Sunday, August 13, 2006

Flexi Cash earned 3.5% after initial charge of 0.1%

Dear Mr Tan

I refer to your posting on 8 August 2006 where you indicated that the flexi-cash earned a return of 3.5% per annum in the past 1 month, presumably during the month of July 2006.

I have invested $200,000/= on 7 July 2006 and looking at the unit price on 7 August 2006, my return is less than 1.8% p a. I earned interest of only $300 on $200,000 for 1 month).

Please care to enlighten me how the earning of 3.5% per annum came about.

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Dear,

The return for 1 month is about 0.28% (equivalent to 3.5% per year). Less the front end load of 0.1%, you get 0.18% for the past one month.

Next month, if the return in the money market fund is still the same, you will get 0.28%. If the money market fund increases, you will get highier.

The unit price is a way to calculate the average return of all the investments in the money market fund, and especially as investors join and leave on different days.

You will certainly enjoy the higher interest rate after overcoming the initial front end load of 0.1%. It is a good investment. Your money is not locked in to any specific period.
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2 comments:

VivaRevolution said...

That is the problem with all these promises and projections which are made by these financial institution! I am fed up!!

Same thing happened to my global bond and singapore bond fund which was promised an annualised return of 3.5% pa is it?? Now the return is not even 2% for one of teh funds and in negative territory for the other after a few years.

I asked for a review of the fund managers performance and I get the usual excuses. Then we get a posting that the YTM is very good - who cares!! Investment is a funny thing - you can twist and turn and try and make it look good but ultimately it is very clear when our money has not grown as promised.

In the first place , people should not have promised us the sky and the moon when they cannot deliver the goods!

August 13, 2006 10:33 AM
Tan Kin Lian said...

Here is my reply to "VivaRevolution".

The return from the Global Bond and Singapore Bond funds have been poor, due to rising interest rate.

As the bonds were locked in at a lower interest rate, an increase in interest rate will give rise to a lower price.

But, if you keep the bonds for a longer period, you are likely to get a return of 3% to 4% per annum.

I encourage long term investors to invest in equity funds. Although it is more risky, the risk can be reduced if you invest in a large, well diversified fund and invest for the long term, ie 10 years or longer.

August 13, 2006 1:29 PM

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