Question

Hi, can you answer this question in more detail?

Subject: Hong Kong Personal Financial Planning Practice

Q4. A

Monthly investment plan for stocks is getting more popular in Hong Kong. Analyze the characteristics, advantages and disadvantages of such investment plan with examples.

(Words: 600 - Don't direct copy)

Answer 1

The Monthly Stock Investment Plan

When you enroll in a Monthly Stock Investment Plan, you commit to investing a fixed amount each month, and you choose which stocks you would like to purchase with this amount. The bank / broker will allow you to skip the lot size restriction when this happens.

The thing you need to be aware of the most is the fees involved – if you’re investing a small amount each month and paying a fixed fee, the costs can add up dramatically

e.g. investing $1,000 a month with a $50 min. fee means you’re paying 5% in fees each month!

Characteristics

• A Wide Selection of Stocks Over 100 Hong Kong listed stocks and ETF for selection

Stocks available for selection

• Low Investment Amount Monthly investment amount as low as HKD1,000 each month
• Low Handling Charges The handling charge, costs as low as HKD50 per month per security, includes brokerage fee, stamp duty, HKEX trading fee, SFC transaction levy, safe custody fee, securities deposit charge for purchase order and nominee services fees. There is no charge for plan readjustment, or termination

Fee Table

• Direct Debit for Maximum Convenience - Your monthly investment amount will be paid by direct debit for convenience
• Manage Your Investment Plan With Ease - You may capture investment opportunities by selling all or part of your securities at any time through Hang Seng Personal e-Banking, Manned Securities Trading Hotline (2532 3838) or at designated branches
• Dollar Cost Averaging - By using Dollar Cost Averaging investment method, you can buy more shares/units when the price goes down and fewer shares/units when the price goes up with a fixed monthly investment amount. Such investment method enables you to capitalise on the potential returns (if any) of the stock market in medium to long term without having to worry about short-term price fluctuations

Notes:

1. Customers should set up a direct debit authorisation together with plan subscription for subsequent monthly investment payment at designated branches or via Hang Seng Personal e-Banking.

2. After a securities transaction has been executed, the Bank will make available the essential features of the securities transaction as soon as reasonably possible through such means or medium including but not limited to Personal e-Banking, Automated Securities Trading Hotline, Instant Order Confirmation Service or personal call provided by the Bank from time to time and at the Bank's discretion. Customers shall check the essential features of the securities transactions by themselves through such means or medium provided by the Bank.Sale orders of securities are subject to the brokerage fee and the transaction charges charged by third parties such as Transaction Levy, Stamp Duty and Trading fee, etc.

Advantages

1. Affordable

The Hong Kong monthly investment plan for stocks are affordable by the persons. One can buy the top Hong Kong listed stocks and funds as little as HKD1,000 per month.

2. Even out Market Volatility

They use dollar cost averaging with which one can buy shares which is close to their average price over the period and which makes us worry less about market timing.The advantage of "Monthly Stocks Savings Plan" is based on the concept of "Dollar Cost Averaging". You can acquire more shares when the stock price goes down and less shares when the stock price goes up. With this long term investment strategy, you do not have to worry about short term market fluctuations, but with more balanced overall investment effectiveness.

3. Flexible and Convinient

In this type of investment plan, one can increase, decrease or redirect monthly investment and can sell your shares at any time over the period. With this there is potential growth of the shares.In other words, selling Odd Lot Stocks at Market Price with More Flexibility i.e You can sell any stocks maintained in the plan at market price (even if the number of shares is less than one lot) to enjoy a higher return. What's more, you can adjust the monthly contribution amount or the stock portfolio according to your investment needs without handling charges, grasping every investment opportunity with greater flexibility.

4.Low Contribution Amount

According to your own preference, you can invest in selected stocks provided by BOCHK. The minimum monthly contribution is as low as HK$ / RMB500 (For each additional stock, any additional contribution may be made in integral multiples of HK$ / RMB500).

For example:

Maximum number of stock(s) invested	Minimum monthly investment amount
1	HK$ / RMB500
2	HK$ / RMB1,000
3	HK$ / RMB1,500
4	HK$ / RMB2,000

5. Preferential Transaction Fee

A maximum of 20 stocks can be selected in each plan. A transaction fee equivalent to 0.25% of the total monthly contribution amount is charged for each plan. And the minimum charge is HK$ / RMB50 per month (including brokerage fee, stamp duty, transaction levy and transaction charge). You can also enjoy waivers on safe custody and collection fees of shareholder entitlements (e.g. dividend) to save more.

6.Earning Credit Card Gift Points by Making Contribution via Credit Card

Monthly contribution can be made through autopay from your securities settlement account or BOC Credit Card. There is no upper limit on the contribution amount. In addition, you can earn the credit card gift points by settling the contribution payment with BOC Credit Card. The longer the period of consecutive contributions, the higher gift point conversion rate.

Consecutive Month(s) of Contributions	1 to 12 months	13 to 24 months	Over 24 months
Conversion Rate (HK$ / RMB contribution amount: Credit Card Gift Points)	5:1	3:1	1:1
Upper Limit of Gift Points	A maximum of 10,000 BOC Credit Card Gift Points can be earned for each monthly contribution

Disadvantages

Monthly Stock Investment Plans have some very clear disadvantages: the fees can be quite high, your choice of stocks are limited and there's no guidance whatsoever. Low fees, expertly managed, guidance in building a portfolio and an overall great way to start investing.