## Saturday, September 04, 2010

### Family3 for a child

A parent bought a Family3 policy for a child. He was attracted to the limited 10 year payment and the series of cash bonus and survival benefits, but was not aware about the cost of the insurance. Here is an analysis of the policy and the alternative of investing the same sum of money in a low cost investment fund.

Go to www.tankinlian.com/latest.aspx (search for Family3).

Spur said...

I think many people have asked for long term returns / yield of Singapore's stock market. Using Yahoo Finance, we can see that the STI index started on 28 Dec 1987.

Let's say we started at the beginning of 1988 and hold on until today, all through the Asian Financial Crisis, Dot-com Bust, 911, SARS, and the recent Great Financial Crisis. All these events resulted in STI crashing by 50% to 60%.

STI on 4 Jan 1988 was 833.
STI on 3 Sep 2010 was 3002.
We just take it as time period of 22 years.

Calculating annualised yield Y as:
Y = 1 - (3002/833)^(1/22)
we get Y = 6%

Remember that STI is price only, it does not include dividends. We take it that average blue chip dividend yield is 2.5%.
Hence total yield for SG blue chips = 8.5%

So if average investment costs are 1% per annum, then a realistic long term yield for Singapore stock market is 7.5%

You can further improve this returns by:-
1) Re-invest the dividends --- can improve the total yield by 1%-2%.
2) Be very cost conscious, e.g. if trading commission is \$28 per trade, do not invest less than \$3000 per trade. Or else use Philips Share Builder plan.

Spur said...

Oops, the above formula should be:

Y = (3002/833)^(1/22) - 1

I must be drinking too much beer.