Delta Neutral
Delta neutral trading is a sophisticated strategy in options trading that aims to minimise risk by balancing the sensitivity of a portfolio’s value to price movements in the underlying asset. This approach allows traders to focus on other factors, such as time decay and volatility, rather than the asset’s price direction. This comprehensive guide will delve into delta neutrality, its advantages, challenges, and practical applications, providing a solid foundation for beginners.
Table of Contents
What is Delta Neutral?
Delta neutral refers to a portfolio strategy in which the overall delta, the measure of how much an option’s price changes concerning a US$1 change in the underlying asset’s price, is zero. A delta-neutral portfolio is constructed so that small price movements in the underlying asset do not significantly affect its overall value. This neutrality is achieved by balancing positions with positive and negative deltas.
For example:
- A long stock position has a delta of +1 per share.
- A short call option might have a delta of -0.5.
By combining these positions appropriately, traders can offset the directional risks associated with price changes in the underlying asset.
Understanding Delta Neutral
Delta in Options Trading:
Delta is one of the “Greeks” used in options trading to measure risk. It represents how much an option’s price is expected to change for every US$1 change in the underlying asset’s price. For instance:
- A call option might have a delta of +0.5, meaning its price will rise by US$0.50 if the underlying asset increases by US$1.
- Conversely, a put option might have a delta of -0.5, indicating its price will decrease by US$0.50 if the underlying asset increases by US$1.
Achieving Delta Neutrality:
To achieve a delta-neutral position, traders combine options and/or underlying assets so that the total delta equals zero. This can involve:
- Buying and selling options with opposing deltas.
- Combining options with positions in the underlying asset.
For example:
- A trader holds 100 shares of a stock (delta = +100).
- To neutralise this, they could sell two call options with a delta of -0.5 each (total delta = -100).
The result is a portfolio that remains unaffected by small price movements in the stock.
Advantages of Delta Neutral Trading
Delta neutral strategies offer several benefits:
- Risk Mitigation:
By balancing positive and negative deltas, traders can reduce their exposure to directional price movements in the underlying asset. This hedging technique allows for a more controlled risk environment.
- Profit from Volatility:
Delta-neutral positions enable traders to focus on profiting from volatility or time decay (theta) changes, rather than relying on market direction. This approach can be particularly advantageous in volatile markets.
- Flexibility:
These strategies can be adjusted dynamically as market conditions change, making them adaptable to various trading environments. Traders can modify their positions to maintain delta neutrality as needed.
- Market Inefficiency Exploitation:
Traders can take advantage of pricing discrepancies between options and their underlying assets, potentially leading to arbitrage opportunities.
Challenges and Risks in Delta Neutral Trading
While delta-neutral trading offers numerous advantages, it also comes with challenges:
- Frequent Adjustments:
Maintaining delta neutrality requires constant monitoring and rebalancing as market conditions evolve (e.g., changes in volatility or time decay). This process, known as dynamic delta hedging, can be time-consuming and complex.
- Transaction Costs:
Frequent adjustments can lead to higher trading fees, which may erode profits. It’s essential to consider these costs when implementing delta-neutral strategies.
- Complexity:
Constructing and maintaining a delta-neutral portfolio requires a deep understanding of options pricing and risk management. This complexity can be a barrier for less experienced traders.
- Residual Risks:
While small price movements are neutralised, significant market shifts or unexpected events can still impact the portfolio. Traders must remain vigilant to such possibilities.
Examples of Delta Neutral Strategies
Here are some practical examples of delta-neutral strategies:
Example 1: Hedging with Options
- A trader owns 300 shares of Stock XYZ (delta = +300).
- To achieve neutrality, they sell three call options with a delta of -0.3 each (total delta = -300).
- The net portfolio delta becomes zero, protecting against small price changes.
Example 2: Iron Condor Strategy
An iron condor involves selling both call and put options at different strike prices while buying further out-of-the-money options for protection:
- Sell one call option (delta = +0.2) and one put option (delta = -0.2).
- Buy another call (delta = -0.1) and put (delta = +0.1) further out-of-the-money.
- The net delta equals zero, allowing profits from low volatility scenarios.
Example 3: Calendar Spread
A trader buys a long-term call option and sells a short-term call option with the same strike price:
- If the deltas are equal but opposite, the position becomes neutral.
- Profits arise from time decay differences between the two options.
Frequently Asked Questions
To achieve delta neutrality, follow these steps:
- Calculate Total Delta: Determine the combined delta of your portfolio, including stocks and options.
- Offset with Opposing Deltas: Add positions with opposite delta values to bring the net delta to zero.
- Adjust as Needed: Monitor the position regularly and rebalance as market conditions change.
Delta neutrality can be created using:
- Options alone (e.g., selling calls and buying puts).
- A mix of options and underlying assets (e.g., owning stock while selling futures contracts).
Traders use these strategies to:
- Hedge against price fluctuations.
- Profit from volatility or time decay.
- Reduce directional market risks.
Yes, but effectiveness varies:
- In volatile markets, traders profit from changes in implied volatility.
- In stable markets, they earn from premium collection (e.g., iron condors).
- Straddles & Strangles: Buying or selling calls and puts at different strike prices.
- Iron Condors: Selling both calls and puts while using protective options.
- Calendar Spreads: Using options with different expiration dates.
