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Saturday, July 22, 2006

Flexi-Cash: it takes 12 days to recover the initial spread

A policyholder invested $200,000 in the FlexiCash and monitored the price movements. He found that it was still making a loss after a few days. He compared to a ban deposit that shows the interest accruing immediately.

Here is my explanation.

Dear

There is a spread of 0.1% when you make your investment. This is the difference between the offer and bid price of the unit. When you make an investment, you pay a spread of $200.

The bid price is expected to grow based on the yield of the money market rate fund. Based on the current rate, the yield should be 3%. It can go up and down according to the money market.

It will take about 12 days to earn enough to cover the spread. After that, you can earn more.

The advantage of Flexi-Cash is the higher interest rate and no lock-in period. The slight disadvantage, compared to a bank deposit, is the initial spread, which takes 12 days to recover.

During the promotion period, which spread is 0.1%. After the promotion, the spread will be increased to 0.25%. At that time, it will take about 30 days to earn enough to cover the spread.

I hope that this explanation is clear to you. I will put it in the FAQ so that this point is clearer.

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