I sent a letter addressed to:
Tan Kin Lian
Singapore 809744.
10 days have passed. It never arrived!
Singapore Post must have decided that this address is incomplete and thrown the letter away!
Tuesday, March 25, 2008
Low cost products
I wish to give an idea of the type of products that give good value to consumers. I hope that these products will be available through a new life insurance company later this year.
This company will offer the products through the internet and call center, making it easy for consumers to buy the products.
LOW COST INSURANCE
1) Term insurance
Pays the sum assured in the event of premature death during the insurance period The sum assured is level during the period. Example: insure $200,000 for 20 years.
2) Reducing Term Insurance
Pays the reducing sum assured in the event of premature death during the insurance period. The sum assured starts at a higher amount and reduces each year during the period. Example: insure $400,000 reducing by $20,000 yearly over 20 years.
3) Family Income Benefit
Pays a monthly income in the event of premature death during the insurance period. The income is payable for the remainder of the period. Example: insure $2,000 payable monthly for the remainder of 20 years.
4) Family Protector
Combines a term insurance and a family income benefit. Example: insures $50,000 plus $2,000 a month for 20 years.
LOW COST DIVERSIFIED FUND
5) Wealth Accumulator
Allows you to invest in a diversified investment fund (i.e. equity, bond or treasuries) to earn the market rate of return. Reduces the risk by diversifying over a large number of quality investments. You can invest for the long term to average out the good and bad years. There is no front-end load. The expense ratio is probably the lowest in the market (e.g. 0.6% for an equity fund).
This company will offer the products through the internet and call center, making it easy for consumers to buy the products.
LOW COST INSURANCE
1) Term insurance
Pays the sum assured in the event of premature death during the insurance period The sum assured is level during the period. Example: insure $200,000 for 20 years.
2) Reducing Term Insurance
Pays the reducing sum assured in the event of premature death during the insurance period. The sum assured starts at a higher amount and reduces each year during the period. Example: insure $400,000 reducing by $20,000 yearly over 20 years.
3) Family Income Benefit
Pays a monthly income in the event of premature death during the insurance period. The income is payable for the remainder of the period. Example: insure $2,000 payable monthly for the remainder of 20 years.
4) Family Protector
Combines a term insurance and a family income benefit. Example: insures $50,000 plus $2,000 a month for 20 years.
LOW COST DIVERSIFIED FUND
5) Wealth Accumulator
Allows you to invest in a diversified investment fund (i.e. equity, bond or treasuries) to earn the market rate of return. Reduces the risk by diversifying over a large number of quality investments. You can invest for the long term to average out the good and bad years. There is no front-end load. The expense ratio is probably the lowest in the market (e.g. 0.6% for an equity fund).
Financial planning can be confusing
Hi, Mr. Tan,
I spent two hours with an insurance agent to do a financial planning exercise. We went through many projections using different rates of inflation and insurance products. I find the projections to be quite confusing as they produce different results.
To meet my target of retiring at age 60 with a monthly income of $x (adjusted for inflation), I have to save $y (about 30% of my salary) each month. I cannot afford to save this amount. If I save a smaller sum, I need to invest my savings more agressively to earn 10% per year. Is this realistic? Can you advice?
REPLY
I find this approach to be quite speculative. The results differ according to the assumptions on:
a) inflation
b) investment return
c) period of investment (or retirement age)
Here are my general tips:
a) Save 10% to 15% of your monthly salary, if your budget is tight
b) Save more, if your regular expenses take a smaller share of your salary (for singles and high earners)
c) Invest your savings in a low cost, diversified fund
d) Buy low cost insurance, to provide a payment in event of premature death
e) Retire at an age when your accumulated savings (with yield) is sufficient to meet your future lifetime expenses
f) Be flexible on your retirement age and the amount of retirement income (i.e. live within your means)
Using my guidelines, you will be able to retire quite comfortably at the age of 65 years. You can retire earlier, if you are prepared to accept a more frugal lifestyle.
Read this FAQ:
http://www.tankinlian.com/faq/fptips.html
I spent two hours with an insurance agent to do a financial planning exercise. We went through many projections using different rates of inflation and insurance products. I find the projections to be quite confusing as they produce different results.
To meet my target of retiring at age 60 with a monthly income of $x (adjusted for inflation), I have to save $y (about 30% of my salary) each month. I cannot afford to save this amount. If I save a smaller sum, I need to invest my savings more agressively to earn 10% per year. Is this realistic? Can you advice?
REPLY
I find this approach to be quite speculative. The results differ according to the assumptions on:
a) inflation
b) investment return
c) period of investment (or retirement age)
Here are my general tips:
a) Save 10% to 15% of your monthly salary, if your budget is tight
b) Save more, if your regular expenses take a smaller share of your salary (for singles and high earners)
c) Invest your savings in a low cost, diversified fund
d) Buy low cost insurance, to provide a payment in event of premature death
e) Retire at an age when your accumulated savings (with yield) is sufficient to meet your future lifetime expenses
f) Be flexible on your retirement age and the amount of retirement income (i.e. live within your means)
Using my guidelines, you will be able to retire quite comfortably at the age of 65 years. You can retire earlier, if you are prepared to accept a more frugal lifestyle.
Read this FAQ:
http://www.tankinlian.com/faq/fptips.html
Petrol cost per kilometer travelled
With the increase in petrol price, do you know what is the petrol cost per kilometer for your car?
Here is a simple way to calculate this cost factor:
a) When you next top up to full tank, record the kilometer reading.
b) On the following top up to full tank, record the kilometer reading and the amount paid
c) Subtract the difference between the reading to get the kilometer travelled
d) Divide the petrol bill by the kilometer reading to get the cost per kilometer travelled.
