a) are transparent
b) have fair charges
Most products traded on an exchange are transparent and fair. The price is determined by the supply and demand. Information is made transparent and available to all market participants. You have the choice to be a buyer or seller.
You can buy stocks and bonds on the exchange and get fair pricing. However, you should avoid the illiquid stocks that may be subject to manipulation by the majority shareholders or certain funds.
You can also invest in unit trust and funds that offer diversification and display daily prices based on the market prices of the underlying assets. Choose the large unit trusts that have a high volume of daily transactions. Avoid the small unit trust with less than $100 million of assets.
Avoid structured products, as they tend to be non-transparent and are designed to have a large profit margin for the product issuers. These structured products also have high marketing costs that are passed to the investors. After paying for the high charges, which are usually not disclosed, the investors are likely to get a poor return.
Life insurance products of the investment type generally give a poor return, for the same reasons as the structured investment products. They are not transparent and impose high charges (to cover marketing and profit margins) on the investor.
To recap: choose transparent products with fair charges. Avoid structured investment products, including life insurance. Invest in financial products that are traded on the exchange.
Tan Kin Lian
If they are investment products they must give fair returns that beat inflation at least. This is what most investors are concerned.
ReplyDeleteMany recently launched products in the market return lower than inflation after 5 years.The just launched Captplus by NTUC is even worse , at only 1.4% for 2 years. The insurers are resorting to pandering to the fear of investors. There is no transparency.Investors are kiasu and the insurers are exploiting their fears.
Of course this is also an opportunity for one insurer which is obsessed with #1 to boost their market share on the sly basis and at the expense of the ignorant and kiasi investors.
This is despicable but they do anything to achieve their agenda.
Singaporean can NEVER have enough to retire and the insurers and their agents are the perpetrators.
Mr Tan, i am not good in financial investment.
ReplyDeleteFor $100K, is it good and very safe to invest in government bonds or term deposits?
What are the pros & cons.
How do I go about to start?
Thank you very much,
James
What are you investing for? to grow? to preserve? for income? These are the usual goals of investing.
ReplyDeleteThere're differences and similarities in ETF and UT. First, the differences.
ReplyDeleteETFs are "closed ended" (fixed number of shares) and traded through exchanged. UTs are "open ended" (unlimited number of units) and transacted through the management.
ETFs being traded on exchange in fixed volume available means that they can trade above or below NAV (net asset value) according to market sentiments. A bearish market condition could see prices excessively depressed (at a discount) and a bullish market condition can see prices excessively lifted (at a premium). Whereas, UTs transact at NAVs all the time, whether buy or sell, bullish or bearish.
Now about costs. Buying into an ETF is the same as buying any share, the transaction cost being a fraction of a percent if one transacts online, or not much more or less than a percent if one transacts through a remisier. Whereas, UT transaction costs range from 2% to 5% depending on the type of fund and the mode of transaction. However, UT usually don't have redemption costs unless specifically stated in advance (very rare). To cash out of an ETF, another transaction cost (sell commission) will certainly be incurred.
Then, we come to similarities. Both ETF and UT are collective investments with underlying shares and bonds making up their portfolios, in which the investor participates in with his/her money. Both will still charge management fees to funds they manage, usually between 1% to 2% depending on the portfolio composition and benchmark.
Index ETFs have lower costs than UTs because they track the index automatically. There is no buy and sell commission or loading except for the brokerage and exchange costs. ETFs outperform most UTs because most fund managers cannot beat the index after charging the high loading and management fees. ETFs also give out dividends tied to the dividends by the stocks in the index. The smart thing to do if you want to invest in equities is to use ETFs which will always have lower costs, lower risks and higher returns than UTs on average.
ReplyDeleteto be fair i think most ILPs or especially mine i have is at least transparent. i thought it is a regulation by MAS to make ILP transparent?
ReplyDeleteSingle premium ILP is practically the same as unit trust. The differences? SP-ILP will come with at least 125% sum assured upon death Note: death, not necessarily including disability. UT costs are quite straight forward, the sales charge and the management charge. For SP-ILP, look out for additional policy fee or mortality charge.
ReplyDelete2:22 AM.
ReplyDeleteFind out the interest rate charged on fixed deposit and on government bonds and make your decision:
FD 0.5% p.a. (interest rate can change in the future on renewal)
Government bonds 2% for 5 years
Which is better for you? If I am keeping the money for 10 years or longer, I prefer to invest in the STI ETF. It should be able to get me an average return of 6% p.a over a long period.
Mr Tan
ReplyDeleteCan you explain where you derive the 6% yield for STI ETF?
From this website http://yieldstocks.blogspot.com/, the yield for STI ETF is only slightly below 3%.
Hi Vincent Teo
ReplyDeleteSTI ETF gives a dividend yield of 3%. The additional 3% (to make a long term average of 6%) comes from capital appreciation.