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Regular Shares Savings Plans – Five Key Facts For Investors
Education | 19 November 2013
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This article is written by Geoff Howie from the Singapore Exchange (SGX). Geoff is widely known for providing insightful investment analysis and this article is republished with permission from SGX My Gateway.

1. Regular Investing Over The Long Term Increases Returns For Retirement Planning.
Today, the average life expectancy is 82 years because of better living standards and healthcare. Individuals who retire at 62, the official retirement age, must prepare for at least 20 years of expenses without an active income. This provides a reason for Singaporeans to consider regular long-term investing as part of their retirement planning. Regular investing in the form of a Regular Shares Savings (RSS) plans, means Singaporeans can proactively supplement their CPF contributions while they are still young and actively employed. Compared to the 2.5 percent interest rate on CPF deposit accounts, over the past five years, automated investing of $100 in the STI at the end of every month generated an annualised total return of 6.1 percent. Taking into account a longer timeframe, the annualised total return over the past 10 years came to 5.3 percent.

2. RSS Plans Invest In Blue Chip Stocks And Funds.
Blue chip stocks are those with larger market capitalisation and are established businesses, and most of which serve Singaporeans daily with important products or services. Blue chip companies are defined in the SIAS Investment Guide Book as well-established companies with stable cash flows and strong management teams. In Singapore, examples of blue chip stocks include local banks (eg. DBS, OCBC), telecommunication companies (eg. SingTel), and other well-known Singapore businesses which have demonstrated strong profitability throughout the years. The list of blue chip companies available in the RSS plans can be found here.

3. RSS Plans Automate Investments For Investors.
This aspect exemplifies the simplicity of the RSS plans – and takes timing decisions out of the investment process. Once investors select the stock(s) they want to invest in and the monthly amount they want to invest into each, the provider of the RSS plan (OCBC, Philip Capital or DBS Group under POSB) will purchase the stock for them on a set day every month. The provider will continue to do so every month on the investor’s behalf until the investor decides to change the stocks selected or the amounts invested, or to stop investing. If dividends are paid out, the provider of the RSS plan will also distribute the relevant amounts to the investor automatically.

4. RSS Plans Lets Investors Buy More Shares At Market Lows And Less At Market Highs.
The RSS plans are built on the principle of investing a fixed dollar amount every month rather than a fixed amount of shares or units. This means the fixed dollar amount will purchase more shares or units at lower prices and fewer shares or units at higher prices. So over a year, the investor will have bought more shares when the price was lower, and less shares when the price was higher. This investment method is known as dollar cost averaging. Institutions and pension funds invest in a similar way, individual investors can as well.

5. Investors Can Invest In The Straits Times Index (STI) With All Three Plans.
The STI is made up of 30 blue chip counters – and is also investable in the form of an Exchange Traded Fund (ETF) that is trade on the Singapore Exchange. This means that
investors can effectively diversify and invest in the shares of all 30 companies just by buying units of the STI ETF. The SPDR STI ETF was listed in 2002 – over the past ten years the ETF has generated an annualised performance of 9.7 percent for investors which includes semi-annual dividend distributions. Over the same period of time, the Urban Redevelopment Authority Property Price Index generated an annualised performance of 6.7 percent which means that the STI has outperformed housing prices.

For more information on the Regular Shares Savings Plans in the market please click here.

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