MoneyOwl just launched WiseSaver and here’s what you should know

MoneyOwl has just launched a new product called WiseSaver which aims to provide investors with higher returns than retail deposits, e.g. fixed deposits, Singapore Saving Bonds with no lock-in period for absolute liquidity.

By investing through WiseSaver, you are looking at a return of 0.79% p.a., which is the gross indicative yield of the underlying cash fund, and may fluctuate as market and economic conditions change.

That makes this product a perfect tool for a portion of your emergency cash savings because you will have access to your funds within 2 working days, whenever you need them.

“WiseSaver is a product that we have worked hard on in collaboration with Fullerton. There is no advisory fee as well as platform fee charged on this product. You are literally saving into a product at “wholesale” price with no middleman cost.”

Christopher Tan, Executive Director of MoneyOwl

There’s really not a lot to say about WiseSaver because the product is super easy to understand and MoneyOwl did a great job at explaining the product on their website.

Key Features of WiseSaver

Higher Returns Than Retail Deposits

No more worries about having to find the next better fixed deposit to move your savings to. The fund has a track record of cash strategy that works to get you one of the best rates.

Expect Low To No Risk

Your savings will be deposited mainly in Singapore Dollars offered by local financial institutions with short-term investment grade ratings.

Liquidity With No Lock-in Period

Withdraw your savings anytime with no minimum lock-in period. Your returns will be computed based on the price you redeem your units at and returned to your bank account within 2 business days.

No Sales Charge, Advisory Or Platform fee

We keep costs low so that every dollar saved generates optimal returns for you. This excludes fund-level fees of 0.15% p.a. charged by the underlying fund manager.

Start Saving From As Little As $50 A Month

You earn higher interest on every dollar saved with no strings attached.

Professionally Managed By Fullerton Fund Management

Have a peace of mind knowing that you are saving in one of Singapore’s largest cash fund used by companies and institutions for their cash management.

So if it was this simple, what’s there for me to write in this article?

In this article, I’m going to focus on the underlying money market fund used by WiseSaver, Fullerton SGD Cash Fund, compare WiseSaver with other similar investment instruments in the market today, and share how I manage my emergency cash savings today.

While WiseSaver also allows SRS investments, I’m going to focus on cash 

Understanding how retail deposits work

Retail deposits are funds deposited using various financial products (e.g. current accounts, fixed deposits, etc.) by physical persons. I’m going to focus on fixed deposits offered by banks to their banking customers and Singapore Savings Bonds, a special type of Singapore Government Securities (SGS) that individual investors can buy.

Fixed deposits

Offered by financial institutions, fixed deposits are low-risk investments that earn you interest over a fixed commitment period. You don’t have to do anything to earn this interest, other than leaving your cash intact with the financial institution. It’s like watching paint dry.

The minimum amount required for fixed deposits can range from as low as $500 and as high as millions. Naturally, the more money you are able to park with them, the more attractive the interest rate will be offered to you. You can also choose to put your money in a foreign currency fixed deposit account for a more attractive interest rate, in exchange for taking on the risk of foreign currency fluctuations.

Liquidity is also not an issue because if you have an urgent need for cash, you can simply close your account or withdraw your fixed deposit prematurely without losing a cent. The only exception is that you may receive no or lesser interest than what was contracted agreed upon. According to the industry’s guideline, interest is paid based on the completed quarters of a calendar year. But naturally it depends on the terms and conditions of the fixed deposit account determined by the financial institution.

Singapore Savings Bonds

Fully backed by the Singapore Government, you can be confident that you will get your Singapore Savings Bond (SSB) investment amount back in full without any capital loss. Just like fixed deposits, you don’t have to do anything to earn this interest, other than leaving your SSB untouched.

But unlike fixed deposits, the interest earned each year varies based on the SSB issued. If you want to achieve the effective interest return each year, you will need to hold on to your SSB for the entire 10 years as the interest rate for  first few years are very low and the interest rate for the 8th to 10th year will play a big part in your SSB.

Let’s take the July 2020 SSB issue (GX20070W). If you only held the bond for 3 years and need to redeem it for an emergency, you will only receive an effective interest rate of 0.34%.

