Thursday, February 25, 2010
Shape Quiz Minipak
I gave the shape quiz mini-pak to a few friends at a lunch. They were amazed at the challenge in forming the shapes. I showed them the approach and to solve some of the shapes using "out of the box" thinking. They also have to follow a systematic approach, i.e. to analyse the shape first, before trying to solve it. It helps to develop the thinking process. You can try the Shape Quiz here for free. The mini-pak sells for $2 and can be ordered here.
Renting and owning a property
Many decades ago, when properties were inexpensive, it was advantageous to buy a property to live in, rather than to rent a property.
The situation has changed. Property prices are high. It may be possible to find a rental property that cost much less than the installment payment to buy a home. In this situation, renting a property may be a more attractive option.
One big advantage of renting a property is the flexibility. You can rent a property that is close to your place of work and reduce the travelling time and expenses. If you change your workplace, you have the flexibility to move to a new rented property.
Many people still like to invest in properties to earn a rental income. This is not as attractive as in past years. It is a hassle to rent out a property and to meet the requests of tenants on repairs, maintenance and other issues. The tenant may not take care of your property or may delay paying the rental. You also have to pay commission to get a tenant.
After deducting the expenses, the net yield on a property is between 2% to 3% (and not counting the hassle that you had to go through). You hope that the yield can be enhanced when you sell the property for a capital gain. But this is not certain, as the value of the property will drop due to age and a shorter lease period. While the price of new property may increase, the high rate of increase does not apply to old properties.
It does not make sense to own a property for renting out. It make better sense to be a tenant. This situation is likely to persist until property prices drop to a more sensible level.
Tan Kin Lian
The situation has changed. Property prices are high. It may be possible to find a rental property that cost much less than the installment payment to buy a home. In this situation, renting a property may be a more attractive option.
One big advantage of renting a property is the flexibility. You can rent a property that is close to your place of work and reduce the travelling time and expenses. If you change your workplace, you have the flexibility to move to a new rented property.
Many people still like to invest in properties to earn a rental income. This is not as attractive as in past years. It is a hassle to rent out a property and to meet the requests of tenants on repairs, maintenance and other issues. The tenant may not take care of your property or may delay paying the rental. You also have to pay commission to get a tenant.
After deducting the expenses, the net yield on a property is between 2% to 3% (and not counting the hassle that you had to go through). You hope that the yield can be enhanced when you sell the property for a capital gain. But this is not certain, as the value of the property will drop due to age and a shorter lease period. While the price of new property may increase, the high rate of increase does not apply to old properties.
It does not make sense to own a property for renting out. It make better sense to be a tenant. This situation is likely to persist until property prices drop to a more sensible level.
Tan Kin Lian
Wednesday, February 24, 2010
Mental training with Intellivence Quiz
The Intelligence Quiz looks difficult, but with some training (following the tips in the book), it becomes manageable. More important, it is a mental exercise that trains you to focus the mind and adopt a systematic approach. Even primary students find it challenging and fun.
You can download a PDF with this puzzle from this website free. If you wish to buy the book, click here. Enjoy a 15% discount up to for the rest of this month (promotion code - BLOG).
You can download a PDF with this puzzle from this website free. If you wish to buy the book, click here. Enjoy a 15% discount up to for the rest of this month (promotion code - BLOG).
Class action in America - suggestion by Teo Guan Hock
Teo Guan Hock is the contact person for Kirby McInerney, the US law firm that is willing to organize a class action to seek compensation in the US on behalf of the investors. They need to have sufficient investors to make the effort viable.
KM needs to have some team leaders (of the investors) to come forward to approach the distributors, e.g., DBS Bank, ABN, Hong Leong Finance, Phillip Securities, UOB, OCBC Securities, CIMB GK, to get them to individually or collectively engage KM to review the cases quickly and if fraud could be substantiated, to file class action litigation cases at the US courts to recover the losses. This would be an ideal outcome.
Timing is of the essence. The faster KM is engaged to file the law suit in the US, the chances of success would be higher. The amount to be recovered would also be higher.
