Saturday, November 10, 2007

Singapore Banks

Dear Mr Tan,

Many of the banks in America are reporting big write-downs on their credit portfolios, in the billions of dollars. Will this situation apply to Singapore banks?


I recall that the Singapore banks had acted earlier and made provision for the write-down on their collaterialised debt obligations. The bank stocks are now trading at 10% to 15% below their recent peak.

I have seen some recommendations from stockbrokers that the banks represent good value at the current level.

However, it is difficult to know if there will be further write offs.

Investing your CPF savings

Dear Mr Tan,

If I remembered correctly, PM Lee Hsien Loong once mentioned on Budget 2007 that the CPF interest gained over time would have been better off if we were to leave our money in CPF account instead of using it for our own investment.

PM Lee said that applies to majority of CPF accounts in Singapore. The goverment must have gotten statistics from the CPF board to prove the statement. Is that true?


I do not recall him making this statement, and the context in which it was made.

Personally, I think that it is better to invest in a large, well diversified, low cost fund comprised of global equity.

When the stockmarket has corrected, it may be a good time to make this investment.

Ride out the fall in the stockmarket

Dear Mr Tan

Earlier this year, when the stockmarket was going up, I made some profit by selling the stocks that have gained in value.

With the drop in the stockmarket, I am now holding on to some stocks that have shown some losses. Should I sell the stocks? Will they drop further?


If you have invested in blue chips with good fundmentals, you can keep the stocks and wait for their values to recover.

However, you have to bear in mind that some of these stocks have earnings that were partly contributed by the boom conditions. With the excess earnings are removed, these stocks may be over-valued. You may have to consider to sell the over-priced stocks.

Thursday, November 08, 2007

Insurance for a child with Down syndrome

Hello Mr. Tan,

My youngest daugther has Down Syndrome. She attends normal mainstream school and has no congenital medical condition. We would like to plan for her future investment, especially when we are not around with her. Can you advise what insurance plan/life policy are available in Singapore or even overseas country?


I suggest that you buy a fixed term annuity for your daughter. You can pay a single premium, and she will receive a monthly sum for a fixed number of years, say for 20 or 30 years. Your doctor can probably advise what is a suitable term based on her life expectancy.

As this is a fixed term annuity, the payment will continue to be made for the fixed term, regardless of the survival status.

You will probably find it difficult to get medical insurance to cover her medical expenses.

Insurance agent start a new business

Dear Mr Tan Kin Lian,

In 1990's, lot of Great Eastern agents left the insurance company. In 2004, my Income agent left for starting his Insurance business. This year, my Manulife agent also left for starting her own Insurance business.

Why these peoples left insurance company during his/her career and economic peak period? Are they suffered from lost of commission? What was actually happened?


For the insurance agent who left to start a new business, they have made their calculation. They expect to earn more from the new business, which can compensate for the loss of renewal commission. Perhaps the renewal commission is quite small.

Loan for HDB Resale Property

Hi Mr Tan,

I enjoy reading your blog as it provide me with knowledge on insurance, investment, current affairs, etc.

I would like to consult you on a CPF matter. My wife and I have $230,00 in our CPF and $20,000 already invested in unit trust.

We decided to buy our next HDB flat in the resale market. The flat cost 400k and we are entitle to HDB con loan of 2.6% per annum.

Should I let HDB deduct all of our CPF or should Itake out $40,000 to invest in unit trust?


I think it is better as much as possible from the HDB loan and to invest your CPF savings in unit trust (which should earn more than 2.6% per annum).

If you do not wish to take the risk from equity at this time (when the market is high), you can invest in bonds and earn say 3.5% return (i.e. better than 2.6% interest on HDB loan).

You have to invest your money first, before you apply for the HDB loan, as they will take away all of your available balance.

Problem with high profile charities

Hi Mr Tan,

What are your views about the problems with our high profile charities? First NKF. Now Ren Ci. Is it due to weak corporate governance in Singapore?


I think that the problem is wider. In both cases, the charities are raising a lot of money compared to the number of their direct beneficiaries.

Perhaps, Singaporeans are not so discerning and are too generous in contributing to high profile causes?

Low interest rate in Singapore

Dear Mr Tan,

Singapore bank deposit interest rates are, except for some short periods, mostly very low for the past years. I read that it is the 2nd lowest in the world after Japan. Many years ago, the rates were much more decent than now.

