RECEIVED THIS E-MAIL:
Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys at $10 each. The villagers, seeing that there were many monkeys around, went into the forest and started catching them. The man very gentlemanly bought thousands of monkeys at $10 each, but as supply started to diminish, the villagers slowed down and eventually stopped their efforts.
The man then announced that he would now buy at $20. This renewed the energy and efforts of the villagers and they started catching monkeys again. Soon the supply diminished even further, and people started going back to their farms.
The offer was then increased to $25 each, but the supply of monkeys became so little that it was a almost a miracle to even spot a monkey, let alone catch one.
The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would transact on his behalf.
In the absence of the man, the assistant assembled the villagers and told them : " Look at all these monkeys in the big cages that the man has collected. I will sell them to you at $35 each, and when the man returns from the city, you can in turn sell them to him at $50 each. Deal or no deal ? "
The excited villagers, smelling a quick-profit killer opportunity, immediately rounded up all their savings and bought all the monkeys. Then they never saw the man nor his assistant again, and there were just monkeys everywhere!
Now you have a better understanding of how "greed"makes monkey of men?
Sunday, February 17, 2008
Financial product with a guaranteed return
Dear Mr. Tan,
What are your views about life insurance products that give a guaranteed return?
REPLY
Life insurance companies sell products that offer a guaranteed return. They may appear to be attractive to a risk adverse investor, but they generally give poor value to the consumer.
If interest rate goes up, due to inflation, the life insurance company makes a big profit. The consumer gets back the savings in depreciated dollars.
If insurance rate goes down, the life insurance company makes a loss. To avoid this loss, they get the insurance agent to convince the customer to switch to a new product (which usually contains some frills). The customer is not aware that the new product offers a poorer return. In addition, he has to suffer the upfront cost of the new product.
I have seen this unethical practice over the years, in several countries. Here is an example of the potential impact of a change of interest rate.
1. Take the case of a 30 year endowment policy with a guaranteed return of 4% per annum. An annual premium of $5,000 will produce a guaranteed maturity amount of $280,000.
2. If the actual interest rate earned by the fund over 30 years is 6% per annum, the premiums paid will accumulate to $395,000. The insurance company pays out the guaranteed amount of $280,000 and makes a profit of $115,000.
3. If the actual interest rate earned by the fund over 30 years is 2% per annum, the premiums will accumlate to $203,000. The insurance company should suffer a loss of $77,000. The insurance company can avoid this loss by getting the insurance agent to make the customer switch to a new product.
Lesson: If you are making regular savings in the future, it is better to invest in a transparent product, such as a low cost unit trust, and keep the return for yourself. Do not give the return away by buying a guaranted return.
If you have bought a guaranteed product, do not allow the agent or employee of the company to talk you into switching to a new product.
What are your views about life insurance products that give a guaranteed return?
REPLY
Life insurance companies sell products that offer a guaranteed return. They may appear to be attractive to a risk adverse investor, but they generally give poor value to the consumer.
If interest rate goes up, due to inflation, the life insurance company makes a big profit. The consumer gets back the savings in depreciated dollars.
If insurance rate goes down, the life insurance company makes a loss. To avoid this loss, they get the insurance agent to convince the customer to switch to a new product (which usually contains some frills). The customer is not aware that the new product offers a poorer return. In addition, he has to suffer the upfront cost of the new product.
I have seen this unethical practice over the years, in several countries. Here is an example of the potential impact of a change of interest rate.
1. Take the case of a 30 year endowment policy with a guaranteed return of 4% per annum. An annual premium of $5,000 will produce a guaranteed maturity amount of $280,000.
2. If the actual interest rate earned by the fund over 30 years is 6% per annum, the premiums paid will accumulate to $395,000. The insurance company pays out the guaranteed amount of $280,000 and makes a profit of $115,000.
3. If the actual interest rate earned by the fund over 30 years is 2% per annum, the premiums will accumlate to $203,000. The insurance company should suffer a loss of $77,000. The insurance company can avoid this loss by getting the insurance agent to make the customer switch to a new product.
Lesson: If you are making regular savings in the future, it is better to invest in a transparent product, such as a low cost unit trust, and keep the return for yourself. Do not give the return away by buying a guaranted return.
If you have bought a guaranteed product, do not allow the agent or employee of the company to talk you into switching to a new product.
Saturday, February 16, 2008
Invest in the Combined Fund
Hello Mr Tan
1) I read a lot about the NTUC low cost funds on your blog. Recently, I invested through SRS as follows:-
50% in Growth Fund
50% in Singapore Equities Fund
I decided on this allocation as the stock market is at a low. What is your opinion of this allocation?
Reply: It is okay.
(2) I am not sure about how the fund works. When you say that investors can expect a higher return (say, 5%) over a long period of say, 10 - 20 years, are you referring to the difference between the offer price I pay now, versus the bid price if I should sell at that time?
Reply: This is calculated based on bid to bid price. If you deduct the bid-offer spread, it will reduce the yield by about 3%. If you invest over 10 years, the yield will be reduced by 0.3% (i.e. 3% spread over 10 years). If you invest in the STI ETF, you incur a upfront cost of only 0.3% (instead of 3%).
(3) The Combined Fund is invested as follows, Equities 70%, bonds 30%). Does NTUC Income adjust these allocations based on their experience and how the market is performing, or do I have to monitor myself and do my own switching or balancing? My concern is that I may not know the market well enough to decide on the better allocation.
Reply: NTUC Income keeps the fund invested in the above proportion and does not change the allocation. It is best that you keep invested in the fund, and do not try to make switching beween the funds.
1) I read a lot about the NTUC low cost funds on your blog. Recently, I invested through SRS as follows:-
50% in Growth Fund
50% in Singapore Equities Fund
I decided on this allocation as the stock market is at a low. What is your opinion of this allocation?
Reply: It is okay.
(2) I am not sure about how the fund works. When you say that investors can expect a higher return (say, 5%) over a long period of say, 10 - 20 years, are you referring to the difference between the offer price I pay now, versus the bid price if I should sell at that time?
Reply: This is calculated based on bid to bid price. If you deduct the bid-offer spread, it will reduce the yield by about 3%. If you invest over 10 years, the yield will be reduced by 0.3% (i.e. 3% spread over 10 years). If you invest in the STI ETF, you incur a upfront cost of only 0.3% (instead of 3%).
(3) The Combined Fund is invested as follows, Equities 70%, bonds 30%). Does NTUC Income adjust these allocations based on their experience and how the market is performing, or do I have to monitor myself and do my own switching or balancing? My concern is that I may not know the market well enough to decide on the better allocation.
Reply: NTUC Income keeps the fund invested in the above proportion and does not change the allocation. It is best that you keep invested in the fund, and do not try to make switching beween the funds.
Make regular savings in a low cost fund
Dear Mr, Tan,
I read your blog everyday as I find there is always something new to learn from the questions posed by your readers. I am interested to buy Term insurance with a critical rider.
My financial advisor has advised me that I should get a whole life policy with critical rider as once my Term policy has expired after 30 years, I could still get a critical illness and by then I would have to bear all the treatments myself. Thus a whole life policy makes sense in this case. He further argued that if I would have accumulated enough savings by then but would I want to use my hard earned money to be spent on treatment or be protected for life.
I prefer to take a Shield plan to cover critical illness, and I could invest the difference in plans to get a higher return. Overall this is more cost effective. Could you advise?
REPLY
The insurance adviser want people to buy a whole life policy, as he or she can earn a much higher commission.
My advice is to buy a 30 year Decreasing Term insurance policy and invest the difference. After 30 years, you will have more than sufficient savings for your retirement, medical and other needs (but you must have the discipline to set aside the regular savings). Read this FAQ:
http://www.tankinlian.com/faq/savings.html
I read your blog everyday as I find there is always something new to learn from the questions posed by your readers. I am interested to buy Term insurance with a critical rider.
My financial advisor has advised me that I should get a whole life policy with critical rider as once my Term policy has expired after 30 years, I could still get a critical illness and by then I would have to bear all the treatments myself. Thus a whole life policy makes sense in this case. He further argued that if I would have accumulated enough savings by then but would I want to use my hard earned money to be spent on treatment or be protected for life.
I prefer to take a Shield plan to cover critical illness, and I could invest the difference in plans to get a higher return. Overall this is more cost effective. Could you advise?
REPLY
The insurance adviser want people to buy a whole life policy, as he or she can earn a much higher commission.
My advice is to buy a 30 year Decreasing Term insurance policy and invest the difference. After 30 years, you will have more than sufficient savings for your retirement, medical and other needs (but you must have the discipline to set aside the regular savings). Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Intimidating letter from lawyer
Dear Mr. Tan,
Three months ago, I was involved in an accident with a taxi. I was making a legal U-turn but was hit by the taxi in the opposite direction. It is just a minor accident with a slight band on our bumpers.
I just receid a letter from a lawyer acting on behalf of the taxi driver. Three weeks ago, I received a call from my car insurance company asking me if I can agree to the claims from the taxi driver. I agreed.
In the lawyer's letter, they requested a copy of my IC, insurance schedule and confirmation that I was the driver. The letter was issued based on the presumption in law that the driver was not me. Can I know why this course of action? I have no problem providing them the needed info.
REPLY
It is all right to reply to the lawyer and confirm the identity of the driver. You are not required to send photocopy of NRIC. You can tell them about the identity of your insurance company and ask them the third party lawyer to make the claim directly with them.
If you feel the lawyer is acting in an intimidating way, you can complain to the Law Society.
Three months ago, I was involved in an accident with a taxi. I was making a legal U-turn but was hit by the taxi in the opposite direction. It is just a minor accident with a slight band on our bumpers.
I just receid a letter from a lawyer acting on behalf of the taxi driver. Three weeks ago, I received a call from my car insurance company asking me if I can agree to the claims from the taxi driver. I agreed.
In the lawyer's letter, they requested a copy of my IC, insurance schedule and confirmation that I was the driver. The letter was issued based on the presumption in law that the driver was not me. Can I know why this course of action? I have no problem providing them the needed info.
REPLY
It is all right to reply to the lawyer and confirm the identity of the driver. You are not required to send photocopy of NRIC. You can tell them about the identity of your insurance company and ask them the third party lawyer to make the claim directly with them.
If you feel the lawyer is acting in an intimidating way, you can complain to the Law Society.
Friday, February 15, 2008
Identify the poisoned wine
CAN YOU SOLVE THIS PUZZLE?
A king has 1000 bottles of wine. An assasin tried to poison the wine. The king's guards caught the assasin after he poisoned only one bottle, but they did not know which bottle was poisoned.
It is known however that the poison is so powerful that even a tiny bit of the poisoned wine will kill, and it is known also that the poison will only kill after 24 hours. The king order you, his advisor, to get some of the criminals in the dungeon to test the wines for him. The king expects to find out the result the next day, essentially 24 hours after the testers drink the wine.
Now the simplest way is if 1000 criminals were available, just get them to each drink a little bit from each of the 1000 bottles. Hence, the poisoned bottle will be identified when one particular tester, out of the thousand testers, dies the following day. However, only 10 criminals is imprisoned in the dungeon on that particular day!
Is there a way to identify the poisoned bottle by the following day using only 10 testers? What is the method?"
A king has 1000 bottles of wine. An assasin tried to poison the wine. The king's guards caught the assasin after he poisoned only one bottle, but they did not know which bottle was poisoned.
It is known however that the poison is so powerful that even a tiny bit of the poisoned wine will kill, and it is known also that the poison will only kill after 24 hours. The king order you, his advisor, to get some of the criminals in the dungeon to test the wines for him. The king expects to find out the result the next day, essentially 24 hours after the testers drink the wine.
Now the simplest way is if 1000 criminals were available, just get them to each drink a little bit from each of the 1000 bottles. Hence, the poisoned bottle will be identified when one particular tester, out of the thousand testers, dies the following day. However, only 10 criminals is imprisoned in the dungeon on that particular day!
Is there a way to identify the poisoned bottle by the following day using only 10 testers? What is the method?"
Selecting a unit trust
hi Mr. Tan
I understand that ETF has an expiry time limit. I have to track the index before actually trading in it. Do you know which unit trust that tracks only STI which is suitable for long term investment?
I am keen to invest STI index, as the charges are much lower compared to unit trust. Can you advise on suitable funds for a time horizon of 20-30 years, with consistent return above 10%?
REPLY
The STI ETF is a fund. It does not have any expiry date. I do not have any information about the funds that you are looking for. You can talk to a financial adviser.
I understand that ETF has an expiry time limit. I have to track the index before actually trading in it. Do you know which unit trust that tracks only STI which is suitable for long term investment?
I am keen to invest STI index, as the charges are much lower compared to unit trust. Can you advise on suitable funds for a time horizon of 20-30 years, with consistent return above 10%?
REPLY
The STI ETF is a fund. It does not have any expiry date. I do not have any information about the funds that you are looking for. You can talk to a financial adviser.
Eldershield
Dear Mr. Tan,
I will be age 40 this year and CPF Board will soon mail me the brochures on ElderShield. You mentionedthat we should use Medisave sparingly because it is our hard-earned money and it is meant for ourfuture medical expenses.
Should I consider ElderShield; knowing a female at age 40 has to pay at least $5444 (ie $217.76 x 25 years) to get a lifetime coverage with max payout of $28800 (i.e. $400 x 72 months)?
Should I use cash instead to pay for this plan, if it is allowed?
REPLY:
It is a good idea to use cash to pay for Eldershield, if it is allowed. This allows you to earn 4% plus 1% on the money that is kept in your special account
If you have adequate savings for your retirement needs, you can buy Eldershield. I expect that more than 30% will eventually make a claim. If your savings is not sufficient, you can skip Eldershield (as it is of lower priority).
I will be age 40 this year and CPF Board will soon mail me the brochures on ElderShield. You mentionedthat we should use Medisave sparingly because it is our hard-earned money and it is meant for ourfuture medical expenses.
Should I consider ElderShield; knowing a female at age 40 has to pay at least $5444 (ie $217.76 x 25 years) to get a lifetime coverage with max payout of $28800 (i.e. $400 x 72 months)?
Should I use cash instead to pay for this plan, if it is allowed?
REPLY:
It is a good idea to use cash to pay for Eldershield, if it is allowed. This allows you to earn 4% plus 1% on the money that is kept in your special account
If you have adequate savings for your retirement needs, you can buy Eldershield. I expect that more than 30% will eventually make a claim. If your savings is not sufficient, you can skip Eldershield (as it is of lower priority).
Term insurance
Mr. Tan,
For a Term insurance, the yield is 0%. What is the benchmark to decide on a "good value" policy?
REPLY:
You should compare the cost of the Term insuance policy insuring the same amount and period. You can ask for a quotation of the premium by calling the insurance companies listed in this FAQ:
http://www.tankinlian.com/faq/termd.html
Mr. Tan,
I agree with you that Term insurance gives good value. But are you being responsible in asking people to buy Term insurance? What if the term matures and the policyholder still needs coverage? He may not be able to get the coverage because of poor health. Even if he is able to get coverage it will come at a higher cost.
REPLY
You can buy a Term insurance to cover 30 years and pay a level premium. Most people need life insurance for 30 years to cover their working life. They do not need any more life insurance after they have accumulated sufficient savings and their children have grown up. It is more important for you to have adequate insurance in the earlier years, when your children are still young. This is only possible through Term insurance. Read this FAQ:
http://www.tankinlian.com/faq/term.html
For a Term insurance, the yield is 0%. What is the benchmark to decide on a "good value" policy?
REPLY:
You should compare the cost of the Term insuance policy insuring the same amount and period. You can ask for a quotation of the premium by calling the insurance companies listed in this FAQ:
http://www.tankinlian.com/faq/termd.html
Mr. Tan,
I agree with you that Term insurance gives good value. But are you being responsible in asking people to buy Term insurance? What if the term matures and the policyholder still needs coverage? He may not be able to get the coverage because of poor health. Even if he is able to get coverage it will come at a higher cost.
