The Boy who Procrastinates (TBWP)

Portfolio Review for Sept 2018

By The Boy Who Procrastinates - September 29, 2018

The third quarter of 2018 has been a struggle as the global market is plagued with escalating tit-for-tat trade dispute between the two economic powerhouses, United States and China. And just this week, the US Federal Reserve has raised the interest rates by 25 basis points, bringing it to 2.25%.

In the local context, Dairy Farm International has replaced Starhub as STI constituent with effect from 24 Sept. The STI Index has tested its new low in the third quarter of the year. Since its closing at 3277.43 in the beginning of July, the index has been bounded within a range of 3176 to 3347 before proceeding on a declining trend to 52-week low at 3102.73 in the mid of Sept. Subsequently, it has inched upwards to end the month at 3257.05. Overall, the STI has recorded a drop of 0.62% for the quarter.

One the other hand, the SGX S-REIT 20 Index, which measures the performance of the 20 largest and highly traded REITs listed on the local bourse, has seen some recovery from 1193.856 in July to 1235.959 in Sept, with an increment of 3.53%.

Portfolio

It has been an monotonous quarter for me due to the lack of capital injection and I have mostly been watching the market from the side. This probably also explains why there hasn't been much analysis and review of specific stock.

Despite so, the portfolio value has climbed gradually to the $78,000 mark in Sept. Against the backdrop of STI ETF's YTD time-weighted return of -1.18%, the portfolio has returned 2.35%.

Perhaps the most exciting episode of this quarter is the recent general offer of S$2.06 by two of M1's significant shareholders, namely Keppel Corp. and SPH for its remaining shares. This offer also comes during a time of uncertainty for the telecom industry with the upcoming launch of the 4th player, TPG Telecom later this year. The ball is now in the court of Malaysia's Axiata Group Bhd, the largest shareholder with a 28.69% stake.

Personally, I am vested in M1, albeit not a significant exposure. At this stage, I am not in a frenzy to sell as I'm inclined to think that there's still much value to be unlocked for M1 and will wait out for further development on the general offer.

Dividend

The 3rd quarter saw the highest dividend collected so far, mainly contributed by the collection in the month of August. However, there is still much for me to work on if I were to reach my personal goal of $500 dividend income per month in 3 years time. Currently, my progress bar is only at 22%.

With the uncertainty revolving around the global trade tension and the recent rising interest rate environment, I am keeping a keen lookout for any undervalued stocks that may align with my long-term goal.

Total dividend collected: $1,474.01

Average dividend/month: $112.83

*Exchange Rate

1 EUR : 1.5925 SGD

If you do not wish to miss out on any articles, you may consider following the facebook page for timely update.

2 Comments

Credit Card

Compilation of Hacks to meet the minimum credit card spending

By The Boy Who Procrastinates - September 26, 2018

Do you sometimes find yourself coming up short of hitting the minimum monthly spending requirement for your credit card? If so, you might have been missing out on earning the credit card rebate and/or interest from your savings account.

Following from the previous discussion on Active Savings Accounts, the interest received from fulfilling the credit card spending criterion can be rather rewarding. For example, charging $500 of qualifying retail transactions to the Bonus$aver card, along with $100,000 balance in your Standard Chartered Bonus$aver account would earn an interest of approximately $65 in a given month, which is equivalent to 13% of the amount spent. This has not taken into account the interest earned from completing other prerequisites like salary crediting and payment of bills.

Once in a while, I do find myself coming up short of hitting the minimum credit card spending, usually by a mere $50 to $100. It doesn't help that the hawker stalls that I usually dine at only accept cash payment. And yet on the other hand, I find it wasteful to purchase items that I have no use of, just for the sole intention of hitting the minimum spending.

Unwilling to give up on the potential interest that is within grasp, I would comb for "hacks" on forums, as well as through discussion with friends. For that reason, this article seeks to consolidate and compile them for ease of reference in future.

Purchasing Gift Cards / Vouchers

If there are particular retailers that you frequent, it is probably a good idea to purchase its vouchers / gift cards for future use. From supermarket chain to online shopping platform, there is a wide array of merchants which you can pick up these stores of value from. However, one should be mindful of the expiry date on these branded currencies (usually up to a year validity).

