Advice on reducing risk

Hello Mr Tan

I am only 45 but am not a risk taker. I wish to invest lump sum $30K from CPF-OA to accumulate till age 62 to draw out monthly in future. Should I take a guaranteed annuity now?

J

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Dear J,

I suggest that you invest in our Growth plan, which offers a guaranteed return of about 2%. With bonus, it should earn slightly more than 4%. You this FAQ: Growth

You should also consider investing in our combined fund. Although it has higher risk, the risk can be minimised by investing in a large, well diversified fund and invested for the long term (ie 10 years or longer). You can turn risk to your advantage. Read this FAQ: Ideal

You can convert your investments into a life annuity at age 62 or later. I will get an insurance consultant to advise you.

Tan Kin Lian

Logic9 books as Christmas gifts

A friend approached me to buy 30 pieces of the Logic9 pocketbooks. She finds Logic9 to be interesting and wanted to give the pocketbooks to her grandchildren as a Christmas gift.

Another friend, who runs a nursing home, bought 30 pieces of Logic9 pocketbooks to give to her employees, also as a Christmas gift.

If you are interested, you can buy them at any of the NTUC Income branches. If you buy 10 pieces of more, you enjoy a discount (i.e. $4 per pocketbook).

500 people attended the Logic9 Day

About 500 people attended the Logic9 Day held at HDB Hub, Toa Payoh. This was a good turnout for a weekend. The conference room was full for the first 3 sessions.

The attendees enjoyed the 3 tips given by me on how to solve the Logic9 (Sudoku) puzzles. Most of them were aware about the 1st tip (i.e. "find the missing number"). They were surprised to learn the next two tips (based on patterns).

I intended to hold another Logic9 Day at Income Center, Bras Basah Road. We will charge an admission fee of $5 and provide 2 pocketbooks (worth $10). And the free tips.

Feedback from a customer on our website

Mr Tan,

I am a 29-year-old working professional. However, in terms of financial investments, I am only a layperson.

As a hardworking and thrifty person, I am very concerned about investing my hard-earned money in cash and from my CPF Account.

In a bid to improve my own knowledge so as to understand investments better in future, I trawled the Internet & learnt from various websites.

I am very impressed by the NTUC Income website which provides very clear advice. I am now thinking of investing my very hard-earned money with NTUC Income (I am already a client with an NTUC Living Policy but now am thinking of making further investments by investing in the Combined Funds with cash and CPF monies).

From a layperson in this area, the website has helped greatly in my education in financial management. The details of the various funds are also provided in the pdf documents online, including the yields over various periods and the top holdings of each fund.

I am also deeply impressed that there was a link to your Blog. Seldom does a CEO find time to actually be at the ground level to connect with so many clients. It must be very busy for you. This is helpful and humble of you.

I wonder how you find the time to actually attend to the many queries that must have reached you since you provided your email address on the web, including the queries that you published on your blog.

The queries and the suggestions that you have published on your blog provide insights for laypersons like myself.

The reassurance that you have personally given to others like myself and the other interesting anecdotes that you provide, such as on customer service in other industries and the level of service in Dubai, provide insights in other areas to many Singaporeans as well.

Merry Christmas.

TMJ

Visit the Business Center

I met a few senior civil servants over lunch. They asked for my advice on the insurance and savings plans for their children. They are reluctant to talk to an insurance agent.

They felt that the insurance agent is more interested to recommend products that are attractive to the agent, and not to the customer.

I suggested that they visit the business center and talk to my salaried consultants. They welcomed this suggestion warmly.

I explained that the insurance advisers from NTUC Income are not pushy, and will recommend products that give good value to the customers. They will explain on our FAQs. They felt more assured and welcomed the approach taken by us.

Customer is stuck with structured deposit

Mr Tan,

I enjoy reading your blog it is very informative. Hopefully we can still read your blog after you left NTUC.

I have bought structured deposit from a bank in 2004. It was terminated in 2005 and my funds was transferred to purchase another structured deposit on the advise of the bank representative. He explained that the bank is revising the rate for the benefits of customer.

I was told to pay a replacement cost of 15% as I had terminated early. I was not getting the interest rate of 3.18% because the interest rate has gone up. I was also told it is a different kind of structured deposit.

I felt so cheated. How can I seek redress or highlight my experience to others so that they will not be trapped into a similar situation.

