Einstein's Intelligence Quiz
http://www.business.uiuc.edu/broker/iq.htm
Einstein wrote this quiz last century. He said that 98% of the people in the world cannot solve the quiz.
There are 5 houses in 5 different colors
In each house lives a person with a different nationality
These 5 owners drink a certain type of beverage, smoke a certain brand of cigar, and keep a certain pet
No owners have the same pet, smoke the same brand of cigar or drink the same drink.
Here's the question: Who owns the fish?
1. The Brit lives in a red house
2. The Swede keeps dogs as pets
3. The Dane drinks tea
4. The green house is on the left of the white house
5. The green house owner drinks coffee
6. The person who smokes Pall Mall rears birds
7. The owner of the yellow house smokes Dunhill
8. The man living in the house right in the middle drinks milk
9. The Norwegian lives in the first house
10. The man who smokes Blend lives next door to the one who keeps cats.
11. The man who keeps horses lives next door to the man who smokes Dunhill
12. The owner who smokes Blue Master drinks beer
13. The German smokes Prince
14. The Norwegian lives next to the blue house
15. The man who smokes Blend has a neighbor who drinks water
With these 15 clues the problem is solvable.
Here's the question: Who owns the fish?
You can read the technique to solve this quiz (within 10 minutes) from this webpage: http://www.tankinlian.com/quiz/index.html
Saturday, November 24, 2007
Investment horizon
Hi,
I have some saving to invest. I am undecided about investing in shares or putting them in foreign fixed deposit. Which can give a better return for an investment of at least one year?
REPLY
If you are investing for 10 years or more, it is better to invest in a low cost, large, well diversified equity fund.
Read this FAQ:
http://www.tankinlian.com/faq/returns.html
If you are investing for the short term and is not familiar with the investment market, it is bettter to put your money in a fixed deposit in local currency to earn 2% or to buy government bonds to earn slightly more than 2%.
If you wish to invest in fixed deposit in foreign currency, read this FAQ
http://www.tankinlian.com/faq/foreign.html
I have some saving to invest. I am undecided about investing in shares or putting them in foreign fixed deposit. Which can give a better return for an investment of at least one year?
REPLY
If you are investing for 10 years or more, it is better to invest in a low cost, large, well diversified equity fund.
Read this FAQ:
http://www.tankinlian.com/faq/returns.html
If you are investing for the short term and is not familiar with the investment market, it is bettter to put your money in a fixed deposit in local currency to earn 2% or to buy government bonds to earn slightly more than 2%.
If you wish to invest in fixed deposit in foreign currency, read this FAQ
http://www.tankinlian.com/faq/foreign.html
Insurance to cover working years
Hi Mr. Tan
I read through your FAQ and understand why it is better to buy insurance and investment seperately.
What happens if I am not covered by insurance after age 65 and is hit by a critical illness? Will it be better to buy an ILP which covers me throughout my life?
REPLY:
If you have accumulated sufficient savings at the time of your retirement (say, at age 65), you do not need to be insured for critical illness beyond that age.
A medical insurance plan, such as Medishield or private Shield, is likely to cover you for most of the cost of treatment. If you are insured under Medishield, you can be treated in a subsidised B2 ward.
If you have to work beyond age 65 to accumulate sufficient savings for your retirement, you can have a decreasing term insurance to cover you up to the that later age.
I read through your FAQ and understand why it is better to buy insurance and investment seperately.
What happens if I am not covered by insurance after age 65 and is hit by a critical illness? Will it be better to buy an ILP which covers me throughout my life?
REPLY:
If you have accumulated sufficient savings at the time of your retirement (say, at age 65), you do not need to be insured for critical illness beyond that age.
A medical insurance plan, such as Medishield or private Shield, is likely to cover you for most of the cost of treatment. If you are insured under Medishield, you can be treated in a subsidised B2 ward.
If you have to work beyond age 65 to accumulate sufficient savings for your retirement, you can have a decreasing term insurance to cover you up to the that later age.
Buy Term and Invest the Difference
Dear Mr. Tan,
Why does a life insurance policy give a poor return to the policyholder? Is it due to the cost of insurance protection?
REPLY
The return to the policyholder (i.e. the person who buys the insurance policy) will eventually work out to be:
a) The return earned by the insurance fund from investing the premiums, less
b) The deductions from these returns to cover the expenses, mortality and profit margin.
If the investment fund earns an average of 5% per annum, the return to the policyholder is likely to be reduced by the following:
a) Cost of selling insurance: 1.2%
b) Mortality (i.e. to provide the insurance protection): 0.3%
c) Profit margin to insurance company: 0.5%
The return to the policyholder will, in this case, work out to an average of 3%
If you "buy term and invest the difference", you are likely to get a return of about 4.7% (i.e. after deducting the cost of the life insurance protection).
If you save $300 a month, the difference in payout at the end of 20 years is:
Return of 4.7% p.a. $115,000
Return of 3% p.a. $ 97,000
Difference $ 18,000 or 18% more than $95,000
Why does a life insurance policy give a poor return to the policyholder? Is it due to the cost of insurance protection?
REPLY
The return to the policyholder (i.e. the person who buys the insurance policy) will eventually work out to be:
a) The return earned by the insurance fund from investing the premiums, less
b) The deductions from these returns to cover the expenses, mortality and profit margin.
If the investment fund earns an average of 5% per annum, the return to the policyholder is likely to be reduced by the following:
a) Cost of selling insurance: 1.2%
b) Mortality (i.e. to provide the insurance protection): 0.3%
c) Profit margin to insurance company: 0.5%
The return to the policyholder will, in this case, work out to an average of 3%
If you "buy term and invest the difference", you are likely to get a return of about 4.7% (i.e. after deducting the cost of the life insurance protection).
If you save $300 a month, the difference in payout at the end of 20 years is:
Return of 4.7% p.a. $115,000
Return of 3% p.a. $ 97,000
Difference $ 18,000 or 18% more than $95,000
By separating insurance from investment, you will earn 18% more (in this case), over a period of 20 years.
The difference comes mainly from the selling cost and profit margin of the insurance company.
Buy term first
Hi Mr Tan,
I am enquiring about term or life insurance. I saw your article on "Take a term insurance and invest the rest". How should I be going about it then?
I am a non-risk taker, and want to policy which provide comprehensive cover. What is your recommendation?