If you are interested to be involved and take the lead, you can contact Teo Guan Hock at:
Mobile Tel: +6596695578
Fax: +6563820421
Email: tguanhoc@singnet.com.sg
Tan Kin Lian
KM needs to have some team leaders (of the investors) to come forward to approach the distributors, e.g., DBS Bank, ABN, Hong Leong Finance, Phillip Securities, UOB, OCBC Securities, CIMB GK, to get them to individually or collectively engage KM to review the cases quickly and if fraud could be substantiated, to file class action litigation cases at the US courts to recover the losses. This would be an ideal outcome.
Timing is of the essence. The faster KM is engaged to file the law suit in the US, the chances of success would be higher. The amount to be recovered would also be higher.
If you are interested to be involved and take the lead, you can contact Teo Guan Hock at:
Mobile Tel: +6596695578
Fax: +6563820421
Email: tguanhoc@singnet.com.sg
Tan Kin Lian
Popular items from i-Shop
The most popular items bought from i-Shop are:
Practical Guide on Financial Planning
Rechargeable torchlight
Shape Quiz Mini-pak
Order here.
Practical Guide on Financial Planning
Rechargeable torchlight
Shape Quiz Mini-pak
Order here.
Tuesday, February 23, 2010
Mobile Application
I wish to give a contract to develop an application on the iPhone, Windows Mobile and Android. If you have the experience and are interested, send an e-mail with your resume to kinlian@gmail.com.
IMF experts rethink long term ideas
Read this report. The experts think that inflation at 4% is better than 2% and that capital flow should be restricted. I agree with both ideas. Higher inflation will also mean that interest rate will be higher (i.e. good for retirees and savers) and that asset bubbles will be contained (i.e. stock and property prices will not run away). This will produce a more stable economic system.
Distribution cost
The benefit illustration for a life insurance policy has an item called "distribution cost". This is the amount taken away from your savings (i.e premiums) to pay the commission to the insurance agent and his agency manager. It is usually a large sum of money, representing more than 18 months of premium. If you save $500 a month, the amount that is taken away as distribution cost could be (say) $9,000. A large part of this sum is taken away during the first year and the rest over the next four years.
You should ask, "Is it too much to give away (say) $9,000 to buy a life insurance policy? You have more attractive alternatives. You can buy term insurance to cover a larger sum (say $300,000) by paying less than $500 a year. You can invest in a low cost fund, such as the Exchange Traded Fund in SGX, and pay only a small annual fee of 0.3% for the asset management service.
If more consumers are aware about the alternatives, there is no need for them to pay 18 months of their premium as "distribution cost". This will force insurance companies to reduce their distribution cost and find more efficient and low cost ways to market their products. Some countries plan to ban the payment of commission for the sale of insurance products, as the consumers had been given a bad deal for the past years.
After paying such a high distribution cost, you are not getting a superior product that gives superior return. Most life insurance policies give a yield of 2% to 3% over 30 years. This is too low. It should be higher, if the distribution cost and other charges are kept at a modest level.
However, if you find a life insurance policy that has a modest distribution cost, say $300 or less, it is all right to buy the product. Alternatively, you should be willing to pay a fee of $300 for advice, provided that the commission built into the life insurance policy is refunded to you.
Tan Kin Lian
You should ask, "Is it too much to give away (say) $9,000 to buy a life insurance policy? You have more attractive alternatives. You can buy term insurance to cover a larger sum (say $300,000) by paying less than $500 a year. You can invest in a low cost fund, such as the Exchange Traded Fund in SGX, and pay only a small annual fee of 0.3% for the asset management service.
If more consumers are aware about the alternatives, there is no need for them to pay 18 months of their premium as "distribution cost". This will force insurance companies to reduce their distribution cost and find more efficient and low cost ways to market their products. Some countries plan to ban the payment of commission for the sale of insurance products, as the consumers had been given a bad deal for the past years.
After paying such a high distribution cost, you are not getting a superior product that gives superior return. Most life insurance policies give a yield of 2% to 3% over 30 years. This is too low. It should be higher, if the distribution cost and other charges are kept at a modest level.
However, if you find a life insurance policy that has a modest distribution cost, say $300 or less, it is all right to buy the product. Alternatively, you should be willing to pay a fee of $300 for advice, provided that the commission built into the life insurance policy is refunded to you.
Tan Kin Lian
Survey: The Stingy Nanny
Effect of Deduction
An agent who recommends a life insurance policy to you is required to provide a benefit illustration, which can take 10 pages or more.
