Dear Mr. Tan,
I am interested in Investments that will give me monthly returns and low risks. I am also interested in the Singapore shares i.e SIA, Sembcorp, SingTel etc. My questions is how do I go about investing?
REPLY
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Monday, April 28, 2008
Online Citizen
I will be making a regular contribution to the Online Citizen. My first article will appear tomorrow, 30 April. It is entitled "High Cost of Living".
http://www.theonlinecitizen.com/
http://www.theonlinecitizen.com/
Short bus trips
My friend stayed in Punggol and work in Raffles Hospital (next to Bugis Junction). If he takes the MRT, he has to make two transfers at Dhoby Ghaut and at Raffles City.
He thought that it wuld be more convenient to take the MRT to Dhoby Ghaut and to change to a bus to Bugis Junction, which is just a few stops away.
The trouble is: what bus to take?
I searched the Public Transport Guide (available from Popular Bookstore for $6.50). There are 18 bus services passing the nearest bus stop to Dhoby Ghaut. There are 17 bus services passing the two bus stops next to Raffles Hospital. By checking through these two long lists, I was able to find two bus services that connect these two bus stops.
Most people buy the bus guide published by Transit Link. It is dificult to use and will take a long time to search for the connecting service. No wonder many people are reluctant to take public transport.
I hope that, in the revamped public transport system, there will be 2 to 4 local services to connect each town to the nearest MRT stations and bus interchanges. This will encourage short trips on the buses. With fewer services, the waiting time will also be shorter.
He thought that it wuld be more convenient to take the MRT to Dhoby Ghaut and to change to a bus to Bugis Junction, which is just a few stops away.
The trouble is: what bus to take?
I searched the Public Transport Guide (available from Popular Bookstore for $6.50). There are 18 bus services passing the nearest bus stop to Dhoby Ghaut. There are 17 bus services passing the two bus stops next to Raffles Hospital. By checking through these two long lists, I was able to find two bus services that connect these two bus stops.
Most people buy the bus guide published by Transit Link. It is dificult to use and will take a long time to search for the connecting service. No wonder many people are reluctant to take public transport.
I hope that, in the revamped public transport system, there will be 2 to 4 local services to connect each town to the nearest MRT stations and bus interchanges. This will encourage short trips on the buses. With fewer services, the waiting time will also be shorter.
Lawyer for Injury Claim
Dear Mr. Tan
Would you be able to recommend a lawyer, specializing in motor accidents claim.
in this unfortunate incident, a family member was hit by a motorcycle. Appreciate your kind recommendation
REPLY
I am not able to recommend any lawyer to you on this matter.
If you check Google and type "lawyer motor claim Singapore", you can find a few firms listed.
All the best.
Would you be able to recommend a lawyer, specializing in motor accidents claim.
in this unfortunate incident, a family member was hit by a motorcycle. Appreciate your kind recommendation
REPLY
I am not able to recommend any lawyer to you on this matter.
If you check Google and type "lawyer motor claim Singapore", you can find a few firms listed.
All the best.
Zero Certs
Dear Mr. Tan,
What is your opinion about Zero Certs? The advertisement claimed that it is like an indexed fund and is transparent. The investor can also select the Singapore stockmarket, like the ETF. Is it a good investment?
REPLY
The price of the Zero Cert is based on the index. However, all the dividends paid on the underlying stocks of the index are kept by the fund manager, as their expense charge.
The average dividend yield of the component stocks of the ST index is about 2.5%. As the Zero Cert take away the dividend entirely, the expense charge of the Zero Cert is about 2.5% per year. This is a high charge for an indexed fund.
It is better to invest in the StateStreet STI Trakker Fund (i.e. the STI ETF). The expense ratio is only 0.3%. If you earn an average dividend yield of 2.5%, you will get a net yield of 2.2% plus the gain in the price of the index.
Lesson: avoid complicated products. Invest in simple, transparent products.