REPLY:
I suggest that you buy term insurance first. You can save your money in the bank and invest it at a later date. I shall be recommending some low cost investment funds in a few month's time.
You can get the indicative cost for the term insurance from this FAQ:
http://www.tankinlian.com/faq/choice.html
I am enquiring about term or life insurance. I saw your article on "Take a term insurance and invest the rest". How should I be going about it then?
I am a non-risk taker, and want to policy which provide comprehensive cover. What is your recommendation?
REPLY:
I suggest that you buy term insurance first. You can save your money in the bank and invest it at a later date. I shall be recommending some low cost investment funds in a few month's time.
You can get the indicative cost for the term insurance from this FAQ:
http://www.tankinlian.com/faq/choice.html
Investment fund with no front end charge
Hi Mr Tan
I am 22 years old. I wish to start a investment plan. You had advised to set aside 10% to 20% of my salary for investing, and to invest in unit trust or insurance funds.
You said that insurance products does not provide a satisfactory return, compared to an investment fund.
What kind of insurance funds should I invest in. I wish to have a plan that have a low front end charge, so that I can see breakeven earlier?
REPLY
I suggest that you invest in the Combined Fund through the Ideal Plan (ID7) from NTUC Income. You can buy this plan directly from the Business Center.
It allows you to invest 100% of your monthly savings. You can buy a decreasing term insurance to give life insurance protection.
Read this FAQ:http://www.tankinlian.com/faq/fptips.html
Here is the info on the business center:
http://www.income.com.sg/businesscentre/
I am 22 years old. I wish to start a investment plan. You had advised to set aside 10% to 20% of my salary for investing, and to invest in unit trust or insurance funds.
You said that insurance products does not provide a satisfactory return, compared to an investment fund.
What kind of insurance funds should I invest in. I wish to have a plan that have a low front end charge, so that I can see breakeven earlier?
REPLY
I suggest that you invest in the Combined Fund through the Ideal Plan (ID7) from NTUC Income. You can buy this plan directly from the Business Center.
It allows you to invest 100% of your monthly savings. You can buy a decreasing term insurance to give life insurance protection.
Read this FAQ:http://www.tankinlian.com/faq/fptips.html
Here is the info on the business center:
http://www.income.com.sg/businesscentre/
ILP - single or regular premium?
Hi, Mr. Tan,
Is it better to buy a single premium ideal plan or regular premium one? It seems for regular premium ideal plan, I need to pay $4/mth policy fee for whole life. But for single premium, they only charge one time $50 for opening account.
But the advisor stated that regular premium, though charge more, can be less risky.
REPLY:
If you have a lump sum, it is better to invest in a single premium, as the charge is lower.
If you do not wish to take the risk of investing a large sum at one time, you can break into three tranches and invest them over a few months (as recurring single premium).
The regular premium plan is intended for you to save a monthly sum over 10, 20 or more years.
Is it better to buy a single premium ideal plan or regular premium one? It seems for regular premium ideal plan, I need to pay $4/mth policy fee for whole life. But for single premium, they only charge one time $50 for opening account.
But the advisor stated that regular premium, though charge more, can be less risky.
REPLY:
If you have a lump sum, it is better to invest in a single premium, as the charge is lower.
If you do not wish to take the risk of investing a large sum at one time, you can break into three tranches and invest them over a few months (as recurring single premium).
The regular premium plan is intended for you to save a monthly sum over 10, 20 or more years.
Buy life annuity at 62
Dear Mr. Tan,
The current 4% interest for retirement account is only for the next 2 year. Is it better to look for an annuity product that can give better return, or to leave the money with CPF?
REPLY
I suggest that you wait and see if the interest rate for the retirement account is maintained at 4% or more, beyond two years. I think that it may go higher.
You can wait until 62 to decide on buying a life annuity. You do not need to decide before that.
The current 4% interest for retirement account is only for the next 2 year. Is it better to look for an annuity product that can give better return, or to leave the money with CPF?
REPLY
I suggest that you wait and see if the interest rate for the retirement account is maintained at 4% or more, beyond two years. I think that it may go higher.
You can wait until 62 to decide on buying a life annuity. You do not need to decide before that.
Friday, November 23, 2007
Liquidity of STI Exchange Traded Funds
Hi Mr. Tan,
You recommended investing in the STI exchange traded fund. But, I find the volume to be small. Just 1 or 2 lots a day. How can I accumulate a large volume in this thin market?
REPLY
If you wish to buy a large quantity of ETF, the fund manager (i.e. State Streets) will sell the ETF units to you and create new units by buying the underlying shares from the market.
Similarly, if you wish to sell a large quantity of ETF, the fund manager will buy the ETF units from you and redeem the units by selling the underlying shares to the market.
In actual fact, the fund manager makes the market. They will do it at the fair price of the ETF shares (which should reflect the value of the underlying shares). There is no lack of liquidity.
You recommended investing in the STI exchange traded fund. But, I find the volume to be small. Just 1 or 2 lots a day. How can I accumulate a large volume in this thin market?
REPLY
If you wish to buy a large quantity of ETF, the fund manager (i.e. State Streets) will sell the ETF units to you and create new units by buying the underlying shares from the market.
Similarly, if you wish to sell a large quantity of ETF, the fund manager will buy the ETF units from you and redeem the units by selling the underlying shares to the market.
In actual fact, the fund manager makes the market. They will do it at the fair price of the ETF shares (which should reflect the value of the underlying shares). There is no lack of liquidity.
Have a budget
You must have a budget. Allocate your earnings in the order or priority to the mandatory expenses, such as taxes, repayment of your housing loan and the necessary expenditure for transport, food, utilities, telephone. Be frugal.
Set aside not more than 3% on your insurance and 10% to 15% as savings for the future. If you still have money left, you can use it for entertainment, holidays and splurging,
Set aside not more than 3% on your insurance and 10% to 15% as savings for the future. If you still have money left, you can use it for entertainment, holidays and splurging,
Personal savings for your retirement
Most people need personal savings to supplement the CPF savings. You should set aside at least 10% of your earnings as savings for the future. If possible, the saving rate should be increased to 15%.
A saving rate of 15% over a working career of 40 years can provide income of about 40% of the pre-retirement income, with some regular adjustment to compensate for inflation. This will be sufficient to give a comfortable standard of living to the retiree.
