Regular Savings Plan (RSP): What They Are And The Best Ones To Invest In

Think of them as a souped-up savings account, to kickstart your investment portfolio from as little as S$100 a month. Here’s a look at what RSPs are and why they’re great for easing into your investment journey. 

With the majority of the population working from home and social gatherings still being controlled, you’re likely saving from all the foregone commute and work lunches. With these extra bucks in your pocket, it’s an opportune time to start investing them. 

Regular savings plans can help you do just that, especially for investors that lack discipline, advanced knowledge or large capital. 

Table of contents

• What is an RSP?
• Why you should make regular investments with RSPs
• How much to invest each month
• RSP options you can choose from

What is a regular savings plan (RSP) and how does it work?

Try not to let the ‘savings’ in the name mislead you, a RSP is an investment instrument that requires you to set aside a fixed sum on a regular basis. The money invested is channelled into assets such as stocks, ETFs and unit trusts, which means RSPs come with risks. They are also known as monthly investment plans. 

With as low as S$100, you can start an RSP to grow your investment portfolio gradually, with minimal effort.

Why the minimal effort? An RSP taps into the concept of dollar-cost-averaging (DCA). With the same monthly investment amount, you buy more units of the same asset when prices are low, and less when prices are high. This helps to ensure that you continue to invest regularly, regardless of the market conditions. This also allows you to average out the price of the asset you are buying into. 

Here’s a simple example of how dollar-cost-averaging works, based on a monthly investment amount of S$500.

Over six months, you could have accumulated 1,112 units with S$3,000. This is better than the 833 units you would have gotten from investing all S$3,000 in July, though not quite as good as the 1,428 you would have gotten if you invested that amount in November. 

Reasons to make regular investments 

While we would all like to think that we have the knowledge, foresight and skill to buy low, sell high, the truth is, even professionals struggle to catch the market bottom. 

Making regular investments with DCA has the following benefits:

1. Avoid timing the market: Regular investments take away the emotions and psychological aspects of investing. You don’t have to spend extra time always monitoring prices. 
2. Start small: RSPs allow you to start investing with small amounts, from as little as S$50 or S$100 a month. This is particularly beneficial for new investors, as there is no need to accumulate a lump sum before you start investing. This minimises the opportunity cost and maximises the power of compounding. Starting small is also less daunting for newer, apprehensive investors. 
3. Disciplined investing with low effort: RSPs ensure that you stay invested and grow your portfolio. Once the RSP is set up, this monthly investment is automatic and recurring, like GIRO payments.
4. High flexibility and liquidity: While the RSP is automatic, you can still alter your monthly investment amount. You can also stop the RSP anytime. Although this isn’t ideal, unfortunate situations do arise and this option allows you to ease cashflow temporarily and resume the plan later.

How do you determine how much you should invest each month?

Every investor’s investment goals, risk tolerance and financial stability differs. How much you invest each month depends on a few factors. 

• How much you save

The more you save, the more cash you have and the more you can afford to invest, right? That might hold on paper, but this depends on whether your savings are intended for a specific purpose, like wedding expenses or a big ticket splurge. Saving more doesn’t necessarily equate to investing more. 

• How much you earn 

If you look at monthly investment amounts as a percentage of your salary, your income is a big factor in determining how much you invest each month. A S$500 monthly investment would be 11% of a S$4,563 salary (the nominal median income in Singapore) but just 5% of a S$10,000 salary.

If you’re looking for a budgeting guideline, the 50/30/20 rule encourages you to spend 50% on needs, 30% on wants and 20% on savings. From there, one consideration is to further split those 20 % savings and invest 10%. That works out to be S$456, amounting to S$5,472 into your investments for the year—a great start for any new investor.

To grow your investments quicker with a lower salary, you could consider allocating a larger percentage of your salary to investments, to tap on the power of compounding early on. Of course, this would depend on your financial situation.

• How much you’re being charged for fees 

Like all investments, RSPs also come with a fee. This could be transaction fees, processing fees, service fees and platform fees. The costs involved will ultimately affect the performance of your investments. 

For flat fees charged, it could make more financial sense to invest a larger amount. For example, if you invest in two counters with POEMS Share Builders Plan, it would cost S$6 for investment amounts below S$1,000. This means that be it S$100 or S$900, you would incur a cost of S$6. The larger your investment amount, the smaller this fee is as a percentage of your investment.

Where to start investing in RSPs 

You can start an RSP with various financial institutions, including banks, brokerage firms and robo-advisors. Here are the common providers that you can start a RSP with. 

1. DBS/POSB Invest Saver

DBS/POSB Invest Saver lets you get started conveniently. Without having to create pesky new accounts altogether, you can start investing with your existing DBS/POSB account. The dividends will be automatically credited to the same account, too.

