Wednesday, October 29, 2008

Buying Government Securities

Many people have asked how they can buy Government Securities. I asked Adrian Tan to do some research. Here are his findings.

DO-IT-YOURSELF
http://www.sgs.gov.sg/pub_guide/faqs/publ_faqindinvestors.html
Go to “PURCHASING AND SELLING SGS” section.

To summarise, you have to open an account with a primary dealer (these include ABN AMBRO, DBS, OCBC and UOB) or a secondary dealer. “Banks, merchant banks and stockbroking firms are among the approved Secondary Dealers”.

“With this account, you can purchase SGS over the counter with these banks.”

If you follow this route, make sure you ask about the commissions and other charges that are applicable.

If you face difficulties, say finding the right people in the bank to talk to, I suggest you tell MAS about your experiences.

ELECTRONICALLY (fundsupermat)

If you have have an investment account with fundsupermart, you may invest in SGS bonds using this existing account. If you have never opened an investment account, you will be required to open one before you can invest in SGS bonds https://secure.fundsupermart.com/main/acl/registerAccount1.tpl

You are only allowed to purchase SGS Bonds via this platform using cash

'For SGS Bond, the charges that you will incur is 0.1% processing fee and 0.1% annual custody fee. The 0.1% processing fee will be deducted from your nominal value upon purchasing and the remaining 0.1% annual custody fee will be deducted yearly from your coupon payment i.e. 0.05% semi annually as the coupon payment will be paid out every 6 months. Please be noted that no charges will be incurred when you sell the SGS Bonds.

Please refer to FAQ over the website:
http://www.fundsupermart.com/main/faq/sgs_faq.tpl?id=6546
http://www.fundsupermart.com/main/faq/sgs_faq.tpl?id=910
http://www.fundsupermart.com/main/faq/sgs_faq.tpl?id=3826

Author's note -- You have to be personally satisfied that you are comfortable dealing with fundsupermarket.com or its related entities. Mr Tan Kin Lian or Adrian Tan are not making any representations about fundsupermarket.com or its related entities.

17 comments:

Anonymous said...

Error noted:

"Mr Tan Kin Lian or Adrian Tan are [not] making ......"

Invest SGX said...

I think you want to say that you are 'not' making....

"Mr Tan Kin Lian or Adrian Tan are making any representations about fundsupermarket.com or its related entities."

Anonymous said...

I buy treasury bills and SGS bonds directly from the bank. It is a bit inconvenience to go to the bank to submit the forms. Buying from fundersupermarket is convenient because you can do it online anytime and anywhere. But the price is 0.1%pa.

Jasmin

firemju said...

Hi Mr Tan,

Thank you for helping retail investors to make more informed choices.

Can we purchase T-Bills on fundsupermart.com as well?

Tan Kin Lian said...

firemu
read the FAQ and find out for yourself. Then post the answer here.

Anonymous said...

Secondary SGS bonds can be bought from fundsupermarket.
Secondary T-bills from POEMS.

Jasmin.

Cheng Siong said...

I computed the yield to maturity (mature in 1st Sept 2008), the yield is about 2.9% p.a.

The computation has factored in the bid/offer spread, and assuming there is ZERO fees.

10 yrs investment get 2.9% or less, is it attractive? However it is a reference benchmark(at a given time) to observe, when you choose any investment, i.e. consider the risk vs rewards.

Anonymous said...

The bank will always try to upsell you whatever what product they have. I tried to buy Treasury Bills through the weekly auction via a bank. First the staff have to take 1 hour reading their "procedural" book on how to do this transaction. After they non-stop ask me to buy some other XYZ products. I managed to buy the T-bill but after so much hassle, it was not worth it.

Besides, if the bank collapse the T-bill will be stuck in the bank for sometime before it can be release. looking at the high mis-selling practice in these banks, the chances of these banks collapsing in the future is 99%. I don't want to have the T-bill stuck with the bank.

I STRONGLY suggest that old folks do NOT go to the bank to buy T-BIll or SGS Bonds. The old folks could end up buying some other things. In fact, if it is possible never try to interact with any bank. It is like interacting with a lion and just one fatal blow and you have no chance of surviving. Look at this High Note/Lehman fiasco - Some retirees lost so much money.

Anonymous said...

Hi firemju,

Fundsupermart.com (FSM) is actually secondary dealer for SGS Bonds. The bonds we carry in out platform are secondary which was already trading in the market. However, FSM do not carry any T-Bills at the moment.

Koh Siew Yong said...

Some turnoffs for me when it comes to SGS bonds

1. hassel of buying when it is through banks
2. cost of buying - 0.1% when it is through fundsupermart + 0.1% p.a. custodian fees. Before start to receive coupon already out of money liao.
3. price risk or interest rate risk - fluctuation of the bond price - a major factor when it comes to selling your bond in case need cash urgently. In other words, you can sell at a price which is lower than what you pay for if not held to maturity.

For me, Fixed Deposit still safest.

1. No fees
2. Online - Maybank issavy
3. The amount take out always = amount put in + interest.
4. Even in case of emergency, there is no penalty for withdrawal. Only interet is gone.

nhyone said...

10:29 AM, I'm surprised. I filled in the application form from UOB under 5 minutes.

Anonymous said...

nhyone,

Your Sgs/t-bill is held by a bank as custodian. If the bank collapse (which is 99% sure since they like to mis-sell products), than you'll be stuck for sometime before the bonds can be transferred to other banks. But other banks don't earn any trailer for sgs bonds or t-bills and so it will be very hard to find a distributor to take on your bonds.

In other words, your bank is still the weakest link.

Don't have anything to do with the bank. It is the surest way to lose your financial independence.

As for fundsupermart, their custodian is Standard Chartered. Also a bank. Alamak, can we just get rid of these banks?

koh siew yong said...

i think nyhone missing the point here.

the fact u have to be physically at the bank is a hassel...not to say risky cos you may be sidetracked and you end up buying something else other than a bond.

i always prefer to do it myself online - at least less 'noise'.

Anonymous said...

Think there is a charge of .5% comm if you buy from secondary mkt thru the bank.

firemju said...

thanks mr tan and everyone else. Since dealing with banks can be such daunting, the safe way is really to lock cash in a safe :)

The sad thing in Singapore is that Vanguard does not accept small investment. Does anyone know the requirement to start a investor owned company like Vanguard in Singapore? So that investors can pool their money to pursue sound investment strategies.

freeier said...

if you want an easier way, for for the corporate bonds of stat board listed in singapore exchange. hdb, jtc, lta, etc.etc...

those shld have sufficient 'credit worthiness' for investment.

find a day when the buy-sell queue are close enough, e.g. 100.1 buy and 100.3 sell and just buy it from the seller.

KK said...

I remember there was a time when I was withdrawing cash from a local bank after the proceeds from sale of shares return to the bank account, the teller purposely take a long time to process my transaction. Then came the banker or relationship manager and offer different products ranging from insurance to unit trusts to structured deposits.

Can't they just leave us alone. We only use the banks for saving our money. If I need insurance, I will go to insurance company. If I need to do investments, I will go to broking firms.

If I need structured products.... no no no, I don't want any structured products!

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