Wednesday, January 29, 2014

Time to buy Equities?

STI has dropped from a high of 3174 on 2 Jan 2014 to 3039 as of writing (on 29 Jan 2014). This represents a 4.25% dropped in a matter of 1 month. Although its not yet a bear market, the drop is deeper than a normal correction. Those who have been eyeing to buy some shares can consider nibbling into the market bit by bit. Value is starting to emerge if this drop continues.


Some blue chips have emerged with good yields. With their stable business nature, they can be a good long term investment. Among those with current yield of more than 4% are Singtel,SPH and Keppel Corp. Beside providing the possibility of capital appreciation, they have been distribution regular dividends to share holders and these easily beats the low interest that banks are giving at the moment.

Monday, January 27, 2014

Promotional Deposit Interest Rate for the Lunar New Year

Its the time of the year where Chinese are preparing the Lunar New Year celebrations. Shops are coming out with all sorts of promotions to entice consumers to part with their money and banks are no exception. The only difference is that banks want you to leave your cash with them by giving you a higher interest rate for your money.


By giving you a few tenth of a percentage more in interest, the banks hope that you will leave more of your hard earned cash with them, so that they can use that funds to earn more money for themselves. This is why most of these promotions are only applicable if you deposit fresh funds with them. Fresh funds, in this case, are money that do not originate from the banks. Some of them may even add in conditions to the promotion that funds withdrawn and re-deposit within X amount of weeks cannot be counted as fresh funds.


What are some of the available promotions for cash deposit at this point in time?


OCBC

The bank is offering a promotional interest rate of 1.1% p.a. for a 12 month SGD time deposit with a fresh fund of at least $20,000.


They also have a Bonus+ account that offers 0.9%p.a. effective interest rate for 3 months with $10,000 fresh fund. Their premier customer will be offered a 1.0%p.a. effective interest rate for 3 months with $100,000 of fresh funds


UOB

UOB is offering a 1% p.a. 13 month SGD time deposit with a fresh fund of at least $20,000. In addition, their savings account can earn extra bonus rate of up to 0.9%p.a. until 28 Feb 2014 if you top them up with fresh funds


CIMB

CIMB is offering interest rate of 1.1% for a 12 month SGD time deposit of at least $25,000. For normal saving accounts, CIMB still offer a good rate of 0.8% p.a. if the monthly increment is more than $100

Tuesday, January 21, 2014

Interesting account that rewards banking relationship with DBS, the new DBS Multiplier Programme

Just came across this new program from DBS that rewards total banking relationship for their average retail clients, called the DBS Multiplier Programme. Ok, I admit that I am a little slow and this programme is actually not so new, as it was launched in December 2013. Nevertheless, it promote a interesting concept of total banking relationship with a bank that was previously only available to the affluent segment of the banking customer.

How it works?


Basically, the bank will track your monthly cash flow on the following segments
  1. Salary credited to the bank
  2. Credit card spending
  3. Home loan
  4. Dividends from CDP

At the end of the month, it will tally to see how much cashflow is involved in the above activities.
From this final cashflow figure, interest rate of various tiers will then be paid out.

Below is an extract from their website on the type of interest rate that you can expect when your cashflow hits certain level.

Total Monthly Cash Flow#Higher Interest Rate (p.a.)*
S$7,500 to <S$10,0000.98%
S$10,000 to <S$12,5001.28%
S$12,500 to <S$15,0001.38%
S$15,000 to <S$20,0001.48%
S$20,000 and above1.58%

My thoughts


The interest rates being offered are actually pretty good for the current low interest environment. Those who are interested can check out the information at http://www.dbs.com.sg/personal/deposit/multiplier/default.page

As with all other banking products, there are certain fine prints associated with it. Do check out the T&C and make sure that you understand them before opening the account.


UPDATE
Follow-up article can be found at
http://moneychatroom.blogspot.sg/2014/03/dbs-multipler-programme-has-increased.html



Monday, January 20, 2014

Is it still safe to invest in 2014?

Fed had just started tapering their quantitative easing (QE) policy in December 2013. They will start with $10 billion dollars a month and is expected to gradually increase this amount in each of their 2014 meeting. This signals the start of removing "easy money" from the economy. Although this action targets the US economy, it inevitably creates a rippling effect across the world. As the old saying goes, "When US sneezes, the rest of the world catches a cold". So what will be the best bet for investing in 2014?

Equities


A lot of analysts have recommended sticking to equities. Although Dow and S&P have reach their highest point in 2013, the analysts are proclaiming that there is still room for further increase. Dow index components are trading at PE of 17 with dividend yield of 2%. This is hardly rewarding for those who are into value investing. STI is at a PE of 12 and this is slightly below its long term PE of 14.  Given a choice, I would choose STI over the US market for now. I will still invest in equities, but will go in with my eyes wide open. One good way is to buy STI ETF that tracks the index. This gives you exposure to the full range of STI component stocks with a smaller initially cash outlay.

Bonds


Bonds are the next class of possible investment. However, given the imminent scenario of interest rate increment in 2015, bond prices will tend to drop. Singapore, being a open economy, has its interest rate tied closely to that of USA. This also means that interest rate will increase in Singapore and bond prices will increase. Therefore, this is one asset class which I will advise investors to stay clear of bonds for now.

Is keeping cash a good option?


The interest bearing accounts in Singapore banks are very low. In fact it is less than the official inflation rate of the country. So it is not wise to keep too much cash. My advise is to keep enough cash that can sustain your lifestyle for 6 to 9 months if you are out of work. The rest of the money should be made to work harder. The closely alternative to cash and fix deposit will be money market fund. These funds invest in short duration bonds that aims to give a better return rate than banking accounts, but at the same time, is not as risky as normal unit trust that invest in equities or long term bonds.

I have no experience in other investment class such as forex, precious metal or alternative investment like wine or painting, so I will not comment on them. On a closing note, do not stop investment completely. You can never time the market and it pays to invest small amount regularly to enjoy the benefits of dollar cost averaging.