19 months ago, DBS decided to revamp their higher yielding savings account offering.

I wrote about the account, and then I made this into one of the main savings account that I used.

The DBS Multiplier account was pretty refreshing when it was launched because it caters to a particular group of savers that other banks were not catering to.

On 1st of May this year, DBS decided to enhance their DBS Multiplier so that you may be able to benefit from higher interest rate and have this interest rate applied to a larger savings amount.

I took a look at the offering, and I think I will stick to the DBS Multiplier.

So let me explain to you the changes, why I decide to stick with my decision, and some of the ways that I can make use of it to help me build wealth better.

The Current DBS Multiplier

Before I carry on the explanation, you might be interested to hear my perspective of the Multiplier account 19 months ago. You can read the link above.

I think before I explain the changes it is better to refresh our memory how the Multiplier is like currently.

If we recall, the table above shows the interest that you can earned if you made different levels of transactions. If you have satisfied that particular band of transactions, and have fulfilled 1 or 2 categories of different transactions, you earn that amount of interest within that band on the first $50,000 in your DBS Multiplier Account.

The mandatory criterion is that you must credit your salary into a DBS/POSB savings account. This does not have to be the DBS Multiplier account, it can be your savings account, multi-currency account, joint savings account with your spouse. DBS have a way to track the salary being credit to any account under your name.

There are 2 different tiers of interest rates that you could earn, and it depends on how many categories of transactions you can satisfy:

1. Credit Card Spend with DBS/POSB
2. Home Loan Instalments with DBS/POSB. Both contributions from CPF and cash payments for home loan instalment qualify
3. Insurance with DBS/POSB. Selected new regular premium insurance policies purchased through DBS/POSB
4. Investments with DBS/POSB. This includes dividends from CDP credited into your personal or joint DBS/POSB deposit accounts. New lump sum or regular savings plan (unit trust or ETFs) bought through DBS/POSB. Buy transactions made via DBS Vickers Online Trading, mTrading, DBS digibank, iWealth

This looks like any of the hurdle savings account out there in the market such as the OCBC 360, Maybank Saveup, UOB One, BOC Smartsaver, Standard Charted Bonussaver.

Except that instead of high minimum for each category, to qualify, the Multiplier allows you to aggregate ALL your transactions to see which transaction band you hit and what is the interest you can earn.

The minimum is to have $2,000 in transactions.

This sounds complicated but it is not let me go through some examples.

For example, suppose that I earned a take home pay of $1,500 and

1. I spend $300 on a DBS/POSB credit card
2. I bought a regular Manulife Term Insurance and paid $200 in premiums

So I satisfy

1. The salary credit
2. 2 categories of transactions
3. The total transactions add up to $2,000, which satisfy the minimum $2,000 in transactions

According to the table, I will earn 1.80% per year in interest.

This is pretty sweet for you if you are starting out and do not earn so much. You would have failed other savings account qualifications.
If instead you spend $500 on your credit card (as an example, it is a bit irresponsible to earn $1,500 and spend $500 in credit card transactions!) and no insurance, investments or home loans, you satisfy 1 category instead of 2.

You still earn 1.55% per year in interest.

Here is an example for the graduates.

Suppose your take home pay is $4,000/mth and you spend $1 on a credit card transaction and $20 per month on an insurance product:

1. You satisfy 2 transaction categories minimally
2. You credit a salary

Your total transactions of $4,021 qualifies you for 2% in interest rate.

Notice that without a minimum amount for each category, unlike its competitors, you are able to qualify for the DBS Multiplier bonus interest rates. I will probably explain the advantages to me below.

Boosting the DBS Multiplier

DBS will be providing a boost to the interest you can earn on the money in your DBS Multiplier account.

Potentially, you can earn higher interest on $100,000 instead of $50,000 currently.

However, it is not so straight forward.

Let me explain.

So what I have explained in the previous section is still valid.

There are no changes there for the 2 tiers of interest rates, and transaction bands that I talked about.

DBS introduce a third tier of interest.

To satisfy this tier of interest you have to qualify one more category of transactions.

And if you manage to satisfy one more category of transactions, you earn a higher interest on another $50,000 of savings in the DBS Multiplier.

Let us go through an example.

Suppose you:

1. Have $100,000 in your DBS Multiplier
2. Have $4000 salary credited to another POSB savings account
3. Have a $1400 DBS home loan mortgage paid via your CPF
4. Purchase $5000 worth of stocks through DBS Vickers for the month

You have hit at least $2000 worth of transactions, 3 categories, and amassed $10,400 in total transactions for the month.

For this month your interest will be

1. 2.2%/12 on your first $50,000 for this month
2. 2.4%/12 on your next $50,000 for this month

If instead of three categories, you can only hit two categories, and amass $9000 in eligible transactions for the month, your interest for the month will be:

1. 2.2%/12 on your first $50,000 for this month

So there is no penalty, you will still earn like your original multiplier.

Why I am Sticking with the DBS Multiplier

As a wealth builder, I have to balance my life and how hard my money works for me. So we are always evaluating which savings account we should use in our daily lives.

I will stick with the DBS Multiplier (unless a competitive bank comes up with a 5% yielding, low hurdle savings account!).

Let me share with you some of the reasons and my perspectives about the account.

1 Throwing down the Gauntlet if You have the Spending Ability

The original Multiplier did something really great.

And that is that it caters to those who have a lot of trouble hitting the high minimums of the various transaction categories in other banks. Due to that, if your earning and spending is low, you are left to earn a low interest of 0.05%. They changed that by enabling those who could hit $2,000/mth in transactions to earn 1.55%.

They took care of the lower bound. And they have kept that lower bound.

With these changes they are challenging those who can bank with DBS more :

If you have the ability to fulfil one more category in transactions, we are going to reward you with more! Higher interest on another $50,000.

But if you failed this challenge, they are not going to penalize you.

2 A Challenge with a Worthwhile Reward

And for me if you fulfil the additional category it is worth it.

By satisfying just one more category, and with no minimum category transactions, you get potentially $1000 to $1900/yr more in interest.