Without further ado, here are some of the common ones:

Supermarket Chain vouchers: Since there's a NTUC branch that is conveniently located within walking distance from where I stay, it certainly comes as no surprise that one of my favourite "hacks" is to purchase its vouchers towards the end of the month. Simply inform the cashier (usually the express counter) that you would like to purchase NTUC vouchers and make payment using your credit card. Alternatively, you can get your hands on Diary Farm vouchers which can be used at Giant, Cold Storage, Jasons, Market Place, Guardian or 7-11 outlets.
Watson Gift Cards: It probably makes sense for fans of healthcare and skin care product to purchase Watson gift cards for future use. You can pick this up in one of the retail branches and the minimum and maximum amount for each top-up are $10 and $200 respectively.
Changi Gift Cards: Avid travellers would be keen to get the Changi gift cards which can be used for purchases within the airport premises. The card can be loaded with any value between $20 to $990, in denominations of $10.
IKEA Gift Cards: This is perhaps one of the essential gift card for homeowners who linger in IKEA for home ideas and have a penchant for assembling their own furniture. These cards are available in any amount from $20 to $1,000 and it is also accepted at the IKEA restaurants which would be an ideal stored-value card for foodies who crave for their signature meatballs.
Qoo10 Gift Cards: Online shoppers can consider getting the Qoo10 gift card from 7-11 or directly from the site itself.
Spotify Gift Cards: Similarly, music lovers can purchase the Spotify gift card from 7-11 or online from Spotify for the renewal of their premium subscription.

Qoo10 and Spotify Gift Cards found in 7-11 outlets

For those who planned on getting their mitts on CapitaVoucher, you should be reminded that only cash and American Express CapitaCard are accepted.

Making a top-up

Apart from purchasing gift cards / vouchers, you can also give thought to making a top-up to your digital payment accounts or to the stores of value typically found in your wallet.

Ezlink Card: This transport card needs no introduction since most of us should have an Ezlink card in our wallets. Simply top up your Ezlink card via credit cards using the General Ticketing Machine found at any MRT stations.
Kopitiam Card: If you frequently dine at Kopitiam, you are likely aware that you can now do a cashless top up for your Kopitiam card via credit cards at the Kopitiam Top-up Machine. However, it is worth noting that an extra 2% of the total top-up amount is levied as the credit card administrative fee. There is a minimum top-up of $10 for each transaction and the maximum amount you can top up at a time is $50.
Starbucks Card: Coffee enthusiasts who habitually get their morning fix of caffeine, can top up their Starbucks cards at any participating store.
Grabpay: For those who routinely travelled via Grab, topping up their Grabpay wallets would be an apparent option. In addition to paying for Grab rides, approximately 200 other third-party merchants also accept payment via this digital payment app.
ActiveSG: Fitness junkies can consider topping up their ActiveSG eWallets via the mobile app to enjoy access to a comprehensive range of facilities such as swimming pools, ActiveSG gyms, studio programmes and badminton courts. You should note that there is a minimum top-up of $10 for each transaction and the maximum balance is $1,000 at any point in time.

Spending for the future

Alternatively, you can stock up on the the necessary household items or bring future spending to the present.

Stock up on essential and non-perishable items: For those who prefer to receive tangible items in exchange for your credit card spending, consider stocking up on the essential household products such as toilet rolls, silverware, dishware, towels, etc. On the assumption that you do not intend to consume within a short span of time, try to avoid obtaining perishable items such as fruits, meat and diary products.
Prepay bills: One of the commonly known "hacks" is to prepay your utility or telco bills. For utility bills, you can prepay with your credit cards at SP customer service centres located at Toa Payoh HDB Hub, Woodlands Civic Centre and 8 Cross Street Manulife Tower (formerly PWC Building). For telco bills, you can simply prepay electronically, via the mobile apps or drop by one of the retail outlets. Given the indispensability of such expenses, I would regard it to be arguably one of the more useful tips.
Buy gifts in advance: Do you have a gift that you have been wanting to prepare, be it a birthday present for your close friends or for the upcoming Christmas gift exchange? In such instance, perhaps you can start to look out for those gifts in advance.
Book your holiday trip early: If you have been organising a vacation trip with your loved ones, maybe you could book the hotel/flight earlier or break down the travel expense, such as purchasing of train tickets separately.

Eligibility of transactions

Given the disparity in the terms and conditions for each credit cards, it is imperative to read up on that of the credit cards that you are using and understand what constitutes qualifying retail transactions. To illustrate this, many financial institutions have excluded the topping-up of Ezlink cards as qualifying spending (SCB Bonus$aver Card and UOB One Card for example).

