Saturday, May 08, 2010

Save for children (2)

hi Mr Tan Kin Lian,

I have 2 children, 13 and 15 years old. I intend to buy them a insurance policy. I have read your FAQ. Can you tell me if I will buy endowment policy (saving insurance) from NTUC for my kids, is it good? I intend to spent $100 each for my children. Is there any other policy that you think is suitable to buy, can recommend me. I know very little about insurance.

It is better to invest in a low cost investment fund. this is explained in my book, practical guide on financial planning. You can also read the relevant articles in my blog.

Saving money for their children

Many parents want to save money for the future needs of their children, e.g. education. They asked me if a life insurance policy is suitable for this purpose.

In my book on financial planning, I have recommended that the rate of savings be 25% of the earnings (and this 25% include any saving in CPF that is not used for housing). This saving for future needs can be used for emergencies (due to loss of employment or disability), medical expenses, education, and retirement. The savings is best invested in a low cost investment fund (such as the STI ETF) and should be kept flexible. A life insurance policy is rigid and high cost and does not suit this purpose.

Each time that you decide on the use of your long term savings, you have to consider if it is an appropriate use of the money. You should avoid spending too much of the money on education, if it leads to insufficient savings for retirement. Always consider the need to spend this money and if there are other better options that are less costly.

You can buy my book on financial planning online.

Governent debt and quantitative easing

Read this excellent article by Lucky Tan.

My comments
Europe now has to print money, i.e quantitative easing, to buy over the government debts in several countries. This will cause inflation but will lead to greater stability of the markts. It is dangerous to have government deficits funded through short term borrowings.

There are three ways for a government to fund its deficit
a. increase tax
b. print money
c. borrow

Many governments have borrowed money. It is not sustainable, as the burden falls on the future generations. The other two options have now to be considered.

Friday, May 07, 2010

Greek Debt Crisis

Greece had a big debt caused by a large budget deficit for many years. It was not able to collect sufficient tax revenue to pay for the cost of government. It borrowed on short term bonds to cover the deficit. The lenders are not willing to roll over the debts and to buy new debts.

Many countries are in similar situation. They include the Japan, UK and USA. Will the debt crisis come to these countries? It will - it is just a matter of time.

What is the root of the problem? What is the long term solution?

Top positions in political party

A political party in a certain country has a system for each division to elect a delegate to represent that division. The delegate meet at a national convention to elect the leaders of the party. The people seeking to be leaders have to give money to the delegates to buy their votes. This is called "money politics".

The leaders need to have a lot of money to give to the delegates to win the party elections. They have to earn their money through corrupt means. Althougth the process is democratic, it is tainted by corruption.

Case study - responding to a difficult issue

This is a hypothetical case. I wrote it to illustrate the different approaches to respond to a difficult issue at work.

X is in charge of the daily work at the CDP which keeps the records of shareholders of listed companies. An activist shareholder Y wrote to request that a letter be circulated to all shareholders of a listed company Z regarding a corporate issue, volunteering to pay for the printing and postage cost.

What is the typical response of most people in this situation if they were in X's place? What type of response will you give?

Survey results
Here are the survey results based on 29 responses.

Most people are willing to be helpful and positive, if they feel that they have the authority.

Insight into stock trading

Read this article

My comment
I consider all trading as gambling. If you want to gamble, it is better to choose a product that has high liquity and low trading cost, such as foreign currency.

If you wish to invest for the long term, choose good stocks or a low cost investment fund and do not bother about the volatility in the market.

Land banking

This blog has several postings on land banking.

Capital to Income ratio

This article shows that you need 12 years of your income to be sufficient to retire at age 65, to generate a lifetime income of 80%. I think that this is far too high. You only need to have an income of 40% to live comfortably, so 6 years would be sufficient. During your working life, you only spend 50% of your income, as 25% is saved for the future and 25% is used to pay for your home. When you retire, you will send less, so 40% is more than sufficient. This is explained in my book, Practical Guide on Financial Planning.

