Thursday, July 5, 2007
Surf Deposit 20
Dear Mr Tan
I am stuck in a Surf Deposit 20 - Tranche A structured product which I invested in November 2003. It will mature in 2008. So far, I have received only 2 payout, totaling 4.25% in 2004. The total payout is 5.75% on maturity if I stay invested for the full 5 years.
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REPLY:
I saw a notice in the website for investors of another tranche, ie Surf Deposit 21 (10 year SGD Tranche A). In their case, the investment had an early redemption after 3.5 years and they earned a total return of 11.6% (or 3.2% p.a.).
It seems that the investors in most of the tranches are stuck, like you, and have to wait until maturity to get a low rate of return. If they cash out earlier, they will make a loss.
Lesson: It is better to avoid structured products
I am stuck in a Surf Deposit 20 - Tranche A structured product which I invested in November 2003. It will mature in 2008. So far, I have received only 2 payout, totaling 4.25% in 2004. The total payout is 5.75% on maturity if I stay invested for the full 5 years.
-------------------------
REPLY:
I saw a notice in the website for investors of another tranche, ie Surf Deposit 21 (10 year SGD Tranche A). In their case, the investment had an early redemption after 3.5 years and they earned a total return of 11.6% (or 3.2% p.a.).
It seems that the investors in most of the tranches are stuck, like you, and have to wait until maturity to get a low rate of return. If they cash out earlier, they will make a loss.
Lesson: It is better to avoid structured products
Pay less for your home loan
If you have an existing home loan, or is thinking of taking a new loan, I advise you to read the 14 tips given in Dr Money's website.
Two important tips are:
* selecting the right type of loan, eg variable or fixed, HDB or bank loan
* look into the possibility of refinancing your existing loan, after the lock-in period, to get better terms (e.g. to enjoy attractive offer)
Two important tips are:
* selecting the right type of loan, eg variable or fixed, HDB or bank loan
* look into the possibility of refinancing your existing loan, after the lock-in period, to get better terms (e.g. to enjoy attractive offer)
Wednesday, July 4, 2007
Star Track II SGD
Dear Mr. Tan,
I invested in this product almost 5 years ago. It will mature in 2008.
Name of product: Star Track II SGD
Amount invested: $5,000
Period of investment: 5 years
Return on maturity: Currently, it is worth only $4,373.80. Guaranteed to return back principle invested sum of $5000 on maturity.
Why was the product unsatisfactory? It give a worse return compared to savings account.
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REPLY
I found the following information from the website:
Capital protection:
In order to provide investors protection for 100% of the capital invested, DBS Star Track II will invest a substantial portion of its net assets in a combination of debt securities issued by corporations, governments, government agencies or supranationals.
Participation in the upside of equity stocks:
To give investors the opportunity to obtain capital appreciation at
maturity on 5 November 2008, the remaining net assets of the Fund will be invested in an option (the "Option"), linked to the performance of a basket of equity stocks.
The selection of 3 top performing stocks will be done after the 1st anniversary of the Fund to form a "star" basket, another selection of 3 top performing stocks will be done on the 3rd anniversary.
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REMARKS: Apparently, the options did not produce any return. Hence, the investor obtained only the return of capital (from the debt instruments). The fund has an annual fee of 1% (which eats away from the return).
I invested in this product almost 5 years ago. It will mature in 2008.
Name of product: Star Track II SGD
Amount invested: $5,000
Period of investment: 5 years
Return on maturity: Currently, it is worth only $4,373.80. Guaranteed to return back principle invested sum of $5000 on maturity.
Why was the product unsatisfactory? It give a worse return compared to savings account.
--------------------------------------------------------
REPLY
I found the following information from the website:
Capital protection:
In order to provide investors protection for 100% of the capital invested, DBS Star Track II will invest a substantial portion of its net assets in a combination of debt securities issued by corporations, governments, government agencies or supranationals.
