Source: Bloomberg
California Public Employee Retirement Scheme (Calpers) earned a 19.1 percent return for the year ended June 30, 2007, according to its most recent annual report, compared with a gain of 18.4 percent on the Standard & Poor's 500 Index of stocks.
The fund had about 60 percent of its portfolio invested in public equity, about 24 percent in bonds and other fixed income, 8 percent in real estate, 6.7 percent in private equity and 1.4 percent in cash equivalents, the report said.
Friday, April 25, 2008
Homeowners convert to costlier fixed rate loans
Source: Bloomberg
Mortgage refinancing in the U.S. is increasing as record numbers of homeowners dump their adjustable-rate mortgages for the security of a fixed loan.
The amount of refinanced home loans will reach $321 billion by the end of June, the most in a year. Nine out of 10 of those borrowers will choose a fixed rate.
Property owners are abandoning adjustable-rate mortgages, or ARMs, to ward off the prospect of higher payments. About 6 million U.S. homeowners, or 59 percent of the ARM market, have Libor-indexed loans. The 12-month U.K. benchmark Libor rate rose more than two-thirds of a percentage point in the past month.
Question: Will this situation happen in Singapore? Will more people move from floating to fixed rate loans?
Mortgage refinancing in the U.S. is increasing as record numbers of homeowners dump their adjustable-rate mortgages for the security of a fixed loan.
The amount of refinanced home loans will reach $321 billion by the end of June, the most in a year. Nine out of 10 of those borrowers will choose a fixed rate.
Property owners are abandoning adjustable-rate mortgages, or ARMs, to ward off the prospect of higher payments. About 6 million U.S. homeowners, or 59 percent of the ARM market, have Libor-indexed loans. The 12-month U.K. benchmark Libor rate rose more than two-thirds of a percentage point in the past month.
Question: Will this situation happen in Singapore? Will more people move from floating to fixed rate loans?
Bonus on participating policies
Dear Mr. Tan
I have several life insurance policies with X. They reported higher investment income for 2007. I hear that they will reduce their annual bonus on their policies and increase the maturity bonus. Is this fair to policyholders? If not, what action can the policyholder take?
REPLY
The life insurance company and its appointed actuary is required to act fairly in the distribution of the annual bonus. They have to follow the principles set out in their contract or in their company bye-laws. Recently, the Monetary Authority of Singapore has issued a guideline on the distribution of bonuses on participating policies.
In the situation that you have described, the company X has to give a convincing explanation on why they are reducing their annual bonus, in spite of an increase in investment income. If you are unhappy with the explanation, you can lodge a complaint with MAS or with FiDREC.
You can ask MAS to verify if Company X has met with their obligation under the MAS guidelines.
I have several life insurance policies with X. They reported higher investment income for 2007. I hear that they will reduce their annual bonus on their policies and increase the maturity bonus. Is this fair to policyholders? If not, what action can the policyholder take?
REPLY
The life insurance company and its appointed actuary is required to act fairly in the distribution of the annual bonus. They have to follow the principles set out in their contract or in their company bye-laws. Recently, the Monetary Authority of Singapore has issued a guideline on the distribution of bonuses on participating policies.
In the situation that you have described, the company X has to give a convincing explanation on why they are reducing their annual bonus, in spite of an increase in investment income. If you are unhappy with the explanation, you can lodge a complaint with MAS or with FiDREC.
You can ask MAS to verify if Company X has met with their obligation under the MAS guidelines.
Higher return and lower risk
Dear Mr Tan,
Indeed, having read through your website, I have come to understand just how great ETFs are, esp the STI ETF. You mentioned that STI ETF is like a unit trust, less those high expense ratio and high sales charge. You also highlighted that for long term investors, it is good to invest in ETF.
Having thought through quite some time, I don't get the logic. Since STI ETF can be bought and sold like shares, why is it beneficial, especially to long term investors?
REPLY
Shares are likely to earn a higher return compared to bonds and other safer investments. But shares are volatile, i.e risky.
By investing in a fund comprising of many shares, you reduce the risk through diversification. By investing for the long term, you average out the good and bad years, to get an average long term return.
Hence, a low cost investment fund, such as ETF, allows you to earn a higher return (from shares) and reduce the risk through diversification.
Indeed, having read through your website, I have come to understand just how great ETFs are, esp the STI ETF. You mentioned that STI ETF is like a unit trust, less those high expense ratio and high sales charge. You also highlighted that for long term investors, it is good to invest in ETF.
Having thought through quite some time, I don't get the logic. Since STI ETF can be bought and sold like shares, why is it beneficial, especially to long term investors?
REPLY
Shares are likely to earn a higher return compared to bonds and other safer investments. But shares are volatile, i.e risky.
By investing in a fund comprising of many shares, you reduce the risk through diversification. By investing for the long term, you average out the good and bad years, to get an average long term return.
Hence, a low cost investment fund, such as ETF, allows you to earn a higher return (from shares) and reduce the risk through diversification.
Is the worst over?
Dear Sir
It's nice to read your blog. Just to seek your views:
1) has the worse (financial market) over ?
2) is it time to start investing now or when ?
REPLY
If you are investing for the long term, 10 years or longer, it is quite safe to start investing now.-
It's nice to read your blog. Just to seek your views:
1) has the worse (financial market) over ?
2) is it time to start investing now or when ?
REPLY
If you are investing for the long term, 10 years or longer, it is quite safe to start investing now.-
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