For those who have quite a bit of cash lying around, you may be struggling to fulfil 2 different hurdle savings accounts like the DBS Multiplier. Most would need to have salary credit and credit card transactions.

How does one have so much salary and spend so much money?

If you have a need for home loan, unit trust or insurance needs, it is a worthwhile hurdle to create another high yield savings account.

3 The Only Savings Account that Blends with Your Stock and Bond Investing

As an investor, there are no other savings account that have stock investing as a transaction category that leads to higher interest rate.

Except the DBS Multiplier.

And this suits me a lot.

1. When I purchase local or foreign stocks using DBS Vickers as my broker, this counts as an eligible transaction (sell, contra and electronic payment of shares do not count)
2. When dividends are paid by the stock and credited into my DBS savings account via CDP, this counts as an eligible transaction

As a stock investor who has dividends coming in, together with a minimum credit card transaction, I can satisfy 2 categories to earn the Tier 2 interest.

Now we know that dividends are not paid out in all months, so you might be wondering how do we consistently fulfil the investment transaction category.

You could

1. For those months where there are no dividends, you buy a stock. This might be a bit tough and not really advisable for everyone as the potential losses might be heavier than the interest gain
2. Implement the Singapore Savings Bond ladder. More on this later
3. Buy a bunch of dividend stocks that provide dividends every month. More on this later

#3 is doable but I would advise against forcing yourself just for the sake of higher interest. One dividend investor, Paul Low, managed to invest in such a way, he has dividends payable to him every month.

For most of you, #2 looks to be the most applicable.

In 2015, MAS decide to package our AAA rated Singapore Government Bonds into a Singapore Savings Bond.

This bond

1. Is AAA rated and very hard to default
2. The way its packaged, if you sell it any time, you will get back your principal, and any accrual interest that have not been paid out. So you do not make loses on your principal
3. Pays out interest every 6 months. The pay-out counts as dividends from your CDP into your DBS savings account
4. The minimum amount you can apply is $500. Note that for each buy and sell of the Singapore Savings Bond, there is a $2 admin charge

With $3000, you can form a Singapore Savings Bond ladder that pays you every month. You can look at the admin charge as the cost to get this higher yield interest.

An example of the Singapore Savings Bond Bond Ladder

The table above illustrate how this can be done. For 6 months, you will accumulate different series of Singapore Savings Bonds.

For the next 10 years, you will have 12 interest payment that comes in at all the different months that qualifies you for the investment tier.

Another advantage of the investments category is that, while my income is not more than $30,000, there are some months where I would purchase stocks worth $25,000 to $30,000 which allows me to hit the highest rate of 3.5%. With the enhancement to the Multiplier, I may be able to earn 3.8% on another $50,000.

It is likely I cannot be buying stocks every month at that frequency, I can offset my brokerage fee with this Multiplier interest.

The brokerage fee on a $30,000 transaction is about $60, and the extra interest on the Multiplier at 3.5% to 3.8% can reached $125/mth more. This more than offset my brokerage costs.

4 You may happen to have Insurance Protection Needs

And this would allow you to fulfil that all important third category. However, you have to note that the insurance premiums paid would only qualify you as an eligible Bonus Interest transaction for 12 months. After which, DBS will not count this purchase as a category anymore.

DBS have a 15 year working relationship with Manulife Insurance so there are an assortment of regular insurance plans that qualify for this.

They include:

1. Endowment plans
2. Investment linked plans (Kyith do not advise you to get this)
3. Retirement plans
4. Education plans
5. Income stream plans
6. Decreasing Term Mortgage Insurance
7. Term Life Insurance

For most of my readers, I do recommend that you organize your financial objectives well. Do not mix protection and wealth building needs.
With the thought of satisfying this transaction category I can see you purchasing a term life insurance to augment your current insurance coverage.

The illustration above shows the description of ManuProtect Term, which is a term life insurance that should qualify you as an eligible transaction in this category.

More so, it is likely to meet your protection needs, does not contain cash value, and premiums should be low enough.

I can see myself getting a 5-year term worth $50,000 or $100,000 in coverage.

How much is the premium? You would need to approach a Wealth Planning Manager or a DBS Branch to get the quotation. This is because your premiums will differ based on your age, pre-existing conditions, the term you are looking for, and whether there are any riders attached.

However, we can have an estimation.

If you look at my Cheapest Term Life Insurance Comparison, a Manulife Term Plan covering $1 million costs $1523/yr for a 40 year old and $1044/yr for a 30 year old. While $1 mil is likely cheaper than smaller amounts, if you are covering $100,000, your annual premiums could be closer to $152/yr to $104/yr or $12.66/mth to $8.66/mth.

Now, if this qualifies me for the third tier interest, it means by doing this I can earn $50,000 x 2% = $1,000/yr in interest to $50,000 x 3.8% = $1,900/yr in interest.

It looks worth it.

5 Allow you to Optimize Your Family Savings Well

Perhaps the biggest appeal that Kyith cannot enjoy is to use only 1 salary credit to potentially enjoy higher interest on $200,000 of your family’s savings.

I am not sure whether I should write about this, but it seems this is openly discussed in The Burrow, DBS’s own vibrant Facebook Community. So if you wish to find out more ways how to take advantage of DBS’s services, you can join the 10,000 folks in the community today.

So basically, you do not have to credit your salary into the DBS Multiplier Account.

You can credit into any DBS/POSB account and they will be able to track it.

A pro tip: Under your DBS digibank, Under Accounts, there is a Bank and Earn Summary:

This allows you to see whether you manage to hit all the criteria and what is the interest tier you are. This removes a lot of the uncertainty whether your transactions qualify for bonus interest.

The beauty of the Multiplier is that if you credit the salary, and transactions to a joint account shared with your spouse, or another person, both your DBS Multiplier accounts will earn the bonus interest if you qualify for it.

So in the above illustration, suppose you qualify for 3 transaction categories, due to your salary credit both your DBS Multiplier can earn interest on almost $200,000.

This frees up your spouse salary to tackle another hurdle account.