Related Terms
- Protective Put
- Exotic Options
- Moneyness
- Extrinsic Value
- Cash Secured Put
- Naked Put
- Call Options
- American Options
- Debit Spread
- Open interest
- Short Call
- Rho
- Put Option
- Premium
- Out of the money
- Protective Put
- Exotic Options
- Moneyness
- Extrinsic Value
- Cash Secured Put
- Naked Put
- Call Options
- American Options
- Debit Spread
- Open interest
- Short Call
- Rho
- Put Option
- Premium
- Out of the money
- Option Chain
- Long Put
- Long Call
- In the money
- Implied volatility
- Bull Put Spread
- Gamma
- Expiration date
- Exercise
- European Option
- Delta
- Covered Put
- Covered Call
- Call Option
- Bear Put Spread
- Bear Call Spread
- American Option
- Strangle
- Short Put
- Vega
- Underlying
- Time Value
- Time Decay
- Theta
- Strike Price
- Straddle
- Intrinsic Value
Most Popular Terms
Other Terms
- Gamma Scalping
- Funding Ratio
- Free-Float Methodology
- Foreign Direct Investment (FDI)
- Floating Dividend Rate
- Flight to Quality
- Real Return
- Perpetual Bond
- Option Adjusted Spread (OAS)
- Non-Diversifiable Risk
- Merger Arbitrage
- Liability-Driven Investment (LDI)
- Income Bonds
- Guaranteed Investment Contract (GIC)
- Flash Crash
- Gamma Scalping
- Funding Ratio
- Free-Float Methodology
- Foreign Direct Investment (FDI)
- Floating Dividend Rate
- Flight to Quality
- Real Return
- Perpetual Bond
- Option Adjusted Spread (OAS)
- Non-Diversifiable Risk
- Merger Arbitrage
- Liability-Driven Investment (LDI)
- Income Bonds
- Guaranteed Investment Contract (GIC)
- Flash Crash
- Equity Carve-Outs
- Cost of Equity
- Cost Basis
- Deferred Annuity
- Cash-on-Cash Return
- Earning Surprise
- Capital Adequacy Ratio (CAR)
- Bubble
- Beta Risk
- Bear Spread
- Asset Play
- Accrued Market Discount
- Ladder Strategy
- Junk Status
- Intrinsic Value of Stock
- Interest-Only Bonds (IO)
- Interest Coverage Ratio
- Inflation Hedge
- Industry Groups
- Incremental Yield
- Industrial Bonds
- Income Statement
- Holding Period Return
- Historical Volatility (HV)
- Hedge Effectiveness
- Flat Yield Curve
- Fallen Angel
- Execution Risk
- Exchange-Traded Notes
- Event-Driven Strategy
- Eurodollar Bonds
- Enhanced Index Fund
- Embedded Options
- EBITDA Margin
- Dynamic Asset Allocation
Know More about
Tools/Educational Resources
Markets Offered by POEMS
Read the Latest Market Journal
Patience Pays Off: Mastering the Wheel Options Strategy
Introduction In today’s dynamic economic landscape, investors would miss out on profit-taking windows as a result of heightened volatility. In reality, it may also take a while for investors to see a return on their investment in a safer stock, while faster-paced alternatives like buying short-term options may be too risky. That’s where the Wheel Strategy comes in — a patient, structured approach that helps you generate consistent income while taking advantage of market movements, without the stress of chasing quick wins. What is the Wheel Strategy? The Wheel Strategy combines two option strategies: the cash-secured put and the covered call, and works in a cycle as follows: You sell a cash-secured put to collect a premium while waiting to buy a stock at your chosen price, potentially. If the cash-secured put is assigned, you now own the stock at that price. From there, you switch to selling a covered call, earning an additional premium while holding the shares. If the shares get called away, you return to step one and repeat the cycle. This approach is often described as “slow but steady.” Instead of chasing big, risky wins, you’re consistently generating income from option premiums. As such, it is particularly suited for investors who want a steady cash flow, lower stress compared to large speculative trades, and a disciplined, rules-based strategy that doesn’t require constant monitoring. Think of it as a patient way to let the market work for you over time, while still giving yourself opportunities to accumulate shares or take profits depending on how the stock moves. If you’d like a deeper understanding of cash-secured puts and covered calls, be sure to check out our earlier market journals, where we break down these strategies in detail. Why Patience Matters Each cycle of the wheel takes a certain amount of time to complete. Essentially, you are earning “rent” from your cash or shares. By continuously collecting option premiums, you create a steady income stream while tailoring your strategy to prevailing market conditions. This approach can provide consistent gains over the long run. The strategy works best when applied to stable, highly liquid, and fundamentally strong stocks, where the risks of sudden price shocks are lower and premium collection is more reliable. Risks to Consider ● Underlying Stock Risk Downside risk arises from a decline in the underlying stock price. This means the investor bears the same downside exposure as directly holding the stock — in the worst-case scenario, the stock price could fall to zero, resulting in a total loss of the investment. However, this risk can be mitigated by investing in stable, fundamentally strong companies. Blue-chip stocks, in particular, are less prone to sharp price declines, thereby helping to reduce downside exposure. ● Opportunity Cost The Wheel Strategy also carries opportunity cost. If the stock rises significantly above the strike price, your profit is capped. With cash-secured puts and covered calls, the maximum gain is limited to the option premium received and, in the case of covered calls, the stock appreciation up to the strike price. This differs from simply buying and holding the stock, where potential gains are theoretically unlimited if the stock continues to rally. While option strategies provide steady income and some downside cushioning, they do so at the expense of unlimited long-term upside. Who This Strategy Is For As the name suggests, the Wheel Strategy requires patience. It often involves eventually owning the underlying stock — either at expiration or earlier if the option buyer exercises their rights. This strategy is especially suited for investors who are comfortable holding stock long term, since assignment is always a possibility. The Wheel is designed to provide consistent cash flow and can even lower the average cost of entry into a stock. In times of macroeconomic uncertainty, when market direction can be harder to predict, the Wheel Strategy offers a disciplined approach: it allows investors to stay engaged in the market, collect income, and potentially acquire quality stocks at attractive prices, while managing risk more systematically. Conclusion The Wheel Strategy serves as a reminder that patience can pay off in investing. Instead of chasing fast-moving trades or hoping for sudden windfalls, you’re steadily collecting premiums, small hits that add up over time. It’s not about timing the market perfectly or predicting every move. It’s about having the discipline to follow a structured process, staying comfortable with owning quality stocks, and letting time work in your favour. Ready to start? Explore our beginner-friendly options platform today, or if you would like to dive deeper into other strategies, check out our detailed guide on Cash-Secured Puts. For more information on trading the US markets through POEMS, visit our website or contact our Night Desk representatives at 6531 1225 (available from 2 PM onwards). Don’t wait—register your account today and take the first step towards accessing these exciting markets! Open an Account Now! Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Summary Factor-based (often called smart-beta) ETFs use transparent, rule-based indexes to tilt exposure toward specific investment attributes (factors) such as value, quality, momentum, dividend yield, growth, or low volatility. They offer a middle ground between purely passive market-cap indexing and fully active management, adapting ETF mechanisms with a systematic, repeatable focus or priority aimed at improving risk-adjusted returns or reducing volatility. Examples include dividend or quality ETFs in Singapore (e.g., high-yield Singapore ETFs such as Phillip Sing Income ETF (OVQ)) and US factor ETFs like iShares MSCI USA Momentum Factor ETF (MTUM) and VanEck MSCI International Value ETF (VLUE). 