indicative returns of $11,843.21, which is a 19.7% return on the sum total of $60,000. Read this write-up by SGX about dollar-cost-averaging the STI for a deeper dive into the calculations.
If you have a question about RSS plans, feel free to ask us your question on our Facebook page and we will do our best to answer it.