Dear Mr Tan,
You complained that taxi fares are expensive in Singapore. Yet, you suggested that the flag down fare should be raised. You appear to be contraditing yourself. Can you explain?
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REPLY
I support raising the flag down fare, to replace all the various surcharges. I hope that this improve the utilisation and efficency of the taxi service, and ultimately, the cost will be lower.
The cost of any service depends on the following:
* the actual cost of operation, eg taxi hire, petrol, charges, etc
* how well the service is utilised
The current system of surcharges is complicated. Some taxi drivers do not wait for a booking before they take the passenger, to enjoy a high booking fee. This results in poorer utilisation of the taxis. It leads to higher cost.
If we have a more efficient system, the cost will come down.
Thursday, June 07, 2007
Sunrise at Daydream Island, Australia
I watched sunrise at Daydream Island this morning. It was beautiful.
The colour of the ocean, and the island and trees look rich and quite different in the early morning. It is like a painting. Actually, it is the other way around. Painters paint beautiful scenary.
I walked down the beach and enjoyed the cool breeze. It is a wonderful experience.
The colour of the ocean, and the island and trees look rich and quite different in the early morning. It is like a painting. Actually, it is the other way around. Painters paint beautiful scenary.
I walked down the beach and enjoyed the cool breeze. It is a wonderful experience.
Wednesday, June 06, 2007
Saving for children's education - Australia
I met the chairman of a Friendly Society in Australia. They have 300,000 members. They make regular saving for the education of their child or grandchild.
The savings go into their personal account. The earnings from the investments go into a separate fund to pay for the university education of the students who made it to the university.
The parents or grandparents are happy with this arrangement. If their child or grandchild make it to university, the expenses are paid for under the "scholarship fund". If not, the earnings are used to help the child of another member.
The member can withdraw back the principal, if the child or grandchild does not go to university.
This is the first time that I have heard about the pooling of the investment returns to help the students who makde it to the university. This is the concept of a "friendly society".
A friendly society in Australia is similar to a cooperative society in Singapore. They work on similar principles, although the mode of operation may be different.
The savings go into their personal account. The earnings from the investments go into a separate fund to pay for the university education of the students who made it to the university.
The parents or grandparents are happy with this arrangement. If their child or grandchild make it to university, the expenses are paid for under the "scholarship fund". If not, the earnings are used to help the child of another member.
The member can withdraw back the principal, if the child or grandchild does not go to university.
This is the first time that I have heard about the pooling of the investment returns to help the students who makde it to the university. This is the concept of a "friendly society".
A friendly society in Australia is similar to a cooperative society in Singapore. They work on similar principles, although the mode of operation may be different.
Expensive watches
I heard that many people have invested in expensive watches in Singapore. This is how the watches are marketed.
* Usually, the wateches are from a well known brand name.
* The customer are told that the prices of the watches will increase in price by 10% or 20% soon. You have to buy the watches now to enjoy the low price.
* Many people bought the watches and paid $5,000 to $10,000 for each watch. They think that they have benefitted from the 10% to 20% discount.
Think again. What is the value of the watch? You can buy a good, practical watch for $100. Why do you have to pay $5,000 for a watch, just becuase it has a good brand name?
* Usually, the wateches are from a well known brand name.
* The customer are told that the prices of the watches will increase in price by 10% or 20% soon. You have to buy the watches now to enjoy the low price.
* Many people bought the watches and paid $5,000 to $10,000 for each watch. They think that they have benefitted from the 10% to 20% discount.
Think again. What is the value of the watch? You can buy a good, practical watch for $100. Why do you have to pay $5,000 for a watch, just becuase it has a good brand name?
Financial products in Australia
My friend in Australia told me that many banks in Australia are selling complicated financial products that are misleading to the consumers. Many investors have lost a lot of money on these products or obtained a miserable return.
The investors were asked to read a prospectus of more than 100 pages. Even a financial expert cannot understand what the product is.
It seems that the regulators in Australia do not check on the content of the prospectus or do not take the responsibility to approve the product. The investors have to take their own risk.
I told my friend that a simular situation exists in Singapore. It seems that the regulators in both countries follow the same approach, "let the buyers beware".
The investors were asked to read a prospectus of more than 100 pages. Even a financial expert cannot understand what the product is.
It seems that the regulators in Australia do not check on the content of the prospectus or do not take the responsibility to approve the product. The investors have to take their own risk.
I told my friend that a simular situation exists in Singapore. It seems that the regulators in both countries follow the same approach, "let the buyers beware".
