Saturday, August 23, 2008

Joke: statements of motor accidents

> As I approached an intersection a sign suddenly appeared in a place where no stop sign had ever appeared before. I was unable to stop in time to avoid the accident.

> To avoid hitting the bumper of the car in front I struck a pedestrian.

> My car was legally parked as it backed into another vehicle.

New era of shortages

Will the world enter into a new era of shortages? Oil? Food? What will be the impact?,4136,169560,00.html

Financial planning for a young family

Hi Mr. Tan

My husband and I are doing our reviews of our profile. My financial planner recently recommends that we increase our critical illness coverage to at least $125K, via a limited pay term insurance. The two products recommended are Asia Life TM Legacy and NTUC Income Vivolife.

I have read your FAQ and I'm not sure if we should be increasing the critical illness coverage by another $100K. We have two young children, that's also the reason why we want to ensure at least we are sufficiently covered.


Both of these products are high cost products that give poor value to the consumer. I advice people to buy a 20 year Level Term insurance, and to invest the difference in a low cost fund.

You can see some examples of the difference in the FAQs in my blog:

Friday, August 22, 2008

Joke: statements of motor accidents

> In an attempt to kill a fly, I drove into a telephone pole.

> I had been shopping for plants all day and was on my way home. As I reached an intersection a hedge sprang up, obscuring my vision and I did not see the other car.

> I had been driving for forty years when I fell asleep at the wheel and had an accident.

Claim ratios on motor insurance

Are you paying the right premium for your motor insurance? Dr. Money analyses some claim ratios of insurance companies in Singapore:,4136,170194,00.html

Charges of Investment-linked plans

Hi Mr. Tan,

May I know is it that all regular ILP does not invest 100% of our preimum from the 1st mth? Does single premium ILP invest 100% of our preimum?


There must be 100 different ILPs in the market. I am not able to tell you the difference in structures between these plans. You should ask the insurance companies.

Read this FAQ:

Thursday, August 21, 2008

Joke: statements on motor accidents

> I collided with a stationary truck coming the other way.

> The guy was all over the road. I had to swerve a number of times before I hit him.

> I pulled away from the side of the road, glanced at my mother-in-law and headed over the embankment.

Flexi-link and Ideal plans

Hi Mr. Tan,

From the website, I realised NTUC income have Flexi-link policy & Ideal policy. May I know what are the main difference between the two? If I did not understand wrongly, Flexi-Link(Invest in 1 lump sum min. $5000) Ideal (Invest regularly - min. $100/mth)

There are different plans policy under Flexi-Link (IB1/2/3/4) and Ideal (ID1/2/5/6/7). However the differences are not explained clearly in the website. I only managed to found out a table which shows the policy fee and adviser charges of each policy.

Are you familiar with the above policies? Can you explained more to me about the differences of these policies to clear my doubt. Thks.

If you have $5,000 to start the initial investment, it is better to invest in the Flexi-Link. You can have regular monthly top-ups. The front-end charge for Flexi-Link is 3.5% for each investment. The annual charge is deducted from the fund and varies from 1% to 1.5% depending on the fund invested.

The Ideal plan is a regular saving plan for people who are not able to make the initial investment of $5,000. The Ideal plan are subject to the same charges as the Flexi-link plan and, in addition, there is a further charge of 15% on the annual premium for 3 years (total of 45%) for ID2 and a different charge for ID7 (only available through the business center).

I suggest that you go to the business center in Bras Basah Road and ask the consultant to explain it the difference to you in detail.

The best choice is Flexi-link (if you have $5,000 to invest) or ID7 (but only available through the business center).

Wednesday, August 20, 2008

Joke: statements of motor accidents

> Coming home I drove into the wrong house and collided with a tree I don't have.

> The other car collided with mine without giving warning of its intentions.

> I thought my window was down, but I found it was up when I put my head through it.

Depression of the 1930s

Will the world enter into an economic depression? Dr. Money explained what happened during the early 1930s.,4136,171882,00.html

How to avoid scams

Hello, Mr. Tan,

I was approached by an financial consultant offering an investment product called forex phaetorian. This product originated from an investment company in Singapore. It is a 2 years term, capital guaranteed and 12% interest guaranteed payable every six month. The consultant told me that 12% investment return in singapore is very common.

Mr Tan, what do you think? I mean, if it is so good, then the whole of Singapore should know about it and sold out fast. Why do they have to come to Malaysia and sell to us? I was told it is a private placement and not a public offering product.


There must be a catch. If something is too good to be true, then it is likely to be a scam. Do not trust any product that appears "too good to be true".