Penny Wise, Pound Foolish

While it may be shrewd to maximize the interest rate on savings accounts or rebate/cashback earned on credit card spending, I would not unreservedly recommend spending more than you need in order to earn higher interest.

When all is said and done, it is of utmost importance to understand whether you are spending wisely. Splurging unnecessarily for the sole purpose of hitting minimum credit card spending can be penny wise, pound foolish, leading to a downward spiral of poor financial decisions.

If your spending pattern has consistently remained below the stipulated amount by a sizeable margin, it is probably an indication to review your expenditure and switch to a savings account without rigid spending condition. Aside from that, it is timely to check out other credit cards with lower minimum spending requirement.

Comparison of Active Savings Accounts with the exclusion of credit card spending requirement

If meeting the monthly credit card spending of $500 is deemed to be demanding, it may be sensible to just forgo earning the associated interest completely. This is also what I have to give up every now and then when my credit card bill falls significantly behind the requirement in a given month.

Let's examine the scenario when the credit card spending requirement is removed from consideration and have a comparison across the active savings accounts.

By excluding the credit card spending prerequisite, the overview of bonus interest rate across the 6 active savings accounts appears to have changed significantly. DBS Multiplier Account now leads the pack at 2% interest rate, mainly due to its flexibility around the credit card spending and salary crediting as long as the total eligible transaction amount falls within one of the transaction tiers.

OCBC 360 Account trailed behind at 1.55%, largely contributed by the higher interest rate (1.2%) earned from the completion of salary crediting condition.

As the primary condition to earn interest rate on UOB One Account is contingent on credit card spending, failure to meet this basic criterion will result in earning only the base interest rate of 0.05%.

The bonus interest rate for Maybank SaveUp Account is calculated on the assumption that only 2 criteria are fulfilled with the exclusion of the credit card spending prerequisite. Should you be able to complete any 1 of the remaining 6 categories of products/services, the bonus interest rate will rise to approximately 3%.

Ultimately, the aforementioned "hacks" are supposed to complement your spending if you are close to meeting the minimum credit card spending by a narrow margin.

If you do not wish to miss out on any articles, you may consider following the facebook page for timely update.

Disclaimer: Kindly note that this is not a sponsored post. The author is in no way affiliated with any of the aforementioned merchants and does not receive any form of remuneration for this post. The Boy who Procrastinates has compiled the information for his own reference, with the hope that it will benefit others as well.

1 Comments

Book Review

Thinking, Fast and Slow - Anchoring Effect

By The Boy Who Procrastinates - September 01, 2018

Last year, I have read Thinking, Fast and Slow by Daniel Kahneman, a renowned psychologist and winner of the Nobel Memorial Prize in Economics. The book sheds light on the working systems of the human mind and how it can be susceptible to cognitive biases, fallacies and illusions.

The title was first introduced to me during my Managerial Economics lecture when the Professor fervently recommended it to the class and provided only positive review. As it distills a lifetime of research that Kahneman has conducted in collaboration with the late Amos Tversky, some of the ideas demonstrated can be slightly abstract. It usually requires re-reading of certain chapters in order to grasp the essence of the psychological basis for our behaviour and choices. Overall, I must admit that the recommendation certainly did not disappoint at all.

As the book presents numerous compelling insights from the perspective of behavioral economics, I will touch on a few salient concepts and its application on the financial decisions we make on a daily basis.

Anchoring Effect

As Kahneman has defined in his book, the anchoring effect is a form of common cognitive bias that "occurs when people consider a particular value for an unknown quantity before estimating that quantity".

In other words, when we were asked to come up with a number or value for a certain item (e.g. the value of a house) which we do not have an answer to, there is a human tendency to rely heavily on the first available piece of information, known as the "anchor", even if it is not even remotely relevant.

Here's a trivia question: Is the population of Morocco greater or less than 70 million? Make a wild guess if you can.

Now for the next question, how many people live in Morocco? Come up with a figure without googling and keep it in your head.

To demonstrate the anchoring effect, Kahneman has carried out an experiment in which a wheel of fortune, with the wheel marked from 0 to 100, was set in front of a group of students. Unbeknownst to them, the wheel was rigged to stop at either 10 or 65 every time. After spinning the wheel, the students were asked if the percentage of African nations among UN members is larger or smaller than the number indicated on the wheel. The following question requires the students to provide their best guesses of the percentage of African nations in the UN.