REPLY
You can buy a Term insurance to cover 30 years and pay a level premium. Most people need life insurance for 30 years to cover their working life. They do not need any more life insurance after they have accumulated sufficient savings and their children have grown up. It is more important for you to have adequate insurance in the earlier years, when your children are still young. This is only possible through Term insurance. Read this FAQ:
http://www.tankinlian.com/faq/term.html
Yield of an investment
Dear Mr. Tan,
How do I calculate the yield on an investment?
REPLY:
You can use a financial calculator.
For example, if you invest $1,000 yearly for 20 years and earn a yield of 5% per annum, you will get $34,719 at the end of 20 years.
If you enter the figures of $1,000, $34,719 and 25 years into the calculator, it will be able to compute the yield as 5%.
How do I calculate the yield on an investment?
REPLY:
You can use a financial calculator.
For example, if you invest $1,000 yearly for 20 years and earn a yield of 5% per annum, you will get $34,719 at the end of 20 years.
If you enter the figures of $1,000, $34,719 and 25 years into the calculator, it will be able to compute the yield as 5%.
Rent out your HDB flat
If you are retired, and you need a regular income, you can rent our your HDB flat and earn an income and stay with your children or friend. Here are some tips:
http://newpaper.asia1.com.sg/columnists/story/0,4136,152790,00.html
More articles from Dr. Money
http://www.tankinlian.com/drmoney/.
http://newpaper.asia1.com.sg/columnists/story/0,4136,152790,00.html
More articles from Dr. Money
http://www.tankinlian.com/drmoney/.
Impact of inflation on financial planning
Dear Mr. Tan,
With the high rate of inflation, I am not sure if my savings is sufficient for my future needs after I retire. How should I review my planning?
REPLY
You can get some guidance on this matter from this FAQ:
http://www.tankinlian.com/articles/financial.html
With the high rate of inflation, I am not sure if my savings is sufficient for my future needs after I retire. How should I review my planning?
REPLY
You can get some guidance on this matter from this FAQ:
http://www.tankinlian.com/articles/financial.html
Tuesday, February 12, 2008
Benchmark for Life Insurance Policy
Here is a guide to measure if your life insurance policy gives good value to you.
Calculate the yield on the policy, using your annual premium and the cash value at the end of the premium payment period.
If you get a yield of 4% or higher, the policy gives good value. If it is lower than 3.5%, the policy does not give good value (i.e. high cost).
Here is the reasoning:
1. If you invest for 20 years or longer, you can get a return of 5% or more.
2. The yield on your life insurance policy is due to the expenses and the mortality cover.
3. A significant part of the reduction in yield is used to pay marketing expenses.
4. The reduction should not exceed 1.5%
If you buy Term insurance and invest the difference, you can get a net yield of more than 4%.
Calculate the yield on the policy, using your annual premium and the cash value at the end of the premium payment period.
If you get a yield of 4% or higher, the policy gives good value. If it is lower than 3.5%, the policy does not give good value (i.e. high cost).
Here is the reasoning:
1. If you invest for 20 years or longer, you can get a return of 5% or more.
2. The yield on your life insurance policy is due to the expenses and the mortality cover.
3. A significant part of the reduction in yield is used to pay marketing expenses.
4. The reduction should not exceed 1.5%
If you buy Term insurance and invest the difference, you can get a net yield of more than 4%.
Risk Management & Insurance, SMU
I now teach a course on risk management and insurance at the Singapore Management University. Some of the points posted in this blog are taken from the text book used for my course. It gives a good description of the key concepts in risk management.
Sharp drop in AIG shares
I read a Bloomberg report that AIG shares dropped by 30 percent since the change of CEO from Hank Greenberg.
The recent drop was due to the losses on credit default swaps issued by AIG. This protects the buyer from credit defaults, e.g. due to subprime mortgages.
AIG is the parent company of AIA in Singapore. It has a AA credit rating (previously AAA), but analysts expect the rating to be further downgraded.
More details:
http://www.bloomberg.com/apps/news?pid=20601087&sid=axfNBsHVBagY&refer=home
The recent drop was due to the losses on credit default swaps issued by AIG. This protects the buyer from credit defaults, e.g. due to subprime mortgages.
AIG is the parent company of AIA in Singapore. It has a AA credit rating (previously AAA), but analysts expect the rating to be further downgraded.
More details:
http://www.bloomberg.com/apps/news?pid=20601087&sid=axfNBsHVBagY&refer=home
Visit to Jakarta
I will be visiting Jakarta for the next four days. During this time, I may have difficulty in accessing the Internet and updating my blog.
On my last visit in mid January, some people in Jakarta were worried about any possible unrest when the former president Suharto passed away. He passed away shortly thereafter, but Indonesia had been peaceful. The only problem was the heavy flooding in Jakarta.
On my last visit in mid January, some people in Jakarta were worried about any possible unrest when the former president Suharto passed away. He passed away shortly thereafter, but Indonesia had been peaceful. The only problem was the heavy flooding in Jakarta.
Best terms for a car loan
Dear Mr. Tan,
What should I look out for when buying a new car? How can we have a better deal like car insurance, car loan etc?--
REPLY:
Read this faq about motor insurance:
http://www.tankinlian.com/faq/motord.html
I suggest the following approach to get your car loan.
Ask your dealer what is being offered with the package. They usually include a car loan offered by their tied up bank.
Ask for the following:
What is the amount of the loan
What is the monthly replayment and the number of repayments
What are the additional charges (if any).
You can then call 3 other banks and ask them to offer their loan to you for the same amount of loan and number of repayments.
You can compile the differences between the offers as follows:
Amount of loan: $xx,xxxx
Nr of monthly replayments: xx repayments
X is the bank tied up with your motor car dealer. Usually, they offer the best terms (but not always).
When you have obtained the information, you can share with me.
What should I look out for when buying a new car? How can we have a better deal like car insurance, car loan etc?--
REPLY:
Read this faq about motor insurance:
http://www.tankinlian.com/faq/motord.html
I suggest the following approach to get your car loan.
Ask your dealer what is being offered with the package. They usually include a car loan offered by their tied up bank.
Ask for the following:
What is the amount of the loan
What is the monthly replayment and the number of repayments
What are the additional charges (if any).
You can then call 3 other banks and ask them to offer their loan to you for the same amount of loan and number of repayments.
You can compile the differences between the offers as follows:
Amount of loan: $xx,xxxx
Nr of monthly replayments: xx repayments
Bank Amount of Additional
monthly repayment charges
X
Y
Z
X is the bank tied up with your motor car dealer. Usually, they offer the best terms (but not always).
When you have obtained the information, you can share with me.
Term insurance rates are fixed
Dear Mr. Tan,
Question 1: Term insurance are designed to disappear as we grow older. Term insurance rates are often non guaranteed, the rates will be reviewed on a annual or a 5-yearly basis. The premium increases as we grow older. Is this correct?
Reply: You can buy a Term insurance with the rate fixed for 30 years. Read this FAQ:
http://www.tankinlian.com/faq/choice.html
Question 2: In comparison with a limited payment (maybe 20 year) whole life insurance policy, the coverage may start small, and because of it's contractual base, premiums remains constant. And sum assured increases with age (due to addition of bonus). When death occurs, the life plan will pay the full sum.
Reply: The return from a limited payment whole life is poor. This is due to the high charges deducted to pay agent's commission, expenses and profit for the insurance company. Some examples are given in my blog.
It is better to invest your savings in a separate investment fund. Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Question 1: Term insurance are designed to disappear as we grow older. Term insurance rates are often non guaranteed, the rates will be reviewed on a annual or a 5-yearly basis. The premium increases as we grow older. Is this correct?
Reply: You can buy a Term insurance with the rate fixed for 30 years. Read this FAQ:
http://www.tankinlian.com/faq/choice.html
Question 2: In comparison with a limited payment (maybe 20 year) whole life insurance policy, the coverage may start small, and because of it's contractual base, premiums remains constant. And sum assured increases with age (due to addition of bonus). When death occurs, the life plan will pay the full sum.
Reply: The return from a limited payment whole life is poor. This is due to the high charges deducted to pay agent's commission, expenses and profit for the insurance company. Some examples are given in my blog.
It is better to invest your savings in a separate investment fund. Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Monday, February 11, 2008
Claim settlement service
Here is an example of the claim settlement service provided by an insurance company.
If you drive a motorcar and was involved in an accident, you may receive a letter from the other party's lawyers making a large claim for damages from you. It will be quite troublesome for you to handle the claim, as you have to deal with the following uncertainties:
1. Which party is negligent and responsible for the accident?
2. How much is the fair amount of compensation? Is the repair cost a fair price or exaggerated?
If you buy insurance, the task of claim settlement is passed to the insurance company. They have lawyers and loss adjustors to handel the negotiation and settlement. They also pay the acmount of the claim.
It is useful to have insurance to take care of these matters.
If you drive a motorcar and was involved in an accident, you may receive a letter from the other party's lawyers making a large claim for damages from you. It will be quite troublesome for you to handle the claim, as you have to deal with the following uncertainties:
1. Which party is negligent and responsible for the accident?
2. How much is the fair amount of compensation? Is the repair cost a fair price or exaggerated?
If you buy insurance, the task of claim settlement is passed to the insurance company. They have lawyers and loss adjustors to handel the negotiation and settlement. They also pay the acmount of the claim.
It is useful to have insurance to take care of these matters.
Loss control measures
Here are some examples of valuaable advice on loss control that is given by insurance companies. As they have access to experts, the advice is useful to the insured policyholders.
1. If you wish to insure a factory, the insurance company sends a surveyor to look at the housekeeping and safety measures in the factory. The surveyor will make recommendations on reducing the probability and severity of losses. If you implement the recommendations, the insurance company will offer you a lower rate to insure your risks.
2. If you insure your life, the insurance company will advise you keep to a healthy weight and control your chronic conditions. The premium loadings will be reduced.
1. If you wish to insure a factory, the insurance company sends a surveyor to look at the housekeeping and safety measures in the factory. The surveyor will make recommendations on reducing the probability and severity of losses. If you implement the recommendations, the insurance company will offer you a lower rate to insure your risks.
2. If you insure your life, the insurance company will advise you keep to a healthy weight and control your chronic conditions. The premium loadings will be reduced.
Useful functions of insurance
Insurance performs three useful functions:
a) Pooling of risks. Each policyholder pays a small premium into a pool, to be used to pay for the losses suffered by a some policyholders and the expenses of operating the pool.
b) Settlement of claims. The insurance company is experienced in handling the settlement of claims on behalf of the policyholders.
c) Loss control measures. The insurance company can advise the policyholders on measures to reduce the occurence of losses and their severity.
For these valuable functions, the policyholders are willing to pay a fair loading (of up to 35%) over the cost of claims to buy the insurance.
For example, if the average share of the claim per policyholder is $300, the policyholder is usually willing to pay $400 to buy the insurance. This allows $100 to be used to pay the expenses of operating the pool, including the useful services of claim settlement and loss control.
If the loading is more than 35% of the amount of claim, many people will find the insurance to be too costly and will prefer to be un-insured. This benchmark applies to motor, medical, fire and accident insurance.
In the case of life insurance, a different benchmark applies.
a) Pooling of risks. Each policyholder pays a small premium into a pool, to be used to pay for the losses suffered by a some policyholders and the expenses of operating the pool.
b) Settlement of claims. The insurance company is experienced in handling the settlement of claims on behalf of the policyholders.
c) Loss control measures. The insurance company can advise the policyholders on measures to reduce the occurence of losses and their severity.
For these valuable functions, the policyholders are willing to pay a fair loading (of up to 35%) over the cost of claims to buy the insurance.
For example, if the average share of the claim per policyholder is $300, the policyholder is usually willing to pay $400 to buy the insurance. This allows $100 to be used to pay the expenses of operating the pool, including the useful services of claim settlement and loss control.
If the loading is more than 35% of the amount of claim, many people will find the insurance to be too costly and will prefer to be un-insured. This benchmark applies to motor, medical, fire and accident insurance.
In the case of life insurance, a different benchmark applies.
Legal doctrines in insurance
Moral hazard: behaviour of the policyholder, who becomes less willing to spend money to prevent or reduce losses, after obtaining insurance.
Adverse selection: when policyholders are better informed about expected claims and higher risk policyholders are more likely to buy insurance, compared to lower risk policyholders.
Deductible: the amount that the insured is required to pay for the initial portion of each loss, before a claim can be made on the remaining loss.
Policy limits: the maximum amount payable by the insurance policy on the loss. The excess cannot be claimed.
Exclusions: events that are not covered under the policy, such as war or natural disaster under a property insurance policy.
Indemnity contract: pays up to the actual amount of the loss, even though the sum insured may be higher. Applies to motor and medical expense insurance, but not to life and personal accident insurance.
Insurance-t0-value: if a property has been insured for less than its actual value, the policyholder is allowed only to claim for only a proportion of each loss, and has to bear the proportion that is under-insured.
Contract of adhesion: if the standard policy wording is vague, the court will intepret the wording in favour of the policyholder, as the insurance company is expected to be more familiar with the contract and is expected to write the terms more clearly.
Reasonable expectation: the contract will be interpreted according to the expctation of a reasonable person who is not trained in law.
Adverse selection: when policyholders are better informed about expected claims and higher risk policyholders are more likely to buy insurance, compared to lower risk policyholders.
Deductible: the amount that the insured is required to pay for the initial portion of each loss, before a claim can be made on the remaining loss.
Policy limits: the maximum amount payable by the insurance policy on the loss. The excess cannot be claimed.
Exclusions: events that are not covered under the policy, such as war or natural disaster under a property insurance policy.
Indemnity contract: pays up to the actual amount of the loss, even though the sum insured may be higher. Applies to motor and medical expense insurance, but not to life and personal accident insurance.
Insurance-t0-value: if a property has been insured for less than its actual value, the policyholder is allowed only to claim for only a proportion of each loss, and has to bear the proportion that is under-insured.
Contract of adhesion: if the standard policy wording is vague, the court will intepret the wording in favour of the policyholder, as the insurance company is expected to be more familiar with the contract and is expected to write the terms more clearly.
Reasonable expectation: the contract will be interpreted according to the expctation of a reasonable person who is not trained in law.
Investment Tips for a Retiree
Hi Mr. Tan
There are many articles written about retirement planning and the investment strategy to achieve the retirement goals. However, they do not discuss the appropriate investment and draw-down strategy for retirees like myself – persons who is now faced with what to do with the money accumulated from years of saving.
I have spoke to many independent financial advisers and most of them asked me to allocate the savings into equity, balanced or bond funds according to your risk profile. Some would suggest putting part of the money into annuity.
However, given that all existing annuity plans only achieve between a return of between 3.5% to 4% returns p.a. and payment out from 62 year old, one would wonder if it is advisable to do that?
Also, in reality, bond fund is different from bonds and does not provide fixed coupons for retirees with money to live on. Moreover, judging from current market price bond funds is just as volatile as the equity funds.
You would be doing us a great service if you would write a series of articles giving practical advice on investment strategies and instruments that would benefits a retirees with various amount of saving, say $500k, $1m, $2m, investable income with a goals of 6% to 8% return?
Some of these questions retirees need answers are:
· How should I allocate my retirement funds into cash [no of mth expenses?] and the various investment instruments?
· What are the various financial instruments [UT, ETF, Annuity, property etc] for investing and where can I find them?
· Would investing in index EFT better than UT?
· What financial instrument gives better return than FD, saving account and having similar liquidity need to meet monthly expenses?
· Where else can you find articles discussing this aspect of investment planning for retirees.
REPLY
Can you read the FAQs posted in my website,
www.tankinlian.com/faq
In particular, the following FAQs:
http://www.tankinlian.com/faq/seniors.html
http://www.tankinlian.com/faq/returns.html
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/retirement.html
http://www.tankinlian.com/faq/cpf.html
Let me know if you find them to be easy to understand and helpful to answer your questions.
