Sep 01 2009
DBS Invest Choice Account
I chanced upon an advertisement for the DBS Invest Choice Account a couple of days ago. Taking a closer look at the product, I realised that it is almost the same as the POSB Invest SingGrowth Account that POSB launched back in June 2009. You can refer to the POSB Invest SingGrowth Account post for an explanation of how it works.
The reference entities and redemption conditions are all the same. The only difference is that the payout is 0.22% higher in the first year.
| Year | Fixed Payout | Bonus Payout |
| Year 1 | 3.00% | - |
| Year 2 | 1.08% | 0.50% |
| Year 3 | 1.18% | 1.00% |
| Year 4 | 1.28% | 1.50% |
| Year 5 | 1.38% | 2.00% |
Here is a repeat of the earlier exercise of calculating the returns based on a $100k investment.
Case 1: No redemption event
You will collect:
End of year 1: $3000
End of year 2: $1080
End of year 3: $1180
End of year 4: $1280
End of year 5: $101380
Case 2: Redemption event occurs at end of year 2
You will collect:
End of year 1: $3000
End of year 2: $101580
Case 3: Redemption event occurs at end of year 3
You will collect:
End of year 1: $3000
End of year 2: $1080
End of year 3: $102180
Case 4: Redemption event occurs at end of year 4
You will collect:
End of year 1: $3000
End of year 2: $1080
End of year 3: $1180
End of year 4: $102780
Case 5: Redemption event occurs at end of year 5
You will collect:
End of year 1: $3000
End of year 2: $1080
End of year 3: $1180
End of year 4: $1280
End of year 5: $103380
Case 6: DBS/POSB goes bust
You will get back nothing as this product does not fall under the Singapore Deposit Insurance Act.
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The actual annualised yield for the 5 different cases are computed as follows:
Case 1: 1.59% p.a. (product matures in 5 years)
Case 2: 2.30% p.a. (product matures in 2 years)
Case 3: 2.09% p.a. (product matures in 3 years)
Case 4: 2.01% p.a. (product matures in 4 years)
Case 5: 1.98% p.a. (product matures in 5 years)
You can use the yield and maturity length as a benchmark to compare against other similar products. Of course, no one would be able to predict which of the 5 cases would ultimately happen.
The yield is slightly higher than the POSB Invest SingGrowth Account but it requires a much higher minimum of $100k to invest in the product.
Sounds so complicated.
I’d rather invest directly in stock market i.e. buy STI ETF or other high quality blue chips stocks. No need to wonder on what and how the scenarios will happen.
Reply
lioninvestor Reply:
September 3rd, 2009 at 4:07 am
Hi Vincent,
Personally, I wouldn’t invest into this product but there could be people whom this product is suitable for.
More importantly, anyone who wants to consider this product should understand it carefully before investing in it.
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Hi Lion,
This is interesting. Who does the redeeming ? The bank or the a/c owner ?
Reply
lioninvestor Reply:
September 3rd, 2009 at 4:04 am
Hi James,
The redemption will be triggered by the bank if the redemption conditions are met. ie. All 4 stocks are 15% or more above the original price at various fixing dates.
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James Tan Reply:
September 3rd, 2009 at 11:12 am
Hi Lion,
Thanks for the info. But let’s say if you had $100K, where would you park it to collect guaranteed 3% p.a. plus guaranteed principal ?
Regards,
James
Reply
Eh, the website says minimum investment amount S$100,000…
Reply
lioninvestor Reply:
September 3rd, 2009 at 11:46 pm
You are right. I don’t recall seeing the $100k min criteria on the website. Either I missed it or they just added it in there.
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