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OCBC’s Blue Chip Investment Plan

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On Tuesday, OCBC Bank partners with SGX to launch the OCBC Blue Chip Investment Plan (BCIP). Under this plan, investors can opt to use cash, CPF or their SRS accounts to invest a fixed amount on a monthly basis. For as little as $100 a month, retail investors can get to invest in local blue chips.

You do not need to go through the hassle and open any securities trading account or Central Depository (Pte) Ltd securities account for your shares under this plan. All you need is an OCBC deposit account, OCBC CPF Investment Account or OCBC SRS account.

My view on this scheme is that OCBC has identified a gap in the market and that this scheme is actually meant to address this gap. According to SGX, retail investors account for only 89 per cent of the daily turnover for stocks with a market capitalisation of under S$200 million. But retail investors make up only a quarter of the daily turnover for blue chips, with the rest of the trading controlled by institutional investors. So clearly, most retail players’ participation rate has been low because blue chips’ entry price is relatively high compared to other counters. OCBC hopes that the new plan gives investors an option to buy smaller number of shares with their chosen monthly investment amount. But the question that most investors should ask themselves is: what are the pros and cons on joining this scheme? Beyond the marketing hype, is it important to think through these questions before committing yourself to such financial products.

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I will first touch on the pros. If you are the type of person who wish to invest some of your spare savings but yet don’t like the hassle of learning and building up your investment experiences, this type of scheme is for you. OCBC has shortlisted 20 counters for investors to choose from. Most of them are government-linked companies with established track record of growth and dividend payment. You can buy smaller numbers of shares with your chosen monthly investment amount instead of the standard lot size of 1000 shares, so it works like a monthly investment plan. The best thing is, you don’t need to set up a trading or CDP account. All you need is to have an OCBC account and log on to OCBC Online Banking and apply for BCIP. OCBC will execute your orders on the 22nd of each month if it is a business day. Over time, BCIP will accumulate blue chip shares for you. Therefore, I would say BCIP is a simple scheme meant for entry-level investor who wishes to participate in blue chip stocks in an affordable way.

Now on the cons. There are quarterly fees incurred for CPF accounts and penalty fees for insufficient funds. Please check out OCBC website for details. There are also other transactional fees as well. So effectively, every month, you pay a minimum of $5 for every transactions. Imagine if you opted for 5 counters, then every year, you incurred transaction fees of $275. The amount is quite big if added up annually and I doubt that the dividends collected can cover these costs, given the small odd lots amount invested.

Furthermore, this scheme is still new and obviously has no track record. Investors has no idea of what is the expected rate of returns, so its like putting your money in OCBC with no information on what is your expected interest rates. In addition, investors are given only 20 counters to choose from a handful of industry sectors. Unwitting investors may end up choosing counters from specific industries which they are not familiar with. Nowadays, market can go up and down swiftly, so eventually inexperienced investors’ may end up losing money investing in these counters.

Magically yours,

SG Wealth Builder

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4 Comments

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  1. Do you know if the blue chip investment plan can be used to buy STI ETFs?

  2. Thanks for the nice blog. It was very useful for me. Keep sharing such ideas in the future as well. This was actually what I was looking for, and I am glad to came here! Thanks for sharing the such information with us
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  3. Thanks for sharing Blue Chip Investment Plan. Your information benefit for me. Investing in these stocks, one must have a clear information of every single aspect in order to get your desired results. I am waiting your next post.

  4. This is a useful shared information as many people may think the BCIP is a sure win and may not be aware of the market force which will push the value to a losing trend.

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