The joint savings account is not the only account that you can maximise.

There are a few accounts that are joint, that can boost the total transactions:

1. Credit card. Joint and supplementary cards
2. Mortgage
3. CDP Accounts. Both your buy transactions will boost the transactions, and so are both your dividends

6 No Minimum Transaction per Category is the Multiplier’s Greatest Advantage

You might not agree with me, but for me the absence of minimum transactions for each category is what made the DBS Multiplier the most appealing.

If I look at the competitors, the one with the lowest hurdle is UOB One Account. That enables me to earn an average of 2.44% on $75,000 in deposits. This is pretty good.

However, in the grand scheme, my transactions would likely give me 2.20% in interest on $50,000 on DBS Multiplier Tier 2 interest.

While we are at this point, we are comparing the different accounts whose hurdles you can realistically achieve:

1. Salary credit of $2000
2. Bill payment
3. Credit card transactions of $500

And the realistic interest that you could earn with this permutation is:

1. SCB Bonus Saver: 2.05% on $100k deposit
2. MayBank SaveUp: 1.12% on $50k deposit
3. BOC Smartsaver: 2.35% on $60k deposit
4. OCBC 360: 2.1% on $70k deposit

DBS Multiplier, with Tier 2 interest of 2% to 2.30% is not so different from its competitors. For myself, since there is not so much difference, there is little impetus to shift.

What made me stick with DBS Multiplier is that for all of them, credit card transactions of $500 is mandatory.

And over time, the banks have been tightening up on what is considered as eligible transactions that allow you to earn bonus interest:

1. AXS payment is not included
2. Some town council payment is not included
3. Ez-link, flashpay top up is not included

So what qualifies are the telecom spending transactions, real retail spending transactions, cab rides.

For some of you with higher household expenses, this might not be a problem, but for some of us who are more frugal, there might be some months where we do not qualify.

So it is very freeing to know that if I did not spend so much on my credit card, didn’t buy so much insurance or unit trust, I could still enjoy relatively good interest.

Finally, like DBS Multiplier, the other banks challenge you to fulfil higher transaction amounts to earn higher interests:

1. SCB Bonus Saver: 3.13%, if you bank with them, high credit card spends of $2000 and above
2. MayBank SaveUp: A lot of the minimum is just too high
3. BOC Smartsaver: 3.55%, if your salary is $6,000 and above and credit card spends is $1500 and above
4. OCBC 360: 3.0%, High minimum for insurance and investment plans

To earn the higher interest from the accounts of these banks, you need a lot of high, recurring insurance, investment, salary and credit card transactions.

With DBS Multiplier, you might need recurring insurance, mortgage and credit card spend, but you do not need to have high amounts.

It suits me that in certain months I can boost the interest rate if I make a large stock purchase.

Summary

I used to think that having a high interest rate is the be all and end all.

That was when I have readers that tell me that for some banks the interest is indeed high, but they cannot get used to the challenging interface.

For others, they are big credit card spenders, and in that case, some other high yield savings accounts might be more applicable.

Our consumption patterns are different, and soon you will realize what worked for me might not work for you.

I do think there are various aspect of the DBS Multiplier account that would appeal to a lot of you and I hope I have highlight them well.

Do check them out if you are interested. The folks at DBS paid me to tell you guys more about the changes to the account, but they did not put a gun to my head to use this account.

Let me know your thoughts.

This is a Sponsored Post with DBS. The views are of Kyith’s.

One of my friends in the community told us that he would be presenting something on perhaps investing, personal finance and life to a niche group of folks. 

So the target group from what I gather could be the 30 to 35 year olds, and also those 36 to 45 year olds. 

They should be rather savvy if we are talking about investing, such as rate of return, what are financial statements and the workings of listed companies. 

In terms of life stage, it is likely that they have formed the nucleus of their family, and doing well in their career, above middle income, navigating married life with kids together with it. For those that are older, they should be above middle income, kids are getting older, at senior management or moving there soon.

The question is that what would be the points that would interest them?

My friend Alvin from Dr Wealth asks “What are their pain points?”

And if we are able to frame that well, we might be able to find some good points for my friend to think about. 

So this short Sunday post is to seed some ideas for him. 

Now, if you are in this group, or your social circle are people in this group, do comment below and let me know what is close to the heart for these folks, so that this might be of help to him. 

The Singapore Dream is Dead

This is one recent favorite statement that my friend Chris from Tree of Prosperity.

This was one of his opening in his recent Seedly event, where he explained to an audience of 1,000 young investors why they cannot afford to rely on what worked for their parents.

If they use that, they will either feel very frustrated, or end up in a rather depressive state in their late 30s. 

I would like to think the Singapore Dream is not dead but its more like their Singapore Dream is also rather different from their parents.

Their parents would want an affordable property that they can pay off in 3 to 4 years, then buy an investment property to collect rent. Over time, that investment property, and their own dwelling appreciate in value, and that would be the retirement plan.

For the young investors, they have more concerns because they see their life as more than that steady state. 

There is so much to life now, and that there are a lot of things they feel very strongly about. They might felt more fulfillment if what they do is heard and that they are part of some change that impacts other people’s lives. They do wish for more work and life balance as well.

Largely, I think that dream is not restricted to young investors but these group my friend would be speaking to. 

The So Called Singapore Dream is not dead, it is just that life has gotten more volatile. Life is more uncertain. 

There is no company loyalty because the company is not loyal to you. 

However, we are really bad with handling uncertainty. If we are good at it, everyone would be flocking to the stock market, because that is a realm where things are less than certain.

Even for our generation, there are jobs where you can have a long career in one or two organization, can build wealth with them because these organization pay alright.

If you are smart with your money, you should do relative OK. 

Nowadays, a lot know the formula is not to stay in one company. Your future employer will ask where is your freaking ambition when you stay in a function in the same organization for so long. 

The way HR works also means the growth in compensation comes from moving around. 

Finally, the wage structure was killed in the past, because of a lax foreign labor policy, resulting in the country focusing on lower cost labor and not increasing productivity. We lost the opportunity to struggle and learn how to do things productively. 

