I saw an advertisement for a POSB structured product, the POSB Invest SingGrowth account, in the newspapers the other day. Thought it would be good to highlight and have a look at this product.
The POSB Invest SingGrowth account is a 5-year equity-linked structured product that promises a fixed yearly payout with the potential of a bonus payout if a redemption event takes place.
A redemption event takes place when the share prices of Singapore Telecommunications Limited, United Overseas Bank Limited, Singapore Press Holdings Limited and SembCorp Industries Limited have all risen 15% or more above their original prices on specific fixing dates.
When that happens, the original investment will also be returned and the product will terminate.
| Year | Fixed Payout | Bonus Payout |
| Year 1 | 2.78% | – |
| Year 2 | 1.08% | 0.50% |
| Year 3 | 1.18% | 1.00% |
| Year 4 | 1.28% | 1.50% |
| Year 5 | 1.38% | 2.00% |
The minimum amount for this investment is $5000 and here are some examples of how the payout will look like (using $10,000 as an investment). Note that the analysis and examples might not be exhuastive. I am relying only on the information found on the POSB website (link no longer exists).
Case 1: No redemption event
You will collect:
End of year 1: $278
End of year 2: $108
End of year 3: $118
End of year 4: $128
End of year 5: $10138
Case 2: Redemption event occurs at end of year 2
You will collect:
End of year 1: $278
End of year 2: $10158
Case 3: Redemption event occurs at end of year 3
You will collect:
End of year 1: $278
End of year 2: $108
End of year 3: $10218
Case 4: Redemption event occurs at end of year 4
You will collect:
End of year 1: $278
End of year 2: $108
End of year 3: $118
End of year 4: $10278
Case 5: Redemption event occurs at end of year 5
You will collect:
End of year 1: $278
End of year 2: $108
End of year 3: $118
End of year 4: $128
End of year 5: $10338
Case 6: DBS/POSB goes bust
You will get back nothing as this product does not fall under the Singapore Deposit Insurance Act.
While the 2.78% payout for year 1 might look attractive, the actual yield for the 5 different cases are computed as follows:
Case 1: 1.55% p.a.
Case 2: 2.19% p.a.
Case 3: 2.02% p.a.
Case 4: 1.96% p.a.
Case 5: 1.94% p.a.
Conclusion
For a 5-year product, there are currently other better options around.