There are many articles written about retirement planning and the investment strategy to achieve the retirement goals. However, they do not discuss the appropriate investment and draw-down strategy for retirees like myself – persons who is now faced with what to do with the money accumulated from years of saving.
I have spoke to many independent financial advisers and most of them asked me to allocate the savings into equity, balanced or bond funds according to your risk profile. Some would suggest putting part of the money into annuity.
However, given that all existing annuity plans only achieve between a return of between 3.5% to 4% returns p.a. and payment out from 62 year old, one would wonder if it is advisable to do that?
Also, in reality, bond fund is different from bonds and does not provide fixed coupons for retirees with money to live on. Moreover, judging from current market price bond funds is just as volatile as the equity funds.
You would be doing us a great service if you would write a series of articles giving practical advice on investment strategies and instruments that would benefits a retirees with various amount of saving, say $500k, $1m, $2m, investable income with a goals of 6% to 8% return?
Some of these questions retirees need answers are:
· How should I allocate my retirement funds into cash [no of mth expenses?] and the various investment instruments?
· What are the various financial instruments [UT, ETF, Annuity, property etc] for investing and where can I find them?
· Would investing in index EFT better than UT?
· What financial instrument gives better return than FD, saving account and having similar liquidity need to meet monthly expenses?
· Where else can you find articles discussing this aspect of investment planning for retirees.
REPLY
Can you read the FAQs posted in my website,
www.tankinlian.com/faq
In particular, the following FAQs:
http://www.tankinlian.com/faq/seniors.html
http://www.tankinlian.com/faq/returns.html
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/retirement.html
http://www.tankinlian.com/faq/cpf.html
Let me know if you find them to be easy to understand and helpful to answer your questions.
Personal Risks
Personal risks can be classified in six categories:
a) Earnings risk - unexpected decline in income due to death, sickness or unemployment
b) Medical expense risk - to recover from sickness
c) Liability risk - due to negligence, e.g. use of motor vehicle
d) Physical asset risk - loss of home, car or other property
e) Financial asset risk - decline in value of financial assets
f) Longevity risk - living too long and running out of savings
The first four types of risk can be insured. You should look for low cost insurance. This allows the remaining savings to be invested to provide for your retirement and other financial needs. You can buy life annuity to cover the risk of living too long.
a) Earnings risk - unexpected decline in income due to death, sickness or unemployment
b) Medical expense risk - to recover from sickness
c) Liability risk - due to negligence, e.g. use of motor vehicle
d) Physical asset risk - loss of home, car or other property
e) Financial asset risk - decline in value of financial assets
f) Longevity risk - living too long and running out of savings
The first four types of risk can be insured. You should look for low cost insurance. This allows the remaining savings to be invested to provide for your retirement and other financial needs. You can buy life annuity to cover the risk of living too long.
Whole life, premium payable for 25 years
Dear Mr. Tan
I learned about your blog site after reading the Edge Weekly Paper. I was intrigued by your revelation on life insurance.
I have a $50,000 whole life insurance plan with annual premium of $1,000 payable for 25 years. After 25 years, I do not need to pay any more premium, but remain insured. The cash value at the end of 25 years is $30,900 (of which about two-thirds are guaranteed). Did I get a good deal?
I have already paid two years' premium. Should I continue the policy?
REPLY
If you pay $1,000 a year for 25 years and get back a cash value of $30,900, the return is 1.6% p.a.
Alternatively, you can spend $100 a year on Term insurance and get a higher coverage. If you invest $900 a year for 25 years to earn 4.5% p.a. (not guaranteed, but quite conservative), you will get back $41,900; If you earn 4%, you will get back $39,000.
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
If you write off the loss of 2 years premium (which you have already paid), the yield on $1,000 for 23 years with a return of $30,900 is 2.4%. It is still low, but probably all right. I suggest that you keep this policy.
Lesson: Avoid high cost life insurance, where a large part of your premium is taken away to pay charges. If you are already committed, it is better to keep the policy.
I learned about your blog site after reading the Edge Weekly Paper. I was intrigued by your revelation on life insurance.
I have a $50,000 whole life insurance plan with annual premium of $1,000 payable for 25 years. After 25 years, I do not need to pay any more premium, but remain insured. The cash value at the end of 25 years is $30,900 (of which about two-thirds are guaranteed). Did I get a good deal?
I have already paid two years' premium. Should I continue the policy?
REPLY
If you pay $1,000 a year for 25 years and get back a cash value of $30,900, the return is 1.6% p.a.
Alternatively, you can spend $100 a year on Term insurance and get a higher coverage. If you invest $900 a year for 25 years to earn 4.5% p.a. (not guaranteed, but quite conservative), you will get back $41,900; If you earn 4%, you will get back $39,000.
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
If you write off the loss of 2 years premium (which you have already paid), the yield on $1,000 for 23 years with a return of $30,900 is 2.4%. It is still low, but probably all right. I suggest that you keep this policy.
Lesson: Avoid high cost life insurance, where a large part of your premium is taken away to pay charges. If you are already committed, it is better to keep the policy.
Sunday, February 10, 2008
Avoid high cost plans
Hi Mr Tan
I happen to visit your blog while gathering information about investment and insurance. It's a very informative blog. You have provided us a greater insight to insurance and investment.
I am now 26 years old. I met an an agent recently with the intention to buy a whole life and Term insurance. She recommended two plans. I found the premium to be rather high and there are a lot of uncertainties with respect to the critical illness coverage. (Other details deleted)
REPLY
I usually advise people to buy Term insurance and invest the difference. You can read the following FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/choice.html
You should avoid whole life or endowment policies, as the charges are too high and the policies give a poor return.
I happen to visit your blog while gathering information about investment and insurance. It's a very informative blog. You have provided us a greater insight to insurance and investment.
I am now 26 years old. I met an an agent recently with the intention to buy a whole life and Term insurance. She recommended two plans. I found the premium to be rather high and there are a lot of uncertainties with respect to the critical illness coverage. (Other details deleted)
REPLY
I usually advise people to buy Term insurance and invest the difference. You can read the following FAQs:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/choice.html
You should avoid whole life or endowment policies, as the charges are too high and the policies give a poor return.
Questions from a Young Person
Hi Mr. Tan,
1) I joined the workforce recently. I plan to start saving $100 a month. Can you recommend any cash value insurance, unit trust or bonds?
Reply:
It is better to buy Term insurance and to invest your savings in a diversified, low cost fund. Read this FAQ: http://www.tankinlian.com/faq/savings.html
You should avoid a cash value policy, as the cost is high and takes away too much of your savings.
2) I currently hold two life term insurance policy, i.e. the Dependent Protection policy and a Term policy bought while under National Service. Can a person claim under two or more life term insurance if a mishap occurs?
Reply:
You can claim on all of your life insurance policies, including the two Term policy that you mentioned above. Life insurance is a valued policy and is not subject to the principle of indemnity (which applies to motor and medical insurance). The principle of indemnity limit your claims to the actual expenses that you have incurred.
3) Can a person invest in shares without a stock broker?
Reply:
You have to buy shares through a stockbroker. The commission is low, i.e. 0.3% only.
1) I joined the workforce recently. I plan to start saving $100 a month. Can you recommend any cash value insurance, unit trust or bonds?
Reply:
It is better to buy Term insurance and to invest your savings in a diversified, low cost fund. Read this FAQ: http://www.tankinlian.com/faq/savings.html
You should avoid a cash value policy, as the cost is high and takes away too much of your savings.
2) I currently hold two life term insurance policy, i.e. the Dependent Protection policy and a Term policy bought while under National Service. Can a person claim under two or more life term insurance if a mishap occurs?
Reply:
You can claim on all of your life insurance policies, including the two Term policy that you mentioned above. Life insurance is a valued policy and is not subject to the principle of indemnity (which applies to motor and medical insurance). The principle of indemnity limit your claims to the actual expenses that you have incurred.
3) Can a person invest in shares without a stock broker?
Reply:
You have to buy shares through a stockbroker. The commission is low, i.e. 0.3% only.
Lost a camera in a taxi
Dear Mr. Tan,
I took a taxi to visit a pet lodging shop, on the way to the airport for an overseas holiday. I left my camera in the taxi. There are several treasured pictures of happy moments in the camera.
On my return to Singapore, I called several taxi operators to report the loss, as I forgot which taxi I took. I had to leave messages in many voice mail and speak to telephone operators who were indiffferent as they were so used to taking such calls. It was a tiring and hopeless exefcise for me.
I hope that, in the near future, there is a one-point contact number to report a loss and to receive genuine help.
REPLY
I agree that call center service is generally quiet poor in Singapore, with a few exceptions (such as NTUC Income).
I will post your experience in my blog. However, to reach out to a bigger audience, you can write to the newspapers, like Straits Times and Today, or to the Land Transport Authority. I wish you all the best in the recovery of your camera.
I took a taxi to visit a pet lodging shop, on the way to the airport for an overseas holiday. I left my camera in the taxi. There are several treasured pictures of happy moments in the camera.
On my return to Singapore, I called several taxi operators to report the loss, as I forgot which taxi I took. I had to leave messages in many voice mail and speak to telephone operators who were indiffferent as they were so used to taking such calls. It was a tiring and hopeless exefcise for me.
I hope that, in the near future, there is a one-point contact number to report a loss and to receive genuine help.
REPLY
I agree that call center service is generally quiet poor in Singapore, with a few exceptions (such as NTUC Income).
I will post your experience in my blog. However, to reach out to a bigger audience, you can write to the newspapers, like Straits Times and Today, or to the Land Transport Authority. I wish you all the best in the recovery of your camera.
Low cost index funds
Hi, Mr. Tan
I lament the fact that Singaporeans lack access to really low-cost funds like Vanguard's. Currently, for index fund fans, we only can buy the Infinity series and those cross-listed ETFs on the SGX. Do you know if Vanguard has any plans in the near time to market their products in Singapore?
REPLY
I am not aware of any plans by Vanguard to introduce low cost indexed funds directly in Singapore. They probably find the market to be too small. I hope that other fund managers may start the low cost funds, within the next one or two years. This will be good for the market and for cost conscious investors.
I lament the fact that Singaporeans lack access to really low-cost funds like Vanguard's. Currently, for index fund fans, we only can buy the Infinity series and those cross-listed ETFs on the SGX. Do you know if Vanguard has any plans in the near time to market their products in Singapore?
REPLY
I am not aware of any plans by Vanguard to introduce low cost indexed funds directly in Singapore. They probably find the market to be too small. I hope that other fund managers may start the low cost funds, within the next one or two years. This will be good for the market and for cost conscious investors.
Decline in US Dollar
Hi Mr Tan,
I'm a regular visitor of your blog and applaud your ongoing efforts on educating people on the benefits of index/passively-managed funds and Term insurance.
I read that only USD-denominated investments primarily vested in US assets are affected by the declining USD; but the impact is less so if the investments are not in US assets. Is this true please?
Reply: Many of the US companies have global operation. When the USD declines, their income from global operations, when translated back into USD, is higher. This compensates for the decline in USD, to a certain extent.
If the company have only US operations, the decline in USD may help to make foreign imports less competitive. But, the overall impact on the US operations, due to a decline in USD, is likely to be negative.
I'm a regular visitor of your blog and applaud your ongoing efforts on educating people on the benefits of index/passively-managed funds and Term insurance.
I read that only USD-denominated investments primarily vested in US assets are affected by the declining USD; but the impact is less so if the investments are not in US assets. Is this true please?
Reply: Many of the US companies have global operation. When the USD declines, their income from global operations, when translated back into USD, is higher. This compensates for the decline in USD, to a certain extent.
If the company have only US operations, the decline in USD may help to make foreign imports less competitive. But, the overall impact on the US operations, due to a decline in USD, is likely to be negative.
Economics Joke: Recession and depression
What is the difference between Recession and Depression?
Recession - when you neighbour loses his job.
Depression - when you lose your job.
Recession - when you neighbour loses his job.
Depression - when you lose your job.
Saturday, February 09, 2008
Managing risks
The text-book on risk management says that there are three ways of managing risks, namely:
1. Loss control, i.e. loss prevention and loss reduction
2. Loss financing, i.e. retention, insurance, hedging, transfers
3. Internal risk reduction, e.g. diversification
Retention - set aside a sum of money to meet small or frequent losses, e.g. to pay for visits to the neighbourhood doctor.
Loss prevention - measures taken to reduce the frequency of the loss, e.g. keeping a vehicle in good condition.
Loss reduction - measurs taken to reduce the severity of the loss (if it arises), e.g sprinkler system to reduce the impact of a fire.
Insurance is one way of managing risk. It should be reserved for large and infrequent losses.
1. Loss control, i.e. loss prevention and loss reduction
2. Loss financing, i.e. retention, insurance, hedging, transfers
3. Internal risk reduction, e.g. diversification
Retention - set aside a sum of money to meet small or frequent losses, e.g. to pay for visits to the neighbourhood doctor.
Loss prevention - measures taken to reduce the frequency of the loss, e.g. keeping a vehicle in good condition.
Loss reduction - measurs taken to reduce the severity of the loss (if it arises), e.g sprinkler system to reduce the impact of a fire.
Insurance is one way of managing risk. It should be reserved for large and infrequent losses.
Managing your personal risk
What are the key financial risks faced by a young person?
1. Chance of death during the next 30 years: 2%
2. Chance of critical illness during the next 30 years (not resulting in death): 3%
3. Chance of surviving for 30 years without critical illness: 95%
Many people spent too much money insuring against death and critical illness, which has a 5% chance of occurring. They overlook to insure against the 95% chance of suriving for 30 years and NOT HAVING ADEQUATE SAVINGS for retirement.
It is important to allocate savings to earn an adequate rate of return in a diversified, low cost fund. The savings should NOT be invested in a high cost financial product that takes away more thn 50% of the yield.
For the protection against premature death or critical illness, you can buy a decreasing Term insurance policy with a rider to provide a modest amount cover for critical illness.
1. Chance of death during the next 30 years: 2%
2. Chance of critical illness during the next 30 years (not resulting in death): 3%
3. Chance of surviving for 30 years without critical illness: 95%
Many people spent too much money insuring against death and critical illness, which has a 5% chance of occurring. They overlook to insure against the 95% chance of suriving for 30 years and NOT HAVING ADEQUATE SAVINGS for retirement.
It is important to allocate savings to earn an adequate rate of return in a diversified, low cost fund. The savings should NOT be invested in a high cost financial product that takes away more thn 50% of the yield.
For the protection against premature death or critical illness, you can buy a decreasing Term insurance policy with a rider to provide a modest amount cover for critical illness.
Critical illness
Dear Mr. Tan,
My annual income is around $50,000. Recently, I was recommended to buy a critical illness policy for $300,000 (to cover six years of earnings), but the premium cost about $600 per month, which takes away 15% of my salary. I cannot afford to pay so much, but I need the coverage. I need critical illness to cover my medical expenses and loss of income due to serious illness. What is your advice?
REPLY
You can buy a 30 year Decreasing Term policy to cover $300,000 for about 1% of your salary. If you save 10% of your salary and invest it in a diversified low cost fund to earn a good rate of return, you will be able to accumulate more than $300,000 over 30 years. By that time, you do not need any critical illness insurance.
You can cover most of the expenses of critical illness through a Shield policy, or the group insurance policy provided by your employer.
The chance of a critical illness occuring for a young person is very small. If you wish to cover against the occurence at a young age, you can buy a 20 year critical illness rider to cover $50,000 and pay a low premium. After 20 years, you would have accumulated more than sufficient savings to meet any loss of income.
Thsi is more cost effective than spending 15% of your income ona critical illness policy. This policy is costly due to the high commission earned by the agent, and the high charges levied by the insurance company.
