Saturday, December 01, 2007

Give testimony in court

Recently, I was asked to give an affadavit (i.e. a legal statement) on a dispute involving NTUC Income and other parties. The transaction occurred during the time that I was the chief executive. The lawyer said that I may have to attend court and asked me to set aside two days for this attendance.

I asked, "Will I be paid for the time that I have to spend?" The lawyer replied that I could indicate my cost and he will add it to the bill to be charged to the party that asked for my testimony.

Finally, the case was settled out of court. I did not have to attend court after all.

Lawyers are paid a very large fee for the time that they spend in handling a case. Witnesses should also be paid in a similar fashion. I hope that people are aware of their rights and are adequately compensated for their time. They will be more willing to attend court and be witness.

Get a witness

If you meet with a traffic accident, find an independent witness. Get the name and contact number of the witness. Ask the witness to record down a statement about the events leading to the accident. This may turn out to be useful.

Some people are worried about being a witness, in case they are called to testify in court. This is unlikely to be needed. An independent witness' statement is likely to carry a lot of weight in deciding on liability, outside of court.

If the witness has to attend court, the witness is entitled to get a generous allowance based on the time that is spent, incluidng waiting time. The amount of the allowance can be agreed with the party that calls the witness.

I hope that more civil minded people are willing to be a witness. This will help to resolve disputes between the parties. It will help to speed up settlements.

Tourists come to Singapore

I returned to Singapore from Jakarta last night.

I was surprised to find Terminal 1 packed. It was the first time that I cannot get a trolley for my bags. There were large groups of young people from Japan and Korea. It must be the school holidays. It is boom time for tourism in Singapore.

I also saw many Singaporean families leaving for their holidays abroad.

Investing in Unit Trusts

Dear Mr. Tan,

Why are the charges from the fund houses so high about 5% for the sales charge whereas fundsupermart only charges at about 2%.


Each fund distributor decides on their level of upfront charge. It depends on the service and time that they adviser has to spend. You have to decide on the channel that works best for you. Do try to seek a low cost channel, so that you do not spend too much in the charges.

Risky Business Venture

Dear Mr. Tan,

Thank you for your guidance and your "matter of fact way" of explaining things.

I stumbled upon recently. Basically you buy the rights to minerals in USA through Your name gets registered as a mineral owner in the US. Your capital funds the hi tech exploration.They show geographical printouts of mines.

The company is Power Basin, listed in US. The payout is quite interesting:

* 0%: from 1 to 6 months
* 9% per annum: from month 6 to 12
* 30% per annum: year 1 to 3.5

Residue income from 3.5 years to end of economic life of mines abot year 12. This seems to be a great alternative for annuities.

I am usually suspicious about investments of this type. I keep away from them, in case it is a scam. (Note: I do not make any judgement of this particular investment).

Pick the right stocks

Dear Mr Tan,

Thanks for your advice previously. The STI really corrected till 3300. I am keen to collect some stocks at this kind of cheap price now.

Can you pick some stocks for your readers to consider at the moment? The trouble is, everything has corrected so much that I cant even recognise most of them.

I know STI-etf will be a safer high-risk investment compared to stocks but I am more keen on bluechips as the returns will be higher.


I am not able to advise you on picking the stocks. You can ask your stockbroker. They have their research team.

Misled into a Dual Currency Investment

Dear Mr. Tan,

When my foreign currency matured recently, the bank consultant got me into dual currency investment. He sounded very logic that US dollars will further depreciate and that he believed that the Australian dollars will appreciate. This is a month tenor. He did not work out the exact loss I would face if the situation is not favourable to me.

After I read your article in you website, I felt terrible. What if I lost when it matures on 14th December. This is my savings for the past 18 years. I had put it in fixed deposits all these years and never thought I could be persuaded into this foolish act of mine.

What is your advice to me if I got the other currency and not the base currency. Should I just put the Australian dollors into a fixed deposit? I want to thank you for enlightening me in many of your articles.