Why is the world in such a state?

Extract from Tommy Wong's book, "Wisdom on How to Live your Life"

Tom: Why the world is in such a state?
Guru: The world is like our home. It depends on the people living in it and what they do to it.
Tom: We certainly don’t look after our planet.
Guru: You can say that again.
Tom: We certainly don’t look after our planet.
Guru: Well said. If we don’t look after our home, it’ll be in a mess, right? So why are you surprised that the world is in such a state?
Tom: Because the world is supposed to be looked after by leaders who are clever and smart.
Guru: But what happens if they’re misguided?
Tom: You mean smart people can be misguided?
Guru: Smartness is a double-edge sword. It can heal or kill.
Tom: How can we heal the world?
Guru: By having the right concept.
Tom: What is the right concept?
Guru: We are souls and not bodies.
Tom: Guru Harry, this concept is not new. We’ve been told about this thousands of years ago. So why is the world still in such a mess?
Guru: Because many listen but few practice it.
Tom: You mean such a simple concept can help the world?
Guru: It can bring heaven to Earth.

Tommy Wong

You can order this book online.

Screening of Laptop

In many airports, the laptop can be kept in the luggage to be screen together through the metal detector. In Singapore airport, the laptop has to be removed from the luggage to be screened separately. This adds one more hassle. Are we creating too much hassle in Singapore?

Some airports require a person to remove the shoes and belt. This is not required in Singapore. So, we do have one less hassle in Changi.

Thursday, May 06, 2010

Security check at the airport

I went through the security check at the airport. I had to remove my laptop, mobilephone, keys, coins and pen and produce my boarding pass for checking. After clearing through the metal detector, I had to put back the laptop into the luggage and collect back my other items.

As I was about to leave, the security guard said, "Sir, don't forget your mobile phone". It was kind of him to be observant and to remind me. If not, I would have lost my mobile phone.

I wished that the people in charge would find a better way to reduce the hassle faced by passengers in going through secruity. I believe that it should be possible to find a more effective way, without the hassle - if someone in authority look into this issue.

Tan Kin Lian

Wednesday, May 05, 2010

Wisdom on How to Life Life - Tommy Wong


Humans being the most intelligent species and having lived on Earth for thousands of years, we are yet nowhere near to a life of peace, love, joy and harmony. This book contains a story of a young man, Tom, who had conversations with two gurus, Dick and Harry. Guru Dick epitomizes someone from a worldly society who emphasized on the importance of money and power. Guru Harry epitomizes someone from a spiritual society who offered an alternative way of living which can lead to peace, love, joy and harmony.

Through the conversations, Tom learnt that (1) why peace is better than happiness as a goal in life, (2) how to be empowered in life, (3) how to achieve freedom in life, (4) how to live with pleasure and without pain, (5) what society should be focused on, (6) what is the objective of education, (7) what are the purposes of life, (8) what are the differences between man-made and divine laws, (9) what are the important spiritual concepts, and (10) how to transform Earth into heaven.

Tommy Wong
Book can be ordered here.

Be positive

I encourage people to have a positive attitude - to focus on what is right, rather than what is wrong. They should also avoid trying to pass judgement on other people, based on their limited knowledge, information, perception or prejudice.

I give my views on changes that will be better for the future of Singapore. I get comments from some people that are negative, cynical or judgemental. They say, "This will never happen", "the government will not agree", "you must be dreaming" and the like. There is no need for them to behave in this manner. If they disagree, they can state their reason. There is no need to be judgemental or to attack another person's views.

I believe that a large number of people supporting a positive change can make an impact. While most of us have been educated to find out what is wrong, it may be better to embark on a journey to find out what is right.

Tan Kin Lian

Culture and behavior of people

People are shaped by their culture, education and way of life. They develop certain common traits - generous, selfish, open minded, closed minded, positive, negative, courageous, cowardly, honest, deceitful.