Read this FAQ:
http://www.tankinlian.com/faq/choice.html
http://www.tankinlian.com/faq/savings.html
My annual income is around $50,000. Recently, I was recommended to buy a critical illness policy for $300,000 (to cover six years of earnings), but the premium cost about $600 per month, which takes away 15% of my salary. I cannot afford to pay so much, but I need the coverage. I need critical illness to cover my medical expenses and loss of income due to serious illness. What is your advice?
REPLY
You can buy a 30 year Decreasing Term policy to cover $300,000 for about 1% of your salary. If you save 10% of your salary and invest it in a diversified low cost fund to earn a good rate of return, you will be able to accumulate more than $300,000 over 30 years. By that time, you do not need any critical illness insurance.
You can cover most of the expenses of critical illness through a Shield policy, or the group insurance policy provided by your employer.
The chance of a critical illness occuring for a young person is very small. If you wish to cover against the occurence at a young age, you can buy a 20 year critical illness rider to cover $50,000 and pay a low premium. After 20 years, you would have accumulated more than sufficient savings to meet any loss of income.
Thsi is more cost effective than spending 15% of your income ona critical illness policy. This policy is costly due to the high commission earned by the agent, and the high charges levied by the insurance company.
Read this FAQ:
http://www.tankinlian.com/faq/choice.html
http://www.tankinlian.com/faq/savings.html
Friday, February 08, 2008
Dance: Giselle in the Park
27 to 30 March 2008
Fort Canning Park
Performance from 7.30pm (Gates open from 5pm for picnic party)
Rendezvous with the romantic characters of Giselle under a canopy of stars for an unforgettable and immersive experience of this hauntingly beautiful classical ballet.
Giselle tells the story of a love between a village maiden, Giselle, and a nobleman, Albrecht. Mesmerized by Giselle’s beauty and innocence, Albrecht disguises himself as a peasant and promises eternal love to Giselle despite being betrothed to a Duke’s daughter.
When Giselle discovers his deceit, she loses her mind and dies, turning into a wili (a female spirit). Will Giselle forgive Albrecht for his betrayal or will she seek revenge? Join us as we follow this heart-wrenching love story that is bound to capture the hearts of many.
This special performance of Giselle will also mark the start of SDT’s 20th Anniversary celebrations.
Ticket Prices: $26 (free for children under 6)
Available at:
All SISTIC outlets
SISTIC Hotline: 6348-5555
SISTIC website: www.sistic.com.sg
SDT office at 6338-0611 or ticketing@singaporedancetheatre.com as well as at the door on performance nights.
Sweet Sixteen tickets at $16 per ticket (SISTIC booking fees applies.) available to all full-time students and NSmen. The label on the ticket will read as “Sweet Sixteen”. Sweet Sixteen tickets will not be available at the door.
ICE - In case of emergency
If we were to be involved in an accident or were taken ill, the people attending on us would have our mobile phone but wouldn't know who to call. Yes, there are hundreds of numbers stored; but which one is the contact person in case of an emergency? Hence this "ICE" (In Case of Emergency) Campaign.
The concept of "ICE" is catching on quickly. It is a method of contact during emergency situations. As cell phones are carried by the majority of the population, all you need to do is store the number of a contact person or persons who should be contacted during emergency under thename "ICE" ( In Case Of Emergency).
The idea was thought up by a paramedic who found that when he went to the scenes of accidents, there were always mobile phones with patients, but they didn't know which number to call. He therefore thought that it would be a good idea if there was a nationally recognized name for this purpose. In an emergency situation, Emergency Service personnel and hospital staff would be able to quickly contact the right person bysimply dialing the number you have stored as "ICE."
For more than one contact name, simply enter ICE 1, ICE 2 and ICE 3 etc. A great idea that will make a difference!
TIP BY TAN KIN LIAN: I used the "duplicate" function in my mobilephone to copy the name of my family members into a new contact, and add ICE in front of their name.
The concept of "ICE" is catching on quickly. It is a method of contact during emergency situations. As cell phones are carried by the majority of the population, all you need to do is store the number of a contact person or persons who should be contacted during emergency under thename "ICE" ( In Case Of Emergency).
The idea was thought up by a paramedic who found that when he went to the scenes of accidents, there were always mobile phones with patients, but they didn't know which number to call. He therefore thought that it would be a good idea if there was a nationally recognized name for this purpose. In an emergency situation, Emergency Service personnel and hospital staff would be able to quickly contact the right person bysimply dialing the number you have stored as "ICE."
For more than one contact name, simply enter ICE 1, ICE 2 and ICE 3 etc. A great idea that will make a difference!
TIP BY TAN KIN LIAN: I used the "duplicate" function in my mobilephone to copy the name of my family members into a new contact, and add ICE in front of their name.
Is it necessary to have an adviser?
Dear Mr. Tan,
Is it necessary for me to have an adviser? Can I buy the right product on my own?
REPLY
You have two options:
1. Find a good and trustworthy adviser.
2. Be your own adviser, ie "Do-it-yourself".
If you choose to be your own adviser, you need to be educated about the investment and insurance market. You can read the FAQs in my website and the articles from Dr. Money.
You can choose the simple products, such as:
1. Term insurance
2. Diversified, low cost funds
3. Personal accident insurance
Here are some useful links:
http://www.tankinlian.com/faq/
http://www.tankinlian.com/drmoney/
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/choice.html
You can get an insurance quotation on your own, by calling the insurance company directly.
http://www.tankinlian.com/faq/termd.html
http://www.tankinlian.com/faq/motord.html
Is it necessary for me to have an adviser? Can I buy the right product on my own?
REPLY
You have two options:
1. Find a good and trustworthy adviser.
2. Be your own adviser, ie "Do-it-yourself".
If you choose to be your own adviser, you need to be educated about the investment and insurance market. You can read the FAQs in my website and the articles from Dr. Money.
You can choose the simple products, such as:
1. Term insurance
2. Diversified, low cost funds
3. Personal accident insurance
Here are some useful links:
http://www.tankinlian.com/faq/
http://www.tankinlian.com/drmoney/
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/choice.html
You can get an insurance quotation on your own, by calling the insurance company directly.
http://www.tankinlian.com/faq/termd.html
http://www.tankinlian.com/faq/motord.html
A good time to invest in REITs?
When REITs (Real Estate Investment Trusts) were first introduced a few years ago, it provided a yield of more than 6%. The yield later dropped to 4%, giving an appreciation of more than 50% in the price of the REIT. The dividend payout also increased, due to higher rental income. This led to a further gain in the REIT.
The price of many REITS have dropped by more than 20% from its recent peak. It is now possible to find a few REITS that yield more than 5%. This is an attractive yield.
If there is an economic slowdown, there is the risk that rental income may drop in the future, and reduce the yield on the REIT. This risk is worth taking. Even if the rental income drops by 20%, the REIT will still be able to give a yield of more than 4%.
I have decided to invest in REITS at this time. (Previously, I found the price to be too high).
The price of many REITS have dropped by more than 20% from its recent peak. It is now possible to find a few REITS that yield more than 5%. This is an attractive yield.
If there is an economic slowdown, there is the risk that rental income may drop in the future, and reduce the yield on the REIT. This risk is worth taking. Even if the rental income drops by 20%, the REIT will still be able to give a yield of more than 4%.
I have decided to invest in REITS at this time. (Previously, I found the price to be too high).
Investing in REITS
Mr. Tan,
I am curious abt REIT. While I understand what they are, I do not fully appreaciate their risk. How different are they from bonds? Are they riskier than bonds? What are the chances of a REIT paying less dividends in later years. Can a REIT go bust?
REPLY
A bond gives a guaranteed interest payment and returns the principal at the end of the term. A REIT pays out a dividend depending on the net rental income of the properties that are held by the trust, and does not have a redemption date.
Investing in a REIT is like investing in the underlying properties. All the investors of the REIT collectively own the underlying properties in their respective shares.
The rental income is expected to change with economic situation and the supply and demand of properties. The dividend paid by the REIT is expected to fluctuate in the same manner. Over the long term, rental income is expected to increase with inflation and economic growth.
The risk of investing in a REIT is low. It is like investing in a property that you have paid in full. Even if the rental income comes down, you will still get some income.
A REIT may have some risk, if it borrows money (i.e. leveraging) to invest in the underlying assets. A leverage REIT has to pay the interest on the borrowed money, before paying the net income to the investors. In Singapore, the REITS are allowed to borrow up to only a low percentage (maybe 30%) of the asset value, so the leveraging is low. The risk is also low.
I am curious abt REIT. While I understand what they are, I do not fully appreaciate their risk. How different are they from bonds? Are they riskier than bonds? What are the chances of a REIT paying less dividends in later years. Can a REIT go bust?
REPLY
A bond gives a guaranteed interest payment and returns the principal at the end of the term. A REIT pays out a dividend depending on the net rental income of the properties that are held by the trust, and does not have a redemption date.
Investing in a REIT is like investing in the underlying properties. All the investors of the REIT collectively own the underlying properties in their respective shares.
The rental income is expected to change with economic situation and the supply and demand of properties. The dividend paid by the REIT is expected to fluctuate in the same manner. Over the long term, rental income is expected to increase with inflation and economic growth.
The risk of investing in a REIT is low. It is like investing in a property that you have paid in full. Even if the rental income comes down, you will still get some income.
A REIT may have some risk, if it borrows money (i.e. leveraging) to invest in the underlying assets. A leverage REIT has to pay the interest on the borrowed money, before paying the net income to the investors. In Singapore, the REITS are allowed to borrow up to only a low percentage (maybe 30%) of the asset value, so the leveraging is low. The risk is also low.
Shopping Mall or MRT station
Dear Mr. Tan,
Is it all right to buy insurance from an agent outside a shopping mall or MRT station? They promote new products and offer some freebies.
REPLY
It depends on whether the products give good value. You should buy a product that meets the following criteria:
1. You understand the product
2. It meets your needs
3. It offers fair terms, compared to similar products in the market.
4. You can get an independent view to evaluate your decision.
When you buy from an sales person in a crowded place, you are not likely to be able to achieve the above criteria. You can take some information from the sales person, but you should not buy on the spot.
Do not be distracted by "freebies". They take your attention away from the key features (e.g. the cost) of the underlying product.
Make sure that you know the key features of similar products in the market, before you buy. This ensures that you get good value. It may take some effort, but it will save you a lot of hidden cost.
You should try the "independent view". If you speak to your spouse or friend about the product that you intend to buy, you will be surprised to learn about the "gap" in your knowledge of the product. This reflects an incomplete understanding. This is a warning sign that you should avoid the product.
Gong Xi Fa Cai.
Is it all right to buy insurance from an agent outside a shopping mall or MRT station? They promote new products and offer some freebies.
REPLY
It depends on whether the products give good value. You should buy a product that meets the following criteria:
1. You understand the product
2. It meets your needs
3. It offers fair terms, compared to similar products in the market.
4. You can get an independent view to evaluate your decision.
When you buy from an sales person in a crowded place, you are not likely to be able to achieve the above criteria. You can take some information from the sales person, but you should not buy on the spot.
Do not be distracted by "freebies". They take your attention away from the key features (e.g. the cost) of the underlying product.
Make sure that you know the key features of similar products in the market, before you buy. This ensures that you get good value. It may take some effort, but it will save you a lot of hidden cost.
You should try the "independent view". If you speak to your spouse or friend about the product that you intend to buy, you will be surprised to learn about the "gap" in your knowledge of the product. This reflects an incomplete understanding. This is a warning sign that you should avoid the product.
Gong Xi Fa Cai.
Choose a good adviser
Posted in my blog (and edited by me):
Your adviser plays a VERY IMPORTANT part in the advisory process. It is make or break for your financial future.
A poor and wobbly start and you never achieve your goals.That is the reason why many CPF members still licking their wounds from losses because they never got a qualified and competent adviser in the first place. What they got was a salesman who sold them funds but didn't guide and advise on the investment.
Similarly why many people are still under insured is because they got salesmen and women to advise on their insurance. You be surprised that insurance planning is not about selling you a policy and your concerns and fears will go away and you will get peace of mind. It is about getting all your needs addressed.
This is also the conscience of the advisers plays a key role. Check your insurance. I bet you have a load of whole life, limited premium and endowment. Tally them up to see if you have enough despite paying so much premium. What is the point of paying so much premium and yet you have so big a gap.
Do you know why this blog promotes 'buy Term and invest the rest'? It is because there is great concern for you; to educate you so that you will not be bluffed by insurance salesmen; also to let you know this is the best approach to take care of your protection and wealth accumulation efficiently and effectively.
Straight forward and simple, plain vanilla products. If you have a good qualified adviser he or she can help you to achieve your goals because they guide you all the way and not abandon you after a sale is made like the insurance salesmen.
Remember to choose a good adviser. If you do not have one you can go to www.fpas.org.sg to get help to get an adviser who is attached to the company of your choice. Eg. you want one who is representing NTUC.
Z
Your adviser plays a VERY IMPORTANT part in the advisory process. It is make or break for your financial future.
A poor and wobbly start and you never achieve your goals.That is the reason why many CPF members still licking their wounds from losses because they never got a qualified and competent adviser in the first place. What they got was a salesman who sold them funds but didn't guide and advise on the investment.
Similarly why many people are still under insured is because they got salesmen and women to advise on their insurance. You be surprised that insurance planning is not about selling you a policy and your concerns and fears will go away and you will get peace of mind. It is about getting all your needs addressed.
This is also the conscience of the advisers plays a key role. Check your insurance. I bet you have a load of whole life, limited premium and endowment. Tally them up to see if you have enough despite paying so much premium. What is the point of paying so much premium and yet you have so big a gap.
Do you know why this blog promotes 'buy Term and invest the rest'? It is because there is great concern for you; to educate you so that you will not be bluffed by insurance salesmen; also to let you know this is the best approach to take care of your protection and wealth accumulation efficiently and effectively.
Straight forward and simple, plain vanilla products. If you have a good qualified adviser he or she can help you to achieve your goals because they guide you all the way and not abandon you after a sale is made like the insurance salesmen.
Remember to choose a good adviser. If you do not have one you can go to www.fpas.org.sg to get help to get an adviser who is attached to the company of your choice. Eg. you want one who is representing NTUC.
Z
Dividend paid from a Fund
Mr, Tan,
For the STI ETF, what happens when a dividend is declared? How is it distributed to the investors?
I have the same query about the NTUC Combined Fund which i recently bought - what happens to the dividends declared on the shares held by the funds? Do these dividends increase the value of my investments?
REPLY
The STI ETF declares a dividend every six months. Currently, the dividend paid out represents about 3% of the value of the assets. It is the average dividend paid by the underlying shares.
When the dividend is paid, the net asset value of the fund will drop by this amount. The share price will drop slightly to reflect this payment. After that, the share price should increase, in line with the underlying value of the shares..
In the case of the NTUC Income Combined Fund, there is no dividend payment. The dividends that are received on the underlying shares are re-invested. The price of this fund will increase due to the growth of the underlying shares and the dividends that have been received.
If you wish to receive a payout of (say) 5% from the from the Combined Fund, you can encash 5% of the units that you hold. As the underlying value of the shares is expected to grow by more than 5% (on average), the value of your investments should remain intact. You have the choice of deciding on the amount that you wish to encash each year.
For the STI ETF, what happens when a dividend is declared? How is it distributed to the investors?
I have the same query about the NTUC Combined Fund which i recently bought - what happens to the dividends declared on the shares held by the funds? Do these dividends increase the value of my investments?
REPLY
The STI ETF declares a dividend every six months. Currently, the dividend paid out represents about 3% of the value of the assets. It is the average dividend paid by the underlying shares.
When the dividend is paid, the net asset value of the fund will drop by this amount. The share price will drop slightly to reflect this payment. After that, the share price should increase, in line with the underlying value of the shares..
In the case of the NTUC Income Combined Fund, there is no dividend payment. The dividends that are received on the underlying shares are re-invested. The price of this fund will increase due to the growth of the underlying shares and the dividends that have been received.
