Regular savings plans like the POSB InvestSaver or OCBC Blue Chips Investment Plan (BCIP) were the talk of town quite a while ago. They implement the principles of index investing and dollar-cost averaging, and is especially suitable for investors with little capital or little investing experience.
When I first started my journey in July last year, I subscribed myself to the POSB InvestSaver plan with a meagre sum of $100 a month. With the 1% charge, units of the Nikko AM STI ETF are bought with the remaining amount. For myself, the charge would be $1 and units are purchased with a total sum that usually lies between $97-$99.
So many articles on the interweb have featured about the works of the POSB InvestSaver. However, one tiny detail was probably not pointed out.
When redeeming the units (i.e. selling), you are in no position to control the price at which the units will be sold. Once you click “Redeem RSP” on your i-banking platform, it gives an indicative net asset value per unit (e.g. $3.20). But in actual fact, that value is subjected to changes, depending on when the units are sold and the average price at which all the units (i.e. your units and other people’s units) are sold . So, even when the day’s highest were sold at $3.22, you might eventually be given a price of 3.17 per unit. And there’s no way to reverse the process if you are unhappy with sell price.
Luckily for me, because I bought so few units, $10 was not a huge difference to me. But I can imagine it being a significant figure to some if the capital invested was greater. So do consider this when deciding for such a plan!