27-12-2012, 10:53 PM
Dear buddies
For those using the POEMS account, I need your advice as to whether you think it's a good idea to authorize the excess fund management facility.
The idea behind this scheme is that the excess funds are put into a money-market fund which invests primarily in short-term, high quality money market instruments and debt securities, i.e. at least short-term 'A2' or long-term 'A' as rated by S&P. The money is available for withdrawal whenever needed, and transactions are automatically settled when sufficient funds are maintained. Looking at the annual returns as reported here and here, the funds return about 0.60% p.a (1 year performance), better than the 0.05% p.a on the generic interest-bearing savings accounts.
Some of the fund's debt holdings include Bank of China, Capitamalls Asia, F&N, HSBC, Mapletree, Maybank. These are companies where default in payments is highly unlikely.
However, the disclaimers have left me wary.
1. the funds are not principle-guaranteed, i.e. no guarantee to the amount of capital investment and/or return received
2. annual management fee of 0.5% of NAV
Overall, I think the excess funds option is versatile and relatively safe, and is on the verge of applying for it. However, I would like to hear dissenting opinions, if any.
Input from buddies is much appreciated
For those using the POEMS account, I need your advice as to whether you think it's a good idea to authorize the excess fund management facility.
The idea behind this scheme is that the excess funds are put into a money-market fund which invests primarily in short-term, high quality money market instruments and debt securities, i.e. at least short-term 'A2' or long-term 'A' as rated by S&P. The money is available for withdrawal whenever needed, and transactions are automatically settled when sufficient funds are maintained. Looking at the annual returns as reported here and here, the funds return about 0.60% p.a (1 year performance), better than the 0.05% p.a on the generic interest-bearing savings accounts.
Some of the fund's debt holdings include Bank of China, Capitamalls Asia, F&N, HSBC, Mapletree, Maybank. These are companies where default in payments is highly unlikely.
However, the disclaimers have left me wary.
1. the funds are not principle-guaranteed, i.e. no guarantee to the amount of capital investment and/or return received
2. annual management fee of 0.5% of NAV
Overall, I think the excess funds option is versatile and relatively safe, and is on the verge of applying for it. However, I would like to hear dissenting opinions, if any.
Input from buddies is much appreciated