If you wish to receive a payout of (say) 5% from the from the Combined Fund, you can encash 5% of the units that you hold. As the underlying value of the shares is expected to grow by more than 5% (on average), the value of your investments should remain intact. You have the choice of deciding on the amount that you wish to encash each year.
First Anniversary of this Blog
Dear Mr. Tan,
Wishing you Gong Xi Fa Cai and best of health. Thanks for all the financial advice and education. You have some 200,000 visitors to your blog on the first anniversary of your blog i.e. 8 Feb 2008 . It is a great achievement !!
Best regards
YH
Wishing you Gong Xi Fa Cai and best of health. Thanks for all the financial advice and education. You have some 200,000 visitors to your blog on the first anniversary of your blog i.e. 8 Feb 2008 . It is a great achievement !!
Best regards
YH
Thursday, February 07, 2008
Motor insurance claim
Dear Mr. Tan,
I met with an accident yesterday. It was a small accident. Should I make an insurance claim or try to settle it privately?
REPLY
Read this FAQ:
http://www.tankinlian.com/articles/traffic.html
I met with an accident yesterday. It was a small accident. Should I make an insurance claim or try to settle it privately?
REPLY
Read this FAQ:
http://www.tankinlian.com/articles/traffic.html
Joke - Make a Will
A young doctor and a young lawyer have just set up in private practice. They met in the street one day and the doctor said, "Great news! I have just got my first patient."
"Congratulations", said the lawyer. "When you've got him to the point that he wants to make a will, let me know and I will go and see him. "
"Congratulations", said the lawyer. "When you've got him to the point that he wants to make a will, let me know and I will go and see him. "
Keep invested in STI ETF
Hi Mr. Tan,
I have $90,000 invested in STI ETF. It was slowly accumulated through POEMS Share Builders Plan over the last few years.
Should I sell the ETF and buy individual blue-chip shares? Will it results in more savings over the long-term? Will selling all the shares in one go have any effects on the selling price?
Looking forward to your reply.
REPLY
It is better to keep you STI ETF. It is professionally managed, well diversified. You do not have to worry about collecting dividends, subscribing to rights issues, etc. These are taken care for you. The expense ratio of 0.3% is small.
I have $90,000 invested in STI ETF. It was slowly accumulated through POEMS Share Builders Plan over the last few years.
Should I sell the ETF and buy individual blue-chip shares? Will it results in more savings over the long-term? Will selling all the shares in one go have any effects on the selling price?
Looking forward to your reply.
REPLY
It is better to keep you STI ETF. It is professionally managed, well diversified. You do not have to worry about collecting dividends, subscribing to rights issues, etc. These are taken care for you. The expense ratio of 0.3% is small.
Higher cost of Vivolife
Dear Mr. Tan,
An NTUC agent approached me to sell the new Vivolife product. The return from this product is lower than a similar product that was being discontinued.
The agent claimed that the commission is not significantly different. Why is the return from the so much lower?
REPLY
I am not familiar with the new product. My understanding is that the charges are higher to cover the following:
a) Higher commission to the agent
b) Higher advertising expenses
c) Higher profit margin
d) Cost of the additional benefits (or frills).
I suspect that the yield for the period of premium payment could be quite low. You should ask the agent to compute the yield, based on the cash value at the end of this period. If the net yield(after deducting all the costs) is still more than 3%, you can invest in this product.
If not, it is better for you to follow the advise in this FAQ:
http://www.tankinlian.com/faq/savings.html
Gong Xi Fa Cai.
An NTUC agent approached me to sell the new Vivolife product. The return from this product is lower than a similar product that was being discontinued.
The agent claimed that the commission is not significantly different. Why is the return from the so much lower?
REPLY
I am not familiar with the new product. My understanding is that the charges are higher to cover the following:
a) Higher commission to the agent
b) Higher advertising expenses
c) Higher profit margin
d) Cost of the additional benefits (or frills).
I suspect that the yield for the period of premium payment could be quite low. You should ask the agent to compute the yield, based on the cash value at the end of this period. If the net yield(after deducting all the costs) is still more than 3%, you can invest in this product.
If not, it is better for you to follow the advise in this FAQ:
http://www.tankinlian.com/faq/savings.html
Gong Xi Fa Cai.
Future for Financial Advisers
Mr. Tan,
Can I say that the days of an insurance adviser is numbered because:
1) An insurance adviser is highly unlikely to transact several term a day as each plan will be for very long term. The adviser have to look for the next person for planning.
2) Commission is low especially for Term insurances. It is difficult and take a lot of time to plan and convince the next person to the Term insurance. The adviser eventually get paid peanuts for the vast amount of time taken.
3) Next comes the emergence of index funds which pay low sales charge and no wrap fees. Adviser may even not earn a single cent to introduce these funds.
4) There is also no guideline on how much an adviser is worth for his time and advice. If the public view an adviser time as $10/hour, how many hours must an adviser works to compensate for his business cost? Is it possible for him to get 10 customers a day in order to earn that $100/day. Is meeting that 10 customers day considered as efficient?
5) Financial planner is different from other professional such as doctors and lawyers. People look for them when they are seriously sick or need legal advice. People don't usually think they will need a Financial planner due to their low urgency towards financial planning.
Financial Advisers took great pains to gain hybrid knowledge ranging from Insurance, Investments, Tax, Estate, CPF, Retirement, etc. They also keep updated on all the changes and investment climate.
Do you think that it is fair that advisers should always get lower paid than other professionals?Should the public get all the advices for free and then buy the cheapest term insurance and ETFs and they pay peanuts to the agent?
In your opinion, do you think that if there are no proper framework protecting the advisers in term of compensation scheme, a too drastic change in the benefit towards the public will kill many good advisers which may subsequently result in more social problem?
REPLY
I am optimistic of the future for a new type of financial adviser who provides good value for the client. The client will look for a trusted financial adviser, just as a patient will look for a good and trusted doctor.
The consumer will pay a fair rate of remuneration for the advice and help in making the transaction. The adviser can earn a good level of income by working efficiently and spreading his remuneration over a large number of clients (i.e. keep the cost low for the customer).
Can the new model give a living for many financial advisers? I believe so. There are so many people that need good advice. Many advisers are needed to educate and give good advice to these people.
In the economy, we need many teachers, many doctors, many nurses, many preachers. They do good work to serve the entire population. We also need many financial advisers to do their good work.
Gong Xi Fa Cai.
Can I say that the days of an insurance adviser is numbered because:
1) An insurance adviser is highly unlikely to transact several term a day as each plan will be for very long term. The adviser have to look for the next person for planning.
2) Commission is low especially for Term insurances. It is difficult and take a lot of time to plan and convince the next person to the Term insurance. The adviser eventually get paid peanuts for the vast amount of time taken.
3) Next comes the emergence of index funds which pay low sales charge and no wrap fees. Adviser may even not earn a single cent to introduce these funds.
4) There is also no guideline on how much an adviser is worth for his time and advice. If the public view an adviser time as $10/hour, how many hours must an adviser works to compensate for his business cost? Is it possible for him to get 10 customers a day in order to earn that $100/day. Is meeting that 10 customers day considered as efficient?
5) Financial planner is different from other professional such as doctors and lawyers. People look for them when they are seriously sick or need legal advice. People don't usually think they will need a Financial planner due to their low urgency towards financial planning.
Financial Advisers took great pains to gain hybrid knowledge ranging from Insurance, Investments, Tax, Estate, CPF, Retirement, etc. They also keep updated on all the changes and investment climate.
Do you think that it is fair that advisers should always get lower paid than other professionals?Should the public get all the advices for free and then buy the cheapest term insurance and ETFs and they pay peanuts to the agent?
In your opinion, do you think that if there are no proper framework protecting the advisers in term of compensation scheme, a too drastic change in the benefit towards the public will kill many good advisers which may subsequently result in more social problem?
REPLY
I am optimistic of the future for a new type of financial adviser who provides good value for the client. The client will look for a trusted financial adviser, just as a patient will look for a good and trusted doctor.
The consumer will pay a fair rate of remuneration for the advice and help in making the transaction. The adviser can earn a good level of income by working efficiently and spreading his remuneration over a large number of clients (i.e. keep the cost low for the customer).
Can the new model give a living for many financial advisers? I believe so. There are so many people that need good advice. Many advisers are needed to educate and give good advice to these people.
In the economy, we need many teachers, many doctors, many nurses, many preachers. They do good work to serve the entire population. We also need many financial advisers to do their good work.
Gong Xi Fa Cai.
Medishield: Cheap and Good
Read this article from Dr. Money, published in the New Paper. It explains how to keep the cost of health care low. It also advises on insuring under Medishield:
http://newpaper.asia1.com.sg/columnists/story/0,4136,154148,00.html
More articles from Dr. Money:
http://www.tankinlian.com/drmoney/
Gong Xi Fa Cai.
http://newpaper.asia1.com.sg/columnists/story/0,4136,154148,00.html
More articles from Dr. Money:
http://www.tankinlian.com/drmoney/
Gong Xi Fa Cai.
Wednesday, February 06, 2008
Actuary Joke: Walk half the distance
A mathematician and actuary are in a room. There is a pretty girl at the other end of the room. It takes 10 seconds to walk half the distance to the girl, another 10 seconds to walk half the remaining distance, another 10 seconds to walk half the remaining distance, and so on. How long will it take to reach the girl?
The mathematician replied ... "I will never reach the girl. No matter where I am, there is a distance and it takes 10 seconds to walk half of that distance."
What did the actuary say? .... Remember, the actuary is a practical person.
The mathematician replied ... "I will never reach the girl. No matter where I am, there is a distance and it takes 10 seconds to walk half of that distance."
What did the actuary say? .... Remember, the actuary is a practical person.
Boosting the US economy
The US Government intends to spend USD 150 billion to boost the economy. President Bush and the Republicans like most of the money to be given as tax rebates in the hands of tax payers to spend. The Democrats prefer the money to be spent by the Government to benefit the people.
Which is better?
Surveys have shown that most people will not spend the tax rebate. Instead, they will keep it as their savings. This will not have the impact of boosting the economy.
The Republications argued that individuals know how to spend their money. They do not like other people, such as the Government, to decide how to spend the money.
Generally, I prefer the Democrat's approach. Certain expenditure have to be decided by the Government, e.g. invest in infrastructure, welfare for the poor, or to boost the economy. This is more likely to be effective, compared to leaving it "to the market".
Which is better?
Surveys have shown that most people will not spend the tax rebate. Instead, they will keep it as their savings. This will not have the impact of boosting the economy.
The Republications argued that individuals know how to spend their money. They do not like other people, such as the Government, to decide how to spend the money.
Generally, I prefer the Democrat's approach. Certain expenditure have to be decided by the Government, e.g. invest in infrastructure, welfare for the poor, or to boost the economy. This is more likely to be effective, compared to leaving it "to the market".
Changes to CPF Investment Scheme
Dear Mr. Tan,
From 1 April 2008, there are some restrictions on investing CPF money in financial products. My insurance agent advise me to invest before the deadline. Is this a good move?
REPLY
If you keep your money in CPF, you can earn 2.5% + 1% bonus on ordinary account or 4% + 1% on special account. This is a good rate of return.
Most life insurance products offer a lower return, in spite of a slightly higher risk. This is due to the high charges taken away by the insurance company to pay agent's commision and for their profit margin.
If you wish to invest your ordinary account, you should select a low cost investment fund. Read this FAQ:
http://www.tankinlian.com/faq/savings.html
If you are not sure, it is better to keep your money in the CPF and enjoy a fairly attractive interest rate, with the bonus.
Read this article from Dr Money:
http://newpaper.asia1.com.sg/columnists/story/0,4136,153456,00.html
More articles:
http://www.tankinlian.com/drmoney/
From 1 April 2008, there are some restrictions on investing CPF money in financial products. My insurance agent advise me to invest before the deadline. Is this a good move?
REPLY
If you keep your money in CPF, you can earn 2.5% + 1% bonus on ordinary account or 4% + 1% on special account. This is a good rate of return.
Most life insurance products offer a lower return, in spite of a slightly higher risk. This is due to the high charges taken away by the insurance company to pay agent's commision and for their profit margin.
If you wish to invest your ordinary account, you should select a low cost investment fund. Read this FAQ:
http://www.tankinlian.com/faq/savings.html
If you are not sure, it is better to keep your money in the CPF and enjoy a fairly attractive interest rate, with the bonus.
Read this article from Dr Money:
http://newpaper.asia1.com.sg/columnists/story/0,4136,153456,00.html
More articles:
http://www.tankinlian.com/drmoney/
Agent plays an important role
The agent (e.g. stockbroker, property, insurance) can play an important role in the new economy. They can help the customer to assess information, give advice and handle the transactions.
I communicate with my stockbroker by e-mail, mobile phone and SMS. I ask for information and also make transactions (to buy or sell shares or other securities). The stockbroker can ask his colleagues in the research department to get the information that I need.
I pay a brokerage of 0.3% on the shares that are transacted. This is much lower than the initial spread of 3% to 5% that is charged by unit trust and insurance funds.
I hope that the insurance industry and the agents can be as efficient as the stockbroking industry, and offer their products at lower cost to the customers.
I communicate with my stockbroker by e-mail, mobile phone and SMS. I ask for information and also make transactions (to buy or sell shares or other securities). The stockbroker can ask his colleagues in the research department to get the information that I need.
I pay a brokerage of 0.3% on the shares that are transacted. This is much lower than the initial spread of 3% to 5% that is charged by unit trust and insurance funds.
I hope that the insurance industry and the agents can be as efficient as the stockbroking industry, and offer their products at lower cost to the customers.
Government bonds and endowment
Mr. Tan,
What is the difference between investing in a single premium endowment for 10 years and buying a government bond for the same period? Which is better?
REPLY
The net yield in both cases should be quite similar, i.e. around 3.5% per annum.
The endowment provides some life insurance cover (but this is really quite insignificant). A part of the return is not guaranteed, so the actual return may be slightly higher or lower, depending on the future bonuses. If you terminate the policy before maturity, you are likely to suffer a loss.
The government bond gives a guaranteed yield and is risk free. You can sell the government bond at any time, based on its fair market price. There is no penalty. The dividends are paid to you every 6 months (which may or may not be an advantage to some investors).
I prefer government bonds due to its low cost, and its flexibility (i.e. not locked-in).
What is the difference between investing in a single premium endowment for 10 years and buying a government bond for the same period? Which is better?
REPLY
The net yield in both cases should be quite similar, i.e. around 3.5% per annum.
The endowment provides some life insurance cover (but this is really quite insignificant). A part of the return is not guaranteed, so the actual return may be slightly higher or lower, depending on the future bonuses. If you terminate the policy before maturity, you are likely to suffer a loss.
The government bond gives a guaranteed yield and is risk free. You can sell the government bond at any time, based on its fair market price. There is no penalty. The dividends are paid to you every 6 months (which may or may not be an advantage to some investors).
I prefer government bonds due to its low cost, and its flexibility (i.e. not locked-in).
High cost Endowment Policy - Views
Mr. Tan,
Is it possible for an insurance company to offer an endowment policy with low expense charge, so that the return can be 4% or better? I do not mind giving some of the return, as long as it is reasonable, and i still get a good return.
REPLY
It is possible for an insurance company to design an endowment plan that offers a higher return. The customer has to buy this plan directly from the insurance company, as the insurance agent will not sell it, due to low commission. So far, I am not aware of any insurance company willing to offer this "low cost" endowment plan.
Mr. Tan,
I have been studying your figures closely. If I save $500 over 20 years, my total saving is $120,000. the return based on $198,000 is $78,000. If the charges take away $45,000, then I am left with a return of only $33,000. Why should the charges take away nearly 60% of my hard earned return for 20 years?
