Following a post I read from the Teenage Investor and our short conversation, I thought I would like to look at the 3 main RSP options that is available to all retail investors - POSB, OCBC and Phillip.
Of course, the comparisons of these 2 or 3 investment schemes have been done to the death. The best resource that I found was by BigFatPurse. The next are by Calvin Yeo and the Turtle Investor.
Although BigFatPurse made his own table which is pretty much a splitting image of this, I wanted to create my own table just for the sake of doing one myself.
Now that the basic facts and comparisons of each other 3 plans are out there, how do you pick which plan for yourself? My answer: depending on the investment amount.
I wanted to make a fancy graph, but I'm too lazy to do it in excel and my drawing is horrible.
As long as you're investing between $100 to $500 a month, you should pick POSB as transaction costs as a percentage of total investment is minimized. This will be between $1 to $5 depending on your regular investment amount.
If you're investing between $500 to $3333.33 a month, you should pick OCBC to minimize transaction costs. This will be within the range of $5 to $10 a month depending on your regular amount.
If the amount is above $3333.33, then POEMs is the way to go, as transaction costs will be minimized to just 0.2% of the investment amount. The minimum transaction cost will start from $10 since that is the point of indifference from OCBC.
So, to summarize:
Your investment amount should actually dictate which plan is the most optimum for you. Unfortunately, most investors interested in these kind of plans are not able to commit large amounts of capital, therefore in theory only the POSB and maybe the OCBC plan is viable.
Personally, I would not choose any other underlying investment other than the STI ETF. Diversification is really paramount and this route of investment is more about safely investing for the long-term. Picking individual names is making an active decision (which most investors are often poor at) and also throwing away the benefits of cheap diversification out of the window.
However, those that want to actively punt on certain names and accumulate fractional lots of some of the expensive tickers should consider OCBC for that. At the end of the day, for $10.70, your holdings from this RSP can be transferred to your CDP account for proper management. With the promotional minimum transaction cost of $5 temporarily waived, it makes OCBC more attractive. However, promotions that are not permanent are just gimmicks to draw and lock in lazy capital. I would rather stick with POSB unless I have more than $500 to squirrel away every month.
I personally find that OCBC is the best of the 3 plans, with the glaring exception of a minimum investment of $500 to be cost-effective. The minimum of $500 is sadly a deal breaker because I find that amount too large personally.
POEMS is actually also not too bad, but the commission is always slightly higher than OCBC until $3333. The good news is that POEMS will automatically reinvest dividends, and neither of the other 2 plans do. If reinvesting dividends appeals to you, starting from $600 onwards, POEMS becomes cheaper than POSB, so it would make sense only if you have such large regular capital to invest.
At the end of the day, I think POSB is the only practical plan. If you ever need to liquidate your entire holdings (which is the only option for POSB), you can cash out and use what you need and then take advantage of SCB and purchase lots of Nikko AM STI ETF. Hopefully then, your financial situation will be much better that it is, so it would be feasible to purchase single lots directly through SCB.
Since I have enough capital to buy a lot of Nikko AM STI ETF, and I am completely not bothered at all by manually going into my brokerage account and purchasing lots from the exchange, these plans do not apply to me. However, if I had any friends who are starting out and are looking for a simple way to start investing, I would point them to the POSB Invest Saver.