Look for an attractive rate of return on your personal savings. Many insurance and investment products that are currently provided in the market do not give an attractive return.
A saving rate of 15% over a working career of 40 years can provide income of about 40% of the pre-retirement income, with some regular adjustment to compensate for inflation. This will be sufficient to give a comfortable standard of living to the retiree.
Look for an attractive rate of return on your personal savings. Many insurance and investment products that are currently provided in the market do not give an attractive return.
CPF as a source of savings for retirement
Many Singaporeans rely on the Central Provident Fund as their main source of savings for retirement.
In recent years, many found their CPF savings to be inadequate for retirement. In 1999, only one-third of people reaching age 55 had sufficient savings to meet the Minimum Sum of $60,000. The Minimum Sum has since been raised to $99,600 for people who reached age 55 in 2007.
The Minimum Sum is just sufficient to meet the very basic cost of living in Singapore. For a more comfortable standard of living, you need at least two times of this Minimum Sum.
Many people over-invest on a property. They buy the most expensive property that can be financed by their CPF savings and their spare income. It should be avoided
As a rule of thumb, you should buy a property based on five to seven years of your family income.
Do not make excessive withdrawals for your medical expenses or medical insurance premiums. Try to leave the savings in the CPF as it can earn interest at 5% on the Medisave and Special accounts.
In recent years, many found their CPF savings to be inadequate for retirement. In 1999, only one-third of people reaching age 55 had sufficient savings to meet the Minimum Sum of $60,000. The Minimum Sum has since been raised to $99,600 for people who reached age 55 in 2007.
The Minimum Sum is just sufficient to meet the very basic cost of living in Singapore. For a more comfortable standard of living, you need at least two times of this Minimum Sum.
Many people over-invest on a property. They buy the most expensive property that can be financed by their CPF savings and their spare income. It should be avoided
As a rule of thumb, you should buy a property based on five to seven years of your family income.
Do not make excessive withdrawals for your medical expenses or medical insurance premiums. Try to leave the savings in the CPF as it can earn interest at 5% on the Medisave and Special accounts.
Quotes from Einstein
Source: http://www.quoteworld.org/category/intelligence/author/albert-einstein
"My life is a simple thing that would interest no one. It is a known fact that I was born and that is all that is necessary."
"Intellectuals solve problems; geniuses prevent them."
"If the facts don't fit the theory, change the facts."
"Great spirits have always found violent opposition from mediocre minds. The latter cannot understand it when a man does not thoughtlessly submit to hereditary prejudices but honestly and courageously uses his intelligence and fulfills the duty to express the results of his thoughts in clear form."
"The grand aim of all science is to cover the greatest number of empirical facts by logical deduction from the smallest number of hypotheses or axioms."
"Intellectual growth should commence at birth and cease only at death."
"Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius -- and a lot of courage -- to move in the opposite direction."
"My pacifism is an instinctive feeling, a feeling that possesses me because the murder of men is disgusting. My attitude is not derived from any intellectual theory but is based on my deepest antipathy to every kind of cruelty and hatred."
"It is not the fruits of scientific research that elevate man and enrich his nature. but the urge to understand, the intellectual work, creative or receptive."
"It's not that I'm so smart, it's just that I stay with problems longer."
"My life is a simple thing that would interest no one. It is a known fact that I was born and that is all that is necessary."
"Intellectuals solve problems; geniuses prevent them."
"If the facts don't fit the theory, change the facts."
"Great spirits have always found violent opposition from mediocre minds. The latter cannot understand it when a man does not thoughtlessly submit to hereditary prejudices but honestly and courageously uses his intelligence and fulfills the duty to express the results of his thoughts in clear form."
"The grand aim of all science is to cover the greatest number of empirical facts by logical deduction from the smallest number of hypotheses or axioms."
"Intellectual growth should commence at birth and cease only at death."
"Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius -- and a lot of courage -- to move in the opposite direction."
"My pacifism is an instinctive feeling, a feeling that possesses me because the murder of men is disgusting. My attitude is not derived from any intellectual theory but is based on my deepest antipathy to every kind of cruelty and hatred."
"It is not the fruits of scientific research that elevate man and enrich his nature. but the urge to understand, the intellectual work, creative or receptive."
"It's not that I'm so smart, it's just that I stay with problems longer."
Singapore Market is now approaching 3,300
Dear Mr. Tan,
I want to thank you for your advice to wait until the Singapore market comes down to 3,300 index. I held back my investment and can now buy it at a cheaper price. The index is now approaching this level.
Is it save to invest now? Is there still a risk of a recession in America? Will there be a bigger crash?
REPLY
At the current level, the Singapore stockmarket has fallen 15% below its recent peak. In my view, this is a good level for a long term investor.
There is always a risk (but it is uncertain) of a crash. This happened in 1987, 1997 and 2002. Something may happen to trigger a crash. However, looking at the past experience, you find that the market will eventually recover.
I suggest that you adopt the following approach:
1. Identify the amount that you wish to invest for the long term (10 years or more)
2. Invest one third of this amount now
3. Invest the remaining two thirds over the next two months
If there is a crash, you can invest at a lower price to average down the cost of your investments. If the market moves up, it is good to invest in a recovering market.
Note: I intend to adopt this method for my personal savings (for which a large portion is still in cash). I will invest in the STI Exchange Traded Fund in the stockmarket.
I want to thank you for your advice to wait until the Singapore market comes down to 3,300 index. I held back my investment and can now buy it at a cheaper price. The index is now approaching this level.
Is it save to invest now? Is there still a risk of a recession in America? Will there be a bigger crash?
REPLY
At the current level, the Singapore stockmarket has fallen 15% below its recent peak. In my view, this is a good level for a long term investor.
There is always a risk (but it is uncertain) of a crash. This happened in 1987, 1997 and 2002. Something may happen to trigger a crash. However, looking at the past experience, you find that the market will eventually recover.
I suggest that you adopt the following approach:
1. Identify the amount that you wish to invest for the long term (10 years or more)
2. Invest one third of this amount now
3. Invest the remaining two thirds over the next two months
If there is a crash, you can invest at a lower price to average down the cost of your investments. If the market moves up, it is good to invest in a recovering market.
Note: I intend to adopt this method for my personal savings (for which a large portion is still in cash). I will invest in the STI Exchange Traded Fund in the stockmarket.