With just S$100 a month, the plan lets you tap into a range of unit trusts and ETFs, specifically four ETFs:

• Nikko AM Singapore STI ETF
• ABF Singapore Bond Index Fund
• Nikko AM SGD Investment Grade Corporate Bond ETF
• Nikko AM-StraitsTrading Asia ex Japan REIT ETF

The transaction fees are also reasonably priced. ETF trading will cost you either 0.50% or 0.82% per transaction depending on the ETF you’re trading while unit trusts are charged at 0.82% per transaction. The plan does not have any lock-in period, giving you the flexibility of terminating your account or depositing any amount at any time.

Promotion: Sign up for an Invest-Saver plan from now till 30 October 2021 to get a full rebate of up to S$125 on sales charge for your Invest-Saver transactions. Terms and conditions apply. 

2. dollarDEX

For those who enjoy diversification and the flexibility of choosing your own funds you want to invest in, dollarDEX’s regular savings plan grants you access to more than 1,000 global funds.

Though there is no sales charge, switching or platform fees, you’ll have to pay for their annual management fee that varies according to the funds that you choose. With a minimum investment amount of just S$100, there really isn’t any barrier to entry so it’s suitable for novice investors who are just starting out, as long as you’re at least 18 years old.

Promotion: From now till 31 December 2021, you can receive S$15 worth of bonus units for every S$10,000 invested into any funds under PineBridge International Funds and other selected variants of share classes for PineBridge Global Funds. Terms and conditions apply.

3. FSMOne

FSMOne’s regular savings plans provide you with the ultimate variety as you’ll be able to pick from 1451 unit trusts from 52 fund managers, 66 ETFs listed on SGX, HKEX and US markets and even have 10 managed portfolios for those who would rather sit back and let someone else invest for them. With the sheer options, experienced traders will be pleased to be able to mix and match the funds they would like to invest in and diversify their portfolios across several markets.

With no lock-in period or minimum participation period, you’ll be able to withdraw your funds whenever you need them. To get started, you’ll need a minimum of S$50 for ETFs, S$100 for unit trusts and S$500 for managed portfolios. You’re also able to change your monthly investment amount anytime.

The fees are charged at 0.08% or a minimum of S$1, HK$5 or US$1 (whichever is higher) for ETFs, while unit trusts fees are charged 0.05% to 0.0875% per quarter, and managed portfolios fees are at 0.35% to 0.50% per annum. And because they do have a minimum order fee, it will be more worthwhile if you invest a larger amount each time.

4. MoneyOwl 

An attractive proposition for those who are just delving into the world of investments hence don’t really have adequate knowledge to decide what to invest in, MoneyOwl offers four managed portfolios known as their Dimensional funds under Dimensional Fund Advisors (DFA).

Depending on the fund you choose, they have different fund and sector allocations. These are the four funds they offer:

• Dimensional Global Core Equity Fund
• Dimensional Emerging Market Large Caps Core Equity Fund
• Dimensional Global Short Fixed Income Fund
• Dimensional Global Core Fixed Income Fund

You’ll also get to choose how much you want to commit financially - you can either choose to invest from S$50 per month or opt for the one-off S$100 minimum investment. MoneyOwl is also not charging any advisory fee for the first S$10,000. But accounts above S$10,000 will be charged with a 0.6% advisory fee, while any amount above S$100,000 will entail a 0.5% fee.

5. OCBC Blue Chip Investment Plan

Another one of the lot that does not require you to open a separate account, the OCBC Blue Chip Investment Plan allows you to access more than 20 blue-chip counters and Singapore-listed ETFs from as low as S$100, where you’ll be able to purchase amounts smaller than the standard lot size. Think big players like StarHub, CapitaLand, Singtel and Keppel.

They also have six ETFS consisting of:

• Lion-OCBC Securities Hang Seng Tech ETF
• Lion-OCBC Securities China Leaders ETF
• Lion-Phillip S-REIT ETF
• Nikko AM SGD Investment Grade Corporate Bond ETF
• Nikko AM Singapore STI ETF
• Nikko AM-ICBCSG CN BD ETF SGD

Without a lock-in period, you’ll be able to withdraw and change your investment portfolios according to your needs and priorities. New customers under the age of 30 are entitled to a flat fee of 0.88% of the total investment amount and total sales proceeds for buying and selling, while other customers have to pay a 0.3% fee or S$5 per counter, whichever is higher.

Promotion: Open an OCBC BCIP account and invest a minimum of S$200 a month for three consecutive months in any one of the selected ETFs to receive a S$20 UNIQGIFT voucher.

6. POEMS Share Builders Plan

With just S$100, you are able to access 49 counters including shares and unit trusts that consist of popular blue-chip stocks and REITs when you sign up for the POEMS Share Builders Plan. Some big players you can look forward to investing in are Genting, Singapore Airlines, UOB and Frasers.

For those who do not want to spend time investing each month, this plan offers the option of automatically transferring your funds through GIRO, while dividends go straight into your existing bank account (though you will have to open a separate Phillip Investment Account). The plan also allows you to reinvest your dividends, making it a nifty feature for those who do not need cash and would prefer putting their profits back in for investments.

