Saturday, June 09, 2007

Walking Trail in Hamilton Island

I went on a walking trail in Hamilton Island. The trail went through the woods and up the hill. There were several trails, taking 1 to 3 hours. They were well marked.

The weather was cool and the walk was pleasant. I picked a stick to help me in the walk. It reminds me of my younger days when I was a boy scout on a hike with a staff (stick).

How to make a fire insurance claim

Dear Mr Tan,

My flat burned down. What are the procedure I should follow? I have insured with company X. My upstair neighbours were asking if I have 3rd party insurance. I have none. For my upstair neighbours, what actions I can take?



As you have taken a policy from company X, you should make a report to your insuer. They will help you on your claim. You can also approach the insurance agent who sold the policy to you.

Normally, a fire policy will cover your liability to the neighbours as well. You can check with your insurer. I hope that you will not find any problem in the settlement of this claim.

Hamilton Island, Australia

Hamilton Island is advertised as being the gateway to the Great Barrier Reef. I will be taking a whole day cruise tomorrow, to visit the Reef.

The cruise boat has a glass bottom to view the corals. They have also arranged for snorkelling.

But, it is cold in Hamilton Island now. The temperature is less than 10 degrees Centrigrade. Usuually, at this time of year, the temperature should be at least 20 degrees. The resort employees told me that this is the coldest season that they had for many years.

Token of appreciation

I was given a token of appreciation for speaking at a conference in Australia. I tore away a part of the wrapping to peep at what was in the box. I saw the word, LIAN.

Wow, the organiser must have printed my name on the box.

When the entire wrapping was taken away, the entire word was AUSTRALIAN. It was a box of Australian chocolates.

When I showed it to the organiser, she was surprised at the coincidence. She said that I was a part of Australia.

High cost of living in Australia

In Australia, prices for many items, e.g hotel, food, services, cost twice of Singapore.

How do the Australians cope?

They have higher wages. The minimum wage is about AUD 15 per hour. The lowest paid worker earns AUD 2,400 per month, or SGD3,000. This is about three times of Singapore. So, they can live a fairly comfortable life, as the cost of housing and cars are not as high as in Singapore.

Australians pay higher taxes. But this affect the higher income workers.

Extra charge for using credit card

Many years ago, credit card companies disallow merchants from adding an extra charge on customers for using credit cards.

This has now changed.

When I checked into a resort at Hamilton Island, Australia, there was a sign that states a charge of 1% will be added to the bill for payment by Visa and Mastercard and 2.5% for payment by American Express. JetStar adds an extra charge of about 1.5% for payment by credit card.

If customers have to bear this charge, it is important to learn how to avoid paying by credit card. Here are some ways:

* use cash or debit card
* pay by PayPal.

Thursday, June 07, 2007

Taxi Fares in Singapore

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?



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.

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.

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.

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?

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".

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.

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.

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.



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.


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.

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?



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?



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.



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?



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?



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?



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?



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 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.

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.

Learn about structured products

Before you invest in any structured products, such as Pinnacle Notes, Mini-Bonds and similar products, you should learn the key facts.

Generally, I advice people to avoid these products. Read my FAQ.

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.

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