If you do not wish to take any risk, you should keep the money in Singapore dollar fixed deposit and earn 2% interest. You can also invest in a money market fund or in Government bonds.

If you invest in foreign currency, you can take the risk and hope for the best. You will earn a higher interest rate, but this could be offset by the possible depreciation in the foreign currency.

The foreign curreny may appreciate and give you a double benefit. Read this FAQ:

I am not able to give specific advice on which currency to invest in.

Insurance for disabled child

Dear Mr. Tan,

My son suffers from an Autism Spectrun Disorder (ASD). My wife and I worry about his insurance needs. We have consulted a few insurance advisers but they are unable to tell us whether their companies are willing to insure our child.

Underwriters are generally unfamilar with ASD. Many have the misconception that ASD people are violent and would do harm to themselves or others.

My son is very mild on the ASD spectrum and he currently attends a mainstream primary school. I would really like to cover him under a Living Policy (for permanent disability or critical illness) and a medical and hospitalisation policy (e.g. Medishield or private Shield).

How do we go about getting him covered? My son has been diagnosed by a few highly qualified psychologists to be very mild on the ASD spectrum. What else would an underwriter require? Would the underwriter recommends their panel doctor to examine my son? Who would pay for the consultation?

I hope you could recommend an agent to help me find the insurance application.


I suggest that you approach two insurance companies (e.g. NTUC Income and Aviva) and see if they are willing to insure your son.

If both are unwilling, you have this option:
1. Open an investment account (e.g. unit trust) for your son and make monthly savings into this account.
2. If your son needs medical attention, see if you can send him to a B2 or C ward, where a large part of the cost is subsidised by the government.
3. You can pay for the medical expenses out of the investment account.

Dr Money's articles in The New Paper

Larry Haverkamp (Dr Money) wrote many articles that were published in The New Paper over the past years. Here is a collection of his articles. They are written in a simple style, and quite fun to read.

Company above board? CHECK HERE
Investing v Gambling What's the difference?
Make credit cards work for you
How to make your CPF money work HARDER
What CPF changes mean for us
It comes down to cost and benefit
Health insurance and what you need to know
Know what you'll get from your investment
Are you on the 'suckers' list?
All you need is $250 a month
In the end, it's about reducing risk
Do you have a SAFE ANNUITY?
Are we headed for a CRISIS?
Living in risky times
Do you really understand structured products?
The more, the merrier? Not for these equity-linked notes
Use credit card to buy shares?
Don't get carried away by short-term gains
Do your own homework
Time to pull back from hot market?
Home loan tips you'll want to know
What you don't see may hurt you
Can you reap big gains?
Beware agents' glib sales lines
First, learn the rule of 72
Move your money to make more
Hidden expenses of unit trusts and ILPs
$marter to keep your investments $impler
What you SEE may not be what you GET
What's the worst that could happen?
Is it time for you to refinance?
12 tax tips to save you money
Five home loan tips to get you going
Five money myths debunked
Will US home-loan crisis explode?
4 tips to help you pick funds
Are these funds worth your CPF money?
Better to be your own adviser
Secret doors to special deals
It's cheaper to go group than individual
Should you play the game?
That 2% rise may not mean a pay hike
CPF changes mean your stock porfolio can go up
Think long-term
If you have $3,000, you're rich
5 tips for tax breaks
Take a pause, Santa Claus
Crack the Da Insurance Code
It's a tricky investment
Many happy RETURNS?
INSURANCE PART 3 - Insurance policies fail to give promised returns
INSURANCE PART 3 - Insurance policies fail to give promised returns
Are we paying too much for INSURANCE?
Buying life insurance? Don't wait till you're too old
Should you invest in gold? - Yes
Your money is same when you retire
What you need to know about your insurance policy
But my China shirt's still CHEAPER
Meetings over Woes just beginning
Money well spent
Sell your home, the smart way
Read up (and read this) before buying that home
Before you take that personal loan, read this
Considering an investment-linked plan? Read the fine print first
Where to get $ to start a business
All the gain without the pain
9 things to ask your financial adviser
Want to join these billionaires? Be your own boss
Are you caught in a debt dance?
Finding the best scheme for your idle cash
S'pore, there's still room for improvement
Will raising rates help or hurt?
Caveman economics
Should you pay down?
Trust the way to make money?
Bluff your way to higher rates
Who would get her insurance money?
Investing? Keep it simple
Kids, grow your money
Invest more in your home
Your home is your best investment
Cracking the home loan code
Beat those high home loan rates
Save $$$ on your taxes
Right mix, and dough will rise
A cash crunch is coming!
Watch CPF limits
Should I go with ORDINARY or $PECIAL?
Take closer look at figures
Let sleeping dogs lie
Beware this HOT investment
Beware of structured products
Presents that make $en$e
Want to buy life insurance?
Are they good investments?