You should ask the agent to show you the "effect of deduction" and calculate it as a percentage of the "value of premiums paid". The "effect of deduction" should not exceed the following percentage of the "value of premiums paid" in the case of a regular premium policy:
20 year policy - 15%
25 year policy - 18%
30 year policy - 22%
35 year policy - 25%
The above benchmark is my estimate of the fair amount to be deducted from your "value of premium paid" to cover the insurance protection and investment services provided by the insurance company. If the actual percentage is higher, the amount taken away is excessive.
The "value of premium paid" is the accumulated amount assuming that your premium has been invested to earn the assumed rate of return. The "effect of deduction" is the amount that is taken away from your accumulated amount to cover the charges by the insurance company.
Most insurance policies have an "effect of deduction" that takes away an additional 15% from the accumulated premiums (compared to the reasonable levels shown above). These insurance plans do not provide good value to consumers.
For an investment-linked policy, the "value of premiums paid" is not shown. You have to add the "projected net amount" plus "effect of deduction" to get the "value of premiums paid".
Tan Kin Lian
You should ask the agent to show you the "effect of deduction" and calculate it as a percentage of the "value of premiums paid". The "effect of deduction" should not exceed the following percentage of the "value of premiums paid" in the case of a regular premium policy:
20 year policy - 15%
25 year policy - 18%
30 year policy - 22%
35 year policy - 25%
The above benchmark is my estimate of the fair amount to be deducted from your "value of premium paid" to cover the insurance protection and investment services provided by the insurance company. If the actual percentage is higher, the amount taken away is excessive.
The "value of premium paid" is the accumulated amount assuming that your premium has been invested to earn the assumed rate of return. The "effect of deduction" is the amount that is taken away from your accumulated amount to cover the charges by the insurance company.
Most insurance policies have an "effect of deduction" that takes away an additional 15% from the accumulated premiums (compared to the reasonable levels shown above). These insurance plans do not provide good value to consumers.
For an investment-linked policy, the "value of premiums paid" is not shown. You have to add the "projected net amount" plus "effect of deduction" to get the "value of premiums paid".
Tan Kin Lian
Shared bicycles
I posted a blog on the shared bicycles used in the University of Singapore. A few commentators like the idea while others felt that it will not work in Singapore. Here are some research about shared bicycles used in other countries:
http://en.wikipedia.org/wiki/Bicycle_sharing_system
http://www.veoliatransportation.com/transit/shared-bicycles
http://worksmancycles.com/shopsite_sc/store/html/page59.html
http://www.transalt.org/newsroom/media/1136
Tan Kin Lian
http://en.wikipedia.org/wiki/Bicycle_sharing_system
http://www.veoliatransportation.com/transit/shared-bicycles
http://worksmancycles.com/shopsite_sc/store/html/page59.html
http://www.transalt.org/newsroom/media/1136
Tan Kin Lian
Prepare for high inflation
Dear Mr. Tan,
The deficit at Federal and state levels in USA seems to be the next big thing i.e. bigger than Greek crisis. California is already facing the problem of not enough money to pay their civil servants. Some other states are facing the same problem. There are articles written about it and it seems very serious.
Are you able to share your opnion in your blog as well as letting us understand what is the impact to Singapore since we are very dependent on USA for our survival. Also what can we do to protect ourselves in the event the above happens e.g. buy gold and keep since US$ is going to crush.
REPLY
The USA is facing a large deficit as they are not collecting enough taxes to pay for their government expenditures (at Federal and State levels). Right now, they are issuing bonds to fund the deficit and pay a low rate of interest.
They have to raises taxes to balance the budget, but the politicians are reluctant to do so. They have to cut expenses, but that is also unpopular. At some point of time, they have to print money to fund the deficits. This will lead to higher rates of inflation. Many other countries face the same situation and may have to adopt the same solutions.
We have to prepare for high inflation in the future. In this environment, it will be bad to be invested in bonds that give a fixed rate of return. We have to invest in equities and properties that have a variable return that will increase with inflation. On the other hand, high inflation will burst the asset bubbles in equities and bonds. Maybe the safe asset classes will be gold and cash.
This situation may take many years before the correction occurs. In the meantime, many people continue to ignore the problem. Can I have your views on this matter also?