Monday, June 04, 2007
Rabobank Certs Series 1
Here are the key features of this investment, as reported in their advertisement:
* the certificates are NOT principal protected
* four blue chip Singapore companies are listed as the underlying shares
* if, on the valuation date, the price of at least one of the underlying shares is below 88% of its launch price, the investor may sustain a partial or total loss of its investment
* the certificate performs best when the share price is between 88% and 95% of the launch price during the entire life of the certificate
* investor will receive the maximum return of 20% if a Knock-out Event has not occurred, the closing price of each underlying share is above 88% of its launch price at each quarterly valuation date, and the certificate has not been terminated earlier.
* the certificate is subject to early termination if the closing price of each underlying share is above its Knock-out level at the quarterly date.
To understand how this product works, the investor is required to read the prospectus.
I cannot understand the logic of this product. There are so many uncertainties. It is not worthwhile for me to figure out this complexity.
Lesson: Do not invest in any complicated product that you do not understand. You do not know if the terms are fair to the investor.
* the certificates are NOT principal protected
* four blue chip Singapore companies are listed as the underlying shares
* if, on the valuation date, the price of at least one of the underlying shares is below 88% of its launch price, the investor may sustain a partial or total loss of its investment
* the certificate performs best when the share price is between 88% and 95% of the launch price during the entire life of the certificate
* investor will receive the maximum return of 20% if a Knock-out Event has not occurred, the closing price of each underlying share is above 88% of its launch price at each quarterly valuation date, and the certificate has not been terminated earlier.
* the certificate is subject to early termination if the closing price of each underlying share is above its Knock-out level at the quarterly date.
To understand how this product works, the investor is required to read the prospectus.
I cannot understand the logic of this product. There are so many uncertainties. It is not worthwhile for me to figure out this complexity.
Lesson: Do not invest in any complicated product that you do not understand. You do not know if the terms are fair to the investor.
Travel Insurance
Here are some of the common claims under travel insurance:
* flight delay
* loss of baggage
* medical expenses
If you suffer from food poisoning while on travel, and need to be treated, the cost is covered by the travel policy. The medical bill in Canada, for example, is SGD 300.
The travel policy also covers medical evacuation, caused by an accident. If the injured person needs to be flown back for treatment by air ambulance, the cost could be SGD 100,000 or more. This is covered under a travel policy.
* flight delay
* loss of baggage
* medical expenses
If you suffer from food poisoning while on travel, and need to be treated, the cost is covered by the travel policy. The medical bill in Canada, for example, is SGD 300.
The travel policy also covers medical evacuation, caused by an accident. If the injured person needs to be flown back for treatment by air ambulance, the cost could be SGD 100,000 or more. This is covered under a travel policy.
Be careful of alternative investments
Dear Mr Tan,
I do not know much about investments would be grateful for your advice.
I am X years old and my wife is Y years younger. We have a HDB Executive Apartment (almost paid up) and $Z in fixed deposits and NTUC's money market fund.
I need to ensure that I and my wife have enough to take care of ourselves. I am thinking about investing in unit trusts (like the Growth and Balanced Funds) or buying a life annuity from NTUC.
But some of my friends said that I would earn better returns in alternative investments. Will appreciate your advice.
-------------------------------------
REPLY:
I suggest that you read the following FAQ:
Financial planning for Senior
You should avoid structured investment products as mentioned in this FAQ.
Alternative investments are like structured products, and can be risky. If you are not familiar with these products, it is best that you avoid them.
I suggest that you invest as follows:
* 50% in a life annuity (for your self and your wife combined)
* 50% in a balanced fund (such as that offered by NTUC Income)
I do not know much about investments would be grateful for your advice.
I am X years old and my wife is Y years younger. We have a HDB Executive Apartment (almost paid up) and $Z in fixed deposits and NTUC's money market fund.
I need to ensure that I and my wife have enough to take care of ourselves. I am thinking about investing in unit trusts (like the Growth and Balanced Funds) or buying a life annuity from NTUC.
But some of my friends said that I would earn better returns in alternative investments. Will appreciate your advice.
-------------------------------------
REPLY:
I suggest that you read the following FAQ:
Financial planning for Senior
You should avoid structured investment products as mentioned in this FAQ.
Alternative investments are like structured products, and can be risky. If you are not familiar with these products, it is best that you avoid them.