The product with the word "deposit" is misleading fom a layman's view. We always think that a structured deposit is like a fixed deposit.

Structured Deposit has some form of risk like unit trust, and is also tied to some interest rate which is too complicated for public to understand. Where is the transparancy of the product?

CS

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Dear CS

I suggest that you seek the advice of the MAS, Consumer Association (CASE) or of the Association of Banks regarding the unsatisfactory advice given to you by the bank representatives.

Tan Kin Lian

MENA region

What is the MENA region? It is the Middle East and North Africa. This region comprise mainly of people from the Arabic culture.

The Middle East includes the countries of Saudi Arabia, UAE, Qatar, Kuwait, Iraq, Syria and Jordan. North Africa includes the countries of Egypt, Libya, Tunisia, Algeria and Morocco.

After leaving NTUC Income, I expect to be active in the MENA region, to develop insurance based on the concept of the "Insurance Company for the 21st Century".

Find our more from: IC21

Best Low Cost Funds

Who offers the best low cost funds? Find out more from:

Ask Dr Money

If you invest in a low cost fund, you will get a higher return, after deducting the charges.

Best Life Annuity Rates

Who provide the best life annuity rates? Find out from:

Ask Dr Money

Invest in a unit trust or investment fund?

I was asked, "Is it better to invest regular savings in a unit trust (which does not have an upfront sales charge) compared to an investment-linked plan (where up to 18 months of premium are deducted to pay commission to the agent?"

Here is my reply: "The upfront charge from NTUC Income is about 6 months. This is less than half of the sales charge from similar plans provided by other insurance companies."

The unit trusts have higher annual fee. The fee, including trailer fee to the adviser, can take away between 2% to 3% from your investment yield in each year. This additional charge can be quite costly to you. If you are investing for 10 years or longer, it is better to buy a ILP plan from NTUC Income.

Why invest in a large well diversified fund?

Someone asked me why I recommend investing in a large well diversified fund. It can only provide an average return earned by the market. He feels that it is better to select a good fund manager that can perform better than the market.

I replied: "It is difficult to select a good fund manager. There are a few thousand managers to choose from. If you choose a manager with a good track record in the past, you are not sure that they can perform better than average in the future. You pay a higher fee, and may not get a better return (after deducting the fee).

By investing in a large, well diversified fund, you enjoy the following:

- low fees, due to economic of scale
- diversification (so that you are not affected by a few poor performing stocks)

If you can get an average market return on global equity, you are likely to do well over the long term. By investing for many years, you enjoy some good years and some bad years. The average has always earned more than bonds or cash over a 10 year period."

Lesson: Invest for the long term in a large, well diversified fund.

Enjoy your holiday at Snow City

There is a new, interesting activity at Snow City. Kids will enjoy it. They can experience the cold, and snowfall. They can take photographs with the mascots.

Snow City is in Jurong, next to the Science Center. You can also make a visit to the Science Center and see the interesting exhibits. Look for the photograph of President Nathan. Watch for a while, and he will turn his head and smile at you.

Logic9 (Sudoku) Day at HDB Hub

Sudoku is a popular game, which is a craze around the world.

Many Singaporeans are still not familiar with this game. Even if they have seen it before, they find it difficult to solve the puzzle.

I will be giving a demonstration and tips on how to solve the Sudoku puzzle. It will be held on 14 December at HDB Hub in Toa Payoh. Each demonstration takes about 30 mins. Several sessions will be held in the afternoon. You can come at any time.

I will present three tips, which helps you to solve the difficult puzzle.

This puzzle is good for children (to learn mathematics and be familiar with numbers), senior citizens (keep the brain alert, a good alternative to mahjong) and for adults (to challenge your friends or to occupy your time on the bus, train or plane).

All attendee will be presented with a Logic9 pocketbook (usual price $5). You can buy additional pocket books at a big discount.

Attend this demonstration. Impress your friends.

Policyholder Enquiry (POLE)

I access my insurance policies with NTUC Income using the Policyholder Online Enquire (POLE) service. It shows all my policies and transactions.

It is useful to check my records monthly. I make sure that my transactions are recorded properly and that the premiums are up to date.

My Folder in Big Trumpet

I have an account in Big Trumpet. I used the Folder to store my account numbers, passwords and other information. The information is encripted and protected by a second level password.

The information include:

- Google
- Skype
- Paypal
- Big Trumpet
- and others

If I forget any of these information, I access the Folder and get them quite easily.

