Sunday, July 20, 2008

NTUC Flexi-Cash

In one of my previous articles on Money Market Fund (MMF), I made a comparison on some of the funds that you can buy online. I did not include NTUC Flexi-Cash in that comparison, so I thought of writing something about it now.

From the name, you know that Flexi-Cash is offered by NTUC. You may want to read more about Flexi-Cash from their official website. The description sounds too good to be true but in fact there is nothing much to cheer about.

First of all, let me highlight its good points. From the FAQ, its management fee is at 0.25% per annum. Assuming that expense ratio is the same as management fee, the expense ratio of 0.25% per annum is considered very low for a MMF.

On top of that, the other strong point is the minimum death benefit of 105% of total investment amount after first year. It is mentioned that the insurance is given at no extra cost. Is it really true? In the event of death, NTUC will pay the cash value of the investment or the minimum death benefit, whichever higher.

Now I shall I highlight its disadvantageous in points form.
- Minimum investment amount is $5000. That is the reason why they can keep expense ratio lower
- Minimum withdrawal amount is $500
- Must maintain minimum investment balance of $5000
- First year policy fee of $20. So now you know where the cost of insurance comes from. For that amount, you can get a death protection of at least $100K with a term insurance

The minimum amount of $5000 and requirement to pay a policy fee are really a put off for me to consider this fund. MMFs are meant to cater for short term saving needs. Therefore Flexi-Cash does not meet those criteria. Even if you are looking for a long term saving, why do you need to pay for the policy fee if you don’t need to pay with other funds? In my opinion, the policy fee is to cover the insurance portion which is barely adequate.

As for the performance of the fund, again there is nothing spectacular about it. The 12 months to 31 May 2008 annualised return for Flexi-Cash is 2.07% while Lion Global MMF is 2.19%.

In my conclusion, it is not really that flexible as the name of the fund implies. I think you are better off with the other MMFs available online.

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