If there is one thing that my friend can tackle, is whether there is a solution to this Singapore Dream being more volatile.

How do you stand strong in this volatile, uncertain life environment?

What is it about Wealth Management that they DO NOT Know?

Since the sharing is about money, I guess for savvy people, they would be interested to know another perspective. 

We know the standard formula of building wealth with properties. 

For a group that is likely not qualified for Build to Order HDB flats and can afford private residential, upgrading to a private residential, or getting a second residential property for investment remains the most popular way.

However, lately, even some long time property investors like my uncle have this feeling that the growth rate in the future for properties are likely not going to be like the old days. This can be true or untrue as it is not substantiated. 

Throughout our 2010s, government have been putting in place a lot of measures to curb property prices. They might be putting them in place, so that when shit hits the fan, they have these levers to stimulate the property markets.

But essentially, there is this signal that government would wish the citizens to rid their addiction to building wealth through properties.

This is easy to say then do. 

For the folks that my friend would be speaking to, they are busy people. 

They have gone past the stage where they have more time to explore the topic of wealth building in greater detail. 

Their children is not old enough that they have more bandwidth to handle this. Due to their senior management work, they have to devote more time that is not for the family to ensuring their performance is good so that the bonus is there at the end of the year.

The biggest value add that my friend to provide is

1. even with the property curbs, and the higher ABSD, would the math still make sense to use property as their main wealth building vehicle?
2. how easily upper middle income folks can be scammed by investments that seemingly make sense, even for finance trained folks
3. what are the portfolio management golden nuggets that people gloss over or did not prioritize?

#2 and #3 is seriously big in light of recent bond defaults and perpetual defaults. 

I have a friend who shared with me a very high net worth friend getting scammed in an overseas property venture.

It will be tough for the government, if they would like Singaporeans to have a more diversified portfolio as the property mindset is very strong.

What are the things Outside Their Bubbles that They do not Know About?

This week, ChooseFI interviewed Chelsea Brennan on

1. her career
2. transition to an online business
3. investing in index funds when her main job is to manage an active portfolio
4. on the concept of the Family Binder
5. you can listen in here.

In the realm of financial independence, Chelsea belongs to the high side. She started her career earning $30,000/yr at Goldman Sachs and eventually made her way from Sell Side to Buy Side at Bain earning between $400,000 to $450,000/yr, working 60 to 80 hours work weeks.

She also shares the financial insecurity mindset going to work in such a high salary environment, coming from a less well off background. The typical total compensation is made up of 1/3 base salary and 2/3 bonus. She always had that feeling that her bonus would be zero (which according to her never happened even in challenging 2009) so she sought to save 20-30% of her base salary and all her bonus. That would be 66% of her total compensation.

She eventually walked away from that, when she got really depressed and that they need more time with their family (husband is a stay at home husband). While her savings is far higher than the average, she reckons she still needs 4 to 5 years to reach the wealth require to be financial independent. 

She took out her spreadsheet and work the numbers. And decide to use her bonus to fund 2 years of business building (since the bonus can cover their expenses for 2 full years). 

The idea is that if the business can cover their living expenses for these few years, their existing wealth machine can grow on its own so that they can retire at age 40 to 45 years old. 

They gave up working in a tough job and be financially independent early, with a more sustainable lifestyle and delaying financial independent. This is probably close to what we call Coasting Financial Independence. 

In the interview, Chelsea shared some of the observations working in places, where they generally make much, much more than middle income. 

If there is one point that could summarize the situation is that we lived in our own bubbles and often we find it difficult to see what is beyond those bubbles.

Chelsea explained that it is very difficult to exit their job, despite making far higher salary then a lot of what middle income folks think. 

The dynamics of the work culture contribute to that. 

Typically, the people in there work for 20 years in their career. Even if they wish to stop, the most common situation is that the person took two years off work. 

They will come back and be a CFO in another company. 

Retiring early, is not talked about. We can see why the management do not wish to actively impressed upon their people this kind of narrative.

They have spent so much of their resources to make their people strong, and they can only enjoy their investment for such a short period. If it is in their interest, it is to see their people buy bigger houses and more expensive cars. In that way, they will be in the mindset that they have to work for “the man”. 

She shared that at Goldman, things were more transparent (an open floor plan helps as well). As 2/3 of the compensation were made up of bonus, she could spot co-workers who spend so much that they exceed their basic salary. One of the cited reason that they had to leave the firm to go another place is because this job (those that are on half a million) did not pay well enough to cover what they need.

[There was a senior partner] who had been making seven figures for multiple years and he resigned… and I made a comment to some other VP’s like ‘Oh, he’s retiring’ and the reaction was visceral, of like, ‘Oh no, he couldn’t afford to retire! He’s just taking a couple of years off’… and I remember standing there thinking ‘He can’t afford to retire! What has he been doing?!’

I brought up Chelsea’s example because in my friend’s work place, they could be living in this sort of bubble too. Some of the employees could have worked in the company for numerous years, starting from junior positions. 

When everyone is of a certain pay, your lifestyle will gravitate towards one another. Ideas are exchanged regarding building wealth, how to handle children, cars, career. 

Outside of that, a lot of your circle will be either your ex-colleagues, if you have been with them long enough, or the peers you come through the same education system. If you are from the same junior colleges or polytechnics, the lifestyle will gravitate towards them as well.

What is likely to happen is that your lifestyle becomes very similar to your peers at work and out of work. 

I realize folks in the same bubble do not see things very differently. Those with more dissenting views tend to stick out like a sore thumb. And not many people wishes to stick out like that, for all the wrong reasons. 

I have 3 professional circles:

1. The friends who are my users. I would say they are upper middle income
2. My co-workers. They are lower to middle income
3. My friends back in my main office. They would be middle income

After a while things become very homogeneous within the group. What can be achieved in building wealth and life, there is a limit. For each group the limit is different. 

Money struggles are often not discussed at work, so my friend’s folks do not know what each other’s real money struggles. 

The same about worry about life. These 2 items show weakness and possibly something your competitive peers can exploit.