Therefore, if you wish to invest in a SSB, you should try as much as possible to stay invested for the full 10 year in order to reap the full benefits.

SSBs are reasonably liquid as upon redemption, you will receive the cash in your bank account on the second business day of the following month.

Here’s where WiseSaver invests your money

When you invest through WiseSaver, your money is invested in Fullerton SGD Cash Fund (Class A) through iFAST Financial Pte Ltd who provides custodial and transfer agent services to MoneyOwl.

As indicated in its prospectus, the investment objective of Fullerton SGD Cash Fund is to provide investors with liquidity and a return that is comparable to that of the Singapore Dollar Banks Saving Deposits rate.

The fund hold its assets primarily in Singapore Dollar deposits with eligible financial institutions as defined in the Money Market Funds Investment Guidelines, with varying terms of maturity of not more than 366 calendar days. The fund may also place deposits of varying maturity tenures exceeding 366 calendar days but not more than 732 calendar days, subject to a maximum of 10% of its Net Asset Value.

– Fullerton Fund Combined Prospectus (5 June 2020) –

Sounds complicated?

Here’s the breakdown of where Fullerton SGD Cash Fund’s holdings stated in the statements of portfolio in their annual report and financial statements as at 31 March 2019.

Financial Institutions	Fair value at 31 Marc​h 2019 S$	Percentage of total net assets attributable to unitholders at 31 March 2019 %	S&P’s/Moody’s credit rating
Bank of Tokyo-Mitsubishi UFJ Ltd	74,411,591	8.74	A
BNP Paribas, Singapore	6,811,535	0.80	A+
Industrial and Commercial Bank of China Limited	103,113,797	12.12	A
Landesbank Baden-Württemberg	132,568,787	15.58	Aa3
Mizuho Corporate Bank Limited	38,500,000	4.52	A
Qatar National Bank	71,393,340	8.39	A
Sumitomo Mitsui Banking Corporation	21,126,746	2.48	A
The Sumitomo Trust & Banking Co Ltd	21,000,000	2.47	A
Fixed deposits	468,925,796	55.10	​
Other net assets	382,173,745	4​4.90	​
Net assets attributable to unitholders	851,099,541	100.00	​

Although WiseSaver is similar to fixed deposits and SSB where you don’t have to do anything to earn this interest other than leaving your cash intact with WiseSaver, the calculation of interest earned is very different and is not paid out to you just because of how long you have stayed invested in WiseSaver.

Fullerton SGD Cash Fund invests in multiple tranches of fixed deposits from different banks and at different time and these fixed deposits also expire all at different time. Because of this, the income earned from interests can be lumpy and may not be consistent every month. This is also why the yield of the fund changes daily and it can be higher or lower than the previous day.

Unlike fixed deposits and SSB, there is cost incurred in managing Fullerton SGD Cash Fund as there is work involved in to manage the variety of fixed deposits invested, identifying new ones to invest in, and other work that goes into managing the fund. As such, Fullerton SGD Cash Fund currently has an expense ratio of 0.15% which includes management fee, trustee fee, registrar fee, valuation fee, audit fee, custody and transaction fees, etc.

Unlike most fund arrangements where a portion of the management fee is paid to agents or distributors (trailer fee), I understand that Fullerton SGD Cash Fund’s management fee is distributed between the fund manager and iFAST Financial Pte Ltd and nothing goes to MoneyOwl.

In terms of liquidity, WiseSaver is on par with fixed deposits and SSBs because you can withdraw your investment and receive the cash within 2 working days.

How do you compare and decide if WiseSaver is right for you?

MoneyOwl compares WiseSaver with retail deposits such as fixed deposits and Singapore Saving Bonds because that’s what the underlying fund, Fullerton SGD Cash Fund is investing in.

But as retail investors, it’s inevitable that we will compare WiseSaver with other products such as StashAway Simple, ELASTIQ and SingLife Account, that are readily available to us.

Let’s do a simple product comparison with these products.

Product comparison

Do note that these products are not listed in any order of preference. I just happen to be list them this way.

