With one simple decision to start a Citibank Regular Savings Plan, your regular savings can go towards achieving those important long-term goals - your family's next home, your children's future education, or maybe retirement.
By setting aside a small amount on a recurring basis, you would have made a regular investment that is accumulative in effect. Further it allows you to make use of the popular dollar cost averaging principle.
- Cash savings does not necessarily beat inflation. Inflation can erode the purchasing power of your cash savings. Therefore you may wish to consider diversifying into investments such as bonds and equities, which may beat inflation by a substantial margin over the long term.
- The Citibank Regular Savings Plan will enable you to access an extensive array of investment opportunities that are often out of reach from investors of smaller amounts.
- Enjoy the flexibility of being able to choose from tenures of a 1, 3 or 5 year savings plan or even an alternative tenure that may best suit the timing of the financial goals you are striving to achieve. For example, you may choose to time your Citibank Regular Savings Plan to mature when your child turns 18 years old, and is able to use the savings for university fees.
- Free up valuable time that you may otherwise spend monitoring the markets for investment opportunities.
How does It Work?
A Citibank Regular Savings Plan is able to benefit from the popular investment principal known as Dollar Cost Averaging. This is an investment strategy whereby you decide to invest a fixed amount of money at regular intervals over a longer period of time. It is recognized as one of the best techniques to overcome the effects of market fluctuations.
With dollar cost averaging, you would have purchased more units of an investment when the price is lower and fewer units when the price is higher. This would average out the overall cost of your investment.
This is an investment strategy that may offer some insulation against changes in market price.
A regular monthly investment of $1,000 is made and units of an investment fund are purchased at market prices (shown below in table).
|Illustrating how prices may decrease before increasing|
|Total monthly investment: $1,000 x 12 = $12,000
Total number of units purchased: 296.29
Average cost to you per unit over 12 months: $12,000/296.29 = $40.50
The figures in this table are not based on the performance of specific investment funds and are for illustrative purposes only. They do not represent any actual or anticipated performance of any funds and are not based on actual or anticipated fund prices.
Benefits of this Strategy
- In this example, the average cost per unit of $40.50 is lower than the market price in 7 of the 12 months
- This strategy involves one simple decision at the beginning - to invest $1,000 per month, without having to consider or monitor the general fluctuation of market prices for the rest of the year
- Without any further effort on your part, your investment is able to take advantage of the market when unit prices are low, resulting in an overall cost that may be more favorable than trying to time the market in the long run
What are my risks?
The Dollar Cost Averaging principle of investment in a Regular Savings Plan does not promise a profitable outcome nor does it protect the investor against losses in a continuously falling market.
This technique however, does remove much of the decision making elements of how to invest and when to invest.
Click on to expand and on to minimise the details.
What you will need
- Minimum US$5,000 (or equivalent)
- Minimum monthly subsequent investments of US$1,000 or more.
- Returns are not guaranteed and costs will still be incurred even if the fund performs poorly.
Lack of Control
- By investing in an Investment Fund, you give up control over the choice of individual bonds, shares and other assets that go into the fund, as the fund manager will make these decisions for you.
Impact of Fees on Returns
- The total cost of sales charge and expenses can be higher than investing in individual securities. Investors should be cautious with funds that charge high fees as they can potentially reduce the investment returns.
- The major source of risk and volatility with Investment Funds comes from the underlying assets held by the fund.
- Investment Funds are relatively liquid with most funds allowing access to funds within a reasonable short time frame. In times of severe economic downturns, however, funds can reduce this liquidity, and potentially even freeze all redemptions for a period of time, so as to protect the holdings of the fund and not disadvantage investors who want to stay in the fund.
- The performance of the fund may be affected by the skill or reputation of the fund manager. This may give rise to "key person risks" should the particular fund manager leave the organization.
Exchange Rate Fluctuations
- Investors investing in Investment Funds denominated in non-local currency should be aware of the risk of exchange rate fluctuations that may cause a loss of principal when the foreign currency is converted back to the investors’ home currency.
Risk is an inherent aspect of every form of investment. Investors should be advised that past performance is not indicative of future results and be prepared for fluctuations in the market price of their Investment Funds, including the possible loss of the principal amount invested.
* The above is only a summary of some of the key risks in investing in the product. Detailed risk disclosures are set out in the documentation relating to the specific product. Prior to entering into a transaction, you should ensure that you have read and understood the nature of all of the risks associated with the investment in order to determine whether the investment is suitable for you in light of your experience, objectives, financial position and other relevant circumstances. You should consult with your legal, regulatory, tax, financial and/or accounting advisors to the extent you consider it necessary in making your own investment decision.