1. What is a Factor-Based ETF? Simple Definition A factor ETF tracks an index that explicitly selects and weights stocks according to one or more measurable characteristics or “factors” — e.g., companies with high dividend yields, superior profitability, or recent price momentum. Why “Smart-Beta”? The term smart-beta highlights that these ETFs use “smarter” index construction rules than simple market-cap weighting. They are still index-based (rule-driven), providing transparency and low operational subjectivity, but differ from a plain traditional index by seeking outcomes such as higher income, lower volatility, or exposure to value/growth dynamics. 2. Common Factors and What They Capture Core Factors for Consideration Value: Stocks that appear cheap on metrics like price-to-earnings or price-to-book. o Favours cyclicals, financials at times. Growth: Companies with strong sales/earnings growth expectations. o Favours tech and disruptive firms. Momentum: Stocks that have performed well recently (trend-following). o Can capture strong performers but may reverse in mean-reverting markets. Quality: Firms with stable earnings, high returns on equity, low leverage. o Typically less volatile in downturns. Dividend / Income: Companies with higher or growing dividends. oAttractive for yield seekers and income investors. Low Volatility: Stocks with lower historical price swings. oUseful for defensive allocations. Size: Small-cap tilt. Factor Behaviour It is important to understand how each factor behaves differently across cycles. For example, value often outperforms after a market trough or rotation, momentum performs well in trending markets, and low-volatility may protect capital in downturns. Investors can use factor diversification by combining different factor exposures to smooth returns. 3. How Factor Indexes Are Constructed & Reviewed Selection & Scoring Universe: Start with a market universe (e.g., S&P 500 or Singapore stocks). Scoring: Each stock receives a score based on factor metrics (e.g., yield, ROE, price momentum). Ranking & Cut-Off: Stocks are ranked; the top N (quantity) or top X% (percentage) are included. Weighting: Stocks can be equally weighted, factor-weighted, or follow a modified market-cap rule. Rebalancing Schedule Most factor indexes rebalance on a scheduled basis (quarterly, semi-annually). This maintains the factor tilt but creates potentially higher turnover compared to passive traditional indexes. Higher turnover can increase transaction costs and taxable events (for taxable accounts), leading to a higher expense ratio due to the operating cost of rebalancing. Thus, investors should check rebalancing frequency and expected impact of ETF expense ratios. Example: Income / Quality Index (Singapore) Method: Rank by dividend yield, financial health and business quality; pick top 30 names. Result: A high-income, quality-tilted basket (e.g., Phillip SING Income ETF methodology). 4. Differences Between Factor Selection vs Traditional Index Selection Traditional Market-Cap Index Selection: All eligible stocks included; weight proportional to market capitalization. Outcome: Emphasises largest companies; automatically increases weight as a stock’s price rises (momentum bias). Factor Index Selection: Stocks selected by factor scores (value, dividend, quality). Outcome: Overweights companies with desired traits even if they are not the biggest by market cap; can intentionally underweight or exclude certain sectors. Practical Consequence Factor indices purposely deviate from market-cap benchmarks to pursue specific performance characteristics — this is why their returns can diverge significantly from plain indices. 5. Factor ETFs: Practical Uses and Examples Uses in a Portfolio Return enhancement: E.g., value or momentum factor for potential excess returns. Risk management: Low-volatility or quality factors to reduce drawdowns. Income solutions: Dividend factor ETFs for yield-focused allocations. Diversification: Combining factors with market-cap exposure to potentially smooth returns across cycles. Examples (US & Singapore) Momentum (US): : MTUM — momentum tilt. Value (US): VLUE — value tilt. Dividend (US):: VYM or SDY — dividend-focused indices. Singapore Income / Quality (SGX): Phillip SING Income ETF (OVQ) — high income + quality selection. Thematic overlaps: Growth/AI exposures can be achieved via growth factor ETFs or through thematic ETFs that incorporate factor rules. Source: S&P Dow Jones Indices. As at 30 September 2024. Based on S&P 500 Index and relevant factor indices. Past performance is not indicative of future returns. You cannot invest directly in an index. Index performance does not take into account any ETF fees and costs. 6. What to Look for When Selecting Factor ETFs Key Selection Criteria Clear methodology: Read the index rulebook—how are factors measured and weights assigned? Rebalancing frequency and turnover: Higher turnover means higher trading costs and potential tax implications. Historical factor behaviour: Understand cycle sensitivity (e.g., value vs. growth). Fees: Factor ETFs generally cost more than plain market-cap ETFs but less than fully active funds. Compare expected net-of-fee outcomes. Liquidity & AUM: Sufficient assets under management and trading volume reduce bid/ask spreads and tracking uncertainty. Overlap: Check overlap with existing holdings—factor ETFs can unintentionally concentrate similar stocks across multiple funds. 7. Key Takeaways — Factor ETFs Key Selection Criteria Smart-beta blends rules and targeting: Factor ETFs offer targeted tilts while preserving index transparency and systematic discipline. Know the factor: Different factors perform in different environments; combine factors to diversify factor risk. Mind the mechanics: Rebalancing frequency, turnover, and fees materially affect outcomes—read the methodology.. Use factors strategically:Consider factors as building blocks — e.g., combine a core market-cap ETF with a dividend factor ETF and a quality ETF for balanced exposure. Call to Action Consider adding selected factor ETFs to your watchlist and reviewing how they perform to observe if any can play a role in your investment portfolio. Some examples mentioned in this article are: OVQ (SGX — Singapore income/quality) MTUM (US — momentum) Mind the mechanics Rebalancing frequency, turnover, and fees materially affect outcomes—read the methodology.. VLUE (US — value) VYM / SDY (US — dividend focus) As always, align your ETF picks with your preferred investment goals and strategy. Review choices based on total portfolio exposure to avoid unintentionally becoming overexposed to one or a few counters.. Stay tuned for our next feature, where we explore different aspects of ETF categories in greater detail. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore. CFD Disclaimer This promotion is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information. Investments are subject to investment risks. The risk of loss in leveraged trading can be substantial. You may sustain losses in excess of your initial funds and may be called upon to deposit additional margin funds at short notice. If the required funds are not provided within the prescribed time, your positions may be liquidated. The resulting deficits in your account are subject to penalty charges. The value of investments denominated in foreign currencies may diminish or increase due to changes in the rates of exchange. You should also be aware of the commissions and finance costs involved in trading leveraged products. This product may not be suitable for clients whose investment objective is preservation of capital and/or whose risk tolerance is low. Clients are advised to understand the nature and risks involved in margin trading. You may wish to obtain advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase any of the investment products mentioned herein. In the event that you choose not to obtain advice from a qualified financial adviser, you should assess and consider whether the investment product is suitable for you before proceeding to invest and we do not offer any advice in this regard unless mandated to do so by way of a separate engagement. You are advised to read the trading account Terms & Conditions and Risk Disclosure Statement (available online at https://www.poems.com.sg/) before trading in this product.