Scope of advice

Dear Mr. Tan,

I came to know your blog from "mypaper". I find that some of the financial/insurance planning info and tips you shared with us been very useful and informative.

I would like to seek your advise on the following question: Does the financial adviser restrict their advice to only investment? Do they give advice on financial planning such as expenditure, restructuring of loans, when requested by their clients?


Most of the financial advisers that I am aware of, will help you to buy a financial or investment product. They earn commission by selling the product to you.

As part of their service, they will help to prepare a financial plan for you. But, I am not aware if they are able to help in restructuring loans. I suggest that you ask them directly.

Making a Third Party Claim


I met with an accident recently. My vehicle was damaged as I steered it to my right to avoid the collision with the other party. It was obviously the negligence from the other party. The other driver apologized to me. I told her i going to claim from her insurance company and she agreed. We exchanged our particulars and she drove off for her work. There was no written agreement was signed.

I sent my vehicle to Idac center for assessment. I wanted to make a third party claim, but was advised by my workshop to make a own damage claim first, as the other party might go back on her words.

The workshop will try to help me to do a third party claim against the other party for the Excess, NCD and the loss of use. Is this the proper way of claiming insurance?


It is all right to let the workshop make the third party claim on your behalf. If they are successful, you can ask your insurance company to allow you to keep the No Claim Discount. I hope that you have contact with the other party and can ask her to keep to her word.

Land Banking

Dear Mr. Tan,

The focus of land banking is to purchase a plot of land in the UK, US or Canada. Returns are projected within 4-6 yrs an estimate of 40-60% return. Investment amount is at least min SGD 15000. Returns are realised at point of an exit where 60% of the investors agree to a sale. Said to be next safest to fixed deposits.

Landbankers claims intensive research has been carried out before making it available to investors. Heard several scams especially in the UK.

In Spore, landbanking seems relatively new. They are not under MAS supervision. The promoters paint land banking as a safe investment very low risk. Share your thoughts?


This type of investment lacks liquidity and transparency and is risky. You can be stuck with an illiquid investment for many years. This is best avoided.

Friday, November 30, 2007

Wealth of information

Dear Mr. Tan,

I recently came upon your website and found an amazing wealth of information. I'm sure I'm not the only one who is very thankful for your efforts: the information is clear and well-explained, and answers a lot of questions that I have at the back of my head.

Very often, it is difficult for me to find answers to these questions because (i) the people I know do not possess holistic knowledge of insurance, investments or (ii) the people who know have a vested interest in giving advice.

Thank you very much for sharing your knowledge!

STI Exchange Traded Fund

Hi Mr Tan,

I'm interest for the low cost fund for STI ETF. However I'm really not sure how to start or choose the fund.

1) Is the STI ETF a secure funds to invest for long term? I understand that the STI is just a "counter"?

Reply: The STI is invested in 30 counters that make part of the Straits Times Index. It is traded on the exchange as a "counter", but the value of this counter is based on the underlying counters.

Read this webpage:

2) Is there a website that explain more about STI ETF?