WiseSaver

MoneyOwl invests your money in the underlying fund that will earn you the current rate projected with a total expense ratio of 0.15%.

With a non-aggressive portfolio that invests in fixed deposits offered by Financial Institutions in Singapore market, the projected returns are to be expected in exchange for relatively lower risks.

 

Underlying fund:

• Fullerton SGD Cash Fund

• Current rate: 0.79% p.a. subject to underlying cash fund yield changes
• As low as $100 for one-time saving or $50 for monthly regular savings plan
• Not capital guaranteed, risks pegged to underlying fund
• No lock-in period

Stashaway Simple

Stashaway invests your money equally between the underlying funds that will earn you the project rate with a total expense ratio of approx. 0.205%.

​

With a slightly more aggressive portfolio that invests in high quality short-term deposits and debt securities such as corporate bonds in and out of the Singapore market, the projected returns are higher.

 

Underlying funds:

• LionGlobal SGD Money Market Fund
• LionGlobal SGD Enhanced Liquidity Fund SGD Class I Acc.

• Projected rate: 1.9% p.a. derived by the rate of returns of its underlying investments, net of all expenses and rebates
• No minimum balance
• Not capital guaranteed, risks pegged to underlying funds
• No lock-in period
• Invested fund is commingled with other investors and will not be invested through the custodian under your name

ELASTIQ

You are purchasing a non-participating universal life insurance plan from Etiqa with no fees.

Your policy will earn a guaranteed credit rate for the first 3 years.

• Guaranteed 1.80% p.a. for the first 3 years and subjected to crediting rates based on market rates thereafter
• Minimum $500 to start, a $5 nominal service fee applies if your average daily account value for the policy month falls below S$5,000
• Capital is not guaranteed until 4th year of policy, but the policy is protected under Policy Owners’ Protection administrated by SDIC
• Withdrawal allowed after 90 days lock-in period

SingLife Account

You are purchasing a non-participating yearly renewable universal life insurance plan from SingLife with no distribution cost.

Your policy will earn an interest at the crediting rate based on your account value.

• Up to 2.5% p.a. for first $10,000, non-guaranteed and subjected to changeds to crediting rates
• Minimum account value of $100 to earn returns
• Capital guaranteed and the policy is protected under Policy Owners’ Protection administrated by SDIC
• No lock-in period

What would Mickey do?

There isn’t a one-size-fits-all approach to allocating your emergency cash savings, especially when we all have different risk appetites and the duration in which we are able to leave our emergency cash savings untouched.

In fact, you probably need to access portions of your emergency cash savings at different milestones of your life. 

Personally, I have a layered approach to maintaining my emergency cash savings so that I can split my emergency cash savings into different buckets, some which I have immediate access to but yield little interest, and some which I receive higher interest but would take longer to liquidate and have access to.

For immediate needs, I invested $10,000 with a SingLife Account to earn a capital guaranteed interest of 2.5%. If I need the cash, I can easily have access to it in a matter of days.

For less immediate needs, I keep some cash in USD fixed deposits in an overseas bank that offers me a decent interest rate of above 3% p.a. for leaving my money with them and bearing the risk of currency fluctuations. Terminating the fixed deposits and remitting the money back to Singapore would probably take 2 weeks.

You may be wondering, what happens if I use up the $10,000 emergency cash savings and the remittance from my overseas fixed deposit does not reach me in time? My plan is to use my credit card as cash flow to pay for my expenses while waiting for the remittance to complete.

To cover the gap above, I may consider adding another layer of emergency cash savings with WiseSaver.

Why not consider Stashaway Simple, you may ask?

While Stashaway Simple offers a higher projected yield, the underlying fund holds multiple corporate bonds of companies in and out of Singapore makes the additional 1.11% projected yield in exchange for the risk exposure very unattractive to me.

If I were to open an WiseSaver portfolio with MoneyOwl, The WiseSaver portfolio would then be the first layer of emergency cash savings that I would tap on, followed by a second layer of emergency cash savings using my SingLife Account, and then lastly, my overseas fixed deposits would form my final layer of emergency cash savings.