What my friend can provide is a perspective of what he thinks as a person from outside that bubble. 

And it might be enlightening enough for them. 

Some examples can be

1. how to plan the finances so that a stay at home parent is feasible
2. how does a family without a car survive? Why choose not to have a vehicle when the finances allow you to afford?
3. how much does a family need for retirement, how does that looked like, and whether that is achievable at all

Summary

There is probably one area that I did not specifically cover which is the problem facing the sandwich generation. 

How to deal with the increase sadness as you enter your 40s. 

Chris shared in one of his talk that our unhappiness peaked at 44 years old. Why is that?

I guess it is a combination of:

1. dealing with your children in their adolescent
2. your parents facing a lot of traumatic medical issues or outright dying
3. as you enter your peak earning income, your career have also become the most fragile

And there could be more. 

Would good money planning be able to solve that unhappiness? I think it is tough. Not having money would definitely make the problem 2 to 3 times as hard. 

But if there is something that is painful and hard to articulate, and that people are looking for direction, it is things like this.

As always, I am not a higher income working adult. So I might be wrong and prepared to change my views.

Let me know your perspectives.

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often. You can also choose to subscribe to my content via email below.

Here are My Topical Resources on:

1. Building Your Wealth Foundation – You know this baseline, your long term wealth should be pretty well managed
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free

I think last year Nov 2018, I wrote a post introducing everyone to MoneyOwl. 

If you are financial savvy, take control of your finances, you would have an idea how much insurance coverage you are looking for. You can then survey the different prices for the same type of insurance coverage and see which one offers the most competitive prices, and which one suit your needs, 

Then you can purchase the insurance protection, and not afraid of advisers hounding you to purchase some higher value added policies. 

And there are the readers who knows that you should get protection, are not sure what are your needs, but would want someone dependable and conflict free to speak to, MoneyOwl is also the right solution.

So that is the protection solution. 

In March this year, MoneyOwl rolled out a Digital Will Writing service. This will service is useful for you, if the way you would like to will your assets is not too complicated. 

What is missing is the investment service and this is what I am here to update everyone.

Implementing Wealth Management the Right Way

MoneyOwl is a joint venture between Providend and NTUC Enterprises. NTUC Enterprise is the holding entity for the Labour Movement’s social enterprises which collectively serve more than 2 million customers.

As a subsidiary of NTUC Enterprise, MoneyOwl’s social mission is to help working families make the best possible financial decisions, so that all Singaporeans can achieve greater financial security, better retirement adequacy and be empowered to live fulfilling lives. NTUC decided to collaborate with Singapore’s first fee-only financial adviser and well-known in the industry for its deep expertise in comprehensive financial planning and for championing ethical advice.

We do get the feeling that the government sense that the current wealth management space is “a little uneven”, and wish to take the lead and shape the direction of the industry by participating directly in it. 

As a financial commentator for probably 14 years in this space, I like what I am seeing here. 

If I have an acquaintance that needs help to grow her money, evaluate her financial protection, there is always the lingering thing at the back of my mind asking yourself: “Is this the right adviser to help my friend? Will things turned out in ways I didn’t anticipate?”

Having them around solves a fair bit of these issues.

MoneyOwl provides the following service:

1. Protection Robo. Guides you to pick the right insurance protection to hedge your life risk
2. Self-checkout Insurance Protection. If you know the protection that you need, you can purchase it from MoneyOwl and not be up-sell on other protection
3. Digital Will Robo. Allows you to create your own will, so that you can have a peace of mind how your assets would be passed down
4. Investment Robo. Provides 5 different low cost portfolios, which allows you to build wealth through buy and hold
5. Comprehensive Financial Planning. More to come later

Leveraging on technology, and automating work flows that used to be crumble-some seemed to be the way to go but MoneyOwl is actually more than that. 

They prefer to be known as Bionic, which means a combination of technology and human touch. 

I do agree that to a certain extend, not everything can be automated. There are aspect of wealth management that can be automated and others that require hand holding. 

Perhaps I will go through some examples to let you have an idea why I think MoneyOwl’s service will provide invaluable to you.

MoneyOwl’s Investment Robo

This article is to let you guys know more about MoneyOwl’s Investment Offering.

After they have first provide you with a fundamentally sound way to hedge the risks in your life, the next objective is to answer the question: How do I accumulate my wealth in a fundamentally sound way?

This ties in with the third question they already attempt to help you address, which is: How do I ensure that when I passed on, the wealth is distributed in a way that I want.

Everyone has a philosophy how to build wealth and MoneyOwl is no different:

1. Focus on asset allocation – do not take country, sector or firm-specific risks
2. Go for market-based return – it is hard to consistently beat the markets through active management 
3. Keep costs low – the difference compounds big time, over time
4. Stay invested for the long term – time in market, not time the market! 

I actually think this is the “default” way we should build our wealth, if we do not have the time to mess around with more active approach to wealth building (even if you mess around, it does no mean that your results would be better. Sometimes it will be worst off.)

MoneyOwl will provide wealth builders in Singapore 5 different portfolios to invest. These portfolios differs based on their allocation between equity (stocks) / bonds. 

These are the 5 portfolios:

The 5 portfolios ranges from conservative to equity, with equity being the most aggressive. The aggressive portfolio have a higher equity allocation while, the more conservative portfolio have a higher bond allocation.

