Tan Kin Lian's Blog: Investing in difficult times

Sunday, October 12, 2008

Investing in difficult times

Dear Mr. Tan,
Is it safe to put money in the bank anymore? If not, where can I invest my money? I am scared even to leave the money in the bank as the banks are no longer safe, and they may ask me to invest in the minibonds and other risky products, without my knowledge.

REPLY
My wife asked me the same question. I advised her to buy the STI Exchange Traded Fund. It is a fund comprise of the top 30 shares in Singapore. My reasons are:

1. These are the 30 largest companies listed in Singapore
2. The dividends paid average about 5%, based on the current price. It is paid in two installments every 6 months.
3. If this is for a long term investment, it does not matter if the share prices comes down further. It will eventually recover (maybe in a few years' time and make a good capital gain)
4. If the recession continues for one or two years and the profits of the companies drop by 50%, these shares will still give a dividend of 2.5% (which is better than bank deposit or government bonds).
5. Invest for the long term. Be bold.

Another alternative is to invest in a few RIETs. Many of them have a dividend payout of 10% now. Even if the rentals fall by 50%, the dividend payout is 5%. Make sure that these REITS do not have high leverage.

9 comments:

Anonymous said...: Thank you Mr Tan,
Is EFT derivative? How to buy EFT?
Where to get more info.about EFT?
Thanks.; October 12, 2008 4:41 PM
Anonymous said...: Thank you Mr. tan,
I used to think equity is bad, but after the bad incident of CLS, there is nothing worse than CLS.
I would not be lazy again, especially if I could learn from your good advices.
I think there is some opportunity in equity (like FTF). But I must find out more first. Thanks.; October 12, 2008 5:33 PM
Anonymous said...: STI ETF All-In-One:

http://info.sgx.com/serviceapp.nsf/23f7d809b35095dd48256dad001f2ebe/9cfc6e6d35382679482574e00004c116?OpenDocument; October 12, 2008 5:42 PM
Everlearning said...: From NTUC annual bonus cut, then followed by the banks' and financial institutions' failure to put customers' or clients' interests first, I have decided to take charge of my financial management.
I have ventured into the "unknown" never would I think of getting myself in shares or stocks. But, of course, shocked and surprised when I attended one free seminar.
I would not compromise my beliefs and values for quick gains.
I will go for STI ETF for long-term investments, just for dividends only.
Nowadays, banks cannot be trusted anymore, leaving us very little alternative for conserving our capital.; October 12, 2008 7:06 PM
Anonymous said...: Mr Tan, Do you think it's alright to buy OCBC or UOB Preference shares now. Thanks; October 12, 2008 9:07 PM
Anonymous said...: The Australian govt just announced that they are guaranteeing all bank deposits for next 3 years, regardless of amount.

Why is it our govt still stick to the $20K per person per bank guarantee when a bank fail? If our local banks are that safe, what's the issue with unlimited guarantee as well? It worries me if they still do not want to do it. As an analogy, if my product is good and reliable, I don't mind giving a long warranty because I know there will be no trouble during the warranty and also it is one way to boost customer confidence in the product.; October 12, 2008 9:22 PM
Everlearning said...: This simply shows that our Government has no confidence or faith in our local banks. The Australian government did that to prove that they are backing up the banks there.
That's the very reason why I am taking heed from Mr Tan's advice, to be bold enough to invest myself. From this year, after visiting this blog, I am certain of my choice. It also comes with risks because of inexperience and inadequate financial knowledge I have, but I would want to give it a try!; October 12, 2008 9:50 PM
ym said...: my personal opinion is to be slightly more prudent and do alot alot alot of homework..

the game has changed, years of easy money meant everything was rising - property, commodities and stocks, it also meant stocks tend to recover fast (eg after dotcom etc..)

but now the global money printing machine is damaged becoz the real economy is damaged due to the past malinvestments (its only now that this is exposed)..

i am expecting this recession to go global and to be more severe..; October 12, 2008 11:57 PM
hanglian said...: New Zealand government acts to keep savings safe:

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10537163

Quote:
"The Government is guaranteeing all bank deposits in response to the international financial crisis.

The move, which mirrors one made by Australia's Labour Government, is intended to stop panic withdrawals.

As well as mainstream trading banks, the guarantee covers savings with credit unions, building societies, finance companies that take deposits, and cash portfolio investment entities sponsored by covered institutions.

It is free for banks with deposits up to $5 billion but a fee will be charged on deposits over that amount."; October 13, 2008 1:54 AM