Although the traits are quite common to most people in that culture, there will be exceptions. A statement of trait does not mean that it will apply to 100% of people in that culture. If I say that the X (a certain nationality or people) are hardworking, there will certainly be some who are lazy. It is not necessary to say that "most X" are hardworking, as the word "most" is understood.

In Singapore, there ae certain people who will challenge your observation by asking you to prove their point. They wil ask "Do you have statistics to prove that X is hardworking? Did you conduct a survey? What percentage of X are hardworking? Is your survey reliable?"

After a while, most people learn to keep quiet. They have no opinion. They will let other people make a statement and they can then throw the "statistical" challenge.

I open my eyes and make my observation. I see what are the common traits of certain people. I know Singaporeans well and have observed their traits - which are shaped by our education and environment. Some of these traits are positive. Some are negative and should be changed. I will try my best to point them out. 

I hope that Singaporeans will develop the open mindedness to see our positive and negative traits, be willing to laugh at ourselves, and have the strength to correct our negative traits.

Serenity prayer.
God grant me the serenity
to accept the things I cannot change;
courage to change the things I can;
and wisdom to know the difference

Tan Kin Lian

Useful feedback from Rex

Hello Kin Lian

I'm a fan of your blog because I think it promulgates the right values for all Singaporeans. I also like you to succeed in what seems to be a crusade of awakening and shaking up an apathetic and sentimental population who continue to tolerate misdoings and injustices in society.
In this regard, I just like to suggest to you that some of your recent posts may only give grounds for critics to discredit you.

Example 1.
You said "Singaporeans are well educated and score high marks in academic subjects. Unfortunately, most are not able to think for themselves...."
It would have been less offensive if you said "quite a few" instead of "most". "Most" means more than 50%. You will surely offend a lot of people because without a proper study, it is not possible for anyone to declare that more than 50% of Singaporeans are not street smart or can think. Your original statement will only fend fire for critics to destroy you.

Example 2.
You said "Singaporeans follow a script blindly and do not think."
Likewise, the overall use of the term SINGAPOREANS is damning on 100% Singaporeans. In my opinion you should have said "Some Singaporeans" because it is more accurate, and better from EQ point of view.

Example 3.
You said "Car drivers in Singapore have a bad habit of using the horn to express their anger. "
Likewise, this statement is too strong. It is a direct implication of every car driver in singapre. In my opinion you should have said "there seems to be quite a few car drivers....blah".
But I assure you my intentions are sincere, I do not wish to see criticisms against a person with a good heart, because of minor slip-ups in linguistic usage. Too many good people have fallen unnecessarily in the current regime because of the very same reason.
Thanks for your feedback.
I agree with your points.

Name of company

I called a friend at his office number to confirm our appointment for lunch.

Receptionist, "May I know your name?"
Reply: Tan Kin Lian
Receptionist, "May I know the purpose?"
Reply: I wish to confirm my lunch with him today.
Receptionist, "Which company are you from?"
Reply: "It does not matter which company. I only want to confirm the lunch"
Receptionist, "Ok. I will put you through".

Singaporeans follow a script blindly and do not think. They always have to ask "which company". Does it really matters?

Tan Kin Lian

Poor customer service at call center

I bought a video cam. It failed after 2 weeks. The manufacturer offered a 1 for 1 exchange. The experience of making the claim was bad.

I called their call center. I recognise the accent of the customer service offixer and confirmed that the call was routed to the Philippines. The officer asked for all types of detailed information about the customer, serial number, nature of problem, etc. The call took almost 15 minutes. Due to the poor telephone connection, the information has to be spelled out several times for recording.

It would have been much easier if the company provided a form on the website where the details can be submitted. The call center should only be used for clarification.

Many large organisations have outsourced its call center to an oversea location to reduce cost. But this has resulted in poor service to its customers. The top managers should call their own call center and find out the experience and difficulty of the customers.

The poor standard of customer service happens in many organisations and occurs all over the world. Most companies do not care about customer service, in spite of their mission statement, as the poor standard of service is now the norm.