The participants who landed on a 10, on average estimated that 25% of African nations was part of the UN while those who have seen 65 on the wheel, guessed 45%. It is apparent that the spin of a wheel of fortune cannot possibly yield any useful information and the students should simply ignore it.

However, when the students were unable to come up with any figures with no other clues, they subconsciously fixated on the information at hand - the number as seen on the wheel, thus skewing their responses completely.

To further illustrate the power of anchoring effect, Kahneman has cited a worrying experiment conducted on German judges with an average of more than 15 years of experience. When passing out prison sentence for crimes of comparable gravity, their judgement were affected by factors as trivial as a dice roll. Personally, I find the experiment to be disturbing as it goes to show how the judicial system can be influenced by random and arbitrary elements.

Now, to answer the trivia question earlier, the current population of Morocco is 36 million. Is the figure you have in mind far from the answer?

Financial Applications of the Anchoring Effect

When it comes to finance, we may consider ourselves to be rational creatures who make logical and reasonable decisions based on dollars and cents. However, this may not always be the case as the arbitrary numbers and anchors that we inadvertently encountered can have profound impact on the economic choices that we make.

Negotiation: Do you recall the last time you haggled with a stall owner in the midst of the buzzing night market in Bangkok? There is a high chance that the seller has quoted a high price when prompted initially. During the course of negotiation, the first suggested price usually set the benchmark for subsequent bargaining and this includes the final price. Such scenarios are also prevalent in salary package discussion with HR, as well as bargaining on Carousell.
Sales Technique: In the first half of the year, I have attended a financial introductory course. Towards the end of the session, the speaker revealed that the original price of the investment course is approximately $2,000. And if we were to sign up for it on the spot, they are willing to offer a promotional price of $800. By revealing the original price as the anchor, the promotional price, by contrast, creates a clear sense of value for potential customers. Some might have encountered similar experience with Fave/Groupon deals.
Advertisement: During sales, you may occasionally notice that fashion retailers tend to include the strikeout original price and display the discounted price next to it. The non-discounted price, serving as an anchor, causes potential shoppers to think that they are getting a good deal, thus increasing their propensities to spend.
Investment: The decision to buy/sell a stock by investors can generally be traced back to the anchoring effect. As it is onerous to measure the true value of a stock accurately, people often anchor on its previous price levels. For instance, investors may anchor on a previous high point for the stock's price and likely to believe that a drop in the price provides an opportunity to buy at a discount. While this may have led to undervaluation of the said stock, it is equivalently essential to understand if the drop in share price reflects any change in the underlying fundamental value of the company (e.g. questionable accounting practice/snowballing of debt).
Price Anchoring: Some restaurants have included ridiculously priced premium items in their menus to make the next most expensive dish seems cheaper. Customers would deem it reasonably priced compared to the most expensive item and would gladly ordered them. This may have been so despite the fact that the ordered dish could be pricey elsewhere.

Overcoming the Anchoring Effect

Humans have the tendency to rely on heuristics (e.g. rule of thumb/mental shortcut) to form judgement, which allows us to function efficiently in our decision making process. The anchoring effect illuminates how we predict the outcome of events, how we estimate the duration of a process and how we get a measure of how much something is worth. We constantly require an anchor which we can compare against. However, when the anchoring effect rears its ugly head, it may lead to a downward spiral of bad decision-making.

Fortunately, Kahneman has included a few ways to combat the anchoring effect. When the other party makes an outrageous proposal during negotiations, it is recommended to "focus the attention and search memory for arguments against the anchor" and to "make it clear - to yourself as well as to the other side - that you will not continue the negotiation with that number on the table".

Alternatively, the second mover should concentrate on the minimum amount that the opponent would accept or on what it would mean for him not to reach an agreement. Such strategy in general, may be a good defence against anchoring effects as it negates the biased recruitment of thoughts that produces these effects.

When discussing about salary package with prospective employer, it is desirable to initiate the negotiation and set a higher anchor instead of waiting for the HR officer to propose the range. One should also take note that the anchor should not be overly aggressive, as it may cause the other side to question your credibility and risks derailing the negotiation.