Tuesday, August 19, 2008

Joke: reduce the probability

An actuary is walking down the corridor when he feels a twinge in his chest. Immediately, he runs to the stairwell and hurls himself down.

His friend, visiting him in the hospital, asks why he did that. The actuary replies, "The chances of having a heart attack and falling down the stairs are much lower than the chances of having a heart attack only."

How to stretch your dollar

Dr. Money writes about how to stretch your dollar with the right type of insurance plan:,4136,172456,00.html

Perfect husband

Several men are in the locker room of a golf club. A cell phone on a bench rings and a man engages the hands free speaker function and begins to talk. Everyone else in the room stops to listen.

MAN: 'Hello'

WOMAN: 'Honey, it's me. Are you at the club?'

MAN: 'Yes'

WOMAN: 'I am at the mall now and found this beautiful leather coat. It's only $1,000. Is it OK if I buy it?'

MAN: 'Sure, go ahead if you like it that much.'

WOMAN: 'I also stopped by the Mercedes dealership and saw the new 2008 models. I saw one I really liked.'

MAN: 'How much?'

WOMAN: '$390,000'

MAN: 'OK, but for that price I want it with all the options.'

WOMAN: 'Great! Oh, and one more thing...the house I wanted last year is back on the market. They're asking $2,950,000' for it.

MAN: 'Well, then go ahead and give them an offer of $2,800,000. They will probably take it. If not, we can go the extra $150,000 if it's really a pretty good price.'

WOMAN: 'OK. I'll see you later! I love you so much!'

MAN: 'Bye! I love you, too.'

The man hangs up. The other men in the locker room are staring at him in astonishment, mouths agape.

He turns and asks: 'Anyone know who this phone belongs to?'

Monday, August 18, 2008

Joke: brother-in-law

Mr. Smith was brought to Mercy Hospital (a Catholic hospital), and taken quickly in for coronary surgery. The operation went well and, as the groggy man regained consciousness, he was reassured by a Sister of Mercy, who was waiting by his bed.

"Mr. Smith, you're going to be just fine," said the nun, gently patting his hand. "We do need to know, however, how you intend to pay for your stay here. Are you covered by insurance?" "No, I'm not," the man whispered hoarsely.

"Then can you pay in cash?" persisted the nun. I'm afraid I cannot, Sister."

"Well, do you have any close relative?" the nun questioned sternly. Just my sister in New Mexico," he volunteered. "But she's a humble spinster nun."

Oh, I must correct you, Mr. Smith. Nuns are not spinsters - they are married to God."

"Wonderful," said Mr. Smith. "In that case, please send the bill to my brother-in-law."

Foreign currency deposit rates

Dear Sir,
Currently the FD rates offered by banks in Singapore are 1% or less. I have just opened an Australian Foreign Currency Fixed Deposit that gives me 7+% per annum.

I have no intention to convert the money back to Singapore Dollars in the forseeable future. the money is kept aside for retirement. Would this be a way for Singaporeans to save. Has interest rates in Australia ever gone down to levels similar to Singapore?

I suggest that you ask your bank to give this information to you. They have the past record of currency conversion rates and interest rates.

Avoid whole life policies

Many people are badly advised by insurance agents into buying whole life insurance. Being expensive (compared to term insurance), the consumer has inadequate insurance for their needs.

The agent says that "term insurance will expire after 20 years, and you will not be uninsured at that time".

Many people are unduly concerned about this point. It is largely irrelevant. Most people only need adequate life insurance to cover premature death when their children are young. An insurance period of 20 years is quite adequate to meet this need.

Beyond 20 years, they need to have sufficient savings for their retirement. As a whole life policy provide a poor return, it will not meet this purpose. Many people who invested most of their savings in whole life policies received a poor deal.

I fall into this category. Two of my whole life Living policies have not even reach the breakeven point after more than 10 years. Fortunately for me, they represent only a small part of my total savings.

The return on my two Living policies are far below what is due to me, if my insurance company had distributed bonuses fairly, based on the actual experience of the fund. As these are participating policies, there is an expectation that the insurance company has to act fairly, but they did not. The return on similar policies offered by other insurance companies are probably worse, as they have higher expenses.

It is best to avoid all types of life insurance policies, except for term insurance. Many insurance companies overcharge on their term insurance policies, to push consumers into buying whole life policies. You can compare the premium rates with the benchmark provided in this FAQ:

If you wait for a few more months, a new life insurance company will be offering term insurance at an attractive rate.

If you have the opportunity, you should join a group insurance scheme, such as a plan offered by SAF, SAFRA or your employer. It does not matter that the term insurance is on a yearly renewable basis.