REPLY
It is correct that the high charges take away more than 50% of the return that you can earn over the next 20 years. It is better to invest in a low cost product, so that most of the return will go back to you. For life insurance protection, you can buy a separate, low cost Term insurance plan.
Mr Tan,
Where can I get yield of 5% if I save $500 a month?
REPLY
If you are investing for the next 20 years, it is likely that you will get a return of 5% per annum on an investment fund. The gross return on the life insurance fund should also give you 5% per annum (my estimate), before deducting expenses.
Is it possible for an insurance company to offer an endowment policy with low expense charge, so that the return can be 4% or better? I do not mind giving some of the return, as long as it is reasonable, and i still get a good return.
REPLY
It is possible for an insurance company to design an endowment plan that offers a higher return. The customer has to buy this plan directly from the insurance company, as the insurance agent will not sell it, due to low commission. So far, I am not aware of any insurance company willing to offer this "low cost" endowment plan.
Mr. Tan,
I have been studying your figures closely. If I save $500 over 20 years, my total saving is $120,000. the return based on $198,000 is $78,000. If the charges take away $45,000, then I am left with a return of only $33,000. Why should the charges take away nearly 60% of my hard earned return for 20 years?
REPLY
It is correct that the high charges take away more than 50% of the return that you can earn over the next 20 years. It is better to invest in a low cost product, so that most of the return will go back to you. For life insurance protection, you can buy a separate, low cost Term insurance plan.
Mr Tan,
Where can I get yield of 5% if I save $500 a month?
REPLY
If you are investing for the next 20 years, it is likely that you will get a return of 5% per annum on an investment fund. The gross return on the life insurance fund should also give you 5% per annum (my estimate), before deducting expenses.
Tuesday, February 05, 2008
CDOs being rated downwards
Collateralized debt obligations may be downgraded as many as five levels as mortgage-related losses force Fitch Ratings to review its criteria for $220 billion of the securities.
The biggest cuts will be to AAA rated CDOs that are based on credit-default swaps and aren't actively managed, according to guidelines proposed by Fitch today.
CDOs that package high- yield assets may be reduced as many as three levels for the portions first in line for losses.
The biggest cuts will be to AAA rated CDOs that are based on credit-default swaps and aren't actively managed, according to guidelines proposed by Fitch today.
CDOs that package high- yield assets may be reduced as many as three levels for the portions first in line for losses.
Target of 1,000 visitors a day
My target is to get 1,000 visitors a day. I am still stuck at 750 visitors. Please help me to promote my blog to your friends.
Gong Xi Fa Cai. Wish you prosperity and happiness in the Year of the Rat. (I was borned in the year of the RAT, and will be 60 years old).
Gong Xi Fa Cai. Wish you prosperity and happiness in the Year of the Rat. (I was borned in the year of the RAT, and will be 60 years old).
Invest CPF ordinary account in STI ETF
Mr. Tan,
What is an easy way to invest CPF ordinary account in the STI ETF?
REPLY
From CPF website: The CPF Investment Scheme (CPFIS) gives members the opportunity to invest their CPF savings to enhance their retirement funds. Members may invest all available balance in their Ordinary Account (OA) and Special Account (SA) in professionally-managed products such as fixed deposits (FDs), Singapore Government bonds and treasury bills, Statutory Board bonds, annuities, endowment insurance policies, investment-linked insurance products (ILPs), unit trusts, and exchange traded funds (ETFs).
How to invest?
1) Open a CPF Investment account with any Major 4 Banks (Bring CPFstatement & IC)
2) Check CPF the amount can be invested.
3) Open an acct with the Broking House ( If you do not have one )
4) Instruct Remisier/Dealer to Buy under CPF
You can also refer to this website to see the service provided by UOB:
http://www.uob.com.sg/pages/personal/investments/finplanning/cpfinvestment.html
And DollarDex
http://www.dollardex.com/sg/index.cfm?current=../contents/cpfisoa&contentID=1020
What is an easy way to invest CPF ordinary account in the STI ETF?
REPLY
From CPF website: The CPF Investment Scheme (CPFIS) gives members the opportunity to invest their CPF savings to enhance their retirement funds. Members may invest all available balance in their Ordinary Account (OA) and Special Account (SA) in professionally-managed products such as fixed deposits (FDs), Singapore Government bonds and treasury bills, Statutory Board bonds, annuities, endowment insurance policies, investment-linked insurance products (ILPs), unit trusts, and exchange traded funds (ETFs).
How to invest?
1) Open a CPF Investment account with any Major 4 Banks (Bring CPFstatement & IC)
2) Check CPF the amount can be invested.
3) Open an acct with the Broking House ( If you do not have one )
4) Instruct Remisier/Dealer to Buy under CPF
You can also refer to this website to see the service provided by UOB:
http://www.uob.com.sg/pages/personal/investments/finplanning/cpfinvestment.html
And DollarDex
http://www.dollardex.com/sg/index.cfm?current=../contents/cpfisoa&contentID=1020
Travel by BMW
Singaporeans travel by BMW using “bus, MRT, walk”. To promote, the Government plans to:
a) Build more MRT lines over the nexlt 15 years in Singapore.
b) Introduce more feeder services
I wish to suggest a further leg to this strategy:
c) Make it practical for people to walk to and from the MRT station.
My proposal is:
d) Build elevated, shaded walkways from MRT stations to cover a distance of approximately 1 km to reach different neighbourhoods.
e) Make it possible for people to climb once and use the walkway to reach the MRT station, crossing many roads.
f) It will be comfortable to walk on the elevated walkway as it is shaded from the sun and rain.
g) This will also encourage people to walk to the nearby town center, market, school or bus terminus.
In Taipei, there is an elevated walkway (the local called it the Skywalk) that crosses many roads in the Taipei City Government disrict. It is well used.
It may be costly to build the elevated walkways, but if can be considered as being part of the total cost of the MRT line. The incremental cost of the walkway is probably less than 5%. It can be justified, if it encourages more people living in the nearby areas to use the MRT system.
Perhaps, a pilot project can be done to build this elevated walkway in one town, e.g. Ang Mo Kio, to test its feasibility? If successful, it can be implemented in the other towns.
a) Build more MRT lines over the nexlt 15 years in Singapore.
b) Introduce more feeder services
I wish to suggest a further leg to this strategy:
c) Make it practical for people to walk to and from the MRT station.
My proposal is:
d) Build elevated, shaded walkways from MRT stations to cover a distance of approximately 1 km to reach different neighbourhoods.
e) Make it possible for people to climb once and use the walkway to reach the MRT station, crossing many roads.
f) It will be comfortable to walk on the elevated walkway as it is shaded from the sun and rain.
g) This will also encourage people to walk to the nearby town center, market, school or bus terminus.
In Taipei, there is an elevated walkway (the local called it the Skywalk) that crosses many roads in the Taipei City Government disrict. It is well used.
It may be costly to build the elevated walkways, but if can be considered as being part of the total cost of the MRT line. The incremental cost of the walkway is probably less than 5%. It can be justified, if it encourages more people living in the nearby areas to use the MRT system.
Perhaps, a pilot project can be done to build this elevated walkway in one town, e.g. Ang Mo Kio, to test its feasibility? If successful, it can be implemented in the other towns.
Useful information
Hi Mr Tan,
Thank you for providing such informative information on your blog. I really do appreciate your kindness with all my heart.
I wish I have such knowledge since the day I started working. It is not too late as usually but one is not able to turn back the clock on those lost time.
I just want to wish you and your loved ones a very Happy, Healthy and Wealthy Rat Year! All the best for the forthcoming new year!
V
Thank you for providing such informative information on your blog. I really do appreciate your kindness with all my heart.
I wish I have such knowledge since the day I started working. It is not too late as usually but one is not able to turn back the clock on those lost time.
I just want to wish you and your loved ones a very Happy, Healthy and Wealthy Rat Year! All the best for the forthcoming new year!
V
High cost Endowment Policy
If you save $500 a month over 20 years, and earn an average yield of 5%, you should get a maturity sum of $198,000.
If you put this money in an endowment policy (or a variation of this policy), you get suffer a loss of 20% or more, depending on the expense and other charges taken away by the insurance company. These charges can reduce your yield by 2% or 2.5%.
Here are the figures:
Where did the 23% (ie $45,000) go? They are used to pay the following:
a) Commission to the agent
b) Advertising
c) Expenses and profit of the insurance company
d) Mortality charges
How much does the mortality charge cost, if you buy Decreasing Term insurance to provide the same amount of protection?
The mortality charge should cost less than 2%. The remaining 21% is spent on high expenses and charges.
Lesson: An endowment policy provides good value if the mortality and expense charges is not more than 10% of the premium.
If you put this money in an endowment policy (or a variation of this policy), you get suffer a loss of 20% or more, depending on the expense and other charges taken away by the insurance company. These charges can reduce your yield by 2% or 2.5%.
Here are the figures:
Net Maturity Total
Yield charges
5.0% $198,000 Nil 0%
4.0% $179,000 $19,000 10%
3.0% $161,000 $37,000 19%
2.5% $153,000 $45,000 23%
Where did the 23% (ie $45,000) go? They are used to pay the following:
a) Commission to the agent
b) Advertising
c) Expenses and profit of the insurance company
d) Mortality charges
How much does the mortality charge cost, if you buy Decreasing Term insurance to provide the same amount of protection?
The mortality charge should cost less than 2%. The remaining 21% is spent on high expenses and charges.
Lesson: An endowment policy provides good value if the mortality and expense charges is not more than 10% of the premium.
Dual currency investment (or deposit)
Dear Mr. Tan,
Recently, I wanted to invest in Australian deposit (to enjoy a higher interest rate). The relationship manager recommended a Dual Currency deposit to me. It gives me a higher interest rate, but on maturity I am given my money back in Singapore dollars or Australian dollars, depending on the exchange rate at that time. Is this a good investment?
REPLY
I advise against this type of structured product. Although you get a slightly higher interest rate, you are exposed to the risk of a loss (in case the Australian currency depreciates). You do not get the benefit of any gain in this currency.
This is explained in more detail in this FAQ:
http://www.tankinlian.com/faq/duali.html
It is better to invest in a straight forward foreign currency deposit:
http://www.tankinlian.com/faq/foreign.html
Recently, I wanted to invest in Australian deposit (to enjoy a higher interest rate). The relationship manager recommended a Dual Currency deposit to me. It gives me a higher interest rate, but on maturity I am given my money back in Singapore dollars or Australian dollars, depending on the exchange rate at that time. Is this a good investment?
REPLY
I advise against this type of structured product. Although you get a slightly higher interest rate, you are exposed to the risk of a loss (in case the Australian currency depreciates). You do not get the benefit of any gain in this currency.
This is explained in more detail in this FAQ:
http://www.tankinlian.com/faq/duali.html
It is better to invest in a straight forward foreign currency deposit:
http://www.tankinlian.com/faq/foreign.html
Another perspective
Why did NTUC Income sell endowment and whole life policies during my time as CEO? Here is a view expressed in another blog:
http://www.indextown.com/archives/2007/12/08/mr-tan-kin-lians-blog/
http://www.indextown.com/archives/2007/12/08/mr-tan-kin-lians-blog/
Lower upfront cost
Earlier this week, I wanted to put additional investment in the Combined Fund of NTUC Income. through my Flexi-link policy. I was told that the upfront spread for new investment was 3%.
I decided to look for an alternative investment. I finally made my additional investment in the following:
a) Buy 8 blue chip shares and REIT in the stockmarket (for some diversification)
b) Invest in the STI exchange traded fund
The upfront cost of my investment is only 0.3% (in brokerage fee). This is one-tenth of the cost of investing in the Combined Fund.
A comparison of the annual fees is:
a) Combined Fund - 0.9%
b) STI ETF - 0.3%
c) Blue chip shares - Nil
Lesson: If you have a large amount to invest, you can buy a few shares directly. If you have a smaller sum, you can invest in the STI exchange traded fund (for diversification and low cost).
I decided to look for an alternative investment. I finally made my additional investment in the following:
a) Buy 8 blue chip shares and REIT in the stockmarket (for some diversification)
b) Invest in the STI exchange traded fund
The upfront cost of my investment is only 0.3% (in brokerage fee). This is one-tenth of the cost of investing in the Combined Fund.
A comparison of the annual fees is:
a) Combined Fund - 0.9%
b) STI ETF - 0.3%
c) Blue chip shares - Nil
Lesson: If you have a large amount to invest, you can buy a few shares directly. If you have a smaller sum, you can invest in the STI exchange traded fund (for diversification and low cost).
Minibond Series 35
Dear Mr. Tan,
Please give your advice about minibond series 35, issuer Pacific International limited. The notes have a AAA rate, it means the lowest risk to invest ?
REPLY:
Sorry, I am not able to advice you on this investment.
You have to be careful about the AAA rating. Some CDO (collaterised debt obligations comprising of subprime mortgages) have AAA rating and are found to be of poor quality. I am not sure if the investments of this fund fall in this category.
My general views about structured products (not specifically related to this product) are set out in this FAQ:
http://www.tankinlian.com/faq/sinvest.html
Please give your advice about minibond series 35, issuer Pacific International limited. The notes have a AAA rate, it means the lowest risk to invest ?
REPLY:
Sorry, I am not able to advice you on this investment.
You have to be careful about the AAA rating. Some CDO (collaterised debt obligations comprising of subprime mortgages) have AAA rating and are found to be of poor quality. I am not sure if the investments of this fund fall in this category.
My general views about structured products (not specifically related to this product) are set out in this FAQ:
http://www.tankinlian.com/faq/sinvest.html
Monday, February 04, 2008
REITS with good yield and low price
Here are some REITS with good yields and low price to book ratio:
A P/BR ratio less than 1.0 means that the price is lower than the book value of the assets. Some of the prices have moved over the past few days. (Note: I have personally invested or plan to invest in some of these REITS).
Price Dividend P/BR
31/1 yield
Allco REIT 0.67 11.7% 0.42
Mapletree REIT 0.93 7.9% 1.10
McQuarie Prime 1.05 7.0% 0.91
Suntec REIT 1.50 6.7% 0.73
K-REIT 1.46 6.5% 0.73
A P/BR ratio less than 1.0 means that the price is lower than the book value of the assets. Some of the prices have moved over the past few days. (Note: I have personally invested or plan to invest in some of these REITS).
Buying a Shield plan
Dear Mr. Tan,
Do you have any advice on how to choose between the various Medishield plans offered by CPF and the insurance companies? Which is better choice?
REPLY
You can read my general tips in this FAQ:
http://www.tankinlian.com/faq/shield.html
Do you have any advice on how to choose between the various Medishield plans offered by CPF and the insurance companies? Which is better choice?
REPLY
You can read my general tips in this FAQ:
http://www.tankinlian.com/faq/shield.html
Higher productivity in insurance sales
Mr. Tan,
It seems from your postings, that you are against insurance agents. If there are no insurance agents, how will the insurance company get its sales?
REPLY
I am in favour of insurance agents who play a useful role by offering good value products to customers for a fair rate of commission.
I am against insurance agents who explot consumers by offering poor value products, so that they can earn a high rate of commission. They are trained to find ways of pushing these products to a unsuspecting consumer.
I hope that the selling of insurance can achieve the same level of productivity as the selling of shares. The commission rate earned by stockbrokers has reduced by 70% in recent years. The stockbrokers are able to make an adequate income on a reduced rate of commission by working more efficiently and by handling a larger volume of sales. They are able to bring down the transaction cost for consumers.
It is possible for insurance agents to find a more efficient way of marketing and similar value to consumers.
If insurance companies offer good value products, consumers will buy the insurance products willingly. There is no need for insurance agents to spend a lot of time to push these products to them.
It seems from your postings, that you are against insurance agents. If there are no insurance agents, how will the insurance company get its sales?
REPLY
I am in favour of insurance agents who play a useful role by offering good value products to customers for a fair rate of commission.
I am against insurance agents who explot consumers by offering poor value products, so that they can earn a high rate of commission. They are trained to find ways of pushing these products to a unsuspecting consumer.