However, property, mortgage and loan rates, and more recently inflation, are high.

The low deposit rates are also affecting CPF interest rates which are pegged to it. It also discourages saving and also lures people to try those investment schemes (scams?) promising high rates.

Is it due to a huge influx of foreign money that depress the rates? Or what other likely causes and what will be the future trend of the rates?

I think the issues are not simple but I hope you can share some views and analysis on this in your blog.


I agree with you on the following points:

1. Interest rate is too low in Singapore
2. It lures people to investment schemes (scams) that promise high returns.
3. It is probably due to the influx of foreign funds.

Some investment analysts said that the Singapore dollar could be used to fund the "carry trade", similar to the Japanese yen. So far, this has not happened. We have to keep a watch on this possible development.

Top up in an Ideal plan

Hi Mr Tan,

I had an ideal plan with monthly payment of $400. If I had a lump sum payment of $5000, do you think it would be beneficial to top up this amount to the ideal plan?

I am currently also looking at Revosave. I am thinking of having a monthly premium of $250 for 15 years. The idea of cashback annually meet my objective - saving and able to use the amount after the 2nd year.

However, the comments I read so far are not really impressive. What would be your advise.


You should check with NTUC Income about the topping up in the Ideal plan. If the topping up is made as a single premium, then you incur the upfront charge of 3.5% only. You should check if they can give you a bonus to reduce this upfront charge. If not, it is all right to make this investment.

It is better to invest in the Ideal plan, rather than through Revosave, as the charges are much lower.

Payment by Mobile Phone

The Infocomm Development Authority is trying to encourage people to use their mobile phone for small payment. This is similar to the system used in Japan.

I wish to suggest an easier way.

Many people already carry an ez-Link card. It is better to use ez-Link to make small payments. There is no need to put a chip in the mobile phone, when the chip is already in ez-Link.

Topping up the ez-Link card is quite easy. Anyway, the user only tops up the card once or twice a month.

The challenge is to get many retail establishments to provide payment through ez-Link. MacDonalds have taken this step. We need to get 1,000 to 5,000 establishments to adopt this mode of payment.

At present, the cost to the retail establishment is an issue. If this form of payment can reduce their cost or increase their business, they will be keen to adopt it.

Let us focus on this challenge, instead of finding the chip to install in the mobile phone.

Public Transport needs to be improved

A few people have commented that the public transport in Singapore is not satisfactory and needs to be improved.

I agree.

I find that driving is not easy either, due to our congested roads and high ERP and parking charges.

Here is my interim solution:

1. I take MRT as far as possible
2. I carry the "Public Transport Guide" which shows the bus stops and services. This helps me to find a bus that takes me to the nearest MRT station or from the station to my destination.

I have suggested to SMRT to display a map showing all the bus stops within 2 km of a station and the bus services at these stops. This will help commuters to find a bus for the last leg of the journey.

I hope that the Land Transport Authority will introduce feeder buses to bring commuters to the nearest MRT station.

Note: I bought the Public Tranport Guide from Popular Bookstore and paid $6.11. It is called Signapore Public Transport Guide 2007/8. It is quite handly and is about 25% of the thickness of a normal street directly.

Tuesday, November 06, 2007

Congested Roads

I had to meet someone for lunch at Holland Village and attend an afternoon conference at National University of Singapore.

As public transport was not convenient, I decided to drive to these two locations. It turned out to be a bad idea.

The roads to Holland Village was congested, due to many road works. I had trouble to find a parking space.

The journey from the university to my home took more than 1 hour. The traffic was heavy as it was after office hours. The traffic crawled at a slow pace for a long distance, due to a small accident in Farrer Road. It was stressful.

Lesson: It would have been better for me to take public transport.

Anticipation Policy

Anonymous posting in my blog:

While many who frequent Mr Tan's blog is slamming Revosave, I happened to chance upon a similar insurance product from Income's website called Anticipation Policy. This product pays regular cash coupons every 3 years. Isn't this a product that Mr Tan would say isn't good for the consumer? Ironically, this product was designed while Mr Tan was the CEO. Perhaps Mr Tan could explain this irony.


The Anticipation policy was designed 20 years ago. It had a payout every 3 years (not 1 year).

At the time that it was introduced, it gave a yield that was quite attractive. When the yield on the Anticipation policy dropped due to a reduction in the bonus rate, the sale of this plan was no longer promoted.