I also store my medical records.

Try it.

Be positive in our approach

I wish to encourage Singaporeans to be positive in our approach. Here is a recent example.

Last week, I checked in at Changi Airport for my flight to Dubai. I was travelling economy class. I carry a "elite card" that allowed me to use the lounge and to bring a guest.

I asked the counter staff about this privilege. He said, "Sorry, you cannot bring a guest. SIA had issued an instruction last week that disallowed the guest privilege."

I checked in at Dubai airport a week later to return to Singapore. I asked the counter staff at Dubai, "Can I use the lounge"? She said, "Yes, you can. And you can bring in a guest as well".

I suspect that the counter staff in Singapore probably made a mistake. What is worrisome is that he seemed to so ready to say "no", instead of finding a "yes".

Risk is to your advantage!

Hi Mr Tan,

I am a 27-years-old trainee teacher. I am very new to investing. I attended 2 talks organised by NTUC Income early this year:

At the first dialogue, I asked you whether it would be advantageous, given the past performance, to invest purely in equity funds, as they have been outperforming the bond funds. The key message that I took home were your words of wisdom: "Risk is to your advantage!"

I decided to take a leap of faith. I invested $10,000 of my savings in May this year with NTUC Income. I chose the Flexi-Link Plan with a distribution of my single premium in 70% Global Equity and 30% Singapore Equity. The prices then were:

GE: $2.495
SE: $2.121

In July, I received your letter offering the 1% promotion if I topped up my
Flexi-Link Plan. As such, I decided to top up another $10,000. The prices then were:

GE: 2.336
SE: 1.984

Initially, I was concerned as to when I can see the returns to my investment. Now, the surrender value is $20,837.34. The prices are:

GE: $2.441
SE: $2.244

So if you take the profit of $837.34 in relation to my combined premiums of
$20,000 - I earned 4.2% in half a year! I am definitely impressed with the
performance of the equity funds.

Thank you and your colleague for your honest and convincing advice. I now am a believer and supporter of NTUC Income!

MS

Does your adviser take care of your interest?

I met a senior manager of a life insurance company in Malaysia. They sell their products through their advisers (agents) and through the bank.

They offer a better return on their product sold through the bank, as the regulator sets a maximum commission that can be paid through this channel.

For the same product sold through their advisers, they give higher commission to the agents and charge higher premium to their customers. They leave it to their advisers to convince the customers on the "value of the product".

I am disturbed that the adviser is willing to offer the same product at a higher premium to the customer. After all, they are supposed to take care of their customer.

Does this situation apply in Singapore? I think that our situation may be worse for customers. The commission rates paid in Singapore for advisers and through the bank channels are higher than in Malaysia for similar products.

NTUC Income operates differently. We keep our commission rates at a modest level, to give a modest income to the advisers. We give a higher return to our customers, on their savings.

My future investments

When I leave NTUC Income in early 2007, I intend to keep most of my personal investments with NTUC Income.

Why? They offer the lowest charges. I will be able to get a better return, compared to other forms of investments.

I may re-invest into the ST Tracker Fund in the future, if the market corrects.

I shall be looking out for indexed funds that have low charges, e.g. 0.5% or less a year. So far, I have not found any suitable fund in Singapore. If they are available, I may invest in these funds.

If I do make any re-investment, I shall share my experience in this blog.

Provide for welfare of parents

Hi,

I need some advice from you. The thoughts of buying an insurance plan had been on my mind for quite a while.

I am the only child and my parents are at their 50s. While working now, I am concurrently studying a part time university honors degree.

I am earning a gross wage of $1,500. 40% of it is used to pay for my school fees. Minus other expendure, I still manage to save 30%.

My mother had advised me to buy an insurance plan only after I graduate. However, because I am the only child, I want to buy some minimal plan to least protect the
welfare for my parents. The plan needs not benefit me but it must cover some of my parents' welfare when things happen to me i.e. accidents.

Is there any insurance plan which is suitable for me right now and when I graduate in 8 months time I will be able to increase the premium.

SL

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Dear SL,

I suggest the following:

i-Young to provide the protection. It cost only $100 a year.
Save and invest in a flexible saving plan, ie the Ideal plan.

Here are the FAQ

http://www.income.coop/insurance/i-young/faq.asp
http://www.income.coop/insurance/ideal/faq2.asp

Tan Kin Lian