However, the biggest drawback of this plan is the handling fees. Fees are priced at S$6 for two counters or less, and S$10 for three or more counters, ranking it the plan that charges the highest fees of the list.

Promotion: Sign up for the Share Builders Plan and get three months of handling fee rebates, or start off with the Junior Share Builders Plan and get 12 months of handling fee rebates.

7. SAXO

Whether you’re an amateur investor who doesn’t have sufficient knowledge or a workaholic who has no time for market research to make the best decisions, SAXO’s managed ETF portfolios will have all the legwork done for you. With insights from Lion Global or BlackRock, these portfolios are professionally managed for you based on your risk appetite:

• Defensive (total returns of 18.0% since inception) — a low-risk portfolio focusing mainly on bonds
• Moderate (total returns of 31.8% since inception) — medium-risk
• Aggressive (total returns of 45.6% since inception) — high-risk, focusing mainly on stocks
• Dynamic Growth: Asian Perspective (simulated performance of 84.6%) — high-risk, focusing on Asia & emerging markets

SAXO charges an annual service fee of 0.25% to 0.75%, and an expected ETF cost of  0.23% p.a.. The good news is that they do not charge any platform fee, entry or exit fee or custody fee. You do, however, need to deposit at least S$2,000 in the account and regular monthly deposits of at least S$100 each month.

8. Robo-advisors 

Though robo-advisors are not traditionally considered an RSP, they do function similarly in terms of making monthly investments into the account. Once you’ve set up your robo-advisor account, most platforms offer great flexibility in being able to decide how much you want to invest each month, which can be easily changed.

The fees charged vary depending on your portfolio amount, while there may also be a minimum initial deposit that you’ll have to make based on your portfolio and the platform you choose. Fees are typically charged quarterly or annually, rather than being charged each individual month.

The only difference is that instead of investing into a single ETF or unit trust for RSPs, you’ll be investing in a basket of funds based on the fund allocation of your chosen portfolio. Some of the popular robo-advisor platforms include Syfe, Endowus and StashAway.

Compare Best Robo-Advisors

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Which RSP should I invest in?

If you don’t want to decide for yourself which ETFs and unit trusts are the best for you, then you can consider SAXO and MoneyOwl that offer portfolios that are professionally managed for you so you won’t even have to lift a finger. They both have a range of portfolios you can choose from depending on your risk appetite and funds allocation that you prefer.

Those who do not want the hassle of creating a separate bank account just for their investments can consider the DBS/POSB Invest Saver and the OCBC Blue Chip Investment Plan that allow you to have your proceeds credited directly to your existing bank account. They also offer fairly reasonable fees that won’t have you breaking the bank.

In terms of variety, FSMOne takes the crown as they offer more than 1,500 ETFs and unit trusts for you to take your pick for both local and global indices. It also has the lowest deposit amount at S$50 making it possible for almost everyone to start investing, as long as you’re at least 18 years of age. 

If you’re looking to only venture into Singapore stocks, then the OCBC Blue Chip Investment Plan and POEMS Share Builders Plan offer the most stocks based in Singapore.

Case study: investing S$500 a month

Taking on the persona of a 25-year old who earns a monthly income of S$4,500 based on the median income of Singaporeans, he wants to start investing a regular amount of S$500 a month. To put things into perspective, that’s about 14% of his take-home pay (after CPF contributions) and will amount to S$6,000 a year. Here are the fees that he will have to pay for each plan.

	Fee for S$500 investment per month
DBS/POSB Invest Saver	S$2.50 or S$4.10 (ETFs) S$4.10 (Unit trusts)
dollarDEX	Depends on the funds you choose
FSMOne	S$1 (ETFs)S$0.25 - S$0.438 (Unit trusts) S$1.75 - S$2.50 (Managed portfolio)
MoneyOwl	Depends on the funds you choose
OCBC Blue Chip Investment Plan	S$4 (new customers) S$5 (existing customers)
POEMS Share Builders Plan (1-2 share counters)	S$6 (1-2 share counters) S$10 (3 or more share counters)
SAXO	S$1.25 - S$3.75
Robo-advisors	Depends on the platform and portfolio you choose

From the table, FSMOne is the cheapest to invest in and coupled with the wide range of ETFs, it should be one of the top choices for avid investors. But for those who are just starting out, you might be too overwhelmed with the vast number of funds available.  

Instead, you can opt for the next cheapest option, which is SAXO that provides customers with four managed portfolios - great for those who are still new to investing. Alternatively, the DBS/POSB Invest Saver is also another strong contender with affordable rates, and since it offers only four local ETFs to choose from, it might be more suitable for the newbies. 

If you still can’t decide on which individual ETF or stock to invest in, you can just choose to invest with robo-advisors that’ll do all the work for you. All you’ve got to do is to deposit an amount that you’re comfortable with, regularly invest on a monthly basis and sit back to let the money (and professional robo investors) work for you.

Compare Best Robo-Advisors

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