Tuesday, December 08, 2009

Rechargeable torchlight with locator light

Here is a photo of the rechargeable torchlight with the locator light turned on.

It is easy to locate the torchlight at night to visit the bathroom or kitchen for a drink of water.

You do not need to turn on the main lights and waste electricity.
In an emergency or power failure, you can find the torchlight easily.

It takes 12 hours to charge the battery and can last for about two weeks, based on light usage.

This special feature of a locator light was designed by me and produced to my specification.
The torchlight sells for $6.50 and can be bought from my office ($5.50 for purchase of 5 or more pieces). Office open Mondays to Fridays, 9 am to 6 pm. (The price will be revised to $8 from 2010 when this is made available at the retail outlets).

Delivery can be made to your address for a delivery charge of $7. You can get several friends to buy the torchlight together and share the delivery cost. 

Poor return on special funds

A customer was advised to invest a large single premium in an investment linked product in 2007. He was not clear about the investment. The cash value is now only 55% of the invested sum. I was surprised that the value is so low, as the stock market must have dropped only 20% during this period. I learned later that he was advised to invest in a some special funds.

The public should be careful about these types of special funds, which have high charges and low transparency, and generally perform worse than the broad market. It is better to take the market risk and invest in the STI exchange traded fund.

Lock up for 2 years at low return

Someone asked for my views about a 2 year insurance product that offers a return of  1.5% per annum. I felt that this return was rather low for the investment to be locked up. My preference is to keep the money in cash (earn 0.5% per annum) and wait for better investment opportunities.

Use of Medisave for health screening

Minister for Health Khaw Boon Wan said that the Government is considering to allow Medisave to be used for health screening, but needs some safeguards to be in place to prevent abuses.

A good safeguard is to set a cap on the amount that can be withdrawn for health screening, to be used once every three years. Within this cap, the medical facilities will compete to provide the best packages that is available. Independent experts can comment on the usefulness of these packages. Consumers who wish to spend more can still use their own money, and not draw down on Medisave.

Temasek 20 and 30 year bonds

Temasek Holdings has issued 20 and 30 year bonds paying a coupon rate of 4% and 4.2% respectively. Based on the issue price (which is slightly below par), the bonds offer a slightly higher yield of 4.149% and 4.37% respectively.

Temasek Holdings has a AAA rating from S&P and Aaa rating from Moody's. These are the highest rating available for bonds. The credit risk is as low as government bonds.

However, there is the risk of a change in interest rate. If a 20 year bond yields 4% and the interest rate for this duration increases to 5%, the prices of the bonds will drop by 8.4%  If the interest rate increases to 7% (due to high inflation), the price of the bonds will drop by 28%. When you invest in a long term bond, your return is locked up for this period. You only suffer a capital risk if you decide to sell off the bonds prematurely on the market.

The bonds will refund the principal in full at the maturity date, i.e. the end of the period.
For retirees who wish to have an regular income of a higher yield over 20 and 30 years, this is a good choice. Many insurance companies invest in these type of bonds, but they take away 2% from their policyholders, giving a net yield that is much lower. It is better for the retiree to invest directly in these bonds.

I have asked my bank and stockbroker to tell me how these bonds can be purchased. I will post the findings later.

Tan Kin Lian

Poor yield on life insurance policy

A policyholder paid premium for 21 years under a whole life policy and obtained a surrender value that represented a yield of less than 2%. The insurance had advertised an actual yield of more than 5% for other products of similar durations.

The policyholder was unhappy with the poor yield on his policy and asked for an explanation. He was told that it was due to the specific type of product, which provided high coverage. In my view, this should not account for the large difference in the yield.

It is likely that this policy was given a lower yield due to the restructuring of the bonus. As the bonus varies for each policy, it was difficult for the policyholder to know if he had been given a fair rate of return.

Sunday, December 06, 2009

Lehman Note Arbitration in USA

Investor win arbitration case.

Tour of Jiuzhaigou, China

I will be leaving for a 8 day tour of Jiuzhaigou in Sichuan, China from Wednesday.

Security measures went absurd

Read my experience.

Least corrupt countries

Singapore scores well in the ranking of least corrupt countries.

Foreign shares listed in SGX

Be careful when investing in these shares. Read this article.

Over-investing in mortgages

This article explains why banks over-invest in mortgages and cause the global financial crisis.

Denying insurance claims

Mortgage insurers are now following the practice of health insurers in denying claims. Read this article.

Bus owner practices risk management

I know of a private bus owner who evaluates the following options to insure his bus:
a) Third party only
b) Third party fire and theft
c) Comprehensive.

His old bus has a current market value of $40,000 and the difference in premium needed to cover fire and theft is $200. This works out to a rate of 0.5%. He decided to pay this premium, as he could not afford to take a total loss through theft or fire.

He decided not to buy the comprehensive cover as the difference in premium is too high. He decided to retain the risk and to pay for repairs to his bus on his own. In most cases, this can be funded by the savings in the premium.

This is an example of applying the principles of risk management. Insure the large losses with low frequency, and retain the small losses with high frequency.

I advise consumers to get the relevant facts and decide on the best risk management strategy, instead of relying blindly on the advice of the agent (who has a conflict of interest) or other people (e.g TKL) to decide for them.

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