MoneyOwl took their time to evaluate the investment products out there, and they decided to work with Dimensional Fund Advisors (DFA) from USA to structure these 5 portfolios with 3 low cost, evidence based funds: 

1. Dimensional Global Core Equity Fund (Developed Market Equities in the table)
   • Inception in 2017 Jul
   • Currency: SGD
   • Benchmark: MSCI World Index (net Div, SGD)
   • Total Assets: S$4.5 bil
   • ISIN: IE00BF20L879
   • Dividends: Accumulating
   • Expense Ratio: 0.35%
   • Factsheet
   • 7776 Global Stocks
2. Dimensional Emerging Markets Large Cap Core Equity Fund (Emerging Markets Equities in the table)
   • Inception in 2017 Jul
   • Currency: SGD
   • Benchmark: MSCI Emerging Markets Index (net div., SGD)
   • Total Assets: S$706 mil
   • ISIN: IE00BF20LB02
   • Dividends: Accumulating
   • Expense Ratio: 0.50%
   • Factsheet
   • 922 Emerging Market Stocks
3. Dimensional Global Short Fixed Income Fund (Global Bonds)
   • Inception in 2017 Jul
   • Currency: SGD
   • Benchmark: FTSE World Government Bond Index 1-5 Years (hedged to SGD)
   • Total Assets: S$4 bil
   • ISIN: IE00BF20L549
   • Dividends: Accumulating
   • Expense Ratio: 0.29%
   • Factsheet
   • 181 High Quality Bonds
   • Yield to Maturity: 2.18%
   • Average years to maturity: 3.67 years

MoneyOwl provided the annualized returns, based on the back tested results from 1994 to 2017. There are two returns provided, with fees and without fees. This is so that they are transparent about the fees you are being charged in different ways. (which a lot of financial institutions are not upfront about)

Why use Dimensional Funds?

Dimensional have been in the wealth management business in USA for the past 4 decades. 

They are not a familiar name in Singapore, but I suspect there will be more discussions in the future. You can refer to this page to know more about Dimensional.

To put it simply, they are the Smart Beta funds before smart beta became a popular thing. 

Here are some of the fund’s characteristics:

1. They are not exchange traded funds (ETF), which are listed on stock exchanges whose prices are updated real time. Dimensional funds are unit trusts. Their prices are updated end of the day
2. Unlike the unit trusts that you see distributed in Singapore, Dimensional funds are low cost. Their expense ratio ranges from 0.29% to 0.50% compared to the typical 1% to 3% expense ratio of unit trust
3. Dimensional funds do not pay trailer fees to the distributors. Not many know that your typical unit trust have a high 1% to 3% expense ratio, but a large proportion of this is paid by the unit trust to the distributors like Fundsupermart, Dollardex, POEMs and the banks as a fee for distribution. So even though they charge 0 platform fee, they get paid from you indirectly. That is how they can survive
4. Dimensional funds are passive funds but they are not indexed. Savvy investors would know that investing in low cost index funds/ETFs that follows broad based benchmark index like the MSCI All Country World Index is the way to go. Index funds are passive because instead of a human fund manager who selects what stocks or bonds to buy, hold and sell, a machine sought to mirror the index fund’s net asset value as close to the index as possible. For Dimensional funds, they are similar in that they have a machine at the back end to position their portfolio. However, they do not mirror an index. Rather, they systematically buy, sell and hold based on a few persistent and pervasive factors
5. Building on to #4, Dimensional funds are factor based. They based their buy, sell and hold on factors that are not just persistent but pervasive. These factors are:
   1. Overall Market (Beta)
   2. Company Size (Small Cap over Large Cap)
   3. Relative Price (Low price to book over High price to book)
   4. Direct Profitability ( High profitability over low profitability)
6. You can only buy Dimensional funds through DFA trained advisors. They believe that advisors play a very big role in delivering alpha
7. Dimensional funds are taxed optimized and therefore reduces tax uncertainty. Unlike popular low cost index ETFs listed in other countries, these Dimensional funds are domiciled in Ireland, and are much efficient in dividend withholding tax and estate duty / inheritance / death tax for foreign financial asset holdings

The way I look at MoneyOwl’s investment portfolio is this way:

1. You believe that certain factors are persistent and pervasive. These are backed by extensive research. They will eventually deliver good performance
2. You believe in keeping your costs low. Dimensional funds have low expense ratios
3. You wish to have adequate clarity and eliminate tax uncertainties from your wealth building
4. You do not wish to spend your effort actively managing your investments. You prefer to focus your effort on your job, your family
5. You know what I am saying, but maybe you don’t really know. You would prefer to have companions that have integrity to guide you along this path
6. You wish you can setup a recurring payments instruction, and let your bank automatically funnel money to your investments without you triggering it. This will take you out of the loop and be less affected by market fluctuations

If this fits you, then MoneyOwl’s portfolio might be something you are looking for. 

My Comprehensive Article on Dimensional Funds

A few weeks ago, I wrote an article introducing Singapore readers to Dimensional funds. 

There is only this much that I can cover in this article, so I do hope that those are interested, you can read it. Warning: It is likely you cannot finish it in one sitting. Bookmark and read it over the week on your daily commute. 

The article covers:

1. The targeted market for a group of funds like this
2. How do we build wealth, on a high level with DFA funds
3. Introducing the Dimensional Funds
4. Explaining Evidence Based Investing
5. Examining DFA Results including rolling equity expected returns data
6. Breaking down the Cost Stack and Comparisons
7. Explaining the Adviser’s Alpha
8. Breaking down Dividend Withholding Taxes and Death Taxes
9. The Case to Invest in a Global Equity and Bond Portfolio

Should Singaporeans Invest in Dimensional Fund Advisors (DFA) Funds? My Comprehensive Take >>

The Total Fee Stack for MoneyOwl’s Investment Portfolio

When you invest in other investment products, there are great emphasis placed on performance returns. 

Less on the cost. 

MoneyOwl would like to be transparent with the fees that they are charging. 

That is why they provided a cost stack of their portfolio’s versus the industry:

We observe that the total costs for the 5 portfolio range from 1.15% to 1.21%. This compares against the recurring fee of 2.6% to 3.1% that MoneyOwl estimates.

Cost is a big issue because your returns are uncertain, but your cost, rain or shine, make money or not, you have to pay it. And it is worse that you pay a big chunk of it. 

If you would like to see how MoneyOwl fare against the DIY ETF solutions and other Robo platforms like Stashaway, Autowealth, Smartly, you can read my comprehensive article, where I go into deeper comparisons. 