In today's environment, this plan is not suitable, due to its high cost and low yield.

Left or right brain?

Do you use your left or right brain more?

Take this test.,21985,22556281-661,00.html

Many people see the dancer turning clockwise. The paper said that they are using the right brain.

Can you control your brain to see the dancer turning anti-clockwise?

After that, you can take the Logic9 (Sudoku) test. Try solving the puzzle with flowers (not numbers).

Monday, November 05, 2007

Housing 6.5 million people

In this article, I suggest a way for Singapore to house 6.5 million people without facing the problem of congested roads.

We have to encourage people to work near their homes, or move their homes closer to their place of work.

Do you agree with this suggestion?

Use knowledge and experience

My friend worked for many years as a claims manager for a Japanese insurance company.

He retired at age 62. The Japanese company re-engaged him to be an auditor to audit the underwriting and claims transactions. He earns a lower salary compared to his previous job, but he is happy to continue to be productive.

As he is familiar with the insurance operations, his knowledge and experience is put to good use. He can do a more effective job compared to an internal auditor who is an accountant.

I applaud the Japanese. They know how to put knowledge and experience to good use. I hope that Singapore companies can learn from the Japanese.

Refinancing credit card borrowings

Some young people spend too much money using their credit cards. They accumulated a lot of debts and had to pay high interest on the borrowings.

This is one way to get out of this heavy interest burden. You can approach your cooperative society to take a loan to pay off the credit card debt. The interest payable on the loan from the cooperative is at a modest rate, less than one third of the rate charged by the banks.

Be honest. Tell your cooperative society about your credit card debt. Assure them that you will make a genuine attempt to clear off the debt in installments, and that you will not borrow again on the credit card.

If you have a steady job and a good income, your cooperative society should be willing to help you.

You may be able to approach another bank to refinance the debt at a lower rate of interest. Some banks are keen to provide this assistance to acquire you as their customer.

Encourage tourists to stay a few days longer

My friend told me this story about how he encouraged his friends from Australia to stay a few days longer in Singapore.

1. He asked them to visit the Bird Park. It is the best in the world. His friends like to see the many variety of birds, all in one place.

2. He encouraged them to take the MRT train, especially the portion that runs above the ground, ie, the North South Line after Bishan station. On the MRT journey, the can view many HDB estates in Singapore and also the green spaces in the northern part of Singapore (i.e. Kranji).

Rush hour on the MRT train

I took the MRT train to town at 8 am this morning (i.e. rush hour). The train comes at 2 minutes interval. The train was crowded, but not packed. I had to stand all the way, but it is fairly comfortable. I like our MRT train, even during rush hour.

Business Practice of Insurance Company - Another View


Business models usually evolved and got copied from one company to another. I would like to offer my view to mr. tan's observations:

1. From some friends of mine in a sales department of a networking equipment company, a pharmaceutical company, a software company, they told me that it is very common to have attractive prizes such as overseas trips and motivational activities as incentives, aside from high commission and bonuses that they get from selling the products.

2. With regards to "projections" - isn't projections are what they are meant to be - projections? if anyone tell you that projections are "guaranteed", then better inform MAS immediately. No, better still, if you can tell me which company can guaranteed 100% something in 20 years time, I will invest in it myself.

3. Most people in the sales line will meet objections and rejections. This happens in any industry. Unless you are naturally thick-skinned, you have to learn how to manage them or else how are you going to give your solutions to people. In particular to the insurance industry, where many people do not plan for their own future or unexpected demise, you got to learn how to overcome objections in order to help them help themselves.

4. I think every product serves a need. it is not fair to compare a product of yesterday with a new product today. A good fund yesterday may be a lousy fund today even though same performance. Why? because our expectations have risen. I know some MNCs who practice this model of eliminating staff whose performance levels falls below 5% relative to the performance of his/her peers. That means, every year sure must lay off some people. When a person buys a product, it was intended to serve a purpose and as long as the original purpose is achieved, it is should be ok. That's why people must know that buying insurance is not a one time thing. he/she must always buy new one whenever there are new needs to be addressed.

5. It is better for the company to make profits than to make losses. The questions should be - are the profits channeled back as more bonus for clients, training of advisors and creating more value-added solutions to consumers? Let's not be hypocritical - if you are buying equities or bonds, don't you want the companies that are linked to them to be profitable and sustainable companies?