An Active ETF is an exchange-traded fund with a portfolio that is actively managed by investment professionals. Unlike passive ETFs that simply mirror a stock index, investment in active ETFs involve ongoing buy and sell decisions aimed at achieving a specific goal — whether that is outperformance, generating income, or capturing exposure to a particular theme. How Active ETFs differ from Passive ETFs Objective: Passive ETFs aim to replicate an index (e.g., S&P 500). Active ETFs aim to outperform a benchmark or achieve a specific outcome (e.g. high income or targeted growth). Management: Passive ETFs follow rules automatically while active ETFs rely on human judgement, quant models, or a combination of both. Costs: Active ETFs usually charge higher management fees because of the research, trading, and portfolio management involved. Transparency & Holdings: Passive ETFs typically disclose holdings frequently and are predictable. Some active ETFs may disclose less often to protect proprietary strategies, although many still provide daily updates. 2. Why Demand for Active ETFs Is Growing Access to differentiated strategies Active ETFs open the door for retail investors to tap into strategies once reserved for mutual funds or large institutions. These can include thematic bets on artificial intelligence, enhanced income strategies, or opportunities in niche and tightly regulated markets. ETF wrapper benefits With active ETFs, investors enjoy the best of both worlds: the expertise of an active manager combined with the advantages of the ETF structure. This includes intraday liquidity (they trade like a stock), potential tax efficiencies, and lower minimum investment amounts compared with some mutual funds. Innovation and regulation Recent regulatory developments and improvements in ETF infrastructure have empowered asset managers to launch a wider variety of active strategies in ETF form. This growing menu of options caters to investors’ appetite for more tailored outcomes, driving innovation across the industry. 3. Common Active ETF Strategies (with Examples) Fund managers launch active ETFs using different strategies to appeal to investors with specific goals or preferences. Some of the most common approaches include: A. Thematic & Growth Active ETFs Goal: Capture long-term growth by investing in themes such as Artificial Intelligence (AI), robotics, or disruptive technologies. Example (US): ARK Innovation (BATS: ARKK) — actively selects disruptive growth companies Example (SG): Lion-Nomura Japan Active ETF (SGX: JJJ) — actively selects Japanese stocks with AI-assisted processes B. Income & Option-Enhanced ETFs Goal: Deliver steady income by combining dividends with strategies like covered calls or option overlays. Example (US): JPMorgan Equity Premium Income ETF - (NYSEARCA: JEPI) uses options to enhance yield C. Sector / Regional Active ETFs Goal: Leverage managers’ best ideas in a specific region or sector (e.g. Japan, ASEAN, healthcare) Example (SG): Active Japan ETF JJJ (SGX: JJJ) - An Active ETF where the manager selects 50–100 stocks tailored to current market opportunities 4. Benefits and Risks: What Investors Should Consider Benefits Potential to beat benchmarks: Active managers can exploit inefficiencies, allocate tactically, and lean into high-conviction opportunities Customisation: Investors can express specific views — such as AI adoption or Japan’s recovery — through a single ETF Operational convenience: Active ETFs trade on exchanges like stocks, offer intraday liquidity, and usually have lower minimums than traditional mutual funds Risks & Drawbacks Manager risk: Returns depend heavily on the manager’s skill and process. Past performance is no guarantee of future success Higher fees: Active strategies are generally more expensive, and over time, higher costs can eat into returns Transparency tradeoffs: Some active ETFs limit disclosure to protect proprietary models, which can reduce clarity for investors Underperformance odds: Statistically, many active funds fail to outperform comparable passive benchmarks over time 5. How Singapore Investors Might Use Active ETFs Portfolio Roles Satellite allocation: Use active ETFs as satellites around a core passive portfolio (e.g., 5–15% tactical exposure to AI or income) Access niche markets: Gain exposure to overseas or tightly regulated markets via locally listed active ETFs without complex account setups Income overlay: Replace or complement fixed income with option-enhanced active ETFs for higher distributed yield Tips for ETF selection Understand the manager’s process and look for a track record in comparable mandates Check fund fees, turnover, and tax considerations Limit allocation to active ETFs to a level consistent with your conviction and risk tolerance (e.g., 5–20% of portfolio) Review holdings / performance regularly and watch for changes in strategy or personnel 6. Key Takeaways — Active ETFs Active ETFs blend professional management with ETF convenience: intraday trading, tax efficiency, and low operational friction. They can deliver differentiated outcomes — alpha, income, or niche themes — but they demand confidence in the manager and come with higher costs. They are best used as satellite positions, complementing a low-cost passive core. Due diligence is essential: read the prospectus, examine the manager’s process, and evaluate costs and track record. Conclusion Active ETFs are reshaping the investment landscape by combining the expertise of active management with the convenience of the ETF structure. They provide opportunities for outperformance, targeted exposure, and innovative income strategies, but they also come with higher costs and the risk of underperformance. For Singapore investors, active ETFs can serve as useful satellite allocations alongside a low-cost passive core, offering access to niche markets, thematic opportunities, or enhanced income. Success, however, hinges on careful manager selection, disciplined allocation, and regular review. As the ETF market continues to evolve, active ETFs are likely to play a growing role in portfolios — not as replacements for passive funds, but as complementary tools to help investors navigate a more complex investment environment. Stay tuned for our next feature, where we explore factor-based ETFs and how they fit into a modern portfolio. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore. CFD Disclaimer This promotion is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information. Investments are subject to investment risks. The risk of loss in leveraged trading can be substantial. You may sustain losses in excess of your initial funds and may be called upon to deposit additional margin funds at short notice. If the required funds are not provided within the prescribed time, your positions may be liquidated. The resulting deficits in your account are subject to penalty charges. The value of investments denominated in foreign currencies may diminish or increase due to changes in the rates of exchange. You should also be aware of the commissions and finance costs involved in trading leveraged products. This product may not be suitable for clients whose investment objective is preservation of capital and/or whose risk tolerance is low. Clients are advised to understand the nature and risks involved in margin trading. You may wish to obtain advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase any of the investment products mentioned herein. In the event that you choose not to obtain advice from a qualified financial adviser, you should assess and consider whether the investment product is suitable for you before proceeding to invest and we do not offer any advice in this regard unless mandated to do so by way of a separate engagement. You are advised to read the trading account Terms & Conditions and Risk Disclosure Statement (available online at https://www.poems.com.sg/) before trading in this product.