The anchoring bias in your investment practices can be overcome with objectivity and constructive approach. Instead of submitting your trade order hastily, do take some time to identify the factors behind the sudden rise/fall in share price. For example, if there has been a change in the fundamental value of the stock, does the adjustment in price level justifiably reflect so? By adopting research-based decisions, discplined investors are usually less susceptible to the anchoring effect.

If you do not wish to miss out on any articles, you may consider following the facebook page for timely update.

Disclaimer: Kindly note that this is not a sponsored post. The author is in no way affiliated with the publisher/author and does not receive any form of remuneration for this post. The Boy who Procrastinates has compiled the information for his own reference, with the hope that it will benefit others as well.

1 Comments

Investment

[Python] Exploring the Viability of Flipping IPO

By The Boy Who Procrastinates - August 10, 2018

Among the various short-term trading strategies, there is one prevalent and yet controversial method that can be traced back to the origin of a stock being listed on the exchange. With new common stock issues closing as high as 200% on the first day of trading, it is of little surprise that many have turned to the flipping of IPO for quick and easy profit.

Closer to home, a familiar and respectable figure in Singapore, Mr. IPO has devised the strategy of punting the IPO market and put forward a IPO chillies rating system to indicate the performance of IPO in the short run.

However, one might question the feasibility and soundness of flipping IPO as strategy of such nature seems to bear a more striking resemblance to speculation than to prudent investment management. This article aims to employ a statistical approach to investigate the viability of flipping IPO as well as the potential profitability of such method.

Flipping IPO

For the uninitiated, let's touch on the basic of the flipping IPO strategy. Before a private company gets listed on the stock exchange, an Initial Public Offering ("IPO") was undertaken in which the shares of the company are offered to the public for the first time. Investors can apply for the shares through online banking or via ATM during the IPO public offer period. If the application is successful, shares will be deposited to their CDP account. Typically, the trading of shares on the stock exchange commerces on the following business day.

In this scenario, a IPO flipper refers to someone who applies for an allotment of the shares during the offer period and sells the allocated shares on the stock exchange within the first day or week of trading. The flipper generally rides on the short-term volatility of IPO in the hope of making a quick killing.

Private companies in general, are not legally required to disclose their company information and financial data. In order to be listed on the stock exchange, it is necessary for the company to issue a document known as prospectus. Investors commonly rely heavily on such documents on key indication of the company's financial position, business prospects, management team, key investment risks, intended usage of funds raised through IPO, etc.

Even so, it can be tedious to analyze the fundamentals of company given the limited historical information to draw upon. Under such circumstances, why would the opportunists be drawn to the risk of such untested stocks? Is the short-term speculative strategy of flipping IPO truly lucrative?

Performance of IPO on First Closing Day

Source: SGX

Taking a sample of 617 IPO on SGX that occurred since 2000, we are able to study the performance of IPO on the first closing day. The trend appears to be nearly normally distributed with a slight positive skew or tail on the right side. Majority of the IPO made a tepid debut on the Singapore Stock Exchange, falling within the narrow range of 0 to 5 percent gain.

The breakdown indicates that 69.37% of the IPO show positive post-listing performance at first-day closing, 24.96% close negatively and the remaining settling at the IPO price.

The graph above was plotted using Python Bokeh with the option of interactive tools at the side, best viewed on desktop. You may hover your cursor over the bar to view the number of IPO within each percentage gain/loss interval. The red bars represent the area of negative returns whereas the blue bars represent the area of positive returns.

Performance of IPO on First Closing Week

Source: SGX

If the investor was to hold the IPO shares longer till the first closing week, the landscape of the IPO performance will be slightly different. The normally distributed graph still has a positive skew on the right side. The mode is still in the range of 0 to 5 percent gains but it can be observed that the frequencies of the red bars are catching up. The number of IPO returning -5 to 0 percent is now a mere 14% behind its counterpart in the blue zone.

The breakdown reveals that 56.4% of the IPO close with an increase in its share price on the first week, 39.06% close lower and the remaining settling at the IPO price.

Long-term Performance of IPO

Source: SGX

Now, what will happened if the investor held on to the IPO shares until July 2018? The bar chart shows a declining trend in the order of increasing returns. It is alarming that the number of IPO with -100 to -95 percent return has the highest frequency at 95 out of 617, which equates to 15.4%. It is evident that the direction has now shifted to red's favour. For the scalability of the graph, I have excluded 16 outliers which returned in the range of 520% to 2000%.