Reply: Read this website

3) Is the STI ETF considered as one fund or are there many funds under STI ETF? Which of these funds is most profitable?

Reply: The STI is a fund. There are other ETF (exchange traded funds) that can be bought through the Singapore Exchange.

Thursday, November 29, 2007

Premium rates for Term Insurance

Dear Mr. Tan,

My insurance agents are not keen to sell Term Insurance. They discourage me from buying term insurance. Their premium rates are not as attractive as those indicated in your FAQ.
Where can I get good term insurance rates?


You have to call the insurance company directly.

According to a newspaper survey about a year ago, NTUC Income offers the most attractive premium rates. I am not sure if other insurance companies have since come forward with attractive rates. Perhaps you can try Aviva and AXA as well.

I have set out some indicative premium rates in the FAQ. They are not the actual rates that are being charged by any specific insurance company now. I have calculated them, based on the mortality experience in Singapore and with allowance for expenses.

If you find any insurance company that offers premium rates around the level indicated in my FAQ, you can accept them. Even if the premium rates are slightly higher, you will find that Term Insurance is quite affordable.

Inflation and Financial Planning

Dear Mr. Tan,

How do I take account of inflation in financial planning? I am afraid that the money that I have saved and invested will be eaten up by inflation over the future years.


I shall be posting a FAQ on this matter next week, after I return to Singapore (as I am now in Indonesia).

I will give some simple practical advice on how to deal with this matter.

Wednesday, November 28, 2007

Evaluate an insurance plan

It is easy for you to evaluate an insurance policy, if you look for a standard cover and ask a few questions.

The standard covers are:

* Term Insurance
* Decreasing Term Insurance
* Motor Insurance
* Home Insurance
* Medical Insurance

Most of the standard policies provide the standard cover. Some insurance companies offer some frills (which are usually unnecessary or unlikely to occur), in order to justify a higher cost. Do not fall into their trip.

Get a few insurance companies to quote their premium rates for the standard covers. Make a comparison and select the policy that gives you the best value. If the cost is within 10%, you should select the insurance company based on the quality of service and their trustworthiness.

Evaluate a loan

Which lender gives you the best terms for a loan? How do you evaluate it?

You can ask a few simple questions, and compare the terms on the same basis. Here is an example showing how to evaluate a study loan.

Buying a Shield Plan

Are these questions relevant to you?

1. I am provided with medical benefit by my employer. Do I need to buy a Shield plan?
2. What type of plan should I buy? Medishield (from CPF) or a private Shield?
3. Should I buy the rider to cover the Deductible and Co-insurance?
4. Should I buy a “as charged” plan?
5. Should I buy a plan with a high lifetime limit of $5 million.
6. How do I convert from Medishield to a private Shield plan?
7. Can I cover my parent under a Shield plan?
8. Can I pay a level premium for my Shield plan?
9. How much of the hospital bill is paid by the Shield plan?
10. How can I avoid double insurance?
11. Should I use my Medisave or pay by cash?
12. Can the insurance company refuse to renew my medical insurance, if I make a few claims?

You can find the answers in this FAQ:

Flexi-Link is a better choice

I have been recommending the Ideal plan (ID7) from NTUC Income, as it allows 100% of the monthly savings to be invested. The policy fee is $4 a month. It is available from the Business Center.

Someone told me that the Flexi-Link (a single premium ILP plan) is actually better than ID7. It has the following features:

1> Inital deposit should be at least $5,000.
2> Allows recurring top up: $250 quarterly, $500 half-yearly and $1000 annually
3> Allows ad hoc top up: $1,000 per single premium top up
4> No policy fee after account cash value reached $15,000.

If you have an initial sum of $5,000 to invest, it is better to choose Flexi-Link instead of Ideal (ID7).

Investing in a property

How much should you invest in a property?

I suggest that the value of the property should be 5 to 7 years of your annual income. If your income is $50,000, your property should not exceed $350,000 (i.e. 7 years). You can add the combined income, if both spouses are working.