100% Spenders in Singapore: How to Break Free from Living Paycheck to Paycheck
In 2024, 78.3 per cent of companies in Singapore granted wage increases as compared to 65.3 per cent in 2023, according to the Ministry of Manpower’s Report on Wage Practices 2024 1. Despite this growth in earnings, there are still people who end up with no savings every month, specifically 29%, according to a survey done by Sun Life Singapore 2. These are what I call “100% spenders”; every dollar that comes in goes straight out, leaving no savings, let alone investments. On the surface, they may look financially comfortable, but in reality, they are only one emergency away from financial stress. When asked about their lack of savings, familiar replies surface: “Life is expensive in Singapore” or “I’ll save when I earn more.” But the real reason is not just the cost of living; it is also how easy spending has become, combined with a culture that encourages greater consumption as incomes rise. The Ease of Spending Take PayNow, for example. It has become second nature to users to scan a QR code and pay within seconds. A recent study found that 68% of Gen Z in Singapore prefer PayNow as their main mode of payment 3. This convenience is good for efficiency, but it also makes spending too easy. When spending cash, you physically see the notes leaving your wallet; a more conscious action which reminds you of your accumulative expenses over time. With PayNow and contactless credit cards, no physical cash leaves your hands, making it easy to lose track of how much you are actually spending. The same applies to installment plans. Platforms like Atome have become extremely popular, especially among younger consumers. Research shows that 77% of Gen Z in Singapore have used Buy Now, Pay Later (BNPL) services, compared with fewer than half of millennials and only 13% of boomers. 4 Atome alone has over 1.3 million registered users, mostly aged between 21 and 45. 5 It is not uncommon to see young clients juggling four or five instalments at once. Each one is small, perhaps a few hundred dollars for clothes or gadgets, but together they consume a large portion of monthly cash flow. Debt becomes normal before savings have a chance to take root. Lifestyle and Culture Technology is only part of the story; the bigger driver is lifestyle inflation and social pressure. As income rises, so do expectations. What was once a luxury — dining out, travel, or premium subscriptions — quickly becomes a necessity. Social media amplifies this, making conspicuous consumption part of everyday life, fueling consumers’ urge to “keep up”. The reality is that most adult Singaporeans understand the basics of savings, having been taught the mechanics of compulsory savings under the CPF scheme. The issue is not financial literacy but the gap between knowledge and action. It is less about what people know and more about taking responsibility for putting that knowledge into practice. Building Systems That Work Discipline and will power rarely sustain long-term financial change. What works far better is creating a system that makes saving automatic, much like CPF does. Create a personal CPF-like savings or investment account. As soon as your salary is credited, arrange for a fixed portion, usually 15 to 25 per cent, to be automatically deposited into this separate account. Treat it as untouchable. Over time, it will grow into an emergency fund, long-term savings, or investment capital. Reframe instalments. If you are comfortable committing S$100 a month to fashion or gadgets, why not redirect that same amount into a savings plan or a regular investment? When used wisely, instalments for regular savings can build assets, not debts. Manage lifestyle inflation. Rather than upgrading your lifestyle every time income increases, tie those upgrades to net-worth milestones. This helps to ensure lifestyle growth does not outpace wealth growth. The Results With systems in place, change often happens naturally. People who once struggled to save may find their balances growing steadily. Those who claimed “I just can’t save” realise they can, because the system does it for them. This is not about cutting out joy or living with harsh restrictions; it is about structuring finances so that both spending and saving are intentional. By automating positive habits, the cycle of being a “100% spender” can finally be broken. Final Thoughts In Singapore, spending has never been easier. With modern technology, every temptation is just a tap away. But while technology and culture encourage us to consume, only responsibility and structure can create long-term security. The key is to build systems that make saving and investing a habit, not a choice. That is how “100% spenders” transform into wealth builders — and achieve financial freedom. Contributor: Joshua Lim Wealth Manager Phillip Securities Pte Ltd (A member of PhillipCapital) https://bit.ly/TTPjoshualim Appendix: [1] https://www.ntuc.org.sg/uportal/news/Nominal-and-real-wages-grew-in-2024-but-are-expected-to-taper-in-2025/ [2] https://finance.yahoo.com/news/large-part-singapore-unprepared-retirement-123057707.html [3] https://www.xero.com/us/media-releases/digital-payment-trends-singapore-gen-z-leading-shift/?utm_source=chatgpt.com [4] https://www.channelnewsasia.com/today/big-read/buy-now-pay-later-debt-credit-4846131?utm_source=chatgpt.com [5] https://www.magzter.com/stories/newspaper/The-Straits-Times/YOUTH-IN-SINGAPORE-BUYING-INTO-BUY-NOW-PAY-LATER-SERVICES-REPORT?srsltid=AfmBOor-Ell17DenCu69OwzKn5QiL0V8nczkM5cCFGoKuiUwhSLZ58tY&utm_source=chatgpt.com Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Recognising Biases in Investing and Tips to Avoid Them
Common biases like overconfidence, herd mentality, and loss aversion influence both risk assessment and decision-making. Know the emotional and behavioral biases in investing. In investing, the biggest challenge is often not the market but our own minds. Emotions, habits, and common mental shortcuts can quietly steer decisions in the wrong direction. A Charles Schwab survey found that over 50% of retail investors make choices purely because of the fear of missing out (FOMO). Other influences such as confirmation bias, overconfidence, and the bandwagon effect can cloud judgment and lead to poor outcomes. But once you’re aware of these traps, you can take steps to avoid them and make investment decisions that truly work toward your financial goals. What Is Behavioural Bias in Investing? Behavioural biases are predictable psychological patterns in thinking that lead us away from logical, fact-based decision-making. For example, you hear that investors are rushing into a certain tech stock touted as "the next big thing". You purchase the stock at a premium without analysing the stock in detail. If the decision plays out in your favour, this flawed reasoning feels justified, which may encourage bigger mistakes in the future. If the stock falls, you realise that you were merely jumping on the bandwagon. 