NTUC Income Business Center
Hi, Mr. Tan,
I met up with a consultant at the NTUC Income Business Center. I invested in the balanced fund through the IDEAL plan by investing $300 each month. It is great that they don't charge 45% advisory fee.
When I met five insurance agents earlier. I was confused with their recommendation. This time, I have made up my mind that I want to buy term insurance and to invest my savings in an investment fund. I do now wish to hear about the Limited Premium plan or the Revosave.
I told him directly what I want to buy and how much I want to assure. (I found it is really hard for an advisor to direct you straight to term policy.
The procedure was made very fast and I signed off for the term insurance. Afterwards, I signed the IDEAL plan and chose the Balanced Fund which I think is really will be suitable for me. I felt that my hard work paid off, I bought the IDEAL plan which I truely feel is ideal and the term policy which I felt enough for me.
Thanks again for your great blog and great advice.
REPLY:
I am glad that you have now found the solution to your financial plan. I will post your story to encourage other people to visit the NTUC Income Business Center.
I met up with a consultant at the NTUC Income Business Center. I invested in the balanced fund through the IDEAL plan by investing $300 each month. It is great that they don't charge 45% advisory fee.
When I met five insurance agents earlier. I was confused with their recommendation. This time, I have made up my mind that I want to buy term insurance and to invest my savings in an investment fund. I do now wish to hear about the Limited Premium plan or the Revosave.
I told him directly what I want to buy and how much I want to assure. (I found it is really hard for an advisor to direct you straight to term policy.
The procedure was made very fast and I signed off for the term insurance. Afterwards, I signed the IDEAL plan and chose the Balanced Fund which I think is really will be suitable for me. I felt that my hard work paid off, I bought the IDEAL plan which I truely feel is ideal and the term policy which I felt enough for me.
Thanks again for your great blog and great advice.
REPLY:
I am glad that you have now found the solution to your financial plan. I will post your story to encourage other people to visit the NTUC Income Business Center.
Logic Puzzles
Hi Mr. Tan,
I enjoy the Einstein Intelligence Test. Do you have more logic puzzles of this type?
REPLY
I have seen similar puzzles before, in some magazines and books. But I am not able to locate them now.
If other readers know of similar puzzles, please send an e-mail to me at kinlian@gmail.com.
In the meantime, I suggest that you try the Logic9 puzzles:
http://project.bestsimulation.sg/logic9v4/
I enjoy the Einstein Intelligence Test. Do you have more logic puzzles of this type?
REPLY
I have seen similar puzzles before, in some magazines and books. But I am not able to locate them now.
If other readers know of similar puzzles, please send an e-mail to me at kinlian@gmail.com.
In the meantime, I suggest that you try the Logic9 puzzles:
http://project.bestsimulation.sg/logic9v4/
Thursday, November 22, 2007
Avoid credit card rollovers
Someone told me that many young people now take a holiday to be paid through by rollovers in their credit card. They are not aware about the additional cost.
Here is my calculation.
If you charge $5,000 to your credit card and pays by rollover over 24 months at an interest rate of 2% per month, your additional interest cost is $1,200 (i.e. 24% of $5,000).
If you save first and take a holiday later, you will pay $1,200 less for your holiday.
Here is my calculation.
If you charge $5,000 to your credit card and pays by rollover over 24 months at an interest rate of 2% per month, your additional interest cost is $1,200 (i.e. 24% of $5,000).
If you save first and take a holiday later, you will pay $1,200 less for your holiday.
Budget for insurance
Dear Mr. Tan,
I earn $3,000 a month. An insurance agent recommended a life insurance policy plan for $350. When I asked for term insurance (after reading your blog), I was given a combination that cost $150. Is this too much?
REPLY
I suggest that you set aside 2% of your monthly income (i.e. $60) for your insurance coverage (i.e term and medical insurance) and save 10% to 15% of your monthly income in a low cost investment fund.
If you save $300 a month and invest it over 30 years to earn 5% per annum, you will get $240,000. (If you save $300 + $60 in a life insurance policy, you are likely to get less than $200,000 at the end of 30 years).
You should tell the insurance agent that your budget is $60 a month for the insurance coverage. Ask them to recommend the best combination of term and medical insurance for this monthly budget. You can ask three agents to give you their recommendation.
As the agent does not earn much by selling you the low cost coverage, you should not expect them to see you at your home. Give them a call and ask them to send their recommendation to you through an e-mail. You can discuss with them over the telephone.
I earn $3,000 a month. An insurance agent recommended a life insurance policy plan for $350. When I asked for term insurance (after reading your blog), I was given a combination that cost $150. Is this too much?
REPLY
I suggest that you set aside 2% of your monthly income (i.e. $60) for your insurance coverage (i.e term and medical insurance) and save 10% to 15% of your monthly income in a low cost investment fund.
If you save $300 a month and invest it over 30 years to earn 5% per annum, you will get $240,000. (If you save $300 + $60 in a life insurance policy, you are likely to get less than $200,000 at the end of 30 years).
You should tell the insurance agent that your budget is $60 a month for the insurance coverage. Ask them to recommend the best combination of term and medical insurance for this monthly budget. You can ask three agents to give you their recommendation.
As the agent does not earn much by selling you the low cost coverage, you should not expect them to see you at your home. Give them a call and ask them to send their recommendation to you through an e-mail. You can discuss with them over the telephone.
Minimum income for retirement
What is the monthly income that is needed for a couple to live on during retirement?
I discussed this question with several people above age 50 from the low income sector. We arrived at a sum of $700 a month, comprising of.
Food ($15 a day): $450
Utilities: $70
Medical: $50
Transport: $50
Telephone: $30
Miscellaneous: $50
Total: $700
A female needs a capital sum of $160,000 at age 65 to buy a life annuity that pays $700 a month. A male needs $150,000.
Most of the participants did not have this capital sum. They cannot afford to retire and will have to continue to work beyond 65 years.
I discussed this question with several people above age 50 from the low income sector. We arrived at a sum of $700 a month, comprising of.
Food ($15 a day): $450
Utilities: $70
Medical: $50
Transport: $50
Telephone: $30
Miscellaneous: $50
Total: $700
A female needs a capital sum of $160,000 at age 65 to buy a life annuity that pays $700 a month. A male needs $150,000.
Most of the participants did not have this capital sum. They cannot afford to retire and will have to continue to work beyond 65 years.
