In recent times, it seems that even money kept in fixed deposit in a bank, which pays a low rate of interest, has the risk of default of the bank. Some people think that it is safer to keep the money under the bed!
To make the matter worse, financial institutions have created products that are risky and do not disclose the actual nature of the risk and do not pay a fair rate of return to the investor for the risk!
To avoid risk, it is better to invest in the following:
a) bonds that are issued by the AAA rated government. They offer a low yield, but is fair and safe.
b) A low cost, diversified fund invested in many bonds or shares, such as an indexed fund or exchange traded fund. Invest for the long term, to average out the good and bad years.
For investors who like the excitement of speculating on the price movement of shares or other assets, be honest and recognise that you are actually gambling. If you wish to gamble, it is better to go to a casino. The odds are fairer to the gambler, and the terms of the gamble are controlled by the authorities. You know the odds, and can decide on which side of the gamble to take!
Singapore is opening two world class casinos. When you gamble, make sure that you gamble an amount that you can afford to lose. Enjoy the gamble and good luck
Tan Kin Lian
12 comments:
It is the same thing with insurance. The insurer prays that you will not die. Imagine if all policyholders make death claims the insurer will go bankrupt. The insurer is betting against you that you will not die.
You have heard about traded endowment.
Have you heard about life settlement?
If there is an active market for local insurers' whole life policies the insurers will go bankrupt because they can't afford to have all their policies kept for life to claim.
The whole life products are designed with the assumption that among which, a few policyholders will hold them for life to make claim. This is the evidence that even insurers know that many will not hold for life and yet they sell them as for life products.This is cheating the consumers. Other insurers have so called 'option' to convert to annuity. This is actually the insurers' preventive measure to stop many from holding it to claim.
So you see, many things you are not told and they are skewed to the insurers' advantage.
To pay the insurers back in their own coins I hope there will a local secondary market for whole life policies, either as individual investors market or in the form of unit trust(fund) such as life settlement fund. Let us see whether that will send shivers down the insurers' spine. It means the insurance companies are on the way to bankruptcy.
The Watchman
It is the system that fails us. Like it or not, the world system is corrupted and evil.
Even the insurance company Prudential was in the news about their vast investments in Tobacco business.
Don't justify wrong deeds... what you sow you shall reap...
Hi Mr Tan,
When I go the casino, I play only Tai Sai (Big Small).
If I place at the right bet, my $10become $20. If I lost, my $10 is gone. This yield is either 100% or 0% and in a very short time!
This game is make it or break it.
starlight
(PS: If one can exercise self control, gambling can be a very exciting game. Of course, one should only set aside a tiny amount of money for this dangerous entertainment.)
I don't gamble but agree with you that gambling is a fairer game than playing in stock depending on the so called "Tips".
Professional gamblers play to win and not for fun. If it is for fun, please donate your money to the poor.
Professional gamblers know how to reduce the odds and increase certainty of winning.
The following is a wikipedia link to my favourite econometric theory - the efficent market hypthesis.
http://en.wikipedia.org/wiki/Efficient_market_hypothesis
The empirical evidence suggests that most markets are weak efficent or semi-strong efficent.
This means that technical analysis and perhaps even fundamental analysis cannot generate super normal return.
If you find the arguments valid, you should therefore follow the advice of this blog entry and buy index funds or ETFs. You should avoid instruments with high commission charges, expenses etc. This is because in the long run, it is not possible for such instruments to outperform low cost index funds or ETF's.
To The Watchman,
You said that "The insurer prays that you will not die". There is an exception: CPF LIFE, the new scheme that will provide lifelong payout to elderly in their retirement. The insurer would hope that you die as soon as you take up the scheme so that they can keep the huge premium without the ongoing monthly payout. I don't like the scheme but I won't have a choice since it is a compulsory program installed by CPF. You are not allowed to opt-out even if you have critical illness and may not live long. The scheme give me an impression that it is designed to take advantage of the people who are not well!
What about asking customers to invest their CPF OA or SA in Growth Policy? Assuming the company is able to meet the projected figure, is it justifiable to make customers take so much risk and only to be better than CPF marginally, like 0.1% higher? Or is the miserable insurance provided justifies the investment? This is the argument of the salesmen.
CPF is risk free, and no lock in risk .CPF is not meant for insurance but for retirement therefore the MAIN objective is to maximise the value.
As consumers, you must be clear about this and don't be fooled by unscrupulous insurance agents who would say and do anything to get you part with your money. Their motive is to earn commission from the sale and not your interest to get the best.
The Watchman
It is possible to make good investments after research and analysis. I have done so and reap good profits. The analysis part is the most important. It involves a complex understanding of the market, human psychology and needs etc. It is not gambling when a decision is made after careful consideration and weighing the pros and cons.
Anonymous June 08, 2009 8:26 PM,
If you are 50 or below CPFlife is compulsory .
If you are not healthy choose the lowest plan with the lowest payout and highest refund.
At least you understand the implication annuity has on those who are not healthy but ntuc insurance agents are selling it indiscriminately to old folks with poor health and con them that they can have money for whole life.They use the "for life" as the selling point which is only quarter truth. Their whole life may be 65 or 70 and these folks won't benefit. As said before , these agents don't care , they only want commission.
MAS must investigate for they have breached section 27 of the FAA.
The Watchman
Gambling in a casino is a losing proposition in the long run. The casino operator, being the banker with unlimited cash can easily out run and out play any customers. Statistics can prove this many, many times. Occasionally, some customers, in a lucky streak manage to make some money, but in the long run, they still give back all the winnings to the casino operator as their luck can never beat the casino system. To beat the system, you have to be a very good card counter, and this requires good memory and a very calm disposition in the face of pressure. Remember, it takes a lot of money to build and operate a casino. The capital cost alone can runs into millions and this plus the monthly or yearly maintenance, i.e. staff salaries, furnishings, lightings, carpeting, etc, and profits must come from the from the customers, who will pay and pay.
Yes, the casino is the ultimate winner because it has time and $$ but not a gambler who is there to try his luck.
I hope our 2 casinos can bring more money to the government so that we can continue to pay low tax.
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