5 Common Investor Biases (and How They Can Hurt Your Portfolio) Herding - Chasing Hot Stock Herding happens when investors mimic the actions of others, assuming the crowd possesses superior information or due to a lack of confidence in their own analysis. This often results in chasing trends at the last minute, after most of the profit has been realised. Confirmation Bias Confirmation bias occurs when you consciously look for information that confirms your existing beliefs but dismiss evidence that proves the contrary. For instance, if you believe a technology company is a great investment option, you might only read positive articles and ignore any negative news about that company. Loss Aversion Loss aversion makes investors hold onto losing stocks longer than they ought to, in the hope of a recovery. The pain of a loss feels greater than the joy of an equivalent gain, causing poor decisions and prolonged losses. Overconfidence Overconfident investors overestimate their abilities and knowledge, believing they can outpace the market. This often leads to excessive trading, under-diversification, or unnecessary risks. Irrelevant Price Anchoring Anchoring bias occurs when investors become obsessed with certain prices, such as the previous high of a stock or the price they paid for, and makes irrationally buy or sell decisions consequently. Strategies to Mitigate Behavioural Biases Even though these behavioural biases can affect your investing strategy and reduce potential returns , there are ways to mitigate them. Do Your Research: Carry out fundamental and technical analysis before investing in a stock. This analysis helps you assess risks and returns objectively and choose the right stocks for your portfolio. Be Disciplined: Be it systematic investment, setting stop-loss levels, or asset allocation, discipline takes emotion out ofdecision-making and helps you stay consistent. How Phillip SMART Portfolio Can Help You Invest Bias-Free The Phillip SMART Portfolio is built to take emotion and bias out of investing: Cyborg Methodology – An algorithm processes over 1,000 data points daily, reducing reliance on emotions on trends, while experienced managers add market insight. Automated Rebalancing – Keeps your portfolio on track, avoiding panic selling, herding behaviour or chasing rallies. Professional Oversight – Experts manage your portfolio using a disciplined, research-based approach, countering overconfidence and confirmation bias. Low Entry Barrier – Start from just S$300, making it easier to begin investing steadily, reducing loss aversion and fear of entering the market. Customised Portfolios – Choose from Income, Growth, or US Equity profiles to match your goals and risk tolerance, preventing irrational anchoring to irrelevant benchmarks. Find out more about SMART Portfolio : https://smart.poems.com.sg/ Conclusion Behavioural biases are an inseparable part of the human psyche and making decisions that are completely free from these biases is often easier said than done. However, by developing a rational and focused approach, investors can avoid the pitfalls of these biases. Alternatively, you can also leverage the Philip SMART Portfolio that uses a data-driven strategy to grow your corpus and secure your future. Disclaimer These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.
What is Money Dysmorphia and How to Overcome it?
Money dysmorphia happens when the way you feel about your finances doesn’t match the reality of your situation. It’s not simply the occasional anxiety we all experience about money; it’s a persistent, distorted perception that can affect how you live, spend, and save. You might have a steady income, healthy savings, and no debt, yet still feel as though you’re financially insecure or “behind” compared to others. Over time, this mindset can lead to spending (or saving) habits that aren’t in your best interest. What Are the Common Symptoms of Money Dysmorphia? A leading cause of money dysmorphia is social comparison, particularly online, which makes you question your success even when you are doing well. Here are some common signs that you may have money dysmorphia: Repeatedly thinking that you do not have enough money Stressing out over small things despite having sufficient funds Unendingly comparing your earnings/savings with others Avoiding checking your bank account due to fear Always imagining worst-case financial scenarios Worrying about money when you don’t need to Continuously seeking more ways to increase income Avoiding shopping or making purchases altogether Experiencing intense shame or guilt after buying anything Frequently maxing out the limit of your credit cards How to Overcome Money Dysmorphia? Research shows that 41% of millennials and 43% of Gen Z currently experience money dysmorphia. While there is no way to entirely prevent this insecurity and dysmorphia , here are the tips you can follow to overcome money dysmorphia: 1. Review and Track Your Budget Understanding your financial situation is one of the best ways to overcome money dysmorphia. Track your income, expenses, savings, and goals. Once you look at the numbers clearly, it's simpler to ground your emotions in facts. You can do this through a simple spreadsheet or budgeting apps. The more often you check in, the more you'll feel like you're taking control. 2. Reframe Your Perceptions about Money Your financial objectives should be shaped by your personal objectives. Not by social media or peer comparisons. Reflect on your actual circumstances and the root of your discomfort. Not being content with your current financial situation is justifiable. However, if you are consistently saving, on track with your obligations, and able to treat yourself occasionally, your fears may not be justified. 3. Make Smart Financial Choices Don't let fear or external pressure influence your financial decisions. Take time to plan, learn, and know where your money is heading. It's okay to spend and to save but ensure that your decisions are influenced by your goals and not anxiety. Make Your Money Work for You with SMART Park Another practical way to overcome money dysmorphia is to invest your money for growth. This is where PhilipCapital SMART Park can help. As an Excess Funds Management Facility that automatically invests your idle cash into money market funds, SMART Park avails the following key benefits: No lock-in period No admininstration fee No sales charge Easy online transfer and withdrawal Learn more about SMART Park here Conclusion Money dysmorphia can cloud your judgment and hold you back from enjoying the financial stability you’ve worked hard for. You can overcome it by tracking your budget and changing your perceptions, aligning your financial reality with your perception. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.
