Discount of $500 ??

Some dealers offer a further discount of $500 to the purchaser who agrees to insure the car with their tied insurer.

The premium charged by the tied insurer is much higher than NTUC Income. After the $500 discount, the difference is quite small. If you are already enjoying a loyalty discount of 5% from NTUC Income, it is better to stay with us.

Model                     Tied     NTUC  
                          Insurer  Income
Honda Civic 1.8 Sedan 5   $1995    $1575  
Honda Jazz                $1680    $1280  
Nissan Sunny 1.6 EX Auto  $1578    $1319  
Vios 1.5 Auto             $1578    $1172  

The difference in premium could be $400 a year. If you insure for 10 years, you may be able to save $4,000 by insuring with NTUC Income.

Invest in a well diversified fund with low charges

I saw an investment product offered by a bank that has the following features:

- sales charge of 5%
- annual management fee of 1.75%
- pays out 8% per year, but this may be done by eroding the capital
- sell call warrants

Selling the call warrants allows the fund to earn income, but it also caps the gain that can be earned.

It is better to invest in the combined fund offered by NTUC Income. It is well diversifed and imposes a sales charge of 3.5% and an annual management fee of 0.95%. Due to the difference in charges over a 10 year period, the investment in the combined fund will pay you 10% more than the product offered by the bank.

The actual return depends on the underlying return of the fund. Here I assume that they are both funds provide the same average return over 10 years.

Advice: it is better to invest in simple financial products that have low charges.

Visit www.askdrmoney.com to get a comparison of the charges.

Avoid Investing in Structured Products

I avoid investing in structured products.

Here are my reasons:

- these products have high charges
- the charges are not transparent
- they sometimes have risks which are not well explained
- the investor usually do not get the full gains from the investment.

It is better to invest in unit trusts or investment linked funds. The charges are disclosed to you. Although the investor is exposed to the risk, at least the full gain goes to the investor.

It is better to invest in simple, transparent products.