The summary that I gather is:

1. The total cost stack for the Robo platforms are roughly the same around 1.2% to 1.7% but mostly around the 1.2% range
2. The DIY ETF solutions depends on which broker you use. With the right broker, the DIY ETF solution is the lowest cost

MoneyOwl charges a advisory fee or wrap fee of 0.65%/yr. As they are making use of iFast’s platform, you have to pay iFast a platform fee of 0.18%/yr. 

Some readers in some Telegram chat have asked, how is the advisory fee, platform fee and expense ratio taken from me?

Let me address the expense ratio first. 

Like your typical unit trust or ETF, the expense ratio are incur in the underlying Dimensional fund itself. It is transparent to you (which is why a lot of investors ignore it because they do not see it! They think it does not matter!). The returns that you see in the factsheet, annual report are net of the expenses. In fact, if you read the annual report of the Dimensional funds, you would see how much expense is incurred. It will give you a better understanding.

With regards to the advisory fee and iFast platform fee, they are deducted by selling the units in the best performing fund.

Advisory fee are deducted in April, July, Oct and January. The deductions are reflected in the statements for these months. Note that the months corresponding to each deduction are as follows:

1. Deduction in April: Fees for Dec to Feb
2. Deduction in July: Fees for Mar to May
3. Deduction in October: Fees for Jun to Aug
4. Deduction in January: Fees for Sep to Nov

For example, the fees for Mar to May are deducted in Jun and this is reflected in the quarterly statement given to the client in July. 

The Investment Process

One of the great thing about MoneyOwl is that as a social enterprise, they want to make it easy for people of all income levels to start investing. 

Thus the minimum investment amount for lump sum investment is $100 and the minimum amount for recurring investment is $50 per month.

This means the hurdle to give the platform to try is really, really low!

Like a lot of Robo platform, MoneyOwl will not let you choose which portfolio you would like to get invested. 

Instead, they would recommend you a portfolio based on:

1. How long is your investment horizon
2. Your willingness to take risk

To invest with MoneyOwl, you would have to be at least 18 years old.

The following illustrate the investment process:

1. You will first go through a needs analysis. The end result of the needs analysis is to identify which of the 5 portfolio is suitable for you to invest
2. Then you will create an account, or login
3. MoneyOwl will facilitate the account opening  
4. Then you can fund your portfolio with money to get invested

Now let us briefly go through the process.

To get started investing, you can go through this link here >>

If you have an account like myself with MoneyOwl, you can click on Start Investing to go through the process.

1. Needs and Risk Analysis

The first part of the needs analysis is to assess your risk ability.

If the tenure to which you need to use the money is very short, then it might not be wise to invest. In the screenshot above, you can see a selection of 1 year (genuine for me, if I were to retire next year), MoneyOwl do not even let me invest.

Which begs the question of, what if I wish to retire and spend down my money? I would still need equities. I will still need bonds.

I think right now, MoneyOwl caters more to wealth accumulation not retirement.

If I select an investment horizon of 5 years, MoneyOwl will let me continue.

The next step is for me to specify how much I would like to invest in one lump sum and on a recurring basis.

I realize that you have to invest a minimum lump sum of $100, even if you decide that you wish to invest on a recurring basis. You will also specify your finances such as your monthly income, your savings rate, the assets and liabilities you have. 

I tried clicking that I do not have emergency fund. If I do not have emergency fund, I cannot invest as well. Which is the standard financial planning advice. 

You should have at least 3 month’s worth of emergency fund before you invest. 

If the percentage of income saved is less than the recurring amount that I wish to contribute, MoneyOwl will warned me as well.

The next step is to answer 4 questions to show my willingness to take risk. This is to let you, and MoneyOwl have a basic behavioral check to see where your risk tolerance is at. It looks like I am rather tolerant to some negative downside. 

The result of the needs analysis is an output of the portfolio chosen for me. There are 2 parts. The first part shows me that, if I were to put in $10,000 and $100/mth, how much my money would grow to. 

MoneyOwl will show you based on their historical results the amount you would accumulate. My capital put in will be $15,900 and in the worse case it would grow to $17,116 in 5 years.

The second part shows you the portfolio selected for yourself, the breakdown of the fees.

At this section, you can change your one time investment contribution and monthly investment amount and MoneyOwl will recalculate the wealth growth model for you.

2. Opening your Investment Account

The next step is to open your investment account. 

The filling up of information is done online. This makes it rather easy to open an account. 

What is more, you can make the process smoother by choosing to authorize MoneyOwl to pull your read only info from MyInfo.

You will need a SingPass authentication. 

Once you have authenticated, you will then authorize MoneyOwl to retrieve the information above.

If you do not wish to pull information from MyInfo, you can fill it up manually yourself. 

Once you have finish this portion, your investment account is setup. 

You are ready to fund the account.

3. Funding Your Investment Account at MoneyOwl

The illustration above gives you a clear idea how the funding process will be. For those who have invest in unit trust, this is not to different.

You will fund the Investment account by:

1. Transferring using Online Bank Transfer via FAST
2. Transferring using PayNow

 Both methods are pretty similar and it would be instantaneous for the money to be transferred from your bank account to your MoneyOwl’s account. 

There are different set of standing instructions, and you can refer to a more detail instructions here >>

If you have not fund your account, if you go into your portfolio, you will see a orange triangle. Click on it, it will show you the funding instructions.

The funding instructions will contain iFAST Financial’s bank account for you to fund to. 

Note: If you look at the instructions, it tells you how important it is to key in your Reference Code in the transactions.

You can then go to your bank or your PayNow app to pay. Remember to key in your personal Reference Code. 

For recurring transactions, you can also go to your bank and set up a standing transaction like the screen shot above. Note that MoneyOwl will deduct the money on the 15th of the month, so it is advisable to transfer in a few days before the deadline.

When you have a pay increment and would like to put away more, you can always change the amount you contribute. This is so that MoneyOwl can deduct a higher amount on a monthly basis.

MoneyOwl is Audited and Certified ISO/IEC 27000

It might be tough to trust money to a start up. It is also tough to trust that people will not break into the platform and steal your private information, your passwords and other data. 

We have seen a lot of popular website fall prey to this.

Even established websites were caught storing certain of your passwords in clear. 