The deficit at Federal and state levels in USA seems to be the next big thing i.e. bigger than Greek crisis. California is already facing the problem of not enough money to pay their civil servants. Some other states are facing the same problem. There are articles written about it and it seems very serious.
Are you able to share your opnion in your blog as well as letting us understand what is the impact to Singapore since we are very dependent on USA for our survival. Also what can we do to protect ourselves in the event the above happens e.g. buy gold and keep since US$ is going to crush.
REPLY
The USA is facing a large deficit as they are not collecting enough taxes to pay for their government expenditures (at Federal and State levels). Right now, they are issuing bonds to fund the deficit and pay a low rate of interest.
They have to raises taxes to balance the budget, but the politicians are reluctant to do so. They have to cut expenses, but that is also unpopular. At some point of time, they have to print money to fund the deficits. This will lead to higher rates of inflation. Many other countries face the same situation and may have to adopt the same solutions.
We have to prepare for high inflation in the future. In this environment, it will be bad to be invested in bonds that give a fixed rate of return. We have to invest in equities and properties that have a variable return that will increase with inflation. On the other hand, high inflation will burst the asset bubbles in equities and bonds. Maybe the safe asset classes will be gold and cash.
This situation may take many years before the correction occurs. In the meantime, many people continue to ignore the problem. Can I have your views on this matter also?
Monday, February 22, 2010
Seminar on class action in USA - April 14, Fullerton Hotel
I have received the following information on the seminar:
Date Wednesday 14 April 2010
Place: Fullerton Hotel
Time: Morning, actual time to be confirmed
This date is delayed due to lack of available hotels and availability of speakers from the US firm. The lawyer was not able to arrange it for a weekend due to the above constraints.
More details will be provided when available. The above should be taken as Tentative.
PARTICIPANTS TO BRING DOCUMENTS
Date Wednesday 14 April 2010
Place: Fullerton Hotel
Time: Morning, actual time to be confirmed
This date is delayed due to lack of available hotels and availability of speakers from the US firm. The lawyer was not able to arrange it for a weekend due to the above constraints.
More details will be provided when available. The above should be taken as Tentative.
PARTICIPANTS TO BRING DOCUMENTS
Dear Mr. Tan,
There will also be a one-on-one meeting after the seminar with KM lawyers. These meetings will start about 2 p.m. Please request the investors to bring along photocopies of their investment documents, if this is possible. Then the meetings will bear immediate fruits.
KM - Kirby McInerney - US legal firm specialising in class action on securities.
Singapore contact person - Teo Guan Hock (email: tguanhoc@singnet.com.sg, mobile: 96695578)
website: http://www.kmslaw.com/
website: http://www.kmslaw.com/
RED Map
I wanted to go to Gain City in Ang Mo Kio. I went to the RED Map and type in "Gain City Singapore". It showed the address and postal code and a map of the vicinity. It is very easy to use and fast to respond.
Here is the URL: http://projects.easyapps.sg/propinfo/
Here is the URL: http://projects.easyapps.sg/propinfo/
Better regulation to ensure a fair market
I welcome the move by the Government to put curbs to prevent a bigger bubble on the property market. It is necessary and desirable.
The frequent speculation in the property market is an example of the failure of the market to produce the right results for consumers. It allows certain parties to take advantage of the ignorance of consumers to make excessive profits for their businesses. Another example is the market for financial products.
We need the market to be better regulated to work better in producing fair outcome for all parties. Excessive profiteering, through deceptive means and abuse of pricing power, should be stopped. The regulator has to act to protect the interest of consumers, rather than to expect consumers to find redress through legal means - as they not have the financial resources to engage lawyers.
We have similar problems with public transport and the telecommunication services. They also need to be better regulated to ensure the interest of consumers and businesses are better balanced.
The government policy to allow matters to be decided by the market has boosted the profits of businesses but has caused hardship to consumers. It is time for the policy to be reviewed and for better regulation to be introduced.
Tan Kin Lian
The frequent speculation in the property market is an example of the failure of the market to produce the right results for consumers. It allows certain parties to take advantage of the ignorance of consumers to make excessive profits for their businesses. Another example is the market for financial products.
We need the market to be better regulated to work better in producing fair outcome for all parties. Excessive profiteering, through deceptive means and abuse of pricing power, should be stopped. The regulator has to act to protect the interest of consumers, rather than to expect consumers to find redress through legal means - as they not have the financial resources to engage lawyers.