I suggest that you invest as follows:
* 50% in a life annuity (for your self and your wife combined)
* 50% in a balanced fund (such as that offered by NTUC Income)
University of New South Wales
Several friends have asked for my views about the closure of the Singapore campus of the University of New South Wales.
I wish to address these two questions:
* Was it a good idea to get UNSW to operate in Singapore?
* Should the university have taken a different approach to establish its Singapore campus?
I support the initiatives to get foreign universities to operate in Singapore and make it an educational hub. Many parents from Asian countries prefer to send their children to study in Singapore, rather than western countries The environment and culture in Singapore is more conducive.
Singapore has a niche and a marketing advantage.
In my view, UNSW should have taken a different approach to establish its Singapore campus. They should have taken an "incremental approach".
They should start with some courses in collaboration with local partners and build up the student base, reputation and understanding of the market. They could have made a bigger commitment to Singapore (compared to the other universities now operating on this approach), without having to open a large physical campus at the start.
The Singapore government could have provided financial support for UNSW (in return for their larger commitment) in the form of subsidies for local and foreign students to study for these approved courses in Singapore. This will make it attractive for students to study in Singapore, rather than in Sydney.
I hope that we can learn the lesson from this temporary setback.
Recap:
1. Encourage foreign universities to make a bigger commitment to Singapore by offering more courses in Singapore and enrol a larger number of students.
2. Offer financial subsidy to local and foreign students to study in Singapore. The level of support will be lower than for study in our local universities.
I wish to address these two questions:
* Was it a good idea to get UNSW to operate in Singapore?
* Should the university have taken a different approach to establish its Singapore campus?
I support the initiatives to get foreign universities to operate in Singapore and make it an educational hub. Many parents from Asian countries prefer to send their children to study in Singapore, rather than western countries The environment and culture in Singapore is more conducive.
Singapore has a niche and a marketing advantage.
In my view, UNSW should have taken a different approach to establish its Singapore campus. They should have taken an "incremental approach".
They should start with some courses in collaboration with local partners and build up the student base, reputation and understanding of the market. They could have made a bigger commitment to Singapore (compared to the other universities now operating on this approach), without having to open a large physical campus at the start.
The Singapore government could have provided financial support for UNSW (in return for their larger commitment) in the form of subsidies for local and foreign students to study for these approved courses in Singapore. This will make it attractive for students to study in Singapore, rather than in Sydney.
I hope that we can learn the lesson from this temporary setback.
Recap:
1. Encourage foreign universities to make a bigger commitment to Singapore by offering more courses in Singapore and enrol a larger number of students.
2. Offer financial subsidy to local and foreign students to study in Singapore. The level of support will be lower than for study in our local universities.
Bold steps needed to solve the taxi shortage
Mr Paul Chan Poh Hai wrote an excellent letter, published in the Straits Times. He suggested the following bold measures to solve the taxi shortage:
1. Abolish all surcharges and make phone booking a means to direct cabs where they are needed most.
2. Increase the flag down rate and charged more for extra distance travelled
3. Allow foreign drivers, if Singaporeans don't want the job
4. Let cabbies earn more with higher productivity and hard work. Waiting for phone bookings for extra money is counter productive and nurtures a bad work habit.
I agree with all the suggestions made by Paul Chan. I have a further suggestion:
5. (By Tan Kin Lian) - charge a flat daily rate in lieu of ERP and CBD charges for taxis. This encourages them to enter the CBD when they are needed the most.
1. Abolish all surcharges and make phone booking a means to direct cabs where they are needed most.
2. Increase the flag down rate and charged more for extra distance travelled
3. Allow foreign drivers, if Singaporeans don't want the job
4. Let cabbies earn more with higher productivity and hard work. Waiting for phone bookings for extra money is counter productive and nurtures a bad work habit.
I agree with all the suggestions made by Paul Chan. I have a further suggestion:
5. (By Tan Kin Lian) - charge a flat daily rate in lieu of ERP and CBD charges for taxis. This encourages them to enter the CBD when they are needed the most.
A better taxi service
Dear Mr Tan,
I read several of your blogs where you complained about the high cost of taxi fares. Are you aware that taxi fares are more expensive in cities such as London, New York and Tokyo?
---------------------------------
REPLY:
Taxi fares should be relative to other forms of public transport. It can be 3 or 4 times the cost of bus or train fares, but should not be higher.
Many people are forced to take taxis due to the lack of a convenient alternative. They do not know how to take the bus, because the routes are quite complicated.
We need to improve our public transport system, and make more efficient use of our resources.