Whole Life by Limited Premium

Hi Mr. Tan,
I understand that Buy term and invest the rest strategy and I believe this strategy is better, but would it be risky to buy all insurance on term insurance? Shouldn't one buy at least one small whole life insurance to hedge as well as to keep it for life. Term insurance do not cover for life, if so , it would be very expensive as well.

Should the term insurance lapse for any reasons, the person would be without any insurance coverage. Shouldnt one buy one limited whole life payment for WL, like what you did?

Limited payment whole life has high expenses and does not give value for money. When the Term insurance expires, you will have sufficient savings (if you have invested the savings) and you do not need life insurance any more.

I bought whole life insurance many years ago, but they are not necessary for me now. I get a poor return on these policies. Some of them have still not reach the breakeven point after more than 10 years. Anyway, they represent only a small part of my total savings, so it does not matter to me.

Read this FAQ:

Taxi fare surcharges

Read this letter:

Read about taxi fares in other cities:

A few weeks ago, Comfort taxi imposed a 30 cent diesel surchage due to higher prices. As fuel prices have dropped 20% during the past few weeks, perhaps they should withdraw the surcharge (which they promised to).

I did some research and found this statement from Comfort. It looks like the diesel surcharge will continue for quite a long time:,7ba501,1912_6577.html

The trend is your friend

When you trade (or invest) in stocks or other market products, it is important to catch the right trend, so that you get a better price. Catching the right price is a skill that is difficult to acquire. You can practice with a simulation game, that is developed to be realistic and close to real life.

Is this the right time to invest in stocks?

I think that this may be a good time to invest in stocks. The reasons are:

> The last few months of the year are usually good for stocks
> Oil and commodity prices are moderating
> The stock markets have fallen 30% during the past year

Will the global economy recover? Will there be more bad news? On balance, I think that the bad news have probably been discounted.

Taxi fares in other cities

I made a comparsion of taxi fares and service in a few cities:

More cars, so more ERP

Read about the views expressed in the Online Citizen:

Read about public transport in:

Transfer of shares to family members

The Singapore Exchange allows a shareholder to transfer shares to a family member at a nominal fee of $10 per transfer per share. This arrangement applies only to a transfer to a family member only.

To transfer shares to any other person, the shareholder has to sell the shares through the exchange, and pay the normal fees (which are much higher).

Sunday, August 17, 2008

20 year Term Insurance

I advice consumers to buy a 20 year Term Insurance (or 30 year Decreasing Term insurance).

Some people felt that they need whole life insurance. They must have been "sold" this idea by an insurance agent. Here is the reason why a 20 year Term Insurance is suitable for most people:

At present, Decreasing Term insurance is not available in the market. It will be available in 2009.

Here are some benchmark premium rates:

Joke: accurate but totally useless

A skydiver is blown off-course and lands in a tree in a remote area. After dangling from branches for an hour, he spots a hiker walking by. "Excuse me," yells the parachutist, "but could you tell me where I am?"

The hiker looks up and says, "Yes, you're twenty feet above the ground." "Thank you," replies the skydiver, "You must be an Singaporean."

"What makes you say that?" asked the hiker.

The skydiver answered, "Because what you just told me was 100% accurate, but totally worthless!"

Educational videos on Life Insurance

View these videos:

Whole Life vs Term

Susie Orman – Life Insurance

Term vs Cash Value Life Insurance

Ask the right questions

A reader was given a Benefit Illustration for a life insurance policy (PayMyUni). He did not understand the product and asked for my advice.

The Benefit Illustration contained many pages of information. It is quite complicated to read through the details. Most of the information are not relevant to the consumer who has to make the decision.

The consumer should ask a few questions to the financial adviser:

1. What is the amount that I can get back at the end of the term, based on a projected yield of 3.75% and 5.25% p.a. ?

2. What is the amount that I can get by investing the same premium over the same period to earn 4% p.a. ?

If you buy Term insurance (and spend 5% of the premium) and invest the remaining 95% in a low cost investment fund, you should be able to earn a net yield of at least 4% p.a.

The insurance agent will tell you a lot of other information, that are usually irrelevant to your decision. You should not be distracted by the sales talk. You should focus on getting the relevant figures for your decision.

My advice is to avoid all life insurance products sold by insurance agents, as they have high expenses. To save for a child's education, you can follow the tips here:

Pro-Trader getting to be popular

105 players have now registered to try this application that provides a simulted trading environment:

35 players logged in yesterday to play the game. Many of them played a multi-player game to compete against other players.

Blog Archive