Wednesday, November 21, 2007
CPF provides a good return
Hi, Mr Tan,
I have been reading your blog. Thanks for your time in sharing with all the readers your views & observations.
I have a question regards to CPF. I had made a CPF transfer from OA to SA this year. My money in the CPF exceed the $40k that qualifies for 1% extra.
I am thinking of taking out the excess in the SA to invest in NTUC Prime fund as it has one of the lowest cost. Do you think that is a good choice ? Or should I diversify to others ?
REPLY:
In my personal view, it is better to keep in the special account as it pays 4% interest and is free of risk.
The return from the Prime Fund is uncertain. As the stockmarket is now at a high level, and there is still much uncertainty in the global economy, it is better to keep your money in risk free investment for the time being.
You can review the situation next year.
I have been reading your blog. Thanks for your time in sharing with all the readers your views & observations.
I have a question regards to CPF. I had made a CPF transfer from OA to SA this year. My money in the CPF exceed the $40k that qualifies for 1% extra.
I am thinking of taking out the excess in the SA to invest in NTUC Prime fund as it has one of the lowest cost. Do you think that is a good choice ? Or should I diversify to others ?
REPLY:
In my personal view, it is better to keep in the special account as it pays 4% interest and is free of risk.
The return from the Prime Fund is uncertain. As the stockmarket is now at a high level, and there is still much uncertainty in the global economy, it is better to keep your money in risk free investment for the time being.
You can review the situation next year.
Investing in shares
Hi Mr Tan,
Can I ask you when buy a share at price $3+ hold on to the share until it reach $9 or sell it in between and buy it again when the price goes down. Please enlighten me.
Must I monitor the shares through out the day. By the way, now market is down any good shares can I buy?
REPLY
I suggest that you do not try to buy shares on your own. It requires people who are knowledgeable about the market.
It is better for you to invest in a large, well diversified, low cost fund.
Read this FAQ:
http://www.tankinlian.com/faq/returns.html
Can I ask you when buy a share at price $3+ hold on to the share until it reach $9 or sell it in between and buy it again when the price goes down. Please enlighten me.
Must I monitor the shares through out the day. By the way, now market is down any good shares can I buy?
REPLY
I suggest that you do not try to buy shares on your own. It requires people who are knowledgeable about the market.
It is better for you to invest in a large, well diversified, low cost fund.
Read this FAQ:
http://www.tankinlian.com/faq/returns.html
Experience in talking to insurance agents
Hi, Mr. Tan,
I would like to share my experience with you.
I met five different agents. I am not able to identify the difference in their advice. Three agents strongly promotes Investment Linked Insurance by illustrating to me the working of dollar cost averaging. I already knew it, after being eduated by your blog.
I asked them about term insurance, but they did not want to talk about it. Instead, they try to get me to buy traditional life insurance, saying that term has strong disadvantage since it doesn't cover crisis after the age of 65.
Two other agents told me that term covering $150,000 is not enough. They recommended $350,000. They showed some calculation to me, but I don't really understand. They recommended a combination of term and other insurance that take away $139 a month.
I do believe that all insurance agent does have the professionalism to advise to their client. And it is true since the advice they gave are all so similar, "BUY as many as you can". After talking to the agents, I find that noobody would like to make a deal with low commission.
I do believe there are some insurance agents in this world would really take care of us by considering our real situation and be responsible for us and our money. But I don't think I will be the lucky one to meet them, so I decide to give up.
Some years later, after saving enough money, I will probably take a master degree on finance or related field. If we cannot trust anyone, the only thing we can do is to equip ourselves with financial knowledge so that we won't be easily fooled.
I do sincerely wish that Mr. Tan and your family happy for ever since you are the only one in the insurance industry I know would like to taking care of the general public in Singpore by educating them. Thanks again for educating all singaporean and foreigners by writing your blog.
I would like to share my experience with you.
I met five different agents. I am not able to identify the difference in their advice. Three agents strongly promotes Investment Linked Insurance by illustrating to me the working of dollar cost averaging. I already knew it, after being eduated by your blog.
I asked them about term insurance, but they did not want to talk about it. Instead, they try to get me to buy traditional life insurance, saying that term has strong disadvantage since it doesn't cover crisis after the age of 65.
Two other agents told me that term covering $150,000 is not enough. They recommended $350,000. They showed some calculation to me, but I don't really understand. They recommended a combination of term and other insurance that take away $139 a month.
I do believe that all insurance agent does have the professionalism to advise to their client. And it is true since the advice they gave are all so similar, "BUY as many as you can". After talking to the agents, I find that noobody would like to make a deal with low commission.
I do believe there are some insurance agents in this world would really take care of us by considering our real situation and be responsible for us and our money. But I don't think I will be the lucky one to meet them, so I decide to give up.
Some years later, after saving enough money, I will probably take a master degree on finance or related field. If we cannot trust anyone, the only thing we can do is to equip ourselves with financial knowledge so that we won't be easily fooled.
I do sincerely wish that Mr. Tan and your family happy for ever since you are the only one in the insurance industry I know would like to taking care of the general public in Singpore by educating them. Thanks again for educating all singaporean and foreigners by writing your blog.
Tuesday, November 20, 2007
Save $840 a year
Dear Mr Tan,
My wife and I are unemployed presently. I have been paying premium for the following two policies for past few years. Are we having double coverage?
1. Enhanced Incomeshield with Plus Rider
2. Group Medical Insurance from my former employer. Annual premium is $840. Max coverage per year is $6000 and max per lifetime is $50,000. No co-payment or deductible but there is sub-limits on all benefit items.
Do we need the Group Medical Insurance?
REPLY:
The Enhanced Incomeshield WITH Plus Rider is sufficient for you and your wife. Both of you do not the Group Medical Insurance plan, as it is double coverage. You can save $840 a year.
My wife and I are unemployed presently. I have been paying premium for the following two policies for past few years. Are we having double coverage?
1. Enhanced Incomeshield with Plus Rider
2. Group Medical Insurance from my former employer. Annual premium is $840. Max coverage per year is $6000 and max per lifetime is $50,000. No co-payment or deductible but there is sub-limits on all benefit items.
Do we need the Group Medical Insurance?
REPLY:
The Enhanced Incomeshield WITH Plus Rider is sufficient for you and your wife. Both of you do not the Group Medical Insurance plan, as it is double coverage. You can save $840 a year.