If you take a 30 year loan at 2.6% interest, the annual repayment will be $16,900 or 34% of the income. If interest rate increases to 4%, the annual repayment will increase to $20,240, or 40% of income.

It is all right to commit 34% of your income to your property. At 40%, you are stretching your cash flow.

The burden will reduce in the future, with increases in your income. However, you have to consider the impact of increases in interest rate or a possible reduction in income due to unemployment or change of job.

If you wish to be prudent, you should buy a property that cost 5 times of your combined annual income. At 2.6% interest, the repayment is 24% of income. At 4% interest, it increases to 29%.

Tips on insurance

Do not spend more than 3% of your monthly earnings on life and medical insurance for yourself and your family.

Read this FAQ:

If you have already invested more than 3%, you have probably bought some insurance products that provide some savings. You can keep these products, as you have already incurred the upfront charges.

For your future purchases, you should buy low cost protection products and invest the additional savings in a low cost investment fund.

Decreasing term insurance

Hi Mr Tan,

I wanted to buy term insurance, but the insurance agent recommended against it. She said that the term insurance will stop the cover at the end of the term, and I need life insurance beyond that. She recommended that I buy a whole life policy and pay premium for only 20 years. I am confused.


I recommend that you buy a decreasing term insurance to stop at age 65. You can insure for 5 to 10 years of your earnings. If you annual earning is $40,000, you can insure $200,000 and pay a premium of about $40 (assuming that you are about 30 years old).

If you save $4,000 a year in a low cost investment fund to earn 5% per annum, you will get about $260,000 at the end of 30 years. This is more than your sum assured of $200,000. If you have this amount of accumulated savings, you do not need life insurance beyond 30 years.

A decreasing term insurance covers you the full sum assured during the first year and reduces the cover each year by a small amount, until it runs out completely at the end of the term. The yearly reduction in the sum assured will be offset by your additional savings in each year.

You can ask an insurance broker to get you the best premium rate for a decreasing term insurance. They can source from a few companies. You can also call the insurance companies directly and ask for their quote.

Just tell them the following: I am a male/female, (x) years old. I want $(y) of decreasing term insurance for (z) years. How much is the annual premium?

Read this FAQ

Monday, November 26, 2007

Talk on CPF Changes

The Society of Financial Services Professionals will be holding a
Free Public Forum

CPF Changes : Implications for Financial Planning
Getting, Keeping and Growing Your Money

Saturday, 1 December 2007
2 pm to 5 pm
NTUC Income Centre, Auditorium 7^th Storey, Bras Basah Road

(nearest MRT : City Hall)

No registration required, just turn up

Reduction in Yield

Hi Mr. Tan,

I have been reducing the policy illustration given to me by the insurance agent. It contain many pages of confusing figures.

I saw an item called "reduction in yield" of 1.5% plus. Is this acceptable?


The reduction in yield shows the impact of the various charges that you have to bear, for the commission, life insurance cover and other expenses.

A reduction of 1.5% is high. In most cases, the reduction should be around 1%, The impact of a higher reduction can be quite significant for a policy that is taken for 20 to 30 years.

Read this FAQ:

Pinnacle Notes

Dear Mr. Tan,

I saw the advertisement on the Pinnacle Notes. It offers a higher return, compared to fixed deposit. Is this a safe investment?

The Pinnacle Notes belong to the class of "structured investment products". Read this FAQ:

I have written previously on the risk of this product. You can search my blog for "Pinnacle".

Insurance for a child

Dear Mr. Tan,

An insurance agent advises me to buy life insurance for my child, so that she can enjoy a lower premium. The premium will increase when she takes up insurance at an older age. Is this correct?


It is better for you to invest the additional savings in a low cost equity fund, as it can provide a much higher return than a life insurance policy.

When your child starts to work, she can buy decreasing term insurance, which is very low in cost. It is probably cheaper than the premium that you have to pay for her now.

