The OCBC Bonus+ Savings Account: How much interest

Most local Singapore banks are fighting quite hard to ask you to move your money from one bank to another bank by providing higher interest rate in a super low fixed deposit rate world. OCBC is also doing the same thing.

They brought us a very useful OCBC 360 savings account which a lot of people prefer because there is no need to deposit more and more money into the account (you can read it here), all you have to do is automate salary deposit into the account, pay a number of bills through the account and spend $500 with the OCBC credit card and get up to 3.08% bonus. Best of all you do not need to do all of it. I actually carried out only 2 of the 3 and enjoy 2% bonus per annum (note, this is up to $50,000)

My friend alerted me to this recent initiative, the Bonus+ Savings Account. What screamed at me was a 2.35% per annum interest. I think that will capture a lot of people’s attention as well.

The OCBC Bonus+ Savings Account: How much interest bonus V2

The idea is this:

  1. There don’t seem to be a cap such as maximum $50,000 you can enjoy this interest (which the OCBC 360 has), however should you fall below the $3000 maintenance amount, OCBC will charge you $2/mth
  2. You have the freedom to deposit more money after the initial amount and withdraw money at any time. However, the interest that you enjoy will be affected based on your deposit and withdrawal
  3. At the baseline, your deposit savings enjoy a 0.05% per annum interest (12 times per year)
  4. For each month, if you do not withdraw any money, you enjoy 0.55% per annum interest (12 times per year)
  5. For the quarter, if you do not withdraw any money for the past 3 months, you enjoy an additional 0.55% per annum interest ( 4 times per year)
  6. For the quarter, if you do not withdraw any money for the past 3 months AND if you deposit $10,000 more, you enjoy an additional 1.2% per annum interest (4 times per year)
  7. The interest calculation is per day

Man that sounds really good. However, I think for folks who don’t like maths or can’t be bother with it YET want a lot of returns, they could be tempted into this.

First thing first, its not monthly you earn like 0.55% or 1.2%. The return is per annum so for each month you have to do some maths to get how much is the monthly interest.

To make my life easier, I came up with a OCBC Bonus+ Savings Account calculator here. You can make a copy and simulate how much returns you can get. Some disclaimer here, this is my interpretation based on the various terms and conditions and what is provided. I try my best but I am not the most perfect in my interpretation. If you need any clarification do approach OCBC. I won’t reimburse any money for any mistakes.

The first thing you see is some rate conversion of these 0.05%, 0.55% and 1.2% into the monthly rate. If the interest is compounded daily, I suppose I can’t get them to a very fine detail but I believe monthly rates are good enough for us to make educated decisions.

The OCBC Bonus+ Savings Account: How much interest q8IvYdX

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The annual best case interest shows the annual interest rate that you get to enjoy if you do all the things OCBC want you to do. that is almost 1.18%, which is what is written in their website, so my computation is quite there. Below that, I did a computation when you didn’t deposit more but you also didn’t withdraw. This is as if you treat it as a normal fixed deposit.

The annualize rate you will earn is 0.78%. On $10,000, you earned $78.43, which is right about there.

If you deposit $10,000 per quarter, your returns are higher. You can spread out the $10,000 over the three months. However, to maximise compounding i felt if possible, deposit in the earlier months.

The OCBC Bonus+ Savings Account: How much interest V5w5bZW

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If every quarter, you withdraw just $1, you forgo your quarterly bonus interests.

The OCBC Bonus+ Savings Account: How much interest hjrzYza

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Your returns are cut.

Summary

This account isn’t a big problem. most of the returns is like 0.7%, or slightly below that of CIMB Starsaver at 0.8%. The good thing is that if you need emergency money you can put it here without the fear that you can’t tap your money when you really need it.

Its just the way the figures i felt are presented. Play around with it and realize that the returns are not as spectacular as what we think is.

