POSB in early August announced the launch of MyHome Fund which provides diversification into Singapore equities and Singapore-dollar denominated bonds. It does this by investing in two Exchange Traded Funds (ETFs) - DBS Singapore STI ETF and ABF Singapore Bond Index Fund. Both these ETFs and MyHome Fund are managed by DBSAM , DBS's asset management arm.
MyHome Fund “caters to those who can accept some to a medium level of investment risk and an investment time horizon of three years and above”. There are three portfolios to choose from:
- HomeSteady portfolio has a 80% exposure to ABF Singapore Bond Index and 20% exposure to DBS Singapore STI ETF – This is very, very conservative.
- HomeBalanced has a 50% allocation to ABF Singapore Bond Index and 50% allocation to DBS Singapore STI ETF – This is conservative.
- HomeGrowth portfolio with a 80% exposure to DBS Singapore STI ETF and a 20% bond allocation to ABF Singapore Bond Index is moderately aggressive. (Note the writer has not seen the sales brochure for this portfolio.)
The minimum investment is $1000, with an initial sales charge of 3% . There is an annual management fee of 0.5%. Application can be done using cash or SRS via POSB branches, ATMs or internet banking.
This is Singapore's first retail unit trust that offers investors exposure to index-linked products.
As with any product there are pros and cons. You have to weigh these before making a decision.
Pros
MyHomeFund allows investors the opportunity to invest passively into the Singapore market on a regular basis. And who do not wish to buy direct into one of the two STI ETFs because they do not want the volatility associated with pure equities plays.
If the fund attracts a lot of money, POSB may be able to get the manager of the DBS STI ETF and ABF Singapore Bond Index (also DBSAM), to create units at net asset value: investors would save on the bid-ask spread. A cost that someone who buys the ETFs directly from the market will have to pay.
The pre-defined percentages means that there is no need to rebalance the portfolio yourself. This is something that you would need to do if you were to construct your own ETF portfolio by buying both ETFs directly.
Investing direct into ABF Singapore Bond Index is not that easy as it is illiquid.
Based on last friday's closing prices , investing in one lot (1000 shares) each of both ETFs will cost you a total of $3660 (before brokerage etc). Via this fund you only need $1000.
Holders may also participate in a Regular Savings Plan ("RSP"), “To participate in a RSP, investors must first invest S$1,000 and the minimum monthly investment under the RSP is S$100”.
Cons You are paying two sets of management fees. The ETFs each charge charge a 0.5% per annum management fee and MyHomeFund charges another 0.5% fee.
You pay a front-end sales fee of 3% when you invest in MyHomeFund. If you buy these ETFs direct you only pay brokerage, which could be as low as $25 a trade if you are trading online. The 3% sales charge is in line with other unit trusts sold here. But in other countries funds that invest in indices, charge no brokerage or very low brokerage.
As with all index-linked products, prices may jump all the place. You need to take your personality into account before investing.
If the writer was still a twenty-something, fresh-eyed employee, he would definitely put some money into the HomeGrowth portfolio, and avail himself of the Regular Savings Plan. He would not like the 3% sales charge, but he doesn't want to be, “Penny-wise, pound foolish,” as the saying goes.
But your circumstances may not be the same as his, so weigh the pros and cons.