I hope that the selling of insurance can achieve the same level of productivity as the selling of shares. The commission rate earned by stockbrokers has reduced by 70% in recent years. The stockbrokers are able to make an adequate income on a reduced rate of commission by working more efficiently and by handling a larger volume of sales. They are able to bring down the transaction cost for consumers.
It is possible for insurance agents to find a more efficient way of marketing and similar value to consumers.
If insurance companies offer good value products, consumers will buy the insurance products willingly. There is no need for insurance agents to spend a lot of time to push these products to them.
Selecting Blue Chips
Dear Mr. Tan,
In your blog, you mentioned to select 5 to 10 blue chips and invest $10,000 to $20,000 in each share. I wish to ask which are the 5 companies you feel has greatest value and potential? I understand this is in your perosnal capacity and that you are actually doing me a favour if you reply.
REPLY
I assume that, in a perfect market, the prices of each share reflects its future profitability. You only need to be concerned with:
a) Buying blue chip shares - as they are more stable
b) Have a certain degree of diversification.
I do not have any insight into which of the 30 shares in the STI index that I should invest it. I just chose one from each sector, say bank, property, conglomerate, media, transport.
In your blog, you mentioned to select 5 to 10 blue chips and invest $10,000 to $20,000 in each share. I wish to ask which are the 5 companies you feel has greatest value and potential? I understand this is in your perosnal capacity and that you are actually doing me a favour if you reply.
REPLY
I assume that, in a perfect market, the prices of each share reflects its future profitability. You only need to be concerned with:
a) Buying blue chip shares - as they are more stable
b) Have a certain degree of diversification.
I do not have any insight into which of the 30 shares in the STI index that I should invest it. I just chose one from each sector, say bank, property, conglomerate, media, transport.
Divident yield on STI Exchange Traded Fund
Dear Mr. Tan,
Does the STI Exchange Traded Fund pay out a dividend? Is the dividend yield good?
REPLY
My stockbroker has confirmed that the STI ETF gives a dividend every six months. The total dividend for the past year is 10 cents, representing about a 3% yield on the current share price of $3.20.
Apart from the dividend yield, you should be able to enjoy an appreciation in the share price, as it tracks the STI index.
Does the STI Exchange Traded Fund pay out a dividend? Is the dividend yield good?
REPLY
My stockbroker has confirmed that the STI ETF gives a dividend every six months. The total dividend for the past year is 10 cents, representing about a 3% yield on the current share price of $3.20.
Apart from the dividend yield, you should be able to enjoy an appreciation in the share price, as it tracks the STI index.
Redeem whole life policy?
Hi Mr. Tan,
I had bought a whole life policy in 2000 covering sum assured OF $50,000. I'm paying about $850 per annum. It going to break even in about 1 year's time. Is it advisable to redemn the policy and buy a term policy instead?
REPLY
Read this FAQ and see if it answer your question:
http://www.tankinlian.com/faq/exist.html
I had bought a whole life policy in 2000 covering sum assured OF $50,000. I'm paying about $850 per annum. It going to break even in about 1 year's time. Is it advisable to redemn the policy and buy a term policy instead?
REPLY
Read this FAQ and see if it answer your question:
http://www.tankinlian.com/faq/exist.html
Call and Put Options
Dear Mr. Tan,
I need your advise on how to purchase Options (ETF) for STI index. If I buy OPTIONS, is it subjected to PUT/CALL ? If I invest regularly for 20-30 years, can I buy OPTIONS that do not expire? Is there any difference between buying Options thru broker & via ONLINE website?
REPLY
I am not able to advise on short term investments, such as options. Generally, options are costly and are intended for short term speculation or hedging. All options have an expiry date that is usually three months. It is not suitable as a long term investment.
Generally, you should avoid investing in financial products that you are not familiar with.
I need your advise on how to purchase Options (ETF) for STI index. If I buy OPTIONS, is it subjected to PUT/CALL ? If I invest regularly for 20-30 years, can I buy OPTIONS that do not expire? Is there any difference between buying Options thru broker & via ONLINE website?
REPLY
I am not able to advise on short term investments, such as options. Generally, options are costly and are intended for short term speculation or hedging. All options have an expiry date that is usually three months. It is not suitable as a long term investment.
Generally, you should avoid investing in financial products that you are not familiar with.
Single Premium Endowment
Hi Mr. Tan,
What is single premiun endownmwnt insurance plan? Should I invest in this policy? Is it safe to invest my retirement fund in The Big-e plan paying 2.75%, better than CPF board rate of 2.5%.
Interest rate is dropping everywhere, despite of the high inlation rate this year (estimated 6%)
Recently, I lost money in the stock market, so I had decided to park my emergency fund in a safe investment.
REPLY
A single premium endowment gives you a return of about 3% to 4%, but your money has to be invested (i.e. locked in) for the entire duration of 10 to 15 years. If you withdraw early, you are likely to suffer a penalty. It also offers some modest life insurance cover.
The difference between BIGe and CPF is only 0.25%, it is better to keep your money in CPF. If possible, transfer your savings from ordinary account (0.25%) to the special acount (4% + 1%) to earn a higher interest rate.
If you wish to have a better return, you can invest for the long term. Read this FAQ:
http://www.tankinlian.com/faq/savings.html
What is single premiun endownmwnt insurance plan? Should I invest in this policy? Is it safe to invest my retirement fund in The Big-e plan paying 2.75%, better than CPF board rate of 2.5%.
Interest rate is dropping everywhere, despite of the high inlation rate this year (estimated 6%)
Recently, I lost money in the stock market, so I had decided to park my emergency fund in a safe investment.
REPLY
A single premium endowment gives you a return of about 3% to 4%, but your money has to be invested (i.e. locked in) for the entire duration of 10 to 15 years. If you withdraw early, you are likely to suffer a penalty. It also offers some modest life insurance cover.
The difference between BIGe and CPF is only 0.25%, it is better to keep your money in CPF. If possible, transfer your savings from ordinary account (0.25%) to the special acount (4% + 1%) to earn a higher interest rate.
If you wish to have a better return, you can invest for the long term. Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Questionable sales practices
Over the years, and in many countries, they have been lots of consumer complaints on the sales practices of:
a) used car dealers
b) insurance agents
c) property agents
Here are the underlying causes of this problem:
a) the sales person is paid a commission on the sale
b) if they do not make any sale, they do not earn any commission
c) it is difficult to make a sale in a competitive market
d) some have to resort to questionable practices to close the sale
e) the products are non-standard
f) there is lack of consumer information
Some organisations try to solve this problem by setting standards of professional practices. But, this is difficult to achieve, due to the inherent conflict, and the need to close a sale in a competitive market.
Here are tips for consumers:
a) Do not buy from a sales person who approach you
b) Do some research to understand the product
c) Get price comparison of similar products
d) Ask questions to get answers that can be compared easily
e) Get an independent person to help you to make the decision.
All the best.
a) used car dealers
b) insurance agents
c) property agents
Here are the underlying causes of this problem:
a) the sales person is paid a commission on the sale
b) if they do not make any sale, they do not earn any commission
c) it is difficult to make a sale in a competitive market
d) some have to resort to questionable practices to close the sale
e) the products are non-standard
f) there is lack of consumer information
Some organisations try to solve this problem by setting standards of professional practices. But, this is difficult to achieve, due to the inherent conflict, and the need to close a sale in a competitive market.
Here are tips for consumers:
a) Do not buy from a sales person who approach you
b) Do some research to understand the product
c) Get price comparison of similar products
d) Ask questions to get answers that can be compared easily
e) Get an independent person to help you to make the decision.
All the best.
Save in a period of inflation
A young person made this argument, "What is the point of saving when prices will increase next year. It is better to spend now."
Here are my views:
1. Do not spend on unnecessary and expensive things.
2. If more people curtail their spending, prices will come down
3. You can invest your savings in equities and properties, to earn a return that beats inflation
4. Invest in a low-cost fund to achieve diversification. It also allow you invest in small amounts.
Inflation is caused by too many people spending too much in the fear of increasing prices in the future.
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Here are my views:
1. Do not spend on unnecessary and expensive things.
2. If more people curtail their spending, prices will come down
3. You can invest your savings in equities and properties, to earn a return that beats inflation
4. Invest in a low-cost fund to achieve diversification. It also allow you invest in small amounts.
Inflation is caused by too many people spending too much in the fear of increasing prices in the future.
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Sunday, February 03, 2008
MediShield
Medishield is a medical insurance scheme operated by Central Provident Fund. It pays 80% to 90% of hospital bills above $1,000/ $1,500. It covers daily charges up to $250 per day ($500 for intensive care) and up to certain limits for surgery, implants, radiosurgery and outpatients.
There is an option for you to buy a private Shield plan (instead of MediShield) to get higher coverage. You have to pay a higher premium.
There is an option for you to buy a private Shield plan (instead of MediShield) to get higher coverage. You have to pay a higher premium.
Medisave
Medisave is a sub-account in your CPF account. Workers up to 35 years contribute 6.5% of their wages into the Medisave account (subject to a limit). Older workers contribute a higher porportion of their wages. The balance in the Medisave account earns interest at 4% (plus 1% bonus, subject to a cap).
The Medisave account can be used for paying hospital bills, certain outpatient expenses and for medical insurance.
The Medisave account can be used for paying hospital bills, certain outpatient expenses and for medical insurance.
Use Medisave sparingly
Many people like to use their Medisave savings, whenever they have the opportunity, e.g. to pay the hospital bills or buy expensive medical insurance.
I wish to make this suggestion: if you can afford to pay your hospital bill by cash, it is better to pay cash and keep your Medisave intact.
Why?
Your money in the Medisave account will earn interest at 4% plus 1% (for the first $20,000). This is much higher than the interest that you can earn on fixed deposit. It is better to keep your money in Medisave to earn a higher rate of interest.
When your Medisave exceeds the cap, it will be transferred into your special and ordinary account. It can be withdrawn when you reach age 55, if you wish to use the money. If not, you can keep it in the retirement account and earn 4% plus 1%.
Lesson: Keep your money in Medisave to earn a higher rate of interest. Do not withdraw it, unless you have no other way to pay your hospital bills. Do not overspend on your medical insurance.
I wish to make this suggestion: if you can afford to pay your hospital bill by cash, it is better to pay cash and keep your Medisave intact.
Why?
Your money in the Medisave account will earn interest at 4% plus 1% (for the first $20,000). This is much higher than the interest that you can earn on fixed deposit. It is better to keep your money in Medisave to earn a higher rate of interest.
When your Medisave exceeds the cap, it will be transferred into your special and ordinary account. It can be withdrawn when you reach age 55, if you wish to use the money. If not, you can keep it in the retirement account and earn 4% plus 1%.
Lesson: Keep your money in Medisave to earn a higher rate of interest. Do not withdraw it, unless you have no other way to pay your hospital bills. Do not overspend on your medical insurance.
Medishield and Eldershield
Dear Mr. Tan,
What is the difference between MediShield and Eldershield? For an individual at the age of 50, does it make sense to insure to the maximum in these two plan?
REPLY
Medishield pays for most of the hospital expenses above a certain sum.
Eldershield pays a monthly income of $400 for a period of up to 72 months, if the insured is incapacited to an extent that he or she is not able to carry out several activities that are needed for daily living. This benefits helps to pay part of the cost of nursing care.
It is better to insure for the basic coverage. Do not over-insure, as you will be paying a higher premium. You need to keep some of your savings to meet the higher premiums when you grow older.
What is the difference between MediShield and Eldershield? For an individual at the age of 50, does it make sense to insure to the maximum in these two plan?
REPLY
Medishield pays for most of the hospital expenses above a certain sum.
Eldershield pays a monthly income of $400 for a period of up to 72 months, if the insured is incapacited to an extent that he or she is not able to carry out several activities that are needed for daily living. This benefits helps to pay part of the cost of nursing care.
It is better to insure for the basic coverage. Do not over-insure, as you will be paying a higher premium. You need to keep some of your savings to meet the higher premiums when you grow older.
Savings for the short term and long term
From your monthly income, you have to pay the expenses. You should keep the remainder as savings for the future.
For the short term savings, you have to keep in a savings or current account. You may have to make certain large payments during the year, for example, expenses for the start of the school year, payment of taxes, etc. This can come out of your bank account.
You can set aside a part of your savings for the long term. This should be invested to earn a high rate of return, e.g. in an investment fund. As the flow of your future savings is uncertain, you should avoid investing in an inflexible financial contract that have a large upfront charge or imposes a penalty on early termination.
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
For the short term savings, you have to keep in a savings or current account. You may have to make certain large payments during the year, for example, expenses for the start of the school year, payment of taxes, etc. This can come out of your bank account.
You can set aside a part of your savings for the long term. This should be invested to earn a high rate of return, e.g. in an investment fund. As the flow of your future savings is uncertain, you should avoid investing in an inflexible financial contract that have a large upfront charge or imposes a penalty on early termination.
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Impressions of Kuala Lumpur
I visited Kuala Lumpur on 1 February on the inaugural flight of Jetstar Asia. I was surprised that there is no need to complete any immigration and customs form. The authorities have recently dispensed with this requirement. It was quite easy to clear through the formalities. Wow!
I hope that more countries will make life more enjoyable and simpler for the traveller.
I stayed one night at Genting Highlands and another night in Kuala Lumpur (at Bukit Bintang). This area is like Orchard Road in Singapore. It is busy and exciting. Several of the five star hotels in the area belong to the Starhill Group. (I wonder if Starhill is the translation of Bukit Bintang?)
Traffic is bad in Bukit Bintang, but I was told that this was due to the festive season. Otherwise, my stay in Kuala Lumpur is enjoyable.
I hope that more countries will make life more enjoyable and simpler for the traveller.
I stayed one night at Genting Highlands and another night in Kuala Lumpur (at Bukit Bintang). This area is like Orchard Road in Singapore. It is busy and exciting. Several of the five star hotels in the area belong to the Starhill Group. (I wonder if Starhill is the translation of Bukit Bintang?)
Traffic is bad in Bukit Bintang, but I was told that this was due to the festive season. Otherwise, my stay in Kuala Lumpur is enjoyable.
Friday, February 01, 2008
Keep your savings in your personal insurance policy
A mother bought an endowement policy in the name of her son. The policy matured recently and a cheque was delivered to the home. The son was under custody for drug rehabilation.
The mother was worried that if the maturity money is credited into the son's account, he will use it to buy drugs.
But she is stuck. The money legally belonged to the son, even though she paid the premium over the years. The mother is poor, and actually need the money for her own use.
Lesson: It is better to keep savings in your own name, and not in the name of your children. You can use the money for their education or other suitable purchase at a future date. If you buy the policy in the name of your child, you will lose control of the money.
The mother was worried that if the maturity money is credited into the son's account, he will use it to buy drugs.
But she is stuck. The money legally belonged to the son, even though she paid the premium over the years. The mother is poor, and actually need the money for her own use.
Lesson: It is better to keep savings in your own name, and not in the name of your children. You can use the money for their education or other suitable purchase at a future date. If you buy the policy in the name of your child, you will lose control of the money.
Invest on your own
If you invest on your own in the stock exchange, you can reduce your expenses considerably. If you buy shares or the exchange traded fund, you pay a brokerage of 0.3%. There is no annual fee.
If you are not sure about the shares to select, invest in the STI exchange traded fund. It is invested mainly in about 30 Singapore blue chips that make up the ST index. This gives you diversification.
1,000 STI ETF will cost you abotu $3,200 now. If you are investing your monthly savings, you may have to wait for 1 year to accumulate sufficient savings to buy 1,000 shares.
You can offer a price between the buy and sell price quoted on the exchange. Your order will stand in the queue, waiting for someone to sell to you. If you are keen to buy immediately, you can pay a higher price to match the sell price on the board.
