This article explains about the loss of income for retirees
http://www.cnbc.com//id/48776785
A large cause of the loss of income is caused by the extremely low interest rate, and retirees depend on interest income earned on their past savings. The loss interest rate environment is not fair to retirees, and is a form of hidden tax. The interest rate is now below inflation rate, especially when retirees invest in "safe" government bonds.
Relying on the appreciation of houses is also dangerous, as seen from the US experience. This will also hit the inflated housing market in Singapore, in due course.
Even "safe" investments are not safe anymore. The municipal bonds in the USA may default. Some government bonds issued by European governments are now questionable.
The "best" investment is to invest in a diversified portfolio of blue chip shares. This is explained in my talks on investments conducted by FISCA (www.fisca.sg, Events). You can invest in an indexed fund, including ETF of index funds.
http://www.cnbc.com//id/48776785
A large cause of the loss of income is caused by the extremely low interest rate, and retirees depend on interest income earned on their past savings. The loss interest rate environment is not fair to retirees, and is a form of hidden tax. The interest rate is now below inflation rate, especially when retirees invest in "safe" government bonds.
Relying on the appreciation of houses is also dangerous, as seen from the US experience. This will also hit the inflated housing market in Singapore, in due course.
Even "safe" investments are not safe anymore. The municipal bonds in the USA may default. Some government bonds issued by European governments are now questionable.
The "best" investment is to invest in a diversified portfolio of blue chip shares. This is explained in my talks on investments conducted by FISCA (www.fisca.sg, Events). You can invest in an indexed fund, including ETF of index funds.
11 comments:
Hi Mr Tan,
My friend would like to introduce me to a preview given by a FX school in town, she highlights to me the school obtained few SME awards and ISO, and the student can make an average 10 to 30% monthly. I m a bit confused, do these awards guarantee the success of such trading strategy and qualify the strategy is safe? I also see couple of post from you to advise people to learn forex trading from free online resource and practise it by using free demo account. So I m a bit hesitate of should I attend the preview and would like to seek your opinion.
Economic downturns can last for more than 15 years, and specifically, interest rates can remain low for long periods.
Japan's bank deposit rates have remained below 1% for more than 15 years.
Stock markets on the whole may rise and fall. Indexed funds mirror these movements by buying into companies that represent the market.
Their dividends may not be that generous and for retirees, cash flow is vital.
To prepare for retirement, preparation to maintain cash flow for expenses is key.
It can be from:
-rental income
-dividend income
-interest payments from bonds
-annuities
For many, its just their savings in the bank, CPF or the sale of their homes.
Planning for retirement is not difficult. Calculating your current expenses is. We live in denial, we live in hope, we satisfy our wants. This will lead to a difficult retirement.
Time is critical and everyone should begin early. And I do not mean buying insurance plans!!
Foreign exchange trading is best left to professionals and banks. I doubt you could make any money in the long term. There are way too many varibales which are man made and can not be predicted.
Besides, you have to trade on platform prepared by banks or instituitions that are authorised by their central banks. People behind this platform make a small percentage cut(or spread) on every trade you make.
To make money in the long term, you have to invest, not trade. You could trade for the excitement and entertainment of trading. Very likely those trades you make will end up with losses.
Key to success in retirement planning is having an HONEST, COMPETENT retirement planner and NOT insurance salesmen who peddle so called retirement products which are actually endowment products with returns below inflation.
Insurance salesmen are incompetent and dishonest and who put their own interest first above yours.Worse they are unqualified and they have only tikam tikam certs which your cats and dogs might be able to pass. Yet these salesmen require their customers to have degree in finance before they can invest themselves.It is stupid, isn't it? It should be the other round, ie. the salesmen should have a degree in finance to advise. No wonder they are peddlers no different from the drug peddlers peddling poisons to make a living to feed their families at the expense of their customers.
If MAS doesn't overhaul the industry drastically Singaporean will be not only under insured but unable to retire.MAS should dismantle the tiered remuneration structure of agency model in insurance companies and reduce the commission to 50% spread over 5 years to weed out the salesmen and the fly by night agents.
In the last Sunday Times invest page it was reported a 23 year old insurance agents made $200k a year in commission.Did he help his clients or himself? How many lives did he ruin? What does he know about finance or insurance ? How did he approach his clients' needs?
In all likelihood he peddled and pushed tha products that benefitted him, ie hgih commission.
I bet that his customers wont' know they have been fleeced and short changed.
Planning is not difficult.
Its deciding what and how much to invest.
If dividend income is the focus, it means that for all the shares that you own, it will pay dividend amounts equivalent to one month's expenses.
This is not easy.
Investment in blue chip companies such as DBS, UOB, SIA, SingTel, KepCorp, SembCorp, F&N, City Developments, Suntec Reits require a substantial amount of cash outlay.
You need time to accumulate.