If you have done this calculation, please post a comment showing the following: your model of car, petrol cost per kilometer travelled.
Here is a simple way to calculate this cost factor:
a) When you next top up to full tank, record the kilometer reading.
b) On the following top up to full tank, record the kilometer reading and the amount paid
c) Subtract the difference between the reading to get the kilometer travelled
d) Divide the petrol bill by the kilometer reading to get the cost per kilometer travelled.
If you have done this calculation, please post a comment showing the following: your model of car, petrol cost per kilometer travelled.
Travel to Manila, Philippines
I will be in Manila for the next four days. I shall present a paper to a meeting organised by the regional office of the International Cooperative Alliance. During this period, I shall be updating my blog less regularly.
Switching into the Wealth Accumulator plan
Dear Mr. Tan,
I am interested in your Wealth Accumulator plan, which is to be introduced later this year. I am now invested in the Combined Fund of NTUC. Should I switch to this new plan?
REPLY
The expense ratio of the low cost funds that can be purchased under the Wealth Accumulator plan is likely to be 0.3% lower than the Combined Fund. There is a small advantage in making this switch, but it is a recurring annual saving.
For new investments, the Wealth Accumulator plan has no front end charge (except for a small transaction fee). New investments into the Combined Fund attract a front end charge of 3% (invested through Flexi-Link) or 18.5% for the first three years and 3.5% for subsequent years (invested through the Ideal plan).
It is better to switch to the Wealth Accumulator plan, if you expect to make new investments. There is no penalty on withdrawal from the Combined Fund.
A similar advantage applies to switching form the ILP funds of other insurance companies.
Note: The Wealth Accumulator plan is not available at this time. Please wait for it to be available and details to be confirmed, before you make your decision.
I am interested in your Wealth Accumulator plan, which is to be introduced later this year. I am now invested in the Combined Fund of NTUC. Should I switch to this new plan?
REPLY
The expense ratio of the low cost funds that can be purchased under the Wealth Accumulator plan is likely to be 0.3% lower than the Combined Fund. There is a small advantage in making this switch, but it is a recurring annual saving.
For new investments, the Wealth Accumulator plan has no front end charge (except for a small transaction fee). New investments into the Combined Fund attract a front end charge of 3% (invested through Flexi-Link) or 18.5% for the first three years and 3.5% for subsequent years (invested through the Ideal plan).
It is better to switch to the Wealth Accumulator plan, if you expect to make new investments. There is no penalty on withdrawal from the Combined Fund.
A similar advantage applies to switching form the ILP funds of other insurance companies.
Note: The Wealth Accumulator plan is not available at this time. Please wait for it to be available and details to be confirmed, before you make your decision.
Investing in REITS
Dear Mr. Tan,
Thank you for maintaining your blog. I have learned a lot from your experience, observation and answers to other people's questions..
May I know your views on Real Estate Investment Trusts (REIT) for long term investment as compare to STI ETF?
There are 20 REITs listed on SGX
http://stquote.sgx.com/live/st/STREIT.asp.
At the current price, their average return is about 6.8% p.a
http://www.reitdata.blogspot.com/
REIT would meet some of your criterias for long-term investment:
a) A diversified fund
b) Blue chip investments, i.e. non-speculative
c) Low cost, i..e. less than 1% per annum
d) Low upfront fee, less than 1%
REPLY
REITS are invested in properties. This is an asset class separate from equities.
Properties are also suitable for long term investments. You can have some of your long term savings in REITS. A suitable proportion is 25% in REITS and 75% in equities and bonds.
You are right that REITS offer an attractive yield. Part of the yield represents a return of your invested capital, as the properties are a depreciating assets.
After allowing for this factor, the yield is still attractive. I have invested part of my savings in REITS. If you search my blog and look for REITS, you will get a few postings.
Thank you for maintaining your blog. I have learned a lot from your experience, observation and answers to other people's questions..
May I know your views on Real Estate Investment Trusts (REIT) for long term investment as compare to STI ETF?
There are 20 REITs listed on SGX
http://stquote.sgx.com/live/st/STREIT.asp.
At the current price, their average return is about 6.8% p.a
http://www.reitdata.blogspot.com/
REIT would meet some of your criterias for long-term investment:
a) A diversified fund
b) Blue chip investments, i.e. non-speculative
c) Low cost, i..e. less than 1% per annum
d) Low upfront fee, less than 1%
REPLY
REITS are invested in properties. This is an asset class separate from equities.
Properties are also suitable for long term investments. You can have some of your long term savings in REITS. A suitable proportion is 25% in REITS and 75% in equities and bonds.
You are right that REITS offer an attractive yield. Part of the yield represents a return of your invested capital, as the properties are a depreciating assets.
After allowing for this factor, the yield is still attractive. I have invested part of my savings in REITS. If you search my blog and look for REITS, you will get a few postings.
Quality of a Good Leader in Science
Mrs Lee Kum Tatt has dug up some scripts of her husband which she wants to share with us. It will be interesting to find out how some of the values which Dr. Lee selected have affected his life and work.
This is meant to encourage, if not inspire, those who are pursuing a Science profession and career to be courageous to pursue their ideals and dreams. If handled properly it is a small prize to pay to be a good scientist.
www.leekumtatt.blogspot.com
This is meant to encourage, if not inspire, those who are pursuing a Science profession and career to be courageous to pursue their ideals and dreams. If handled properly it is a small prize to pay to be a good scientist.
www.leekumtatt.blogspot.com
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