I read several of your blogs where you complained about the high cost of taxi fares. Are you aware that taxi fares are more expensive in cities such as London, New York and Tokyo?
---------------------------------
REPLY:
Taxi fares should be relative to other forms of public transport. It can be 3 or 4 times the cost of bus or train fares, but should not be higher.
Many people are forced to take taxis due to the lack of a convenient alternative. They do not know how to take the bus, because the routes are quite complicated.
We need to improve our public transport system, and make more efficient use of our resources.
Buy a policy for the son
Hi, Mr Tan
I am trying to get a good policy that suitable for my son. Any commendation?
---------------
REPLY:
I suggest that you read my FAQ on "Financial Tips for the Yong" in my website.
My preference is to invest in a large, well diversified, low cost fund, such as the Ideal plan from NTUC Income. If insurance is needed, it is better to buy a decreasing term insurance.
I am trying to get a good policy that suitable for my son. Any commendation?
---------------
REPLY:
I suggest that you read my FAQ on "Financial Tips for the Yong" in my website.
My preference is to invest in a large, well diversified, low cost fund, such as the Ideal plan from NTUC Income. If insurance is needed, it is better to buy a decreasing term insurance.
Money Market Fund
Dear Mr Tan
Please explain what's the difference between the Money Market Fund and ordinary shares. I have to buy at bid price which is very much like buying share from the market.
How is the yield (of about 3%) calculated? Some good shares provide higher yields.
Fixed deposit rate is too low. I wish to look for other investments that allow me to get easy access to my money.
---------------------
REPLY:
The money market fund is invested in money market investments, such as short term bonds and certificates of deposits. These investments currently yield about 3% per annum, and are usually for durations of less than 1 year.
When you invest in the money market, you buy units at its unit price (or net asset value). The unit price changes everyday according to the value of its underlying investments.
If you measure change in the unit price over a few weeks, you will probably find that the annualised yield is about 3% per annum. This yield may change according to the underlying investments.
The manager of the fund will take a small charge (usually less than 0.5% per annum) from the fund. Hence, you will get the net yield.
For the money market fund managed by NTUC Income, the annual charge is 0.25% per annum. There is no transaction cost or sales charge when you buy or sell the units.
Please explain what's the difference between the Money Market Fund and ordinary shares. I have to buy at bid price which is very much like buying share from the market.
How is the yield (of about 3%) calculated? Some good shares provide higher yields.
Fixed deposit rate is too low. I wish to look for other investments that allow me to get easy access to my money.
---------------------
REPLY:
The money market fund is invested in money market investments, such as short term bonds and certificates of deposits. These investments currently yield about 3% per annum, and are usually for durations of less than 1 year.
When you invest in the money market, you buy units at its unit price (or net asset value). The unit price changes everyday according to the value of its underlying investments.
If you measure change in the unit price over a few weeks, you will probably find that the annualised yield is about 3% per annum. This yield may change according to the underlying investments.
The manager of the fund will take a small charge (usually less than 0.5% per annum) from the fund. Hence, you will get the net yield.
For the money market fund managed by NTUC Income, the annual charge is 0.25% per annum. There is no transaction cost or sales charge when you buy or sell the units.
Sunday, June 03, 2007
Annuity for a young person
Hi Mr Tan,
I have been reading your blog and appreciate your valuable advice on financial planning.
Will an insurance company accept a person aged 40 years old for taking up a life annuity product using cash? Can you recommend any good product?
-------------------------
REPLY:
At the younger ages, I usually advise people to take the fixed term annuity or annuity certain. For example, you can take a fixed term annuity for 20 or 30 years.
The insurance company is uncertain about the mortality rates over a long period, and may not quote attractive rates due to this reason.
If you are really keen on the life annuity, I think that NTUC Income will be able to quote the annuity rate for a person at aged 40.
Can you tell me why you wish to have this type of product?
I have been reading your blog and appreciate your valuable advice on financial planning.
Will an insurance company accept a person aged 40 years old for taking up a life annuity product using cash? Can you recommend any good product?
-------------------------
REPLY:
At the younger ages, I usually advise people to take the fixed term annuity or annuity certain. For example, you can take a fixed term annuity for 20 or 30 years.
The insurance company is uncertain about the mortality rates over a long period, and may not quote attractive rates due to this reason.
If you are really keen on the life annuity, I think that NTUC Income will be able to quote the annuity rate for a person at aged 40.
Can you tell me why you wish to have this type of product?