However, a company that wish to improve its customer service can stand out. I hope that some companies will try to make a difference and set a positive example.

Tan Kin Lian

High cost of free seminars

Singaporeans like to get free service, free advice and free seminars. They even ask if the event comes with a  free goodie bag.

They should realise that the event cost a lot of money to organise, including the high cost of advertising, rental of the venue and the cost of the speakers. How does the organiser get the revenue to pay this cost?

The answer is obvious. It comes from the products that are sold at the event. The price of these products are marked up to cover the high cost of marketing. If few sales are made, such as in a seminar on land banking time sharing or "special" financial products,  the markup has to be increased accordingly. And the markup can be very high!

It is better for the public to pay to attend a seminar on financial planning that is organised by a consumer education body, such as FISCA. You will get impartial and relevant advice that is good for consumers. You will get advice on how to avoid expensive financial products that take away a large part of the accumulated savings.

Before you attend a financial planning seminar, it is better for you to read a book to get background information. Spend $12 and 12 hours to be educated with my book, Practical Guide on Financial Planning. Be educated and avoid paying the high price of ignorance!

Tan Kin Lian

Tuesday, May 04, 2010

Tangram Book ($6)

The tangram book ($6) will be available in the major bookstores and the convenience stores by Monday 11 May. It can also be ordered online now.

Healthcare in Singapore

Here is the view from Lucky Tan.

Ability to think

Singaporeans are well educated and score high marks in academic subjects. Unfortunately, most are not able to think for themselves or are not "street smart". They rely on the advice of other people. They are quite trusting and gullible and may not even know who can or cannot be trusted. They are easily cheated by people with bad intentions.

This is why so many people are misled into investing in the credit linked notes, such as the mini-bonds. They rely on the advice and assurances of the people who sell the products, not knowing that these people are also ignorant and are mostly interested in the commission or meeting the sales quota. Their managers of the distributors trusted the investment banks who created the products and failed to do the due diligence.

The inability to think extend beyond the credit-linked notes. Many people are now being deceived by the empty promises made by the promoters of certain products, such as land banking or promises of buyback of the investments with an attractive rate of interest. The buy back options are written with legal loopholes.

For a long time, Singaporeans have been used to an environment where they do not have to exercise their legal or human rights. They trusted the "safe" environment" in Singapore. However, this environment has changed and is no longer safe. It is easy for crooks to go around cheating people under the environment  of "caveat emptor" or "regulate with a light touch".

There is a story about the frog in a pot of water. As the water becomes heated, the frog get used to the temperature and was not aware about the danger, until the frog was finally boiled. I am afraid that there is a similar situation to what is heppening in Singapore today.

It is important for Singaporeans to pay attention to the new environment and be aware that they cannot continue to blindly trust people who have their own self interest. Singaporeans should learn to think for themselves, i.e. gather the facts and make their own judgement. They have to learn about the legal and human rights that they are guaranteed under the constitution of Singapore.

The leaders can take the lead to educate the people about their constitutional and human rights.

Tan Kin Lian

An Accountable Parliament - NSP newsletter

My friend, Goh Meng Seng, is the Secretary General of the National Solidarity Party. Meng Seng helped me in translating my speeches into Chinese at Hong Lim Park.

Meng Seng asked me to send an article for publication in the next issue of his party's newsletter. I decided to use this article. I believe that it is important for the future of Singapore to have an accountable Parliament that reflects the views of the ordinary people of Singapore.

Finder's keepers

If someone finds a valuable property, it must be sent to the Police for safe-keeping, so that the owner can claim the item. Read this letter.

The owner can also offer a reward in the Lost and Found portal here. I hope that the Police will search this portal to locate the owner and encourage the owners of lost item to report in this portal.

Fake request for financial assistance

During the past month, I received this type of e-mail from two people that I knew. I suspect that they are fraud. Be careful. I hope that the Police will carry out a sting operation and catch the culprit. It is easy for the police to do it, if they are willing to take the trouble.


