Dear Mr. Tan Kin Lian,
I am an avid reader of your blog and must thank you very much for all the help and info you provided. Unfortunately I invested in Minibond before getting to know about your blog.
Though not urgent, perhaps you could write something about Islamic Investment products in your blog. I somehow feel that the current fiasco involving Minibond, Jubilee, Pinnacle, High Notes 5 products etc WOULD NOT have occurred had these products been structured according to Islamic investment guidelines.
From the little I know about Islamic investments, they are governed by certain principles viz:-
> Full transparency in the product structure. Product should not knowingly hide bad points and boast about the good points.
> There must be no intent to deceive investors, nor sell knowingly worthless products.
> Product should not involve highly risky companies whose values may swing very high or very low.
> Product should not be speculative in nature, but rather based on solid long-term fundamentals.
> Investment should not be linked to immoral activities eg gambling, drug trafficking, prostitution etc.
> “Interest” should not be paid to investors, but modest “dividends” may be distributed to investors based on product profitability.
> Above all, the investment product must comply with Islamic religious scriptures.
I feel such products are what we need in this age of uncertainty. They will be very reassuring for the bulk of investors who are mainly low-risk type. Certain Middle East countries are moving fast in this direction, including targeting women investors who are traditionally risk-averse and are now coming out of the closet.
In the book that you are planning to write, pls dedicate several detailed chapters on Islamic Investment products. The world is full of western-style investment gurus, but short on Islamic Investment advisers.
I don’t see much of Islamic investment opportunities for the retail sector in Singapore. There are some, but are meant more for institutional investors or having a high entry level. Any pointers on this pls? Thank you very much for your continued efforts to educate investors.
VS
REPLY
I am not knowledgeable on Islamic principles. But, I must say that I like all of the principles that have been described above (except the "above all" principle, which is relevant only to the Muslims).
VS, The products would be distributed likely by the same FI that sell you the minibomb. Are you game enough to invest again?
ReplyDeleteif you look at Islamic trusts in Malaysia, the are all beow par as well, frankly speaking, they are all the same... when the tide down, all down.
ReplyDeleteIf the Islamic principles are followed, products like the credit linked notes will never be allowed to be sold. They are not transparent, high risk, misleading, etc.
ReplyDeleteThese products still carry the risk of the market. But, the market can go down and can recover. So, the long term investor can wait for the market to recover.
No more "investment products" islamic or otherwise. Once bitten twice shy. Hereon, it's strictly Fixed Deposits and buying shares in AAA rated Singapore Blue chips. If they sink and go belly up, I am prepared to go down with them. Then again, Singapore will really be Sinkapore when that happens!
ReplyDeleteBe positive, after the storm , sun will rise again...Sing-apore
ReplyDeleteIf all these Islamic investment products do catch on, there will no doubt be some FIs that'll package it in a way that'll benefit themselves more than the investors.
ReplyDeleteAt the end of the day, we investors still have to stay informed & vigilant.
If you really want to make or have big money "legally", be a big time politician, businessman, top professional, investment banker or inherit wealth. Very few can become really rich solely through investing. In fact in the US only Warren Buffett is truly one who attains wealth through investment. He never sells any of his skills or products nor is he a politician. In fact he has no products to offer.
ReplyDeleteThese Islamic principles are useful to prevent the bad products from being sold.
ReplyDeleteThe products that pass these tests will be fair and transparent products. They may carry market risk, but for a long term investor, the market risks can be reduced through averaging the good and bad years.
For those who do not wish to have market risks, there are other safe products that offer a low rate of return - like government bonds.
It is useful to have principles such as those listed here.
trouble is that after loosing 300k, i am scared to death with any investment products as how can i tell whether they are the same bomb or not. better focus on fd and if taking market risk like bond and shares that are transparent.
ReplyDeletefor me, i am afraid no more investment products as i do not want to loose money for receiving peanut insurance premium again.
Financial products marketed using a religion is more dangerous in my opinion. They give the potential investor a false sense of security due to its perceived link to his religion.
ReplyDeleteIt would be wise to study the terms regardless of what the product is named.
I agreed with Mr Tan that if investment products follow the Muslim investment product principles, such toxic products will not be released to the market. They will still be subjected to market force but at least the built in (SURE DIE) toxicity is minimised.
ReplyDeleteHaving said that and not being able to understand/decipher the pricing statement and the prospectus or the energy to attempt to do so, my best bet is still FD and more FD.
Frankly I lose all trust in any financial products now.
Kin Lian,
ReplyDeleteWe still have to be careful. Because the FIs may claim that their products are Islamic in nature but just "a wolve under a sheep skin". This is so because there is no authority in Singapore that monitors and supervises whether products are sold follow Syriah laws accordingly. And in Singapore, Syriah laws have no teeth.
Take it from a practioner,
ReplyDeleteall those are pretty nice sounding but none of them are really carried out...
the fact is, most investors are hungry for returns, and are not realistic in their expectation of risk.
once you have that, most products will turn itself into some manner till they converge.
I would be glad to correct myself if there are decent islamic investment products, but 1. no, there aren't, and 2. they are mostly conventional products tweaked into islamic structure.. i.e. you pay more cost.
but what Mr Tan said might be true, they will not allow those over opaque and potentially toxic products..
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