How to clear off a credit card debt
Dear Mr. Tan,
I am desperate to find ways to clear my debt. I need your advice.
I earn a monthly salary, after CPF, of $2,600. After paying my credit cards, loans, tax, insurance, Pub & phone bills, I have only $500 for my expenses. I use my credit card to pay additional expenses and the amount owing keeps increasing due to the interest charges. My total debt has now increased to $34,000.
I am not able to cope. Should I declare bankruptcy or is there a better way to clear my debt?
REPLY
You can get advice from this organisation:
Credit Counselling Singapore
http://www.ccs.org.sg/ccs.html
The can find an adviser who can help you to find a solution to clear your debt.
I am desperate to find ways to clear my debt. I need your advice.
I earn a monthly salary, after CPF, of $2,600. After paying my credit cards, loans, tax, insurance, Pub & phone bills, I have only $500 for my expenses. I use my credit card to pay additional expenses and the amount owing keeps increasing due to the interest charges. My total debt has now increased to $34,000.
I am not able to cope. Should I declare bankruptcy or is there a better way to clear my debt?
REPLY
You can get advice from this organisation:
Credit Counselling Singapore
http://www.ccs.org.sg/ccs.html
The can find an adviser who can help you to find a solution to clear your debt.
Singapore Polytechnic
The Singapore Polytechnic played an important role in the production of the S & T and technical manpower required for Singapore’s development. Many people were involved. They went through some difficult times.
Dr. Lee Kum Tatt has spent a great part of his life in building the S & T and technical manpower and institutions in Singapore. He now shares with us some of his experiences with some inside information of what happened in the earlier days of Singapore’s development. This will form the next topic of his Blog.
www.leekumtatt.blogspot.com
Dr. Lee Kum Tatt has spent a great part of his life in building the S & T and technical manpower and institutions in Singapore. He now shares with us some of his experiences with some inside information of what happened in the earlier days of Singapore’s development. This will form the next topic of his Blog.
www.leekumtatt.blogspot.com
Selling a put option
When you invest in a Dual Currency Investment, you are selling a Put option. How does it work?
1. You place your money in fixed deposit in the foreign currency at an interest rate of x%
2. You give a put option to the bank to pass them the appreciation in the foreign currency for y%.
3. You take the risk of a fall in the foreign currency.
You get a total return of x% + y% from the investment. This is higher than the interest (x%) on the deposit in foreign currency.
Are you getting the correct price (y%) for the put option? Quite likely, you are getting much less than the true price for the option.
For example, if the value of the put option is 2% (i.e. to compensate you for the risk), you may be offered only 0.5%. The remainder (i.e 1.5%) goes towards the expenses and profit of the bank.
As you are not familiar with the correct price of the put option, it is best that you avoid this type of investment completely.
1. You place your money in fixed deposit in the foreign currency at an interest rate of x%
2. You give a put option to the bank to pass them the appreciation in the foreign currency for y%.
3. You take the risk of a fall in the foreign currency.
You get a total return of x% + y% from the investment. This is higher than the interest (x%) on the deposit in foreign currency.
Are you getting the correct price (y%) for the put option? Quite likely, you are getting much less than the true price for the option.
For example, if the value of the put option is 2% (i.e. to compensate you for the risk), you may be offered only 0.5%. The remainder (i.e 1.5%) goes towards the expenses and profit of the bank.
As you are not familiar with the correct price of the put option, it is best that you avoid this type of investment completely.
Monday, November 19, 2007
Car Pooling
We need to promote car pooling.
Many of the guests attending an event usually come on their own, in a separate car. The road to the venue is usually congested. There is inadequate parking spaces. After the event, there is a long wait to move out of the car park.
If there is an efficient way to organise the guests, perhaps the number of cars coming to the event can be reduced by half.
Many of the guests attending an event usually come on their own, in a separate car. The road to the venue is usually congested. There is inadequate parking spaces. After the event, there is a long wait to move out of the car park.
If there is an efficient way to organise the guests, perhaps the number of cars coming to the event can be reduced by half.
Dual Currency investment
Dear Mr. Tan,
My bank offered me a high rate of interest on a dual currency deposit. Is it safe to invest in this type of deposit?
REPLY
A Dual Currency Investment is not a deposit. It is an investment product. You are given a higher interest rate, but you face the risk of suffering the loss on the original investment, if the currency rate goes against you.
The principal sum and interest are repayable on maturity in the base currency (i.e in which the investment is made) or the linked currency, whichever is the lower.
If the linked currency goes up, you will only get the fixed return. If it goes down, you will have to suffer a loss. Your loss can be quite substantial.
Usually, the bank does not offer an interest rate that is sufficient to compensate you for the risk.
If you are willing to take the currency risk, it is better to invest in the foreign currency directly. If the currency appreciates, you will get the gain from the currency and the interest rate (which is likely to be higher than in Singapore dollars). The total gain is likely to be better than the interest rate paid on the Dual Currency Investment.
Read this FAQ:
http://www.tankinlian.com/faq/duali.html
My bank offered me a high rate of interest on a dual currency deposit. Is it safe to invest in this type of deposit?
REPLY
A Dual Currency Investment is not a deposit. It is an investment product. You are given a higher interest rate, but you face the risk of suffering the loss on the original investment, if the currency rate goes against you.
The principal sum and interest are repayable on maturity in the base currency (i.e in which the investment is made) or the linked currency, whichever is the lower.
If the linked currency goes up, you will only get the fixed return. If it goes down, you will have to suffer a loss. Your loss can be quite substantial.
Usually, the bank does not offer an interest rate that is sufficient to compensate you for the risk.
If you are willing to take the currency risk, it is better to invest in the foreign currency directly. If the currency appreciates, you will get the gain from the currency and the interest rate (which is likely to be higher than in Singapore dollars). The total gain is likely to be better than the interest rate paid on the Dual Currency Investment.
Read this FAQ:
http://www.tankinlian.com/faq/duali.html
Low cost investment funds
A few people have written to ask for my advice on the low cost funds that they can invest in. Here are some options.
1. STI ETF. You can invest in a minimum of 100 units of this fund. At the current price, the investment is about $3,500. You can accumulate your savings and buy the ETF every few months. Alternatively, you can open an online account with a stockbroker which allows you to purchase odd shares of the ETF under a special plan. (Check with Philipps Securities).