The Employer’s Guide to Domestic Helper Insurance
Domestic Helper insurance may appear to be just another compliance task for employers in Singapore, but in reality, it plays a critical role in protecting both the employer and the domestic helper. The right domestic helper insurance plan could protect you from unforeseen costs and ensure your helper is well cared for in times of need. With the enhancements to coverage requirements effective from 1 July 2025, protection is now stronger and fairer. Employers willing to invest a little more can often secure a policy that rivals local hospitalisation plans. Hence, there’s now a greater need for employers to understand what they are purchasing and how to choose a plan that truly meets their household’s needs, instead of just fulfilling legal obligations. 1. What is Domestic Helper Insurance? Domestic Helper insurance (also known as Maid or Migrant Domestic Worker (MDW) Insurance) is a mandatory policy that covers medical, accident, and liability risks associated with hiring a helper. Under Singapore’s Ministry of Manpower (MOM) regulations, every employer must purchase insurance before the helper commences work. Domestic Helper Insurance protects both the employer (against financial liability) and the domestic helper (through accident and health coverage). Without it, employers may bear the full cost of unexpected medical bills, repatriation, or third-party liability. MOM’s Mandatory Requirements: Medical Insurance: At least S$60,000/year (covering inpatient care & day surgery) Personal Accident Coverage: At least S$60,000 in the event of accidental death or total permanent disability Security Bond[1]: A S$5,000 bond for non-Malaysian MDWs MOM’s Rules: Insurance must be in place before the helper commences work or before the renewal of work permit Employers who fail to do so may face penalties, revocation of work permits, and blacklisting 2. Why is Domestic Helper Insurance Important? For Financial Protection Unexpected events such as accidents, surgeries, or medical conditions can cost thousands of dollars. Repatriation for a critically ill or injured helper is often also costly. Insurance shields you from such sudden and significant financial burdens. For Peace of Mind Employers are legally liable for their MDWs. Having proper insurance reduces both legal and financial risk, allowing employers to focus on their families and work, knowing that their helper’s medical and emergency needs are covered when required. 3. Why is the Domestic Helper Insurance either a 14 or 26 Month Plan? Domestic Helper Insurance plans are issued for either 14 or 26 months, rather than 12 or 24 months. MOM requires an additional 2 months of coverage (at no extra charge) to ensure your MDW remains insured after the work permit expires, in case repatriation is delayed. Most plans also offer a letter of guarantee for the mandatory S$5,000 security bond, as required by the MOM, for non-Malaysian MDWs. 4. What is a Security Bond & Waiver Option? Employers are also required to post a $5,000 security bond (for non-Malaysian MDWs) as a financial guarantee to MOM. However, many insurance plans include an optional waiver of indemnity, meaning that if the bond is forfeited due to unforeseen circumstances (e.g., the helper runs away), the insurer will cover the cost up to the stated amount, provided the employer has not breached any conditions. This is an important detail that many employers overlook, and opting for a plan that includes a bond waiver can prevent significant out-of-pocket losses. 5. What does the Domestic Helper Insurance Typically cover? To name some: Coverage What It Includes Hospital & Surgical Expenses2 Inpatient care, surgery, specialist treatment, emergency care, etc. Annual limit of at least S$60,000, with a co-payment of 20% - 25% by employers for claim amounts above S$15,000 (depending on insurer) Coverage for pre-existing medical conditions (if the helper is employed for more than 12 months in Singapore) Personal Accident Compensation for death or permanent disability due to accidents for up to S$100,000 (depending on insurer) Repatriation Expenses Costs of sending the helper home in case of death or permanent disability, up to S$20,000 Personal Accident Compensation for death or permanent disability due to accidents for up to S$100,000 (depending on insurer) Third-Party Liability If the helper accidentally injures others or damages property Re-hiring Expenses Covers agency/recruitment costs if the contract is terminated prematurely Accident Medical Reimbursement GP visits, TCM, dental—depending on the plan 6. Should employers opt for only S$60,000 or more? Although S$60,000 is the current legal minimum for medical coverage, employers should consider whether this amount is sufficient. A single hospitalisation involving surgery, ICU care, or an extended stay could easily exceed this amount. Choosing a plan with higher limits may provide better protection, particularly for households with elderly, young children, or dependents with complex needs. 7. How to choose the right Insurance Plan Choosing the right domestic helper insurance depends on your risk profile, budget, and your helper's role in the household. Ask Yourself: Do you have elderly or children at home (This means a higher workload and risk, so you may want a plan with higher liability coverage and outpatient care benefits.) What is the medical coverage limit, and is it sufficient for your needs? Is ease of claim and a 24/7 hotline support important to you? Key Factors to Compare: Hospital & Surgical Expenses coverage limits (e.g. $60k vs $120k) Outpatient care inclusion Accident medical reimbursement Co-payment terms Early termination or re-hiring benefits Online claims & emergency helplines Length of Stay: Choose longer coverage periods (e.g., 26 months instead of 14 months) to reduce renewal hassle 8. Is My Helper Covered During Holidays Back Home? No. Domestic Helper Insurance only covers your helper while they are in Singapore. If they travel back home, it is advisable to purchase travel insurance for the duration of their trip. 9. Are Hospital Bills Settled Directly by the Insurer? Yes. With the new regulations effective from 1 July 2025, insurers are required to make payments directly to hospitals. This spares employers from having to put up a large payment upfront if their domestic worker requires hospitalisation. 10. What Should Employers Know About the Letter of Guarantee (LOG)? Some hospitals may require a deposit for your helper's hospitalisation or emergency admission. Your insurer can issue a Letter of Guarantee (LOG) under policy conditions, including pro-ration and co-insurance. If provided, the insurer pays hospital expenses directly up to the LOG or policy limit. Employers are responsible for any amount not covered. If the deposit exceeds the LOG, employers may need to make a partial payment. Note: LOG applies to Singapore Public/Restructured Hospitals only. Its issuance doesn't imply approval or admission of any claim under the policy, pending insurer assessment. 11. What are the Pros and Cons of Domestic Helper Insurance? Pros Cons Shields you from high medical bills Some cheaper plans may exclude common treatments Ensures compliance with MOM regulations Limited coverage for pre-existing or mental health conditions Covers wage loss, liability & repatriation Co-payments and waiting periods may apply Some include teleconsultation, no-claim bonuses, or digital platforms Misunderstanding of exclusions may lead to rejected claims Conclusion: Protect Yourself and Your Helper Domestic Helper Insurance is more than just a legal obligation—it’s a vital way to ensure you are prepared for unforeseen situations while treating your domestic helper fairly and responsibly. A thoughtful choice in policy will give you peace of mind and help you manage your responsibilities smoothly as an employer. A basic plan is legal and sufficient – until something goes wrong. A comprehensive plan is strategic – it cushions you when something does. You don’t need to overpay, but don’t underinsure either. Compare wisely. Need Help Choosing a Plan? If you’re unsure which plan suits your needs, feel free to reach out to me for a complimentary consultation. I’ll help you choose a plan that best fits your budget and your household needs. References: [1] If the security bond is not in effect when your helper arrives in Singapore, the immigration officer will not allow entry. You will have to send them home immediately.https://www.mom.gov.sg/passes-and-permits/work-permit-for-foreign-worker/sector-specific-rules/security-bond [2] 12-month waiting period for pre-existing conditions apply. Insurers are not required to pay for claims arising from pre-existing illnesses occurring within 12 months of working for the same employer. https://www.mom.gov.sg/-/media/mom/documents/work-passes-and-permits/standardised-allowable-exclusions-for-medical-insurers.pdf. Refer to Group C: Others (u).employer. Contributor: Sebastian Yeap Financial Services Manager Phillip Securities Pte Ltd (A member of PhillipCapital) https://bit.ly/TTPsebastianyeap Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.