How are you doing? I hope this email reaches you on time, i had a trip to the United Kingdom, but unfortunately for me i got mugged at the park of the hotel,all my cash, credit card and cell-phone were taken away from me. I don't even have a phone where i can be reached right now because of my hotel bill.

Presently my things are been held down by the hotel management due to my inability to pay the hotel bills which i currently owe, they even had to restrict my access to the hotel facilitates until outstanding bills are cleared and i don't have a dime on me again,i had to walk down to the city library in order to send you this email.

I need you to kindly assist me with about $2,780:08 USD so that i can settle the hotel bills and make arrangement to return back home, please let me know how much you can assist me with soonest.

Investigate fraudulent practices

The Securities and Exchange Commission is charging Goldman Sachs for fraudulent practices in US courts. A letter published in the Straits Times asked the Monetary Authority of Singapore to take similar action against financial institutions for similar practices in Singapore. MAS has replied that the jurisdiction is different. Another person commented in my blog that fraud is fraud, regardless of jurisdiction.

Someone commented in my blog that such cases are complex and difficult to prove in court. I wish to take issue on this point. Fraudulent practices have to be investigated, if there are reasons to suspect that it has occurred and many hundreds of people are involved as victims. Only the authority (i.e. state or government) has the resources and power to carry out this investigation. The victims do not have the resources and power to take civil action.

After gathering the evidence, the authority has to bring the case in court and convince the judge that there was fraudlent intent. This may be difficult, but one should not shirk this responsibility. In many instances, the charged party may be willing to negotiate a settlement without admission of guilt and to compensate the victims or the state.

I applaud the attorney general of New York State for brining up the case against the financial institutions on the auction rate securities and on financial reinsurance. The financial institutions decided to settle the case out of court and agreed to make suitable compensations. It was not easy for the attorney general to take this task, but he did not find excuses to avoid the respnsibility.

I hope that our authority in Singapore will take the bold step to protect the reputation of Singapore as a safe place for people to invest their money here.

Tan Kin Lian

High yields on matured policies

A life insurance company advertised the high return (over 5% p.a.) on its policies that has matured in recent years. There is a risk that the agents may mis-use this information to sell their current policies. The possible mis-use are:

a) The high yield was obtained during the past three decades under an environment of high interest rate and economic growth. The future economic environment is quite different.
b) The expenses in the past on the old products were much lower than the new products that are being marketed today.

If the agent or consultant tells you about the high yield, but did not tell you the two key factors (shown above), you should distrust the agent for not being transparent and honest.

When you get a benefit illustration from any insurance company, including one that advertised a high return on matured policies, look for the following:

a) Distribution cost as percentage of premium. If it is more than 50%, it is too high.
b) Look for the "effect of deduction" after 20 years or longer. If it is more than 20%, it is too high.
c) See the proportion of the maturity benefit that is "not guaranteed". Avoid policies that "bump up" the "non-guaranteed" bonus at the maturity date to show a high payout. You may not get this bonus, but it will be too late at that time.

You can get more information from my book, Practical Guide on Financial Planning. There is a table that shows the benchmark for the effect of deduction for various years to maturity.

Monday, May 03, 2010

Investigation of fraudulent practices

Hi Kin Lian,

The Straits Times Forum publised a letter entitled "Should MAS Act". A week later, the MAS gave a short reply which was off tangent to the key issue. The MAS said that the jurisdications are different.

In the case of the US, the SEC filed charges of malpractices and fraud  against Goldman Sach. It was not about breaching regulations of the US jurisdiction, but was about fraudulent practices and non-disclosures. Fraud is fraud regardless of the jurisdiction in question.

Resources and power to investigate and prove these are way above the capabilities any individual or group of individuals possess. Investigations with access to confidential documents can only be done successfully, just like in the US, with the direct involvement of the authorities.