We have similar problems with public transport and the telecommunication services. They also need to be better regulated to ensure the interest of consumers and businesses are better balanced.
The government policy to allow matters to be decided by the market has boosted the profits of businesses but has caused hardship to consumers. It is time for the policy to be reviewed and for better regulation to be introduced.
Tan Kin Lian
Sunday, February 21, 2010
The Stingy Nanny
The Economist magazine had an article entitled "the stingy nanny". Here is the reply from the Singapore High Commission to the magazine.
SIR
SIR
I refer to your article “The stingy nanny” of Feb 13th.
Each society has to decide for itself the appropriate balance between unconditional welfare and self-reliance. Singapore has concluded that we cannot afford European-style state welfare, not because of dogma, but because our circumstances are different. We face competition from some of the most vibrant economies in the world, we have no hinterland or natural resources of our own to fall back on, and our future depends on being a dynamic and self-reliant people who strive our utmost to excel and create wealth for ourselves, our families and our society. Each generation must earn and save enough for its entire life cycle.
Our approach is based on time-tested values of hard work, self-reliance, family responsibility and community support for those in need. While we avoid over-generous welfare handouts, we have substantial state subsidies for education, health care and public housing. These are major investments that uplift the skills, promote the health and increase the assets of all Singaporeans. The result has been high growth, low unemployment, high savings and the highest home-ownership rates in the world.
No society has ever succeeded in totally eradicating poverty, nor in eliminating inequality of incomes, not even Communist systems. A generous welfare state, despite its theoretical attractiveness, is not a panacea. Singapore’s system is by no means perfect, but it has produced real results for the vast majority of Singaporeans, and enabled even the poor to live with dignity and hope. The burden of proof is on its critics to demonstrate that their proposals will in fact work, and improve on what Singapore has achieved, given our socio-cultural fabric and economic circumstances.
Michael Eng Cheng Teo
Each society has to decide for itself the appropriate balance between unconditional welfare and self-reliance. Singapore has concluded that we cannot afford European-style state welfare, not because of dogma, but because our circumstances are different. We face competition from some of the most vibrant economies in the world, we have no hinterland or natural resources of our own to fall back on, and our future depends on being a dynamic and self-reliant people who strive our utmost to excel and create wealth for ourselves, our families and our society. Each generation must earn and save enough for its entire life cycle.
Our approach is based on time-tested values of hard work, self-reliance, family responsibility and community support for those in need. While we avoid over-generous welfare handouts, we have substantial state subsidies for education, health care and public housing. These are major investments that uplift the skills, promote the health and increase the assets of all Singaporeans. The result has been high growth, low unemployment, high savings and the highest home-ownership rates in the world.
No society has ever succeeded in totally eradicating poverty, nor in eliminating inequality of incomes, not even Communist systems. A generous welfare state, despite its theoretical attractiveness, is not a panacea. Singapore’s system is by no means perfect, but it has produced real results for the vast majority of Singaporeans, and enabled even the poor to live with dignity and hope. The burden of proof is on its critics to demonstrate that their proposals will in fact work, and improve on what Singapore has achieved, given our socio-cultural fabric and economic circumstances.
Michael Eng Cheng Teo
High Commissioner for Singapore
London
London
Home prices and average salaries
Some readers have commented that the benchmark of 3 years income to pay for a home is outdated. I agree.
In my book on financial planning, I have used the benchmark of 4 to 5 years. I consider 5 years to be on the higher end of the scale. Some people have commented that they are not able to buy a decent home using this benchmark, as prices are high, even for HDB flats.
My advice is not to go beyond 5 years. It may mean that you have to consider other options, such as renting your home or buying a smaller flat.
Some people pay 6 to 8 years of income for their home. They calculate that they can afford the monthly repayment. But, they forget to take the following factors into account:
a) Interest rate may increase in the future, from the current low levels. The higher interest rate will increase the amount of repayment.
b) Jobs are uncertain. If they lose their current job, they may not be able to find another job that pays the same salary.
If more people take this advice and act prudently, the property price will not continue to escalate, as it had in the past years. Do not chase a property bubble. Do not think that you are making a good investment. An overpriced property can drop in value by 30% and leave you with a large financial burden. This has happened in USA and Europe. It can happen in Asia. The low price may be stuck for a decade or longer, as it has happened in Japan.