2. Unit Trust. There are some low cost unit trust that accept monthly savings. I am looking for a financial adviser who is keen to promote these funds.
3. Ideal plan. You can buy the Ideal plan directly from the business center of NTUC Income and have 100% of the monthly savings to be invested in the combined fund.
Read these FAQs:
http://www.tankinlian.com/faq/fptips.html
http://www.tankinlian.com/faq/choice.html
1. STI ETF. You can invest in a minimum of 100 units of this fund. At the current price, the investment is about $3,500. You can accumulate your savings and buy the ETF every few months. Alternatively, you can open an online account with a stockbroker which allows you to purchase odd shares of the ETF under a special plan. (Check with Philipps Securities).
2. Unit Trust. There are some low cost unit trust that accept monthly savings. I am looking for a financial adviser who is keen to promote these funds.
3. Ideal plan. You can buy the Ideal plan directly from the business center of NTUC Income and have 100% of the monthly savings to be invested in the combined fund.
Read these FAQs:
http://www.tankinlian.com/faq/fptips.html
http://www.tankinlian.com/faq/choice.html
Sunday, November 18, 2007
Foreign Currency Fixed Deposit
Should you invest in a foreign currency fixed deposit to earn a higher rate of interest? What are the risks? How can they be managed?
Read this FAQ:
http://www.tankinlian.com/faq/foreign.html
Read this FAQ:
http://www.tankinlian.com/faq/foreign.html
Dual Currency Investment
Should you invest in a Dual Currency Investment?
I have summarised the various postings in this updated FAQ:
http://www.tankinlian.com/faq/duali.html
I hope that you find it comprehensive and clear.
I have summarised the various postings in this updated FAQ:
http://www.tankinlian.com/faq/duali.html
I hope that you find it comprehensive and clear.
Buying a Shield plan
Which Shield plan should you buy to cover your medical expenses?
I have summarised the various postings on this topic in an updated FAQ:
http://www.tankinlian.com/faq/shield.html
I hope that you find it to be comprehensive and clear.
I have summarised the various postings on this topic in an updated FAQ:
http://www.tankinlian.com/faq/shield.html
I hope that you find it to be comprehensive and clear.
Talk to Three Advisers
I received an e-mail from someone seeking my advice. She saw an insurance adviser who offered three plans.
The recommendations were skewed to get her to move away from term insurance and to buy a limited premium product.
I advised her to adopt the following approach:
1. Talk to three advisers (from the same or different companies)
2. Buy from the adviser who gives you a recommendation in your best interest
3. Do not buy from the adviser who tries to convince you to buy an expensive product
4. Trust your common sense; do not allow the adviser to confuse you.
The recommendations were skewed to get her to move away from term insurance and to buy a limited premium product.
I advised her to adopt the following approach:
1. Talk to three advisers (from the same or different companies)
2. Buy from the adviser who gives you a recommendation in your best interest
3. Do not buy from the adviser who tries to convince you to buy an expensive product
4. Trust your common sense; do not allow the adviser to confuse you.
Lucky to be in Singapore
COMMENT POSTED IN MY BLOG.
I agree that packed trains has a few inconveniences. But I would like to highlight that compared with other countries, we are much much better. Have you tried rush hour in Japan, China, New York or Hong Kong? Too bad for women and people sensitive to body odours because this is the lifestyle of the urban city - the people who complained may be too spoilt and expected everything to be perfect.
One reader mentioned about food. I think it's not too bad - just get the food court/stall uncle/aunty to add more rice for you - you usually get it free or add $0.30 more.
Again, compared this with other countries which has been hit by bad weather or poor economy - please know that they have no food to eat.
Before complaining about Singapore traffic system or inflation, look at the bright side, we are much better off than many countries in the world.
1. It is logical that it costs more to fill up petrol tank. It is a worldwide phenomenon due to rise in old price - supply and due and rising of need for oil in developing countries.
2. It is logical to expect ERP increase as this is due to too many people wanting to use the same stretch of road at peak hours. There are other roads that you can take with using the roads with ERP gantry - the time is longer but you avoid the ERP. I always try to leave home before 7 am and leave work after 10pm to avoid ERP.
3. It is logical parking charges are expensive because lack of parking lot and therefore due to supply and demand, the price goes up. Park and ride system is a good idea too.
Think another way: using our roads cost more means progress for the nation. Who wants to go back to old days of uneven kampung roads with potholes, longkang and no traffic lights?
This progress is the result of years of good governance and the support that the people gave to the efficient and forward-looking government.
The fact that you can see and write on this blog showed that you are better than the other 80% of the world where they don't even have easily assessable broadband, free speech and computers.
The next time you complain about modern conveniences that Singapore has, think Myammer, Thailand, Africa, Nepal, Timbuktu and you will realise how lucky and wonderful we are in this blessed country.
I agree that packed trains has a few inconveniences. But I would like to highlight that compared with other countries, we are much much better. Have you tried rush hour in Japan, China, New York or Hong Kong? Too bad for women and people sensitive to body odours because this is the lifestyle of the urban city - the people who complained may be too spoilt and expected everything to be perfect.
One reader mentioned about food. I think it's not too bad - just get the food court/stall uncle/aunty to add more rice for you - you usually get it free or add $0.30 more.
Again, compared this with other countries which has been hit by bad weather or poor economy - please know that they have no food to eat.
Before complaining about Singapore traffic system or inflation, look at the bright side, we are much better off than many countries in the world.
1. It is logical that it costs more to fill up petrol tank. It is a worldwide phenomenon due to rise in old price - supply and due and rising of need for oil in developing countries.
2. It is logical to expect ERP increase as this is due to too many people wanting to use the same stretch of road at peak hours. There are other roads that you can take with using the roads with ERP gantry - the time is longer but you avoid the ERP. I always try to leave home before 7 am and leave work after 10pm to avoid ERP.
3. It is logical parking charges are expensive because lack of parking lot and therefore due to supply and demand, the price goes up. Park and ride system is a good idea too.
Think another way: using our roads cost more means progress for the nation. Who wants to go back to old days of uneven kampung roads with potholes, longkang and no traffic lights?
This progress is the result of years of good governance and the support that the people gave to the efficient and forward-looking government.
The fact that you can see and write on this blog showed that you are better than the other 80% of the world where they don't even have easily assessable broadband, free speech and computers.