There are circumstantial evidence to warrant investigations in the US. Goldman Sach in its defence was also reported (in ST's May 2) to have alleged that other US investments banks were also doing similar things, not just it alone. That proves the point of how predatorial these banks were back then and operating in packs.

How can MAS totally ignore this course of action of investigation when even countries in Europe may also be following in the US footsteps.

Of course, entities like Morgan Stanley are innocent until proven guilty. But how can they ever be proven guility if MAS refuses to investigate. What's in MAS's minds and agenda is anyone's guess. But it will be a Himalayan task to attempt a private class action suit in the US on transactions booked in Singapore without the sympathetic support and empowerment of local authorities.

Abuse of car horn

In some cities, it is an offense to use the car horn. except in an emergency or to avoid an accident. The abuse of the horn disturbs the tranquility and affects other car drivers and the public. Car drivers in Singapore have a bad habit of using the horn to express their anger. I hope that this is treated as a public nuisance.

Restructuring of bankrupt companies

Large fees are paid to accountants, lawyers and consultants to handle the restructuring of bankrupt companies. They have to be borne by the shareholders who already lost so much value in their investments. Read this report.

My comment
This is clearly excessive, but nobody seems to care. We are in a world of greed and immorality.

Give way on the road

Last Friday, I was driving along the Central Expressway. There were at least five occasions when the vehicle in front of me signalled the intention to cut into my lane. I slowed down and let them passed. It does not matter if they were bad drivers or could have signalled earlier.

Refund of Pinnacle Notes

Two years ago, a finance company sold $40,000 in a Pinnacle Notes to my wife. She brought back the sales brochure and felt convinced that it was a good investment. She believed in the assurances given by the finance company. She was told that many people rushed to buy the product which would be sold out soon.

I saw the wording on the brochure, "You stand to lose all of the amount that you have invested". I read the brochure for more details, but was told that they are explained in the prospectus and other documents (not made available to my wife). I said, "What kind of rubbish is this?".

At that time, I had a distrust of all structured products as my wife had earlier invested in two series of capital guaranteed  products and got back just 2% after investing for 5 years (when a safe government bond would have earned ber 15% at that time).

I told my wife to cancel the investment and ask the finance company to return the money to her. She said that it was not possible, as she had been told that the investment cannot be rolled back. I told my wife to tell the finance company that if they did not refund the money, I would fight them on a matter of principle.

My wife got back her $40,000. If not, she would have lost nearly all of her invested money as the notes are now worthless.

Lesson: It is important for Singaporeans to think for themselves and be aware of their legal and human rights.

Tan Kin Lian

Two sides to a story

Read this article.

My comment
It is better for the government minister to be above the fray and not be defensive about people presenting the other side. By acknowleding that there is another side, the minister will set the environment for a more open society in Singapore. I continue to be hopeful that our leaders have the integrity and intelligence to understand my message.

Sunday, May 02, 2010

Online sale of my books

I was surprised that about 1,000 copies of my Intelligence Quiz Vol 3 has been sold at the bookstores. This is much better than I expected. My online sale of this book has been rather slow. It seems that Singaporeans are still quite traditional in their method of buying. Perhaps, it is quite troublesome to pay through the interent? I allow payment by internet banking, Paypal, ATM and by cheque.

Some people describe the Intelligence Quiz as the "word" version of Sudoku. There is some resemblance. So, Sudoku fans may enjoy this puzzle.

I sold 1,000 copies of the Financial Planning book at the bookstores and about 200 copies through my online shop. In this case, the online sales is doing quite well.

The tangram book is available now and can be ordered online. It will be available in the bookstores by 15 May.

Order books online.

Tan Kin Lian

Press Freedom

Read this article by Yoong Siew Wah.

My comment
The media can play a useful role in educating the public to have good values and be able to think for themselves. This requires the media to present both sides of an issue, so that the public is able to make a judgment on what is right from wrong, good from bad. Generally, Singaporeans are weak in the values, due to inability to think for themselves.

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