Come on, if I buy a product from Income, I also want the company to be profitable and have money to improve the quality of the advisors and come up with innovative products.

There are two sides of a coin and it's not always fair to say that this company or product or agent is bad or good without considering the context where the event took place. By the way, since MAS is the regulatory body, if such practices are not condoned, how come never shut them down?

Evaluate a study loan

Dear Mr Tan,

I wish to sign for a part-time one year degree course. I have to borrow 50% of the course fee of $15,000.

Here are the terms offered by three organisations. Which is better?

Loan 1:

Rates of Interest per Annum: 4.50%
Maximum repayment period: 12 or 24 months
Loan 2:

Interest Rates: 5.350% p.a. on monthly rest.
Monthly instalment is computed based on loan amount and is fixed throughout the loan period.
Loan 3:

Interest rate: 5.58% p.a. (3.88% for Postgraduate Education Financing)
Enjoy easy repayment period of up to 6 years


You should ask each of the body to quote to you the amount that you have to pay each month on the same basis, i.e.

Amount of loan $7,500
Repayment to start from (specify the date)
Number of repayments, 12, 18 or 24 months
Amount of repayment
Other charges, if any:

It is difficult to compare the interest rate alone, as there are many ways of calculating them. It is best that you ask them to give you the specific monthly installments, so that you can make a simple and direct comparison.

You can also decide on the repayment period, based on your personal budget.

Sunday, November 04, 2007

Investing in foreign currency time deposit

Hi Mr Tan,

I like to ask about Foreign Currency Time Deposits.What are the risks involved if I put my money in Foreign Currency Time Deposits?


The risk is in the currency exchange rate. For example, if you put $10,000 in New Zealand dollars for 1 year to earn 7% interest (compared to 2% in fixed deposit in S$), you will earn 5% more in the interest for 1 year.

At the end of 1 year, you may find that the NZ$ has depreciated by 5% against the S$, in which case, you will be okay.

If NZ$ depreciates by more than 5%, then you will lose on the NZ$ deposit. If NZ$ depreciates by less than 5%, you will still be better off, by investing in NZ$ deposit.

If NZ$ appreciates against the S$, you will get double benefit, first from the higher interest rate (i.e. difference of 5%) and second from the higher exchange rate.

The challenge is to know what is the likely trend of the NZ$. No one can help you to make this decision.

The currency experts do not know, especially in 1 year's time. I do not know.

If you study the trend of NZ$ over the past few years, you will find that it has the potential to move up or down 10% within a short period.

Good luck.

Diversify your risk globally

Dear Mr Tan Kin Lian,

A senior person said the Singapore may survive for 2 to 3 weeks should an military invasion occur. We can not rule out this possiblity.

May I seek your opinion on what would be the impact to the Singpaore dollars
invested in insurance company (e.g. NTUC Income).


I have no idea about what the impact would be.

Perhaps, in the globalised world, you should invest some of your money in a global equity fund. This will help to diversify your risk.

Risky to invest in Gold ETF at current level?

Mr Tan

This is another scheme that is good for stock brokers and the SGX. Not sure if good for CPF members.

Tempt CPF members with enough tantalizing stories and they will surely dig into their retirement savings to have a quick and good punt. No wonder many of them retire poor.

I see no fiduciary considerations underlying all of these wonderful things being offered to the "market".


Dear Member,

Please be informed that with effect from 6 November 2007 (trade date), the
Gold ETF (Stock name: GLD 10US$) will be CPFIS-OA approved and investors
are able to use their CPF monies to trade the Gold ETF. The stock is
denominated in US$.

Low wage for cleaners

I met a school principal. He told me that his school has outsourced the cleaning to contractors.

To win the contract, the contractor had to bid a low price. He engaged cleaners and paid them a low salary. The salary for a cleaner used to be above $700 per month and has since dropped to below $700 on the renewal of the contract. He found out the low salary by talking to the cleaning woman.

The contractor declared the base salary as $300 monthly for contribution to the Central Provident Fund. At this salary, the cleaner will have very little savings for their retirement.

Lesson: The outsourcing of cleaning work to contractors is depressing the wages of the cleaners.

Power of the Internet

Many people are still not aware about the power of the Internet.

I gave a talk in Bishan Community Club to teach the attendees about how to play Sudoku. I had to give some history about this game.

I use Google search and typed in the key words "Sudoku" and "history". It gave several links which provided much more than I needed for my talk.

It is amazing.

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