I provide some tips on bond fund investments as contrasted to investing in shares:
1. Do your research as to how your money is invested. Franklin Templeton Fixed Income Strategy's is to invest in Coupon Income (It means buying bonds from governments and earning fixed interest income per year), Active Currency Management (It means they buy and sell currencies of various countries to make money) and Capital Appreciation (It means your share values go up over the years, see table below).
 
2. Some funds are well respected and rated highly (being given awards).

3. Historical results of making money such as the above at 9% are just a guide but past good performance is important for the passive investor.

4. Invest only in money you can afford to lose.

5. Buy low and sell high. Bonds are meant to be a mid to long term investment of 3 to >5 years, rather than making a fast buck as in speculative share or forex trading.

6. Every year, you need to pay a "sales charge" of maybe 1 to 3%, lowering your profits.

7. Know what is NAV (Net Asset Value). In simple terms, it is the money you will get if you sell the fund. The POSB girl defined it as Sum Invested - Sales Charge divided by unit price. The Sales Charge in 2006 was 3% when I invested. In March 2009, it is 1%. It is tempting to invest when the sales charge is now 1%. The annual charge is said to be 1% too.  In the final analysis, it is the results that count, rather than think of the sales charge of 3% or 1%.  

8. Dividends are given in my fund as shares and not as money.

In Dec 2009, the NAV (Net Asset Value) of my Fund was S$11.26 when I sold it. As at Mar 9, 2010, it was S$11.59, the young POSB financial officer pointed out to me. Well, I should not have sold the fund on hindsight. However, the funds are not guaranteed by banks and they may lose value (depending on when you sell).

I sold it because no financial officer in the POSB bothered to advise me. The young financial officers come and go in the POSB branches and therefore there is no after-sales services or creation of loyalty or retention of old customers.

People like Patricia are gems and are very rare in the Singapore banking industry. She has an excellent memory and could remember me at Toa Payoh when she saw me talking to her colleague. She took the trouble to offer me and her colleague (the young POSB Financial Adviser) who was making presentations on the FTIB bond, a cup of mineral water branded by POSB. No young financial officer in the POSB I encountered bothered to do this. In any case, the young man I spoke to had disappeared and this girl had taken his desk. The young financial investment officers of various banks do not seem to be trained or motivated to create a connection with the customer as they know they don't stay long in their desk. That is why I write that Patricia, in her late 30s, is a real gem for a business that is looking for top people-service personnel. 

Excellent client service comes naturally to Patricia (offering water for me and her colleague to drink). She was able to recognise me though she saw me only a few times in Bras Basah Road long ago.  Probably something outstanding about me made her remember me. I had complained to her that the POSB made me lose money by forcing me to buy the fund in order to rent their safe deposit box. And she had actually phoned me back to tell me I was mistaken and that I made good money of over $1,000.      

The Bras Basah branch had closed down in 2009 and she was posted out without knowledge of where she would be going. She does not have name cards when I asked her. So her own customers whom she provided exceptional services had a hard time locating her since she did not know where she would be posted. Some managed to find her in Toa Payoh. Others like me was found by her! Other banks and corporations would do well to poach her if they want to improve their bottom-line.          

POSB (Post Office Savings Bank), Singapore markets a FTIF-Global Bond Fund (as in their letter to me). After going to the web to do some research, the actual name of this fixed investment should be FTIF Templeton Global Fund A (MDIS) SGD as there are 2 others, viz: FTIF Templeton Global Fund A (MDIS) SGD-H (hedged) and FTIF Templeton Global Fund A (MDIS) USD. This is what I mean by doing your own research.

The other 2 funds have NAV of $12.00 and $19.00 respectively. Surprisingly, there is no relevant information about my ex-fund on the internet. The following information regarding my ex-fund (now referred to as FTIF SGD or FTIF in this report) was from the young POSB financial officer I met on Mar 11, 2010. She compared it to the Global Equities Index (GEI) from JP Morgan. Singaporeans love to buy shares. So, the GEI is a smart and relevant benchmark rather than using the bond index. The table is as follows:

She showed that FTIF did not lose the capital and even earn dividends during 2004 to 2009 while the GEI dropped below normal and shot up, indicating high volatility.

In practical terms, this means that if you had sold FTIF at any time during 2004 to 2009, you would not lose your capital and even earn some profits. However, you would lose a lot of capital if you had sold shares in the sub-prime crisis. You would lose around 41% while you would gain 17% if you sold the FTIF (see table above).

If you keep the shares or bond till Oct 2009, you would not lose your capital and would make some money based on my analysis below. Therefore, timing is so important when you sell. For the passive investor who has no time to monitor or speculate, diversify and don't keep all your money in the POSB savings or fixed deposit account as they really earn miserable income for you.

Buy, for example,  $5,000 high quality bonds and keep them for more than 3 years or sell when the recession is over. I have no more interest in bonds but the FTIF-Global Fund seems to be a reasonably high quality investment for the passive investor based on my short research. I just don't spare time for bond research as I have no interest in bond investments. However, for the passive retiree investor, high quality bond investment may be important to ensure that inflation does not shrink the spending power of your savings. Do your research and talk to the financial officer. Successful past historical performance does not guarantee no risk to your capital as the bonds are not guaranteed by banks or the Singapore government. You will lose money if you sell during a recession unlike your savings deposit.

From the above table from the young POSB girl, you can see how I got around 30% profit from buying the FTIF in 2006 and selling in 2009. You add 13%+17%. This is equal to 30% in 3 years. I got back around $1,400 out of $5,000 invested. So, it worked out that I had a return of 28% in simple calculations. I have to thank the POSB for renting me the safe deposit box in 2006 and earning around 9% interest per annum. I would have put the $5,000 in the savings accounts, earning a miserable 0.125% per year!  I recommend my friend, Julia to buy $5,000 of the FTIF as it seems to be a good passive investment for her. She was talking about putting her money in fixed deposits. The interest rate from POSB for people over 55 years is 0.55%. But she never has time to actually do it and now earns 0.15% from her savings account. You need to spend time to research if you want to build wealth yourself. Financial officers may advise but you need to know what risks you will encounter when you are buying into shares and bonds as you will be competing with professional gamblers who can manipulate the markets.   

Toa Payoh Vets
 Clinical Research