To get started with dividend investing, start by bookmarking my Dividend Stock Tracker which shows the prevailing yields of blue chip dividend stocks, utilities, REITs updated nightly.
Make use of the free Stock Portfolio Tracker to track your dividend stock by transactions to show your total returns.
For my best articles on investing, growing money check out the resources section.

The OCBC Bonus+ Savings Account: How much interest ZkB99B2

The uneasiness of leveraged based trading

Last Thursday the Swiss National Bank decided to abandon its currency ceiling against the Euro. What was a rather low volatile relationship between the Swiss Franc and the Euro turn out to be a crazy 20% change in a single day.

The significance of this move is that, different asset classes across different segments move with different volatility. In the case of equities it can be 1 to 3% for a Singapore equities market index, and in the great financial crisis perhaps 5-8%.  In some other countries such as China in the last few weeks, we seen a 7% move in a single day.

In the case of currency pairs, 20% are rather rare.

The uneasiness of leveraged based trading  1x 1

In Singapore, forex trading have become very popular as an active way for folks with skill to build wealth, so much so that there are many training institutes or classes sprouting up to teach people the potential to build wealth with it. There are much appeal in that you can start off with a decent amount of capital and that the currency market allows you to trade at various flexible time outside of your work.

But the peculiar nature of trading various currency pair is that the movement are usually very very small. The daily moves are less than 0.1%. If you use your cash capital, you can’t really make adequate amount of money. You have to use leverage or borrow a few times of your deployed capital so as your return are meaningful.

So if you trade $100 worth of Swiss francs, you usually put down $2 to $10 of cash and borrow the rest.  Your broker will require you to maintain a maintenance margin which you should not fall below. If you fall below, the broker will ask you to top up the difference to make up for the equity to maintain the position. If you cannot come up with the money on time, the broker sells your position to make up for it, and in the worst case close your whole account.

All it takes to hit the worse case scenario when you are very leveraged is a small fall in value.

In the case of the Swiss franc, the traders are accustomed to trading knowing the level of volatility is soooooooo low. In trading sophisticated strategies are planned out with these knowledge. Much of the success of the strategies are probability based, and the skilled trader would have plan for scenarios where things get out of hand and to exit the position, preserve to fight another day.  The unskilled trader would likely get his account blown up.

What happen on Thursday in one day is a 20 standard deviation event. That is astonishing. In my days learning options, we plan with a 3 standard deviation in mind. I doubt many can plan when the volatility and price movement is that drastic in 1 short moment. But i can also think of the lucky folks who manage to get on the right side of the trade. They must have closed out their account with a sudden fortune!

This episode was reflective for me in that I learn just because things haven’t happen for a long time (in this case low volatility for an extended period) doesn’t mean it won’t happen. If you plan is such that you think the most ultra low probability event won’t happen, then one event can undo all the hard work you have done previously. No matter how sure you are, plan for such a worse case scenario and if its difficult to plan. perhaps its wise to avoid it.

When I was structuring options strategies long time ago, most of the strategies were based upon probability, that events such as these extreme currency moves are very rare. The plan is that even if they do happen, YOU HAVE TIME TO REACT. This even really reminds me of my luck to stop implementing these delta neutral strategies shortly before the great financial crisis, because, I was somewhat uneasy that certain underlying assets volatility can be too close to comfort.

I was lucky. Shortly after, the underlying made 5-7% daily moves, which would have wiped out 50 to 100% of my capital.

Are trading a zero sum game? I would like to think wealth building like what Daniel Kahneman’s words is a combination of talent + luck. There are some with enough talent, yet also enough luck so that extreme black swans are not encountered for a long time. There are some with really poor luck to encounter such events.

How about you guys, have you ever been hit by such low probability events before?

To get started with dividend investing, start by bookmarking my Dividend Stock Tracker which shows the prevailing yields of blue chip dividend stocks, utilities, REITs updated nightly.
Make use of the free Stock Portfolio Tracker to track your dividend stock by transactions to show your total returns.
For my best articles on investing, growing money check out the resources section.