The next time you complain about modern conveniences that Singapore has, think Myammer, Thailand, Africa, Nepal, Timbuktu and you will realise how lucky and wonderful we are in this blessed country.
Fostering Neighbourliness
I asked my friend to attend an event with me. He was not able to do so, as he has to look after his children, as his wife is not at home.
I suggested to him to consider the following arrangement in the future:
1. Make friends with your neighbours
2. Leave your children with them, if the parents have to go out for an event
3. Volunteer to take care of their children, when they face a similar situation
4. This will encourage neighbourliness and give more freedom to the parents.
I understand that this practice was quite popular in other countries. We have to develop a similar habit in Singapore.
I suggested to him to consider the following arrangement in the future:
1. Make friends with your neighbours
2. Leave your children with them, if the parents have to go out for an event
3. Volunteer to take care of their children, when they face a similar situation
4. This will encourage neighbourliness and give more freedom to the parents.
I understand that this practice was quite popular in other countries. We have to develop a similar habit in Singapore.
Low cost Investment Funds
A few people have written to ask for my advice on the low cost funds that they can invest in.
I am working out the following options:
1. STI ETF. I am asking my stockbroker about the minimum monthly sum that they can invest in. The monthly savings can be credited into an account and be used to invest in the STI ETF when it reaches the minimum sum. You can purchase odd shares through POEMS Share Builders Plan. Check with Philips Securities.
2. Unit Trust. I am checking for a low cost unit trust that accept monthly savings. I will also look for an financial adviser who is willing to provide this service.
3. Ideal plan. There is a Ideal plan from NTUC Income which allows 100% of the monthly savings to be invested in the combined fund. I am looking for an insurance adviser who is willing to promote this plan, even though they earn a lower rate of commission.
I shall be posting some of these options, when they are finalised. I hope to be above to offer these low cost options to the people who visit my blog and are educated about the merits of this type of investment.
Read this FAQs:
http://www.tankinlian.com/faq/fptips.html
http://www.tankinlian.com/faq/choice.html
I am working out the following options:
1. STI ETF. I am asking my stockbroker about the minimum monthly sum that they can invest in. The monthly savings can be credited into an account and be used to invest in the STI ETF when it reaches the minimum sum. You can purchase odd shares through POEMS Share Builders Plan. Check with Philips Securities.
2. Unit Trust. I am checking for a low cost unit trust that accept monthly savings. I will also look for an financial adviser who is willing to provide this service.
3. Ideal plan. There is a Ideal plan from NTUC Income which allows 100% of the monthly savings to be invested in the combined fund. I am looking for an insurance adviser who is willing to promote this plan, even though they earn a lower rate of commission.
I shall be posting some of these options, when they are finalised. I hope to be above to offer these low cost options to the people who visit my blog and are educated about the merits of this type of investment.
Read this FAQs:
http://www.tankinlian.com/faq/fptips.html
http://www.tankinlian.com/faq/choice.html
Live near your place of work
In most countries, it is common for a person to move house and live near the place of work, especially if they take up a new job in another town. This will help to reduce the need for commuting a long distance.
We have to encourage this new kind of lifestyle. If you live in Woodlands and take a new job in Changi, you should consider moving your house to Tampines or Pasir Ris.
There is a financial obstacle. The cost of selling your house or flat and buying a similar type of house is quite high. You have to pay about 5% to the housing agent, lawyer and in stamp duty.
We have to find a way to reduce this high cost. I hope that the stamp duty can be waived and that the other fees can be reducd considerably. Perhaps the total cost should be reduced to 0.5% of the value of the new home.
If more people can be encouraged to move and live near their place of work, there will be reduced need for commuting and congestion on the roads. The public transport will be less crowded.
We have to encourage this new kind of lifestyle. If you live in Woodlands and take a new job in Changi, you should consider moving your house to Tampines or Pasir Ris.
There is a financial obstacle. The cost of selling your house or flat and buying a similar type of house is quite high. You have to pay about 5% to the housing agent, lawyer and in stamp duty.
We have to find a way to reduce this high cost. I hope that the stamp duty can be waived and that the other fees can be reducd considerably. Perhaps the total cost should be reduced to 0.5% of the value of the new home.
If more people can be encouraged to move and live near their place of work, there will be reduced need for commuting and congestion on the roads. The public transport will be less crowded.
Tips on solving Sudoku puzzles
I am giving a talk on "Tips to solve Sudoku puzzle" at 2 p.m at the Active Aging Carnival, held outside Singapore Plaza (Dhoby Ghaut MRT station).
My tips involve using the left and right brain. Many people think that active use of the brain will help to reduce the risk of Alzheimer's disease. I do not know if this can be scientifically proven.
Here is an explanation about Alzheimer's disease from the Yahoo health website.
Alzheimer's disease is a progressive condition that affects areas of the brain involved in memory, intelligence, judgment, language, and behavior. It is the most common form of mental decline, or dementia, in older adults.
Alzheimer's disease is more severe than the mild memory loss that many people experience as they grow older. Alzheimer's disease also affects behavior, personality, the ability to think clearly, and the ability to carry out daily activities. Close family members usually notice symptoms first, although the person affected also may realize that something is wrong.
What causes Alzheimer's disease?
It is not clear why these changes in the brain occur, but research to discover the cause of Alzheimer's disease is ongoing. Although most people who develop Alzheimer's disease do not have a family history of the condition, you are at increased risk for the condition if a member of your family has it.
My tips involve using the left and right brain. Many people think that active use of the brain will help to reduce the risk of Alzheimer's disease. I do not know if this can be scientifically proven.
Here is an explanation about Alzheimer's disease from the Yahoo health website.
Alzheimer's disease is a progressive condition that affects areas of the brain involved in memory, intelligence, judgment, language, and behavior. It is the most common form of mental decline, or dementia, in older adults.
Alzheimer's disease is more severe than the mild memory loss that many people experience as they grow older. Alzheimer's disease also affects behavior, personality, the ability to think clearly, and the ability to carry out daily activities. Close family members usually notice symptoms first, although the person affected also may realize that something is wrong.
What causes Alzheimer's disease?
It is not clear why these changes in the brain occur, but research to discover the cause of Alzheimer's disease is ongoing. Although most people who develop Alzheimer's disease do not have a family history of the condition, you are at increased risk for the condition if a member of your family has it.
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