Yield of 4% p.a. on endowment plan
Dear Mr Tan,
I bought a 13-year endowment with compound reversionarly bonus from Great Eastern. The basic sum assured was $60,000 and annual premium was $5096.
I received an amount on maturity of $88,547. This means that I earned only $22,302 or 2.6% p.a. In your opinion, is this a fair deal?
-----------------------
REPLY:
Your yield is actually 4.06% p.a. You have to consider that your total premium is paid annually over 13 years, and not in a lump sum at the beginning.
It is a fairly attractive yield. You also enjoyed life insurance for the past 13 years, without making any separate payment for this coverage.
I bought a 13-year endowment with compound reversionarly bonus from Great Eastern. The basic sum assured was $60,000 and annual premium was $5096.
I received an amount on maturity of $88,547. This means that I earned only $22,302 or 2.6% p.a. In your opinion, is this a fair deal?
-----------------------
REPLY:
Your yield is actually 4.06% p.a. You have to consider that your total premium is paid annually over 13 years, and not in a lump sum at the beginning.
It is a fairly attractive yield. You also enjoyed life insurance for the past 13 years, without making any separate payment for this coverage.
NTUC Income shares
Dear Mr Tan,
My friend recently received a letter from NTUC Income that his investment with them will be paid a dividend of 6% plus a special dividend of 2%, totalling 8% for the financial year 2006.
Such high dividend payable (although not guaranteed) is possible because it is a cooperative organisation with very good management.
In your view, should I not invest in NTUC Income? How do I invest in this?
---------------------
REPLY:
Your friend bought the shares of NTUC Income. It is a safe investment, which gives an attractive return.
I understand that NTUC Income is not issuing new shares at the present time, as they have adequate share capital.
My friend recently received a letter from NTUC Income that his investment with them will be paid a dividend of 6% plus a special dividend of 2%, totalling 8% for the financial year 2006.
Such high dividend payable (although not guaranteed) is possible because it is a cooperative organisation with very good management.
In your view, should I not invest in NTUC Income? How do I invest in this?
---------------------
REPLY:
Your friend bought the shares of NTUC Income. It is a safe investment, which gives an attractive return.
I understand that NTUC Income is not issuing new shares at the present time, as they have adequate share capital.
Traded Endowment Policies
Dear Mr Tan,
I like to ask about a rare product that not popular in Singapore but was approved by MAS. It is the UK Endowment - Fixed Price Trade Endowment Policy.
This product is sold by a bank in Pound, with a minimum investment of $20k and the shortest tenor is 2 - 3 years to maturity.
I understand that the average return is 6% - 9% p.a. , the only drawback is the currency exchange. What is your view on this product?
------------------------
REPLY:
You should ask the financial intermediary (who offers this product to you) to explain the risk. Get them to put it in writing.
The risk depends on the parties involved. You must understand the risk before you make any investment.
--------------------------
Edited by Tan Kin Lian
Dear Mr Tan
I noticed with interest your mention of TEPs on your blog.
I am a principal of the longest established TEP market maker in the UK. Your enquirer may be interested in the information on our website at www.policyplus.com. We also run a collective investment scheme which is MAS approved.
As you rightly say in your response, it is important for clients to be properly advised. The TEP market is certainly resurgent at present, but we would not want to see people getting into it without understanding what they are getting involved in.
There are a limited number of advisors who genuinely understand this product. If assistance is needed, we will pass on details of some we know.
I like to ask about a rare product that not popular in Singapore but was approved by MAS. It is the UK Endowment - Fixed Price Trade Endowment Policy.
This product is sold by a bank in Pound, with a minimum investment of $20k and the shortest tenor is 2 - 3 years to maturity.
I understand that the average return is 6% - 9% p.a. , the only drawback is the currency exchange. What is your view on this product?
------------------------
REPLY:
You should ask the financial intermediary (who offers this product to you) to explain the risk. Get them to put it in writing.
The risk depends on the parties involved. You must understand the risk before you make any investment.
--------------------------
Edited by Tan Kin Lian
Dear Mr Tan
I noticed with interest your mention of TEPs on your blog.
I am a principal of the longest established TEP market maker in the UK. Your enquirer may be interested in the information on our website at www.policyplus.com. We also run a collective investment scheme which is MAS approved.
As you rightly say in your response, it is important for clients to be properly advised. The TEP market is certainly resurgent at present, but we would not want to see people getting into it without understanding what they are getting involved in.
There are a limited number of advisors who genuinely understand this product. If assistance is needed, we will pass on details of some we know.
