I usually warn people not to buy investment or insurance products from banks. For the mass majority of normal, working adults, a good rule of thumb to remember is never get any financial products from aside from savings accounts and credit cards. Not without prior research at least.
DBS Invest-Saver is a rare exception to this rule, and I think it would find its place in most young adults’ investment portfolio, especially if you have no idea where to start.
How does it work?
DBS Invest-Saver allows you to pick up to four Exchange Traded Funds (ETF) to invest in, as well as a range of unit trusts sold by DBS. You can start from as low as $100 per month, and increase it in multiples of $100.
When you invest in such funds, your money is pooled together with other investors and the money is used to invest according to the fund’s mandate. For instance, A US fixed income or bond fund would invest primarily in US bonds, and a Singapore equities fund would be investing in Singaporean companies via the stock market.
I personally believe more in passive management and reducing fees, so I would go for the passively managed Nikko AM Singapore STI ETF. The fund would thus use its money to purchase equities according to the 30-company Straits Times Index (STI) which is largely reflective of the Singapore economy:
Dividends accrued are also paid out to you, and while some may like the idea of regular income, unfortunately there isn’t a way to automatically reinvest these dividends.
Too many eggs in a basket, perhaps
More than 40% is taken up by the financials sector, with our big banks DBS, OCBC, and UOB representing a sizeable chunk.
Unfortunately, this also poses some concentration risk if you solely invest in this. Your investment would be heavily focused on a few sectors located in one country – the same country whose fate your job and housing are inevitably tied to. That is putting a lot of eggs in a single basket.
Nonetheless, Singapore remains a very viable place for investments, and diversifying beyond one country when you’re just starting out doesn’t really matter as much until your investment portfolio becomes larger. You can look at other instruments when that happens.
Fees and charges
The sales charge is 0.82%, and the annual expense ratio is a relatively low 0.30%, compared to the typical 1.5 to even 2% some actively managed unit trusts charge, offering little to no discernible advantage.
Essentially, this means that you pay 82 cents for every $100 you put in, and on an annual basis the fund take management fees from your total holdings. Passively managed funds will have significantly less management fees, and in my opinion you want to reduce such expenses as far as possible. Many fund managers charge high fees without giving you better returns than a passively managed one.
For amounts around $500 to $800 or less per month, the fees DBS Invest-Saver charge are very competitive.
Clocking the Invest category for DBS Multiplier
Importantly, taking up a DBS Invest-Saver, even at the minimum $100 per month, clocks the Invest category for your DBS Multiplier and lets you get higher interest for a 12-month period. This is rather significant added returns per month depending on your balance amount.
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For a relatively low cost and easy way to invest monthly in Singapore’s economy, DBS Invest-Saver is a good place to start. The added bonus of fulfilling one more category on your Multiplier account should provide some motivation for you to begin the habit of regular investing.
- Low-cost access to investing monthly
- Unlocks 1 category for DBS Multiplier for added bank interest
- Few ETFs to choose from (although they recently added a REIT option)
- No option to reinvest dividends
- It only unlocks the Invest category for DBS Multipler for 12 months, even if you continue investing beyond that. Ugh