Breaking down the number indicates that 29.50% of the IPO show positive post-listing performance until the recent month, 69.85% close negatively with the remaining settling at the IPO price.

The table below sums up the performance of IPO at the first closing day, first closing week and in recent month. The number of issues that close below the IPO price appears to increase when held on longer. The converse holds true as well. This probably elucidates the flipping behaviour by the opportunists within the first closing week. In the long-run, the performance seems to attest to the familiar shorthand for IPO that "It's Probably Overpriced".

*adjusted for rights issues / share consolidation / bonus issues

Viability of Flipping IPO on First Closing Day

Inspired by the Intelligent Investor, Chapter 6 Commentary, I am intrigued to figure out the outcome if an investor were to invest $1,000 across every IPO since 2000, at its offering price and sell it at the end of the first closing day.

To ascertain the viability of flipping IPO, I suppose it will be more pragmatic if the necessary fees that comes along with the application of IPO and selling of shares via brokerage are included in the calculation. The included fees are as follows:

$2 IPO application fee
Minimum commission fee of $25
Clearing fee of 0.0325%
SGX trading fee of 0.0075%
7% GST chargeable on commission payable, clearing fee and SGX trading fee

For simplicity sake, the number of IPO shares purchased are rounded down and I assume that odd lots can be sold as well. Furthermore, I have excluded the new issues that do not offer public placement which trimmed the total number further down to 520.

Source: SGX

One may observe that the plot closely resembles that of its counterpart without the inclusion of fees with the normal distribution and a tail on the right side. However, one conspicuous difference lies in the mode of the graph. The performance of a great number of new issues falls within the range of -5 to 0 percent loss.

The breakdown reveals that investment in 60% of the IPO produces positive return on the first closing day whereas the remaining 40% produces negative return.

All in all, if the said investor were to invest $1,000 faithfully in every IPO since 200 and sell it at the end of the first closing day, he would have amassed $87,725.62 profit, a mere 16.87% return over 18 years.

Closing Thoughts

Statistically speaking, it might appear profitable to flip IPO on the first closing day at first glance, with 69.37% probability of the issue closing above the offer price. However, after factoring in the pertinent fees, the chance of such strategy producing negative return has risen to 40%.

Based on the results, the performance from employing the short-term method of selling the allotted shares right away in the secondary market is probably just slightly better than the odds in a coin-tossing contest. But of course, it is also essential to take note that past performance is not an indicator of future outcomes.

Nevertheless, it does not necessarily mean that we should not touch IPO with a ten foot pole. Benjamin Graham has mentioned in the Intelligent Investor that "it might seem ill-advised to attempt any broad statements about new issues as a class, since they cover the widest possible range of quality and attractiveness."

It is imperative to conduct your own due diligence and not ride on the FOMO trend blindly. Given the limited historical information on the company to draw upon, it is beneficial to always study the prospectus with a giant degree of skepticism. If you look hard enough, sometimes you may find a gem among the stones.

For blog posts with the "Programming Project" label, the relevant codes can be found on the GitHub page.

If you do not wish to miss out on any articles, you may consider following the facebook page for timely update.

Disclaimer: All information in this post is published in good faith and for general information purpose only. The ideas and opinions expressed in this post are purely that of the author's and should not be used or construed as an offer to sell, a solicitation of an offer to buy, a recommendation for any security or as professional financial investment advice.

2 Comments

Savings

Revision of Interest Rates for UOB One Account

By The Boy Who Procrastinates - July 22, 2018

In the relentless onslaught of time, one could argue that the only constant to the landscape of our world is change. First launched in April 2015, UOB will be revising the interest rates on the UOB One Account for the first time, in less than 2 weeks with effect from 1 August 2018. This article aims to provide an overview of the upcoming changes and whether the existing account holders stand to benefit from the revision. You may also wish to refer to the t&c for more information.

Revision of Interest Rates for UOB One Account

*Interest Rate is inclusive of the base interest rate of 0.05%

The most striking change to the interest rate for the UOB One Account is the increment in the maximum account balance for which bonus interest is accorded. You may now earn higher interest on your first $75,000 instead of the current $50,000 cap. It appears that the revision would align with the upcoming increase to the deposit insurance coverage to $75,000 per depositor from 1 April 2019.

