Due to the prevailing low interest rates, consumers look for investment
opportunities that allow them to earn a return that can at least offset
Many of them were unfortunately badly advised to invest in risky products,
such as the credit linked notes, currently linked notes and other
structured products based on derivatives. In most cases, the bad advice
was given by the relationship managers working for the banks that they
had trusted for years.
Some of them were misled into investing in unregulated products, such as
the "guaranteed pay-back" schemes that offer a high return. Recently,
Geneva and Profitable Plots were raided by the Commercial Affairs Department
for alleged fraudulent practices in promoting these types of schemes.
The Financial Services Consumer Association have been educating the public
about the merits of investing in an index fund, such as the
STI Exchange Traded Fund that is offered in the Singapore Exchange. This is
a low cost, diversified fund that is invested mainly in blue chips, and is suitable
for conservative, risk adverse investors to invest for the long term.
Another suitable type of investment is in an insurance linked policy that is offered by
life insurance companies, except that most of these products in the market
take away 3% to 4% from the yield earned on the investment each year, compared to
0.3% from the index fund. The high charges in the investment linked policies
make them unsuitable for the public.
While the index fund is the best type of investment for the conservative investors,
the regulations imposed by the Monetary Authority of Singapore
make it almost impossible for the general public to invest in this asset class.
The investor is required to pass an online test that requires knowledge of warrants, options,
futures, exchange traded notes, extended settlement contracts, discount certificates and
callable bull and bear contracts.
Although I am qualified as an actuary and have over 30 years of investment experience,
I am not familiar with some of these investment products and would most certainly advice
the general public to avoid them. Why educate them in the products that should be avoided?
If investors are denied the option to invest in the index fund, some are likely to end up
speculating in penny stocks and questionable investments, including overseas stocks, that
are not suitable for long term investors.
I urge the Monetary Authority of Singapore to review their existing regulation and make it easy
for the general public to invest in the cash-based indexed funds that do not have nay leverage