One Stock, Many Prices: Understanding US Markets
Why Isn’t My Order Filled at the Price I See? Have you ever set a sell limit price, watched the market tick right past it, and thought, “Great, my order should be done by now!”—only to find nothing happened? You check your account again, and mysteriously, your order has expired unfilled. Puzzled, you checked Yahoo Finance. Sure enough, the day’s high shows a price higher than your limit. So why wasn’t your trade executed? The answer lies in the hidden details behind US market operations —where your order is routed, which exchange it reaches, and why the price you see on a consolidated tape or a price feed might not be the price available to you at that exact moment. Unlike SGX or HKEX, which operate a single centralised exchange where all orders are routed and matched, and where market participants receive the same standardised price feed, other markets, such as the US, may have multiple venues with differing order routing and pricing mechanisms. In this article, I’ll take you behind the scenes of order routing and explain how it works, what really happens when you click “Buy” or “Sell,” and why sometimes your order doesn’t get filled at the order price you place. Understanding Consolidated Tape and National Best Bid and Offer Consolidated Tape The consolidated tape is a feed that aggregates all quotes and trades from all registered exchanges. Think of it as a highlight reel of transactions happening across different venues. Below is a simple illustration: National Best Bid and Offer (NBBO) From this tape, the National Best Bid and Offer (NBBO) is calculated and disseminated by Securities Information Processors (SIPs). It shows the highest available bid (buy price) and lowest available ask (sell price) across all protected US trading venues at any given moment. Under SEC Regulation National Market System (NMS), brokers must ensure client orders are executed at the NBBO or better. Under Regulation NMS, the Rule 611 (Order Protection Rule) is designed to prevent “trade-throughs,” where orders are executed at a worse price than what is available elsewhere. However, there are certain exceptions to this rule, such as: Rule 611 exemptions - Certain trades may qualify for an R6 exemption, meaning a trade can occur at a price outside the NBBO in specific situations. (e.g., blocked trades, intermarket sweep order) Special order types (e.g., pegged orders, midpoint orders) Odd-lot orders (fewer than 100 shares), which historically were not included in NBBO calculations but are now included in the SIP feed, though they may still be treated differently by some systems How Orders Reach the Market Nowadays, retail orders are never routed directly to exchanges. Instead, they are typically sent to market makers—such as Citadel Securities, Virtu Financial, Goldman Sachs, or J.P. Morgan—which may internalise the trade by filling it at a price equal to or better than the NBBO, or, if necessary, route the order to an exchange for execution if they cannot provide the required liquidity. This also means that execution prices may vary slightly between different market makers, depending on their available liquidity, order flow, and internal pricing models. Still, US regulations require orders to be executed at a price equal to or better than the NBBO at the time of the trade, and all trades must be reported to their affiliated Trade Reporting Facility (TRF). Why the Price You See May Differ Different Market Data Sources Many brokers and news outlets use alternative market data feeds. For example, POEMS provides the NASDAQ basic price feed, quotes, and trades from NASDAQ-operated venues, not from all exchanges. As a result, prices may vary slightly from those displayed on platforms that utilize the full consolidated tape. Execution Venue Mismatch Your order may be routed to a venue other than NASDAQ, such as NYSE, Cboe, or off-exchange venues like dark pools, that are not reflected in the NASDAQ basic price feed. While the NBBO ensures you still receive the best available price, the quote you’re watching may not match the venue your order reached. Insufficient displayed liquidity Even if NBBO shows a certain price, the number of shares available at that price might be too small to fill your entire order, causing part or all of it to be executed at the next available price. Take Apple Inc. (AAPL) as an example: its primary listing is on the NASDAQ Global Select Market (NASDAQ GS). This means NASDAQ is considered its “home” exchange for quoting and regulatory purposes. However, trading in AAPL is not limited to NASDAQ. Orders can be executed on: Other national exchanges (e.g., NYSE, Cboe) Alternative Trading Systems (ATSs), including dark pools operated by brokers and institutions. Market makers (E.g., Citadel, Virtu) can internalise trades or route them to exchanges. Regardless of where the trade is executed, it will still be reported to the consolidated tape via the SIP. This ensures the trade is reflected in the consolidated feed that forms the basis of the NBBO. AAPL Consolidated Price Feed AAPL NASDAQ GS Price Feed AAPL NYSE Price Feed AAPL NYSE Arca Price Feed Summary Table As shown above, the reported Open, High, Low, and Close (OHLC) values can differ slightly across exchanges because each market centre executes trades independently. This does not mean that clients receive the worst executions. Under SEC Regulation NMS and the NBBO rule, orders must always be filled at the best price available across all venues at that moment. In this case, a venue such as NYSE Arca recorded a better price than the prevailing NBBO, which explains why it reported the highest high of the day compared to other exchanges. (Refer to the NBBO example mentioned earlier). Conclusion In conclusion, understanding how data such as consolidated tapes and NBBO work can give investors better clarity on how trades are executed and why prices may differ across venues. Most importantly, orders must always be filled at the best price available across all venues based on regulation. This applies to customers trading via POEMS with us. Your orders are executed at the best available price, then, in compliance with the strict requirements of the NBBO. We ensure that all executions meet or improve upon the best bid or offer available across all protected market centres—not just the primary exchange. Furthermore, we can provide detailed trade reports to verify that every execution is carried out in the best interest of our investors. If you want to verify any price differences, you can contact our Phillip Night Desk for a price feed check. We hope this article has provided you with useful insight into how US exchanges operate. If you’re curious to learn more, explore our previous article how extended hours trading works —including why prices may differ during those sessions—or check out our latest write-up on options trading. Visit our website or contact our dedicated Night Desk team at globalnight@phillip.com.sg or (+65) 6531 1225. Start investing smarter with POEMS today—open an account and trade the US markets now! Open an Account Now! Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore. CFD Disclaimer This promotion is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information. Investments are subject to investment risks. The risk of loss in leveraged trading can be substantial. You may sustain losses in excess of your initial funds and may be called upon to deposit additional margin funds at short notice. If the required funds are not provided within the prescribed time, your positions may be liquidated. The resulting deficits in your account are subject to penalty charges. The value of investments denominated in foreign currencies may diminish or increase due to changes in the rates of exchange. You should also be aware of the commissions and finance costs involved in trading leveraged products. This product may not be suitable for clients whose investment objective is preservation of capital and/or whose risk tolerance is low. Clients are advised to understand the nature and risks involved in margin trading. You may wish to obtain advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase any of the investment products mentioned herein. In the event that you choose not to obtain advice from a qualified financial adviser, you should assess and consider whether the investment product is suitable for you before proceeding to invest and we do not offer any advice in this regard unless mandated to do so by way of a separate engagement. You are advised to read the trading account Terms & Conditions and Risk Disclosure Statement (available online at https://www.poems.com.sg/) before trading in this product.