Participation in the upside of equity stocks:
To give investors the opportunity to obtain capital appreciation at
maturity on 5 November 2008, the remaining net assets of the Fund will be invested in an option (the "Option"), linked to the performance of a basket of equity stocks.
The selection of 3 top performing stocks will be done after the 1st anniversary of the Fund to form a "star" basket, another selection of 3 top performing stocks will be done on the 3rd anniversary.
-------------------------------
REMARKS: Apparently, the options did not produce any return. Hence, the investor obtained only the return of capital (from the debt instruments). The fund has an annual fee of 1% (which eats away from the return).
The real winners in structured products
I saw an article in a newspaper, written in November 2006. A summary of the key points:
* structured products have taken Asia by storm
* retail and private banks collected millions of dollars in embedded fees
* more Asians bought these products, compared to Europeans and Americans
* some fundamental questions of the nature of these products are not answered
* the risks are not clearly explained
* prospectuses are couched in financial jargon and are of little help
* most products have a fairly lengthy lock-in
* the sure winners are the investment banks and distributors who always collect a spread, whether the investor wins or loses.
* structured products have taken Asia by storm
* retail and private banks collected millions of dollars in embedded fees
* more Asians bought these products, compared to Europeans and Americans
* some fundamental questions of the nature of these products are not answered
* the risks are not clearly explained
* prospectuses are couched in financial jargon and are of little help
* most products have a fairly lengthy lock-in
* the sure winners are the investment banks and distributors who always collect a spread, whether the investor wins or loses.
Measure yield on money market fund
Dear Mr Tan,
It seems those who bought the above at $1.065 in May 07 are now getting a very bad yield of less than 1 % annualised, which is much worse than even short term (1 to 3 mth) Bank Fixed Deposit rates for amounts >$50K.
The trend (over 30 to 40 days) worsen in June 07. Is the duration enough to make any judgement? Should they hold or cut their losses (relative to FD) ?
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REPLY:
You should measure the yield over 1 OR 2 months, and not just on a few past days (as it may be affected by temporary fluctuations.
I believe that the current yield is about 2% per annum (based on the underlying investments). It is better to stay invested in the money market fund (unless you have specific use for the money).
It seems those who bought the above at $1.065 in May 07 are now getting a very bad yield of less than 1 % annualised, which is much worse than even short term (1 to 3 mth) Bank Fixed Deposit rates for amounts >$50K.
The trend (over 30 to 40 days) worsen in June 07. Is the duration enough to make any judgement? Should they hold or cut their losses (relative to FD) ?
-----------------------
REPLY:
You should measure the yield over 1 OR 2 months, and not just on a few past days (as it may be affected by temporary fluctuations.
I believe that the current yield is about 2% per annum (based on the underlying investments). It is better to stay invested in the money market fund (unless you have specific use for the money).
Any good structured products?
I have taken the position that structured products are bad for consumers. They have high charges and marketing expenses, that eat away the return to the investor.
Someone made a statement that I am not familiar with structured products: they guarantee no capital loss, and allow the investor to make a good gain. He said that it is a "free lunch".
This is how the products were marketed. In think that the actual experience over the past years had been unsatisfactory. In spite of the strong stockmarket, the return on most structured products have been disappointing.
I am not aware about any structured product that have produced a good outcome for the investor.
Do you have any past experience of the structured products? Were you happy or unhappy with your investment? Please send an e-mail to me, at kinlian@gmail.com.
Someone made a statement that I am not familiar with structured products: they guarantee no capital loss, and allow the investor to make a good gain. He said that it is a "free lunch".
This is how the products were marketed. In think that the actual experience over the past years had been unsatisfactory. In spite of the strong stockmarket, the return on most structured products have been disappointing.
I am not aware about any structured product that have produced a good outcome for the investor.
Do you have any past experience of the structured products? Were you happy or unhappy with your investment? Please send an e-mail to me, at kinlian@gmail.com.
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