Read these FAQ:

Medical insurance by Level Premium

Dear Mr. Tan,

Why do the insurance company change increases its premium each year, as I grow older. Why can't they charge the same premium throughout my life, like a life insurance policy?


There are two big factors affecting the cost of medical care:

a) Age. As you grow older, you need more medical care
b) Escalation. As the years goes by, the cost of medical care increases due to technology, more demand and other factors.

It may be possible to charge a level premium to take care of age, but it still does not take care of the escalation of medical charges. Hence, it is not possible to fix a level premium.

Read this FAQ:

Pinnacle Notes Series 9 & 10

Dear Mr. Tan

What is your view about the Pinnacles Notes Series 9 & 10 that was advertised recently? It allows the investor to earn 5% p.a. plus a potentail bonus of up to 4% p.a. Is it a good investment?


Here are some points stated in small print in the advertisement:

1. The Notes are secured by US dollar demoninated CDO securities that are rated at least AA at the time of issue.
2. The Notes are not principal guaranteed. Upon the occurence of a Credit Event (and a few other circumstances), you could lose all or substantially all of your investment.
3. You are asked to read the details in the Prospectus and supporting documents (which I understand is about 100 pages long), before you invest.

Have you heard about the sub-prime problem in USA? Many of these mortgages are repackaged into CDOs and sold overseas. The CDOs referred to in the Pinnacle Notes may comprise of these mortgages.

There are a lot of uncertainty and unclarity. Do you really want to make this investment?

You can read my general comments about structured products in this FAQ:

If you wish to know more specifically about the earlier series of Pinnacle Notes, you can read Dr Money's website:

Save for a child

Dear Kin Lian,

It has been very enlightening to read your blog and gain valuable insights about financial matters.

I bought a Prudential ILP for my son four years old. I now understand better about financial policies. I realize that much of the initial allocation of premiums in the 1st 3 years did not go into the funds purchase, but more of the distribution cost.

I have a one-year old daughter. What type of insurance I should choose for her?


I suggest that you cover her under a Medishield plan (to take care of expensive medical treatment).

You can set aside some personal savings for her in a low cost equity fund. If you wish, it can be a separate investment account specifically for her.

Alternatively, you can make the savings in your own acount and transfer the money to her when she needs it at a later date.

Read this FAQ:

Existing Life Policies

Dear Mr Tan,

I visit your blog almost every day. I'm a GREAT FANS of yours. You have helped to educated many people and I have learned alot from your blog!

Unfortunately, I have already bought two life insurance policies more than 10 years ago, an investment linked and a Financial guardian.

After reading your blog, I understand that it's better to take up term insurance. Please advise me what can I do to reduce my insurance cost so that I can put my money into investments. Should I keep them or terminate my existing policies?

I would like to take this opportunity to Thank You once again for your effort in helping us understand more about insurance and so many other things.


To make this decision, you need to get the following facts from each insurance company:
1. What is the cash value now, if you terminate the policy
2. What is the premium that you have to pay for the next 5 years
3. What is the projected cash value at the end of 5 years? What portion of this projected value is not guaranteed?
4. What are the assumptions in calculating the projected value.

I will be able to help you to make a decision after you have obtained the above information.

Interview with Warren Buffett

There was a one hour interview on CNBC with Warren Buffet, the second richest man who has donated $31 billion to charity. Here are some very interesting aspects of his life:

1. He bought his first share at age 11 and he now regrets that he started too late!
2. He bought a small farm at age 14 with savings from delivering newspapers.
3. He still lives in the same small 3-bedroom house in mid-town Omaha, that he bought after he got married 50 years ago. He says that he has everything he needs in that house. His house does not have a wall or a fence.
4. He drives his own car everywhere and does not have a driver or security people around him.
5. He never travels by private jet, although he owns the world's largest private jet company.
6. His company, Berkshire Hathaway, owns 63 companies. He writes only one letter each year to the CEOs of these companies, giving them goals for the year. He never holds meetings or calls them on a regular basis. He has given his CEO's only two rules.
Rule number 1: do not lose any of your share holder's money.
Rule number 2: Do not forget rule number 1.
7. He does not socialize with the high society crowd. His past time after he gets home is to make himself some pop corn and watch Television.
8. Bill Gates, the world's richest man met him for the first time only 5 years ago. Bill Gates did not think he had anything in common with Warren Buffet. So he had scheduled his meeting only for half hour. But??when Gates met him, the meeting lasted for ten hours and Bill Gates became a devotee of Warren Buffet.
9. Warren Buffet does not carry a cell phone, nor has a computer on ?his desk.