1000 shares of UOB = $20,000
1000 shares of SingTel =$3,300
1000 shares of SIA = $10,900
1000 share of KepCorp = $11,500
Each pays dividends of about $300 to $450 per year. It will not be sufficient to fund a retiree who may need $2000 or more a month.(no outstanding loans)
Furthermore, not all the companies will pay the same.
Beyond selling your home or waiting for a rich uncle to inherit an east coast road property, you need to start early.
Know what are your current monthly expenses... many have absolutely no idea, or dare not account for it.
Plan it yourself.. that way you cannot blame it on the financial planner.
Anon, Aug 25th, 11.23 a.m.
Agree with you, FX trading is best left to professional traders, not greenhorn retirees. Even for those who have been trading for some time, need only one botched trade, is enough to kill him, sometimes sudden, overnight fundamental news, not technical analysis, is the killing, Act of God factor.
TKL's advice on investments are relevant to retirees, yes, very slow and boring returns, but at least you could sleep at night, and not worry how your currency trade would turn out upon you waking up. Worries shorten life span.
Are these few SME awards and ISO come from Revenue and Profits from conducting expensive forex courses or from their own forex trading profits?
Are these claims of forex trading records audited by one of the Big Four Auditors?
These trading schools have claimed to make millions and millions of profits, they can easily afford to pay for an audit report. Right?
Please, don't be easily believe that there is an easy way or method to make money from the market. In reality, it is not.
"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder
Do attend Mr. Tan's talk and learn the finer points and truths of financail planning and investing and avoid being ripped off by insurance salesmen and robbed of your financial goals and retirement.Avoid those rubbish par insurance products with cash value. They are more like scams.These products only enrich the insurance agents, the managers and the CEOs of the insurance companies.
Simple maths; if the agents and the managers become rich it means you make them rich and you become poorer.Remember in this type of life insurance IT IS A ZERO SUM GAME.The agents and the managers win and become rich at your expense.Unless the model changes you will be ripped off by them. Hope that MAS FAIR will level the playing field with consumers' interest in mind.
It is very turth that FX trading is best to left to professional traders from bank/Hedge Fund, it is almost impossible for retail trader to make money in long run.
According to CEO of FXCM, one of the few largest US based retail FX broker, he said he will be surprised if there are more than 5%of the retail FX traders can make money in long run.
For those ISO/SME Awards, it is for show only, so long a company afford to pay, it is not very difficult to get it and it doesn't gaurantee the trading strategy is a sucessful one. Did you ever heard Warren Buffet goes to apply ISO??? Don't easily believe the story from those school marketer, I don't care how fast the coach turns his personal acct from 1K to 1 million, how I know how many accounts he got margin call before getting a profitable one, and almost certainly , the super high returns is link to over-leveraging, just likes someone said a fundamental news suddenly came up in the middle of the night from US/Europe is good enough to kill the account. As a normal singaporean, how many 10K you are afford to lose? On the contrast, the coach can continue to trade and gamble with high leverage as long as there are new students willing to sign up the course and provide him free funding. In reality , the only way to judge whether the trading strategy is workable is to see how many percent of students from the school can trade with that strategy and beat the benchmark index such as S&P500 over long run. But I doubt you can get the school to provide any proven figure in that regard.
As someone said, to make money in the long term, you have to invest, not trade. I 100% agreed!!!!!
NTUC just launched a cashcow product called vivosave. Just wonder who owns the cashcow, the customers or the agents and the company. It looks like the cashcows are the customers for their agents and company to milk for life. Another clever source of money for the agents and the company to milk.
It is not easy for customers to calculate the returns of various payouts. It is complicated. Not even the agents can calculate.Be careful when this product is pitched to you.The 3%, 6% or 8% are NOT returns. Don't fall into the trap. If any agents tell you they are returns report them to MAS straightaway because they are dishonest.
Be careful. Ask the so called expert the financial consultants to calculate the returns of each period( if they are truly consultants). It is only worth it if the average return over the entire period is 5.5% before inflation.
Remember, the total period is long many will not benefit fully , although there is death benefit.
Ask the usual questions.
*WHY IS THIS PRODUCT SO COMPLICATED?Is it to make it hard for me to understand so that I have to be sold and trust you? I don't think I can make an informed decision.
*Why is it suitable for me?
*What is the risk?
*What is the commission for you that you are so keen to push it to me?
*What are the rates of return for each period?
*Is this a wholelife or endwoment product?
*How is it compared to a similar one from Tokio Marine Insurance?
Please tell me. If not how do I know that I am getting the best or better.
Remember* ..IF YOU SAVE AND INVEST REGULARLY THE RESULT IS MUCH SUPERIOR( A FEW TIMES) THAN THE RESULTS OF THIS PRODUCT.
Hey, don't become ntuc agents' cashcows.I bet you are already their cashcow.
You regret, man.
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