Great Barrier Reef, Australia
I will be attending a conference and taking a holiday at Hamilton Island, off the cost of Queensland, Australia. I shall be visiting the Great Barrier Reef. I just looked at Hamilton Island using Google Earth. It gives me an interesting preview of this island.
I will be away for 9 days, starting tomorrow. This will be my first visit to this part of the world. I shall be updating my blog occasionally, depending on the availablility of internet connection in the island.
I will be away for 9 days, starting tomorrow. This will be my first visit to this part of the world. I shall be updating my blog occasionally, depending on the availablility of internet connection in the island.
Skype to Skype
I spoke to my friend on Skype to Skype. The voice is very clear. It is clearer than speaking over the mobilephone. It is free.
Bus to Kuala Lumpur
You can take a "first class (16 seater)" bus to Kuala Lumpur and return for SGD 101. I am told that it is comfortable, like a first class seat on a plane. The journey takes 5 hours.
The bus leaves Golden Mile Complex, Beach Road at 0730, 0930, 1130, 1430 1630 and 1830. The return bus leaves Pasarayat, Jalan Melat (off Jln Imbi) at 0800, 1000, 1100, 1400, 1600 and 1800.
I shall try this mode of transport one day. Maybe, I can stay overnight in Kuala Lumpur.
The bus leaves Golden Mile Complex, Beach Road at 0730, 0930, 1130, 1430 1630 and 1830. The return bus leaves Pasarayat, Jalan Melat (off Jln Imbi) at 0800, 1000, 1100, 1400, 1600 and 1800.
I shall try this mode of transport one day. Maybe, I can stay overnight in Kuala Lumpur.
Learn about structured products
Reduce demand for taxis
It is expensive to take a taxi in Singapore. A short trip in the business district can cost $10.
The high taxi fares is due to the following:
* it is expensive to operate a taxi, due to high rental, ERP and other charges
* there is heavy demand for taxis
Why is there a heavy demand?
Many people find it difficult to take a bus. They may know their regular bus service to their home or workplace, but they usually do not know how to take a bus to other destinations. They have to rely on taxis.
What is the solution?
I suggest that local services should be introduced to move commuters within a town (or the business district) and to the nearby MRT station or bus terminus.
For example, a town like Ang Mo Kio could be served by 4 local services (A, B, C and D). It is easy to display the maps of the local services at the bus stops. The business district could also be served by a few local services.
It is time to re-think our public transport system.
The high taxi fares is due to the following:
* it is expensive to operate a taxi, due to high rental, ERP and other charges
* there is heavy demand for taxis
Why is there a heavy demand?
Many people find it difficult to take a bus. They may know their regular bus service to their home or workplace, but they usually do not know how to take a bus to other destinations. They have to rely on taxis.
What is the solution?
I suggest that local services should be introduced to move commuters within a town (or the business district) and to the nearby MRT station or bus terminus.
For example, a town like Ang Mo Kio could be served by 4 local services (A, B, C and D). It is easy to display the maps of the local services at the bus stops. The business district could also be served by a few local services.
It is time to re-think our public transport system.
Saturday, June 02, 2007
High property prices in Singapore
I worry about the escalating property prices in Singapore.
Although it started with the properties in the prime districts, it has moved to the fringe districts. It will raise the prices of HDB properties in due course.
The increase in property values will not benefit owners who have a single property. They cannot realise the gain as they have to buy another property at a higher price, unless they choose to downgrade to a smaller property.
The higher prices will be a burden to the younger generation. They will find it more expensive to afford a property.
It is better for Singapore, if the property prices are kept at a modest level, and not allowed to escalate out of control.
Although it started with the properties in the prime districts, it has moved to the fringe districts. It will raise the prices of HDB properties in due course.
The increase in property values will not benefit owners who have a single property. They cannot realise the gain as they have to buy another property at a higher price, unless they choose to downgrade to a smaller property.
The higher prices will be a burden to the younger generation. They will find it more expensive to afford a property.
It is better for Singapore, if the property prices are kept at a modest level, and not allowed to escalate out of control.
Traffic in Jakarta
The traffic in Jakarta is congested. It moves slowly most times of the day. It takes a long time to travel a short distance.
Most managers have a driver. The salary of a driver is less than USD 100 a month. Although they have to spend a longer time on the road, the managers are able to discuss business in the car or to prepare for their meeting.
Jakarta has a system of bus-ways. They run on dedicated lanes. There are a few routes that run from north to south, with a circular line to connect them. To move from one place to another, the commuter may have to change to another line. It is easy to understand the system and to move from one part of the city to another part.