His advice to young people: "Stay away from credit cards and invest in yourself and Remember:
A. Money doesn't create man; it is the man who created money.
B. Live your life as simple as you are.
C. Don't do what others say, just listen to them, but do what you feel good.
D. Don't go for brand name; just wear those things in which u feel comfortable.
E. Don't waste your money on unnecessary things; just spend on those who really are in need.
F. After all it's your life so why give chance to others to rule your life?

How to buy Low Cost Funds

Mr. Tan,

I wonder if you have any plan to set up a company where people can buy products at steep discount on producing a 'financial prescription". This prescription will bear the name of company or the adviser to authenticate its origin and to verify also the bearer has undergone a financial health check and the products recommended are the result of it.

In this way the unethical insurance salesmen can be weeded out. This will create a safe environment for customers. Like the medical professions customers can go to seek advice or consultation without worrying of getting a salesman but practitioner with the right qualification and ethics. The practitioner or the adviser is regulated and license to operate will be renewable on the yearly basis.


I am considering to work with a financial advisory firm to offer a few low cost investment funds to the public. There will be separate funds invested in equities, bonds and money market. The expense ratio should be kept within 0.7% per annum for equities and lower for the other funds.

The investor can read my FAQ and decide on their own financial plan. They can also attend an educational seminar. If they wish to see a financial adviser, they can pay a modest fee of (say) $100 per hour.

Do you like this idea?

Sunday, November 25, 2007

Expense ratio of unit trusts

Dear Mr. Tan,

I have check that the upfront charge is 1% on POEMS and 2% on fundsupermart which is both lower than NTUC income fund. However, the annual expense ratio is normally around 1.5%, slightly higher than NTUC income.

These funds are not well diversified. They focused on certain sectors. Is it a good idea for me to buy according to the percentage allocation of NTUC combined fund, as it can reduce my upfront charge significantly.

Is the Annual Management Charge equivalent to expense ratio?


I suggest that you pay the higher sales charge and invest in the Combined Fund from NTUC Income. It is well managed.

Although the initial charge is higher, the impact is quite small if you spread it over an investment period of 10 years or more.

The expense ratio is higher than the annual management charge. There are other expenses added to the expense ratio. Dr Money has written about this matter in his website:

Simple and useful

Dear Mr. Tan,

I want to thank you for writing your blog. I visit it almost everyday.

You explain financial matters in simple language and make it easy to understand. I like your real life cases, although you have removed the personal details.

You say things that are so obvious, yet many people (including me) overlook it. What is said is really common sense and useful.

Please continue to write your blog.


Please help to publicise my blog. Get your friends to visit it.

Experience in buying insurance

Hi, Mr. Tan,

This is a true story from my personal experience. I like to share with everyone visiting your blog.

My motivation of buying insurance came from a friend from X who told me how important insurance is. Since X's charge is quite high, I did not consider it at that time.

Later, I approached company Y. The advisor introduced to me the Limited Premium Living Policy and also the Life policy. He gave me a printed copy showing the cash value and sum assured. The Limited Premium policy gave me the option to stop paying premium after 20 years and enjoy whole life protection.

A friend mentioned Term insurance to me. I asked the advisor. He recommend against it, saying that coverage would only be up to 65 years and that I needed protection most after that. If I bought Term insurance and changed to a Life policy later, I would have to pay a higher cost. He made a calculation showing that term insurance was sunk cost, while Limited premium have a cash value and will breakeven after a few years. I almost decided to buy the Limited Premium policy.

