157 Regular Savings Plan 2.0 (RSP 2.0)

157 Regular Savings Plan 2.0 (RSP 2.0)

RSP 2.0 is the total upgrade of RSP 1.0 and RSP 1.5.

Under RSP 2.0, all monthly top up will be channeled into cost-efficient unit trust investment platform (aka Wrap Account).

Under this cost-efficient platform, investors enjoy lower upfront service fee, and unrestricted free switching. There is an annual wrap fee though.

By using this cost-efficient platform, investors first pay lesser fee to lower his investment cost (faster to make profit). The difference can be as high as 2%-3% depending on funds. Meaning the same fund can be charge different service charge / service fee because of different platform use.

And investors can always use the best funds according to market conditions. Example before this China funds was leading but recently European funds has been rising. Under this cost-efficient platform, investors can choose and invest in the best funds in the market, at NAV price.

However, to achieve the privilege of free switching, investors has to pay a annual fee (Wrap fee). With that, investors need not be bound by a fund company's product only.

Under normal RSP 1.0, agents will not ask investors to take profit. Under RSP 1.5 and RSP 2.0, agent will ask investors to take profit and then re-deploy the redeemed amount into market by doing manual monthly switching.

It is very important to take profit. Market can be very volatile. By taking profit, investors can lock in profit and use it to re-invest again. The benefits of taking profits are:-

1) after long term of monthly top up, the total amount invested is no different to lump sum investment. Any large drop could have a big impact for the investment.

2) by locking profit, investors can use the profit or let profit be invested again, and thus compound the interest. So if market still go up, investors still enjoy new profits.

3) by locking profit, investors can wait for market drop to buy more cheap units.

4) letting a profit investment to become a loss investment is really a painful experience.

5) after locking in profit, investors will be very happy to see market drops. His emotion is totally different than letting whole investment floating with the market. For he knows he will make more profit by capitalizing the market movement, but he must have his first pot of silver (and his first pot of silver is exactly his redeemed profit investment).

So, if you have been investing for a long time, at a substantial amount with profit, you should consider doing your own RSP 2.0. However, if your platform is not switching friendly, then you should think somewhere else. Like I mentioned before, I transfer most of my investments from a very famous unit trust company into Phillip because it is not cost-efficient to do switching there.