Regular Shares Savings plans are a way for you to gradually build your wealth, even if you don't have a huge amount of capital to start with. Here's how they work and the best rates in the market.
- How do Regular Shares Savings (RSS) plans work?
- What are the RSS plans available in Singapore?
- Are RSS plans a risk-free investment option?
How do Regular Shares Savings (RSS) plans work?
Regular Shares Savings (RSS) plans allow you to invest small amounts of money every month to invest in blue-chip stocks, Exchange-Traded Funds (ETFs) that track the Straits Times Index (STI), or Real Estate Investment Trusts (REITs).
By allowing you to methodically investing small sums of money in the market each month, RSS plans help you take advantage of dollar-cost averaging to even out the long-term returns of your investment.
What is dollar-cost averaging?
When prices of the stocks are low, the investor will automatically be purchasing more with his fixed amount of investment. Conversely, less will be purchased when stock prices are high.
The result is an average risk profile that reduces the impact of sudden changes in the market, thus eliminating the need for the investor to time the market and constantly monitor fluctuations.
RSS plans are designed for long-term investors and for investors who are new to investing or do not have the time to monitor the stock market regularly.
What are the pros and cons of RSS plans?
Pros: RSS plans are affordable as they allow you to invest small amounts of money (starting from $100 a month), with the option to step up your investment amount progressively.
Other benefits include the flexibility of changing your investment amounts without incurring a fee, and added convenience as you can buy RSS plans from any of the participating providers (DBS, OCBC Bank, Phillip Securities, and Maybank Kim Eng) with minimal transaction cost.
Since you can invest small amounts every month, it also eliminates the need to time the market and to figure out when is the best time to buy an asset class. It is a disciplined and balanced approach to get exposure to several asset classes without the need to constantly monitor the market.
Cons: Although RSS plans allow you to invest in small amounts and on a regular basis, you can miss out on investing at just the right time or just before the market starts trending upward. In the event that you manage to catch the market at just the right time and invest a lump sum, you will likely do better than if you had invested smaller amounts over a longer period of time.
Other cons are higher fees for higher investment amounts; a limited number of counters; and dividends are deposited into deposit/debit accounts in most cases or re-invested vs paid out in cash.
What are the RSS plans available in Singapore?
Four banks/stockbrokers currently provide the option of RSS plans:
| Provider | Number of Counters/ Investment Products | Fees | Dividends |
| DBS | 2 | 0.5%-1% | Credited to DBS/POSB debiting account |
| OCBC Bank | 18 | 0.3% of total investment amount or $5 per counter, whichever is higher | Cash dividends are credited to OCBC deposit account. Stock dividends or bonus issues are kept with OCBC Securities |
| Phillip Securities | 39 | Invested <$1,000:<=2 counters - $6>=3 counters - $10Invested >$1,000:0.2% or $10, whichever is higher | Reinvested into preferred counter or paid out in cash |
| Maybank Kim Eng | 54 | Invested <$1,000:1% (min $1)Invested >$1,000:0.18% (min $10) | Dividends are deposited into the pre-funded account |
Which RSS plan is the cheapest based on investment amount?
| Provider | Name of RSS Plan | Fees and Charges |
| DBS | Invest-Saver | <$500: $5 or less |
| $500 - $1,000: $5 - $10 | ||
| >$1,000: More than $10 | ||
| OCBC | Blue Chip Investment Plan | <$500: $5 |
| $500 - $1,000: $5 | ||
| >$1,000: $5 (unless amount more than $1,700) | ||
| Phillip Securities | Share Builder Plan | <$500: $6 |
| $500 - $1,000: $6 - $10 | ||
| >$1,000: More than $10 | ||
| Maybank Kim Eng | Monthly Investment Plan | <$500: $5 or less |
| $500 - $1,000: $5 - $10 | ||
| >$1,000: More than $10 |
Each RSS Plan incurs service fees and charges, which can be a percentage of the amount invested or a fixed amount based on the investment sum.
The intense competition among banks offering RSS plans is a boon for most investors since most of them are relatively priced at par with each other in terms of fees and charges.
We would highlight the OCBC Blue Chip Investment Plan which charges a very reasonable service fee of $5 for any investment less than $1,700.
Are RSS plans risk-free?
Although RSS plans reduce your risk of timing the market, the risk-return trade-off is subject to the investments that you make. RSS plans are not risk-free since they invest in asset classes with inherent risks.
Some RSS plans carry more significant risks than others as they may be concentrated solely on a particular asset class or in a particular geography where the asset class is listed, thereby lacking in the diversification needed to cushion the impact of any adverse market conditions.
Read these next:
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Robert Kiyosaki Warns Investors: We’re In A Very Dangerous Time Right Now
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Singapore Savings Bonds (SSB): Interest Rates & How To Buy
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