One day I read WoBao, and learned about Mr. Tan's blog. Mr. Tan recommended the concept of "Buy term, invest the rest". It was really a new concept for me.

I emailed Mr. Tan and showed him the calculation made by the advisor. He replied within a few minutes. (Even a customer service officer would not be able to reply so fast to customer's enquiry. I did not expect the ex-CEO would be replying my email so fast.)

Mr. Tan told me the sum assured recommended by the advisor was too high and took away too much of my savings. I read his FAQ and learned how much more I could get by investing in an investment fund. Most importantly, I would have the flexiblity in investing my money.

Mr. Tan suggested that I should contact a few more agents to gain more insight. Considering this is a long term commitment, I started to call back some agents introduced by my friends, think that they would be more trustful.

The agents were only interested to sell Investment linked or Life policy. None of them talked about Term unless I asked about it. They all recommend against Term. If I had not read Mr. Tan's blog, I would have lose interest in Term.

I should thank Mr. Tan for your great blog. Later, I decided to go straight into Term. After this experience, I learnt that:
1> Do your comparison between different companies based on the same product. (e.g. it is easy to compare Term). Ask the agents lots of question since this is the money you will be locked for long time.
2> Once you have made up your mind, go to that product immediately. Do not waste your time listening to unrelated stuff.
3> Learn to search online. Read the forum to read comments from other people. Many comments showed that insurance product do not give their projected cash value after 20 years, and the customer's money has been locked up and depreciated.

I hope that this is useful to visitors of Mr. Tan's blog.

Keep in the Special Account

Hi Mr. Tan,

I was told that CPF Special Account will be 'locked' with effect from 1st Jan 2008. No more investment will be allowed from this account.

I like to make invest $12,000 from this account now to earn a higher return. What is your advice? Where can I get a better return?


My advice is: Keep your money in the Special Account to earn 4% plus 1%, free of risk. This is the best investment available now.

Insurance for medical and dental treatment

Dear Mr. Tan,
Can I buy insurance to cover medical and dental consultation at private clinics in Singapore?

It is better to pay for the cost of these expenditure out of pocket, rather than through insurance.
Insurance does not add value and is costly for this type of expenditure. The additional cost comes from marketing expense, administration cost and the profit margin of the insurance company. It is further aggravated by lack of claims control over this type of claims.

Generally, it does not make sense to buy insurance to cover small expenditures that may occur a few times in a year.

STI Exchange Traded Fund

Dear Mr. Tan,

Can you kindly explain the difference between investing in Singapore equity and STI ETF?


The STI ETF (exchange traded fund) is invested in about 40 Singapore shares that comprise the STI market banchmark. It has an annual expense ratio of 0.3%

There are many funds that are invested in Singapore equity. The actual shares that are invested in the fund are selected by the fund manager. The annual expense ratio vary from 1% to 2.5%, depending on the fund.

I prefer to invest in the STI ETF.

Einstein Intelligence Quiz - Solution

You can learn the technique to solve this quiz from this webpage:

Budget your monthly expenses

An important part of financial planning is to have a budget for your monthly expenses. Find out the following facts:

1. What is your monthly earnings?
2. What are your monthly expenses for:
* mortgage loan
* tax
* utilities
* food
* telephone
* transport
* insurance
3. Are you able to reduce any of the expenses, i.e. be more frugal?
4. Do not spend more than 3% on life and medical insurance for your whole family
5. What is the balance of your earnings?
6. Set aside 10% to 15% as savings for the future
7. Use the balance for entertainment, holiday, car, splurging
8. If you have year end bonus, you can add 1/12th of it to your monthly income
9. Most important! Avoid rollover on credit card. The interest charge is too high.

If you have already committed more than 3% on insurance, you should not add more to it. Keep what you have. Invest most of your future savings in a low cost investment fund.

Read this FAQ

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