I hope that Jakarta will build a mono-rail system to take large number of commuters. They can follow the system of the bus-ways, as it is easy to understand.
Most managers have a driver. The salary of a driver is less than USD 100 a month. Although they have to spend a longer time on the road, the managers are able to discuss business in the car or to prepare for their meeting.
Jakarta has a system of bus-ways. They run on dedicated lanes. There are a few routes that run from north to south, with a circular line to connect them. To move from one place to another, the commuter may have to change to another line. It is easy to understand the system and to move from one part of the city to another part.
I hope that Jakarta will build a mono-rail system to take large number of commuters. They can follow the system of the bus-ways, as it is easy to understand.
Manchester United: A lesson in leadership
I am amazed at the speed by which Manchester United signed up for their top players for the next season.
The top leaders at Manchester United (i.e. the owner, team manager and chief executive) are able to work together. The trust the leadership provided by the team manager, Alex Ferguson.
It has not been easy for Manchester United. They had two lean years, in which they did not win any major trophy. By sticking to their experienced manager, they have rebuilt their team to win the English Premiership.
We read about the disagreement between in Chelsea, between the team manager and the owner. This makes it difficult for the team manager to win the matches in the football field.
Lesson: In the corporate world, the battle has to be fought in the market place. To win the battle, you need to have knowledgeable people who knows the market, and are not hampered by their owners.
The top leaders at Manchester United (i.e. the owner, team manager and chief executive) are able to work together. The trust the leadership provided by the team manager, Alex Ferguson.
It has not been easy for Manchester United. They had two lean years, in which they did not win any major trophy. By sticking to their experienced manager, they have rebuilt their team to win the English Premiership.
We read about the disagreement between in Chelsea, between the team manager and the owner. This makes it difficult for the team manager to win the matches in the football field.
Lesson: In the corporate world, the battle has to be fought in the market place. To win the battle, you need to have knowledgeable people who knows the market, and are not hampered by their owners.
Insurance Agent
Mr Tan
Is it better for me to buy my insurance directly from the company or go through an insurance agent. What is your advice?
---------------------
REPLY:
You can read my views in this FAQ.
Is it better for me to buy my insurance directly from the company or go through an insurance agent. What is your advice?
---------------------
REPLY:
You can read my views in this FAQ.
Family Insurance Plan
Hi Mr Tan,
I really enjoy reading your blog. It is simple to read and at times, amusing, as you write about your own observations on everyday experiences.
I wish to ask about the differences between the Protection plan and Family Insurance plan offered by NTUC Income. The descriptions and explanations are not clear.
-----------------------------
REPLY:
A protection policy is a whole life policy. It covers you for the whole of life and pays the sum assured and bonuses in the event of death or permanent disability for all causes.
The family insurance policy allows you to insure yourself and members of your family under several coverages, for example, term insurance, accident insurance, medical insurance. You can vary the amount of coverage for each person.
Normally, you will have to take a different policy for each type of coverage and for each person. Under the family policy, you can put these coverages under 1 policy and not under many separate policies.
I suggest that you read the FAQ in these two web-pages:
Protection
Family Insurance
I really enjoy reading your blog. It is simple to read and at times, amusing, as you write about your own observations on everyday experiences.
I wish to ask about the differences between the Protection plan and Family Insurance plan offered by NTUC Income. The descriptions and explanations are not clear.
-----------------------------
REPLY:
A protection policy is a whole life policy. It covers you for the whole of life and pays the sum assured and bonuses in the event of death or permanent disability for all causes.
The family insurance policy allows you to insure yourself and members of your family under several coverages, for example, term insurance, accident insurance, medical insurance. You can vary the amount of coverage for each person.
Normally, you will have to take a different policy for each type of coverage and for each person. Under the family policy, you can put these coverages under 1 policy and not under many separate policies.
I suggest that you read the FAQ in these two web-pages:
Protection
Family Insurance
Invest in Government Bonds
1. How can you invest in Government or Corporate Bonds?
* go through a stockbroker
* go to DollarDex or FundSupermarket
2. What is the yield?
* go through a stockbroker
* go to DollarDex or FundSupermarket
2. What is the yield?
Issuer Tenor Rating YTM
Sp Govt 4.8 yr AAA 2.48%
Sp Govt 7.1 yr AAA 2.67%
Sp Govt 9.3 yr AAA 2.78%
Sp Govt 13.3 yr AAA 2.91%
HDB 3.8 yr AAA 2.73%
Jackson Nat Life 3.8 yr AA 2.97%
HK Land 3.3 yr BBB+ 2.99%
Household Fin 6.7 yr AA 3.37%
Friday, June 01, 2007
Pinnacles Notes Series 7
Dear Mr Tan
What are your views about the Pinnacles Notes that has recently been advertised in the newspapers? Is it safe to invest in these Notes? Do they give a good return?
