Tan Kin Lian's Blog: Surf Deposit 20

Thursday, July 05, 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

6 comments:

Thomas Phua's Blog said...: I had 2 tranches, deposited in 2004 when interest was low.

Well, the bank staff is not honest and forthcoming in telling me the early redemption penalty.

Was told is minimal point something percent.

When I tried to pull out last year, I was told penalty is 15%.

Well, I was foolish enough to trust the relationship manager of DBS in that they are telling lies during signing of the placement.

- Thomas Phua; July 05, 2007 9:32 PM
Anonymous said...: Can't believe that with your knowledge of financial products you became a victim too.And conned by a fellow professional?; July 05, 2007 10:43 PM
Thomas Phua's Blog said...: hee hee...if you think you are smart.

It is interest rate direction that cancel out the formula.

we all make mistake and learn from it.

Not many are as smart to have gone through life not making bad investment decisions.

It is unfortunate that some time we have to pay to learn. Make one wiser.

Never think you are smarter than others.

- Thomas Phua; July 06, 2007 10:48 AM
Unknown said...: Dear Mr Tan,

I have visited the mentioned structured deposit at DBS website. However, I don't understand how do I get the information on return interest rate as discussed here, example, a total return rate of 11.6% for DBS Surf Deposit 21. What does the Indicative Value and Valuation Date refer to?

Appreciate your kind reply.

Thanks.; July 08, 2007 10:30 AM
Tan Kin Lian said...: Dear Jeffrey

You can visit http://www.dbs.com/sg/personal/deposit/surfacct/; July 08, 2007 4:52 PM
James said...: i too have a SURF (DBS) account. sometimes it depends on the formula the bank uses. i guess that's the way the capitalist society works.

which bank will develop a product where only the client will benefit? there has to be benefits to both... or at least to the bank - or in some ways to stay afloat.

my only hope is that my account will have an early redemption as well. at least it is principal protected. the question is opportunity cost... but looking back, i am quite happy that the money was there. because otherwise it would have been parked in FDs.

financial savvyness is one thing, but sometimes the man on the street just doesn't know which way to turn when the wind blows a cold shoulder; December 18, 2008 1:33 AM