My book on Financial Planning can be purchased here.
Tan Kin Lian
In my book on financial planning, I have used the benchmark of 4 to 5 years. I consider 5 years to be on the higher end of the scale. Some people have commented that they are not able to buy a decent home using this benchmark, as prices are high, even for HDB flats.
My advice is not to go beyond 5 years. It may mean that you have to consider other options, such as renting your home or buying a smaller flat.
Some people pay 6 to 8 years of income for their home. They calculate that they can afford the monthly repayment. But, they forget to take the following factors into account:
a) Interest rate may increase in the future, from the current low levels. The higher interest rate will increase the amount of repayment.
b) Jobs are uncertain. If they lose their current job, they may not be able to find another job that pays the same salary.
If more people take this advice and act prudently, the property price will not continue to escalate, as it had in the past years. Do not chase a property bubble. Do not think that you are making a good investment. An overpriced property can drop in value by 30% and leave you with a large financial burden. This has happened in USA and Europe. It can happen in Asia. The low price may be stuck for a decade or longer, as it has happened in Japan.
My book on Financial Planning can be purchased here.
Tan Kin Lian
Intelligence Quiz Vol 3
Two nieces visited my home. They asked for my Intelligence Quiz book. The younger girl, who is now in primary 2, was able to complete the beginner quiz within 10 minutes. They competed with each other and enjoyed solving the quiz tremendously. I was surprised that they found it interesting, at their young age.
You can get your children to be interested in this quiz. It trains their mind to be analytical and also to approach the puzzle in a systematic way. The book contains 72 puzzles at three levels - beginner, intermediate and advanced. They can do the puzzle first, because they have done the earlier volumes. The book also contains instructions on how to solve this type of puzzle.
Volume 3 is available in the bookstores at $7.90. The earlier volumes 1 and 2 have been sold out. You can enjoy a 15% discount (net $6.72) if you order through the internet during this month (promotion code - BLOG). The discount is also available for the other books.
Click here.
You can get your children to be interested in this quiz. It trains their mind to be analytical and also to approach the puzzle in a systematic way. The book contains 72 puzzles at three levels - beginner, intermediate and advanced. They can do the puzzle first, because they have done the earlier volumes. The book also contains instructions on how to solve this type of puzzle.
Volume 3 is available in the bookstores at $7.90. The earlier volumes 1 and 2 have been sold out. You can enjoy a 15% discount (net $6.72) if you order through the internet during this month (promotion code - BLOG). The discount is also available for the other books.
Click here.
Talks on Financial Planning at Company Premises
I am available to give talks on Financial Planning at the premises of organisations. Details as follows:
Title: Financial Planning - for Good and Bad Times
Speaker: Tan Kin Lian, Author, Practical Guide on Financial Planning
Duration: 2 hours, including Q&A
Audience - at least 20 people
Fee - to be discussed
Requirements - seminar room with projector.
If your company or organisation is interested, send an e-mail to kinlian@gmail.com
Title: Financial Planning - for Good and Bad Times
Speaker: Tan Kin Lian, Author, Practical Guide on Financial Planning
Duration: 2 hours, including Q&A
Audience - at least 20 people
Fee - to be discussed
Requirements - seminar room with projector.
If your company or organisation is interested, send an e-mail to kinlian@gmail.com
Talks on Financial Planning
I held two talks at Yishan and Pasir Ris Library. They were successful. The contents were suitable for the public.The interaction with the audience was fun and great.
I hope to be able to hold monthly talks at the National Library in Bras Bash Road and at Singapore Exchange in Shenton Way. This will be arranged under FISCA (Financial Services Consumer Association) with NLB and SGX. Each talk will be for 2 hours and include Q&A.
FISCA also intend to organise a 12 hour course (4 sessions of 3 hours during weekends, to cover 8 topics in more detail).
I hope to be able to hold monthly talks at the National Library in Bras Bash Road and at Singapore Exchange in Shenton Way. This will be arranged under FISCA (Financial Services Consumer Association) with NLB and SGX. Each talk will be for 2 hours and include Q&A.
FISCA also intend to organise a 12 hour course (4 sessions of 3 hours during weekends, to cover 8 topics in more detail).
Subscribe to:
Posts (Atom)