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REPLY:
1. Tranche B (in SGD) pays interest at 5% p.a. for the first 5 1/2 years with a return of the principal on maturity and possible payment of an equity bonus coupon of of 4% p.a. All the payments are subject to conditions.
2. Now, READ THE FINE PRINTS.
The equity bonus coupon is payable if several conditions are fulfilled, including the need for the average closing price of the ordinary share of each "Basket Company", on 3 observation dates to be equal or above 110% of the initial spot price. If any one Basket Company fails, then the bonus is NOT payable. The advertisement did not identify the Basket Companies, but ask you to read the Prospectus for details.
What is the chance of receiving the bonus? I suspect that it is very, very slim.
3. The interest payment of 5% p.a. appears to be attractive. But, the FINE PRINT says:
"The Notes are not principal guaranteed. Payment of interest and repayment of 100% of the principal amount at maturity, may not occur in all circumstances. In particular, upon the occurrence of a Credit Event, a Mandatory Redemption Event, an Event of Default .... you could lose all or substantially or of your investment in the Notes".
What is the chance of any of these events happening? What is the amount that could be lost?
Frankly, I do not know. I am an actuary (and quite knowledgeable about calculations). I know that it is impossible for any investor to calculate the odds.
4. The issuer has the right to exercise the Call option and redeem the Notes. This right can be exercised to the detriment of the investor, if interest rate has dropped. In this case, the Issuer pays back the principal and the investor has to re-invest the money to earn a much lower rate.
5. There is a statement that the Notes are secured by US Dollar demonimated Synthetic CDO rated AA or higher at the time of investment. This type of investment carries credit and currency risks.
6. The advertisement ask the investor to read the Base Prospectus, Applicable Annex, Pricing Statement and supplements. The investor is required to understand all the points that are written in these documents (which comprise many dozens of pages writtenin a confusing manner.)
7. My advice: There are too much uncertainty and risk. This product is too complicated. Do not invest in these Notes.
What are your views about the Pinnacles Notes that has recently been advertised in the newspapers? Is it safe to invest in these Notes? Do they give a good return?
---------------------------
REPLY:
1. Tranche B (in SGD) pays interest at 5% p.a. for the first 5 1/2 years with a return of the principal on maturity and possible payment of an equity bonus coupon of of 4% p.a. All the payments are subject to conditions.
2. Now, READ THE FINE PRINTS.
The equity bonus coupon is payable if several conditions are fulfilled, including the need for the average closing price of the ordinary share of each "Basket Company", on 3 observation dates to be equal or above 110% of the initial spot price. If any one Basket Company fails, then the bonus is NOT payable. The advertisement did not identify the Basket Companies, but ask you to read the Prospectus for details.
What is the chance of receiving the bonus? I suspect that it is very, very slim.
3. The interest payment of 5% p.a. appears to be attractive. But, the FINE PRINT says:
"The Notes are not principal guaranteed. Payment of interest and repayment of 100% of the principal amount at maturity, may not occur in all circumstances. In particular, upon the occurrence of a Credit Event, a Mandatory Redemption Event, an Event of Default .... you could lose all or substantially or of your investment in the Notes".
What is the chance of any of these events happening? What is the amount that could be lost?
Frankly, I do not know. I am an actuary (and quite knowledgeable about calculations). I know that it is impossible for any investor to calculate the odds.
4. The issuer has the right to exercise the Call option and redeem the Notes. This right can be exercised to the detriment of the investor, if interest rate has dropped. In this case, the Issuer pays back the principal and the investor has to re-invest the money to earn a much lower rate.
5. There is a statement that the Notes are secured by US Dollar demonimated Synthetic CDO rated AA or higher at the time of investment. This type of investment carries credit and currency risks.
6. The advertisement ask the investor to read the Base Prospectus, Applicable Annex, Pricing Statement and supplements. The investor is required to understand all the points that are written in these documents (which comprise many dozens of pages writtenin a confusing manner.)
7. My advice: There are too much uncertainty and risk. This product is too complicated. Do not invest in these Notes.
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