If you have a large sum to invest (say $100,000 or more), you can select 5 to 10 blue chips and invest $10,000 to $20,000 in each share. This will give you some degree of diversification. It is like creating your own portfolio.
You will need to open an account with a stockbroker and a CDP account.
If you are not sure about the shares to select, invest in the STI exchange traded fund. It is invested mainly in about 30 Singapore blue chips that make up the ST index. This gives you diversification.
1,000 STI ETF will cost you abotu $3,200 now. If you are investing your monthly savings, you may have to wait for 1 year to accumulate sufficient savings to buy 1,000 shares.
You can offer a price between the buy and sell price quoted on the exchange. Your order will stand in the queue, waiting for someone to sell to you. If you are keen to buy immediately, you can pay a higher price to match the sell price on the board.
If you have a large sum to invest (say $100,000 or more), you can select 5 to 10 blue chips and invest $10,000 to $20,000 in each share. This will give you some degree of diversification. It is like creating your own portfolio.
You will need to open an account with a stockbroker and a CDP account.
Real Estate Investment Trust (REIT)
The share prices of the Real Estate Investment Trusts (REIT) are now about 20% below its recent peaks. The yields on many REITS now range from an an attractive level, from 5% to 8%. Rentals on the properties owned by the REITS are expected to remain strong over the next few years, giving support to the high yield. This is an attractive class of investment.
Thursday, January 31, 2008
Tribute to Mohideen Gany
My dear friend, Mohideen Gany, passed away peacefully this afternoon. He was among the top sales producers of NTUC Income during the initial years.
At that time, the commission paid on the sale of life insurance policies was extremely low (less than one fifth of the level today). He and several dedicated union officials worked hard during their spare time to promote the business of NTUC Income.
I have known Mohideen Gany as a very close friend for the past 30 years. I called him Anneh (elder brother).
I visited Mohideen Gany in hospital last week. I visited him in his home yesterday after his discharge. Although he was very sick and in pain, he was still alert and gave me a happy smile when he know of my visit.
I shall miss a great friend.
At that time, the commission paid on the sale of life insurance policies was extremely low (less than one fifth of the level today). He and several dedicated union officials worked hard during their spare time to promote the business of NTUC Income.
I have known Mohideen Gany as a very close friend for the past 30 years. I called him Anneh (elder brother).
I visited Mohideen Gany in hospital last week. I visited him in his home yesterday after his discharge. Although he was very sick and in pain, he was still alert and gave me a happy smile when he know of my visit.
I shall miss a great friend.
Actuary joke: Feeling comfortable
The actuary says, "If you put one foot in the oven and another foot in the freezer, your average body temperature will be quite comfortable".
Joke: Criminal lawyer
"Do you have a criminal lawyer in this town?"
"Well, we are pretty sure we do but we haven't been able to prove it yet."
"Well, we are pretty sure we do but we haven't been able to prove it yet."
NTUC Growth Fund
Dear Mr. Tan,
I have invested in NTUC Growth fund. I saw that this fund's past performance is very good, outperformed most global balanced fund on the market. However, this is also during the period when you are CEO of NTUC.
I am not sure whether I would continue my regular savings plan on this fund any more since the new managment does not do many good things for the customers nowadays. I worried about this fund's future performance. Also, information of all NTUC fund doesn't seem to be trasparent to customers, we cannot download annual report and prospectus like most other fund.
After some research, I found that there is one fund from UOB UOB Growthpath series which has its major holding on index fund. Althought this fund's performance doesn't seem to be as good as NTUC Growth fund, but the index component keep this fund's ER as low as 1.17%.
I would like to seek your opinions on investing long term on this fund in stead of NTUC growth fund.
REPLY
I am not familiar with the UOB Growthpath series. But, from what you have described, it looks like a good fund.
The Growth Fund from NTUC Income should continue to be a good fund, as it is well diversified, actively managed (by external fund managers) and has a low expense ratio.
If you have any issue with the access to information from the website, you can bring it to the attention of the management of NTUC Income.
I have invested in NTUC Growth fund. I saw that this fund's past performance is very good, outperformed most global balanced fund on the market. However, this is also during the period when you are CEO of NTUC.
I am not sure whether I would continue my regular savings plan on this fund any more since the new managment does not do many good things for the customers nowadays. I worried about this fund's future performance. Also, information of all NTUC fund doesn't seem to be trasparent to customers, we cannot download annual report and prospectus like most other fund.
After some research, I found that there is one fund from UOB UOB Growthpath series which has its major holding on index fund. Althought this fund's performance doesn't seem to be as good as NTUC Growth fund, but the index component keep this fund's ER as low as 1.17%.
I would like to seek your opinions on investing long term on this fund in stead of NTUC growth fund.
REPLY
I am not familiar with the UOB Growthpath series. But, from what you have described, it looks like a good fund.
The Growth Fund from NTUC Income should continue to be a good fund, as it is well diversified, actively managed (by external fund managers) and has a low expense ratio.
If you have any issue with the access to information from the website, you can bring it to the attention of the management of NTUC Income.
Vivolife
Dear Mr, Tan,
I am looking at the product by Income, the Vivolife. How would you rate this product?
REPLY
Please read the various comments (from me and other people) about this product in my blog:
http://www.tankinlian.blogspot.com/
My advise is "Buy Term insurance and invest the difference".
Read this FAQ
http://www.tankinlian.com/faq/savings.html
I am looking at the product by Income, the Vivolife. How would you rate this product?
REPLY
Please read the various comments (from me and other people) about this product in my blog:
http://www.tankinlian.blogspot.com/
My advise is "Buy Term insurance and invest the difference".
Read this FAQ
http://www.tankinlian.com/faq/savings.html
Selling profitable products
Mr. Tan,
Was the NTUC Income Limited Premium Whole Life introduced when you were still CEO of Income? If yes, can you give a comment why you allow such a bad product to be launched when you were in office?
Is it because while in office, you have to ensure good revenue for the company and hence has to sell PROFITABLE product? If so, how can the public be very sure that your new "campaign" against your own company is not due to some hidden agenda? (Not particularly to this product)
When you were in office, why did you allow your company to sell endowments, whole life to the public and have the agent earn a big commission? You should have eliminated all participating products and fire all your agents. Can you explain?
I like to bring to your reminder that your insurance agents were responsible in bringing Income to this level of success. Without them,you cannot never have achieved what you had achieved. Do not forget that your success was due to the hardwork of many AGENTS for without sales, you will have no salary when you were CEO.
For your information, I was not and I am not a NTUC Income agent.
REPLY
I have covered this point on a few occasions in the past.
During my time, the Income agents sell products at a modest level of commission and were able to bring products at lower cost to the customers. This was an efficient means of marketing at that time.
The endowment and whole life policies sold in the past gave much better value to the policyholders compared to similar products in the market.
During my time, I was not concerned about selling PROFITABLE products, because most of the profits go back to the policyholders. I was only concerned about offering products that serve the needs of the policyholders and are fairly priced.
In today's environment, there are more efficient ways for customers to take care of their financial future. I recommend that they buy Term insurance and invest the difference.
Agents can continue to make a living by acting honestly, giving good advice, in the interest of the consumer. Do not exploit the ignorance of the consumer.
Was the NTUC Income Limited Premium Whole Life introduced when you were still CEO of Income? If yes, can you give a comment why you allow such a bad product to be launched when you were in office?
Is it because while in office, you have to ensure good revenue for the company and hence has to sell PROFITABLE product? If so, how can the public be very sure that your new "campaign" against your own company is not due to some hidden agenda? (Not particularly to this product)
When you were in office, why did you allow your company to sell endowments, whole life to the public and have the agent earn a big commission? You should have eliminated all participating products and fire all your agents. Can you explain?
I like to bring to your reminder that your insurance agents were responsible in bringing Income to this level of success. Without them,you cannot never have achieved what you had achieved. Do not forget that your success was due to the hardwork of many AGENTS for without sales, you will have no salary when you were CEO.
For your information, I was not and I am not a NTUC Income agent.
REPLY
I have covered this point on a few occasions in the past.
During my time, the Income agents sell products at a modest level of commission and were able to bring products at lower cost to the customers. This was an efficient means of marketing at that time.
The endowment and whole life policies sold in the past gave much better value to the policyholders compared to similar products in the market.
During my time, I was not concerned about selling PROFITABLE products, because most of the profits go back to the policyholders. I was only concerned about offering products that serve the needs of the policyholders and are fairly priced.
In today's environment, there are more efficient ways for customers to take care of their financial future. I recommend that they buy Term insurance and invest the difference.
Agents can continue to make a living by acting honestly, giving good advice, in the interest of the consumer. Do not exploit the ignorance of the consumer.
Policy will soon be withdrawn
Dear Mr. Tan,
A NTUC agent is trying to sell my the Limited Premium Whole Life policy. He said that this policy will soon be withdrawn and replaced by a new policy that offers lower return to the policyholder. He asked me to sign before the deadline. Please advise me.
REPLY
You should compare each policy on its own merits. What is the cost of insurance? What is the return? Is there a better option to get the coverage? Do not buy a policy just because it will soon be withdrawn.
Generally, a whole life policy provides a poor return, due to the high upfront expenses. The insurance agent wants to sell this policy, to earn a higher commission.
It is better to buy Term insurance and invest the difference. Read this FAQ
http://www.tankinlian.com/faq/savings.html
A NTUC agent is trying to sell my the Limited Premium Whole Life policy. He said that this policy will soon be withdrawn and replaced by a new policy that offers lower return to the policyholder. He asked me to sign before the deadline. Please advise me.
REPLY
You should compare each policy on its own merits. What is the cost of insurance? What is the return? Is there a better option to get the coverage? Do not buy a policy just because it will soon be withdrawn.
Generally, a whole life policy provides a poor return, due to the high upfront expenses. The insurance agent wants to sell this policy, to earn a higher commission.
It is better to buy Term insurance and invest the difference. Read this FAQ
http://www.tankinlian.com/faq/savings.html
Wednesday, January 30, 2008
Payment of claims
Dear Mr. Tan,
I am planning to get two policies from Income. I heard alot of negative feedbacks from friends and insurance agents about the difficulty of claiming the payout. One friend mentioned that her relative did not get the gaurantee payout as printed on the insurance form.
Do you have any comments about this? Particularly about the difficulty of making claims from Ntuc Income....now tt you are no longer working in Income... I thinkyour comments would be fair and just.
REPLY
Agents from other insurance companies have been passing this message "difficult to claim from NTUC Income" for the 30 years or longer. This is totally untrue, but the agents felt that this was the only way to turn customers away from the better value products offered by NTUC Income.
There were many instances where NTUC Income was the first to pay a claim, way before similar claims were paid by other insurance companies. NTUC Income practiced prompt and fair settlement of claims. I believe that the pro-customer claim practice continues today.
Wish you all the best.
I am planning to get two policies from Income. I heard alot of negative feedbacks from friends and insurance agents about the difficulty of claiming the payout. One friend mentioned that her relative did not get the gaurantee payout as printed on the insurance form.
Do you have any comments about this? Particularly about the difficulty of making claims from Ntuc Income....now tt you are no longer working in Income... I thinkyour comments would be fair and just.
REPLY
Agents from other insurance companies have been passing this message "difficult to claim from NTUC Income" for the 30 years or longer. This is totally untrue, but the agents felt that this was the only way to turn customers away from the better value products offered by NTUC Income.
There were many instances where NTUC Income was the first to pay a claim, way before similar claims were paid by other insurance companies. NTUC Income practiced prompt and fair settlement of claims. I believe that the pro-customer claim practice continues today.
Wish you all the best.
CPF Medishield
CPF MediShield is being revised. It will cover a wider range of treatment and cover an average of 80% of hospital bills (increased from the current 60%). The premium will be increased by an average of $10 a month.
For most people, CPF Medishield (after the revision) is better than the Shield plans offered by private insurers for the following reasons:
1. Saving of about 15% of premium in marketing expenses (incurred by private insurers).
2. Saving of about 15% to 25% in the profit margin of private insurers
The potential saving in insuring with CPF Medishield could be 30% to 40% for the same type of coverage.
As most of the medical expenses will be incurred when one gets old, and the cost is likely to escalate due to age and inflation, it is important to choose a cost effective medical insurance plan, such as Medishield.
For most people, CPF Medishield (after the revision) is better than the Shield plans offered by private insurers for the following reasons:
1. Saving of about 15% of premium in marketing expenses (incurred by private insurers).
2. Saving of about 15% to 25% in the profit margin of private insurers
The potential saving in insuring with CPF Medishield could be 30% to 40% for the same type of coverage.
As most of the medical expenses will be incurred when one gets old, and the cost is likely to escalate due to age and inflation, it is important to choose a cost effective medical insurance plan, such as Medishield.
Global warming
China is having its most severe winter in many years. The climate in many parts of the world is going through severe changes. I believe that this is caused by global warming.
Actuary joke - Definition of an actuary?
Someone asked for a joke about the actuary. Here it is:
... An actuary is a person who passes as an expert on the basis of his prolific ability to produce an infinite variety of incomprehensible figures calculated with micrometric precision from the vaguest of assumptions based on debatable evidence from inconclusive data derived by persons of doubtful reliability, for the sole purpose of confusing an already hopelessly befuddled group of persons who never read the statistics anyway.
Explanation: Some actuaries are highly thereotical and get carried away with numbers. I hope that most actuaries are practical, and are able to explain difficult concepts in simple terms.
... An actuary is a person who passes as an expert on the basis of his prolific ability to produce an infinite variety of incomprehensible figures calculated with micrometric precision from the vaguest of assumptions based on debatable evidence from inconclusive data derived by persons of doubtful reliability, for the sole purpose of confusing an already hopelessly befuddled group of persons who never read the statistics anyway.
Explanation: Some actuaries are highly thereotical and get carried away with numbers. I hope that most actuaries are practical, and are able to explain difficult concepts in simple terms.
Tuesday, January 29, 2008
Exchange Traded Funds
Mr. Tan,
I enjoy reading your blog as it gives me a very rational and unbiased view of the investment products available . You mentioned indexed funds and ETF's as low cost funds.
I know of examples of ETF e.g. the STI ETF and Lyxxor ETF's. What are the examples of indexed funds available and how do I purchase them.
REPLY
You can buy the ETFs from the Singapore Exchange, through a stockbroker.
Visit this website:
http://esite.sgx.com/live/st/STETF.asp
I enjoy reading your blog as it gives me a very rational and unbiased view of the investment products available . You mentioned indexed funds and ETF's as low cost funds.
I know of examples of ETF e.g. the STI ETF and Lyxxor ETF's. What are the examples of indexed funds available and how do I purchase them.
REPLY
You can buy the ETFs from the Singapore Exchange, through a stockbroker.
Visit this website:
http://esite.sgx.com/live/st/STETF.asp
Quotation for Term Insurance
My friend carried out a survey to get a quotation for a Term insurance plan by calling the hotline of the life insurance companies. Here are his findings:
1. Prompt response:
Within same day: TM Asia, AXA, Great Eastern
Within two working days: UOB, Income, Prudential, Aviva
2. Ease of getting a quotation:
Verbal, Email (with printed quote): UOB, TM Asia, Great Eastern
Email (no printed quote): Aviva
Verbal: AXA, Income, Prudential
3. Most competitive rates:
Top 4 (ranked): UOB/Aviva (tie), TM Asia, Income
Here are the telephone numbers to call:
http://www.tankinlian.com/faq/termd.html
1. Prompt response:
Within same day: TM Asia, AXA, Great Eastern
Within two working days: UOB, Income, Prudential, Aviva
2. Ease of getting a quotation:
Verbal, Email (with printed quote): UOB, TM Asia, Great Eastern
Email (no printed quote): Aviva
Verbal: AXA, Income, Prudential
3. Most competitive rates:
Top 4 (ranked): UOB/Aviva (tie), TM Asia, Income
Here are the telephone numbers to call:
http://www.tankinlian.com/faq/termd.html
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