The criteria to earn interest on the UOB One Account have remained unchanged with the minimum spending of $500 on UOB credit cards as the primary requirement. The secondary prerequisite to earn additional interest continues to offer an option between the salary crediting of at least $2,000 or the payment of 3 bills via GIRO on a monthly basis.

You would probably have noticed that the revised account balance for the interest rate are broken down into smaller tranches of $15,000 instead of the current $20,000. Even though the revised interest rate will now start from 1.85%, the interest step-up for each tranche (up to the first $60,000) has been drastically reduced to 0.15%.

If we were to assess the current and revised effective interest rates for each $10,000 accumulated, it will be apparent that the revision of interest rate creates an unfavourable situation for account holders with $40,000 to $50,000 balance in their accounts. At this balance amount, they would face an interest rate decline of 0.23% to 0.40%. The juicy interest rate of 3.88% will only be applying to the greater balance amount of between $60,000 to $75,000.

By plotting the trends of the current and revised interest rates, we can observe that the current interest rate is higher between the account balance of $32,500 and $57,500. For someone with the balance that falls between this range in his bank account (e.g., $50,000), placing his savings in either Maybank SaveUp Account (3%) or BOC SmartSaver (2.35%) would probably be a better choice to maximise the effective interest rate at this balance amount. Of course, this would also depend on his savings/spending/earning pattern to fulfill the relevant criteria.

For someone with account balance that falls beyond the aforementioned range (less than approximately $32,500 or more than approximately $57,500), the revision could possibly be a cause for rejoicing. The revised interest rate will start 0.35% higher at 1.85% for $5,000 balance and end with 0.798% higher at 2.436% for $75,000 balance.

Overall, the effective interest rate over the maximum account balance has raised by a paltry 0.01%. (0.004% to be exact; the difference of 0.01% is derived from the rounding down of the current effective interest rate and the rounding up of revised effective interest rate). This is evidenced from the peaks of the current and revised interest rate trends which appears to be of similar values.

Nevertheless, I would still regard this as a positive change due to the cap increment for the higher interest rate. The additional $25,000 will be put to work harder if you have spare cash lying around.

Comparison with other Active Savings Accounts

Following up from the previous post on the comparison of active savings accounts, let's see where does UOB One Account stand with the upcoming revision.

With the 50% increment in the maximum account balance for which the bonus interest are accorded, the UOB One Account has clinched the second place in this segment, with a slight lead ahead of OCBC 360 Account. For the greatest maximum account balance, the Standard Chartered Bonus$aver Account still leads the pack at $100,000.

Given the meagre 0.01% raise in the effective interest rate for UOB One Account, there is insignificant change to the effective interest rate ranking corresponding to each bank's respective maximum account balance as previously discussed.

Maybank SaveUp Account still offers the best bang for the buck at 3% effective interest rate, with a rather taxing requirement of at least $300 GIRO payment or the qualification of any of the other 6 products/services. UOB One Account still retains the runner-up at 2.44% with comparatively relaxed criteria.

If you do not wish to miss out on any articles, you may consider following the facebook page for timely update.

Disclaimer: Kindly note that this is not a sponsored post. The author is in no way affiliated with the stated financial institution and does not receive any form of remuneration for this post. The Boy who Procrastinates has compiled the information for his own reference, with the hope that it will benefit others as well.

10 Comments

Portfolio Review for Sept 2018

Portfolio

Dividend

Compilation of Hacks to meet the minimum credit card spending

Purchasing Gift Cards / Vouchers

Making a top-up

Spending for the future

Eligibility of transactions

Penny Wise, Pound Foolish

Comparison of Active Savings Accounts with the exclusion of credit card spending requirement

Thinking, Fast and Slow - Anchoring Effect

Anchoring Effect

Financial Applications of the Anchoring Effect

Overcoming the Anchoring Effect

[Python] Exploring the Viability of Flipping IPO

Flipping IPO

Performance of IPO on First Closing Day

Performance of IPO on First Closing Week

Long-term Performance of IPO

Viability of Flipping IPO on First Closing Day

Closing Thoughts

Revision of Interest Rates for UOB One Account

Revision of Interest Rates for UOB One Account

Comparison with other Active Savings Accounts

Follow Me

Search This Blog

Fellow Readers

Blog Archive

Categories

Featured post

Amassing $100,000 Before The Age Of 30

Blogroll

Resources