MoneyOwl is ISO27001 certified. The ISO27001 certification is a mark of recognition that a company has met the international standard for establishing, implementing, maintaining and continually improving its information security systems and processes.

The Adviser’s Alpha – Improving your Sophistication So that You can Build Greater Wealth

I do observe that there are quite a bit of comments asking whether it makes sense to pay the 0.65% advisory wrap fee and the platform fee.

And I think that if you are wondering about this, it means that:

1. You know that cost matters
2. You prioritize cost over other investment conveniences
3. You are likely more sophisticated and competent enough to educate yourself how to build wealth through passive investing over the long term

In this case, MoneyOwl might not be right for you. 

One good test is whether you could finish my Dimensional article, understand the stuff and do not have much questions after that.

If you are able to overcome that and think it is a good refresher, then you are probably more suited to DIY your passive investing.

I think as a NTUC Enterprise, they will be glad that more of you guys are that sophisticated and build wealth soundly on your own.

Even so, I do feel that many of us do not know what we do not know. 

I went over to Seedly, and tried to pick out some questions that you might have. You realize that you have a gap in understanding about an investment strategy that you thought it is rather simple. 

What you were expecting is very different from what the strategy delivered.

And these doubts usually surface, in the face of some losses. 2018 is probably a good test and we see a few of these examples here. 

You might know that you should invest for the long term, but the problem is the head may understand this during “peace” time but when the markets start tumbling, the heart may not follow what the head knows:

1. If you DIY, you might not key in that buy order that you normally do on a monthly basis
2. You might cancel your standing order to make more contributions to MoneyOwl

The above chart is the famous Dalbar study. 

It shows the 20 year annualized returns of various kinds of asset class. 

Notice the worst performer. It is the Average Investor. 

Why did the average investor do so poorly? Dalbar cites a few reasons:

1. Panic selling during market downturns.
2. Exuberant buying at market highs

The strategy to invest passively is simple. The tough part of investing is to stay in the game and navigate the storm in your head when things get volatile. 

What MoneyOwl sought to do is to get you to be more sophisticated about investing.

The first way is to give you access to a human adviser, when you need them.

With MoneyOwl, if you have doubts like these, you can have a human adviser, paid a salary, to

1. clear your doubts
2. frame things in a different way for you
3. work with you together to see the best way going forward

The difference between an adviser and asking in an open forum, is that they are your adviser, know your situation and are able to go deeper into your specific situation. As a social media commenter, we do not know your specific situation and could only give our advice based on what we can gather and interpret. 

An example of what these advisers can do for you is to confirm your risk appetite decisions.

While MoneyOwl have a good set of risk questions to ascertain that, your willingness to take risk is really a matter of the heart, influence by many factors that are complex enough that a robo might not fully empathize. Their advisers will be there to provide the judgement so that you can make the correct investment decisions that will help you stay invested when markets become volatile.

Secondly, MoneyOwl will seek to produce more educational materials, in different medium to attempt to get you sophisticated about passive, evidenced-based low cost investing:

1. Written content
2. Video content
3. Easy to digest infographics
4. Investment Symposium 

The idea is to create a MoneyOwl University for Passive, Evidenced-Based Low Cost Investing.

MoneyOwl already have a team of financial literacy trainers providing education to investors.

If MoneyOwl do all the above well and together with you, the chances of you staying invested will be much higher when the markets start to become rough. But when the “shit really hits the fan”, besides doing more education through articles, videos, and events, you can be sure MoneyOwl’s advisers will be on hand to guide you through the storm. You always have access to them.

Summary

Ultimately, I think as a starter MoneyOwl have come up with a rather sound, comprehensive product for the masses.

If there are some last minute take away from this it is to ask yourself: Why do you want to build wealth? What is your reason to accumulate?

The table above, provides you with an easy look up table to show you that if you need $X , how much monthly and annual capital you need to fund the wealth building. 

MoneyOwl is not a magic bullet:

1. You need to earn more so that you have more personal free cash flow to put into investing
2. You need to consistently channel contribution on a monthly or annual basis to build wealth

MoneyOwl provides you with a sound solution if your philosophy is the same as them:

1. Focus on asset allocation – do not take country, sector or firm-specific risks
2. Go for market-based return – it is hard to consistently beat the markets through active management 
3. Keep costs low – the difference compounds big time, over time
4. Stay invested for the long term – time in market, not time the market! 

And this is the kind of investment you are looking for:

1. You believe that certain factors are persistent and pervasive. These are backed by extensive research. They will eventually deliver good performance
2. You believe in keeping your costs low. Dimensional funds have low expense ratios
3. You wish to have adequate clarity and eliminate tax uncertainties from your wealth building
4. You do not wish to spend your effort actively managing your investments. You prefer to focus your effort on your job, your family
5. You know what I am saying, but maybe you don’t really know. You would prefer to have companions that have integrity to guide you along this path
6. You wish you can setup a recurring payments instruction, and let your bank automatically funnel money to your investments without you triggering it. This will take you out of the loop and be less affected by market fluctuations

Check out MoneyOwl’s Investment solution here >> 

Here are some further readings on their investment solutions:

1. The Right Portfolios: Putting it together
2. The Right Building Blocks: About Dimensional and Nobel prize-winning research
3. The Right Way to Invest: Keys to a successful investing experience
4. Why Unit Trusts and not ETF?

Exclusive:  MoneyOwl Investment Symposium in 25th May 2019

If you would like to find out further how to build wealth with Dimensional portfolios, and have further questions regarding the way MoneyOwl structure their investment offering, MoneyOwl will be organizing a 3 hour session at One Marina on a Saturday at NTUC. 

The speakers will be:

• Ms. Chuin Ting Weber, CEO & CIO, MoneyOwl
• Mr. Christopher Tan, Executive Director, MoneyOwl / CEO, Providend Ltd
• Dr. Chen Peng, CEO, Asia ex-Japan, Dimensional Fund Advisors

The event is FREE. Register here >>

This post is Sponsored by MoneyOwl. The views are Kyith’s.