What is your opinion about Zero Certs? The advertisement claimed that it is like an indexed fund and is transparent. The investor can also select the Singapore stockmarket, like the ETF. Is it a good investment?
REPLY
The price of the Zero Cert is based on the index. However, all the dividends paid on the underlying stocks of the index are kept by the fund manager, as their expense charge.
The average dividend yield of the component stocks of the ST index is about 2.5%. As the Zero Cert take away the dividend entirely, the expense charge of the Zero Cert is about 2.5% per year. This is a high charge for an indexed fund.
It is better to invest in the StateStreet STI Trakker Fund (i.e. the STI ETF). The expense ratio is only 0.3%. If you earn an average dividend yield of 2.5%, you will get a net yield of 2.2% plus the gain in the price of the index.
Lesson: avoid complicated products. Invest in simple, transparent products.
Reduction in yield
Hello Mr. Tan,
I bought an Investment Linked Policy (ILP) in mid 2007. After reading this case study (http://tankinlian.blogspot.com/2008/04/high-cost-of-investment-linked-policy.html) , I feel I might've made a poor investment choice but I'm not sure how to get the figures. I just can't seem to find the net yield or the reduction in yield anywhere in my policy document.
The benefit illustration for my policy is listed below. I'll be very grateful if you can guide me and tell me if my ILP is too expensive:
End of Year: 20
Annual premium: $2160
Total premium: $43,200
Distribution cost: $1296
Protection value (guaranteed): $10,800
Total (include nonguaranteed CV): 5% > $60,200, 9% > $92,800
Cash Value (nonguaranteed): 5% > $60,200, 9% > $92,800
Effect of deduction: $23,010
I am really very lost. Thank you Mr Tan!
REPLY
I suggest that you ask your insurance company to calculate for you the reduction in yield, based on an investment period of 10 and 20 years.
You can check it with my calculation below.
You invest $2160 a year. Assuming a gross yield of 5%, you get $60,200 at the end of 20 years (assuming a gross yield of 5%). The net yield (calculated from a financial calculator) is 3.3%. Reduction in yield is 1.7%.
Assuming a gross yield of 9%, you get $92,800 at the end of 20 years. The net yield (calculated from a financial calculator) is 7.4%. Reduction in yield is 1.6%.
If you invest in the STI ETF, the reduction in yield (i.e. expense ratio) is only 0.3%.
I bought an Investment Linked Policy (ILP) in mid 2007. After reading this case study (http://tankinlian.blogspot.com/2008/04/high-cost-of-investment-linked-policy.html) , I feel I might've made a poor investment choice but I'm not sure how to get the figures. I just can't seem to find the net yield or the reduction in yield anywhere in my policy document.
The benefit illustration for my policy is listed below. I'll be very grateful if you can guide me and tell me if my ILP is too expensive:
End of Year: 20
Annual premium: $2160
Total premium: $43,200
Distribution cost: $1296
Protection value (guaranteed): $10,800
Total (include nonguaranteed CV): 5% > $60,200, 9% > $92,800
Cash Value (nonguaranteed): 5% > $60,200, 9% > $92,800
Effect of deduction: $23,010
I am really very lost. Thank you Mr Tan!
REPLY
I suggest that you ask your insurance company to calculate for you the reduction in yield, based on an investment period of 10 and 20 years.
You can check it with my calculation below.
You invest $2160 a year. Assuming a gross yield of 5%, you get $60,200 at the end of 20 years (assuming a gross yield of 5%). The net yield (calculated from a financial calculator) is 3.3%. Reduction in yield is 1.7%.
Assuming a gross yield of 9%, you get $92,800 at the end of 20 years. The net yield (calculated from a financial calculator) is 7.4%. Reduction in yield is 1.6%.
If you invest in the STI ETF, the reduction in yield (i.e. expense ratio) is only 0.3%.
Crowded trains during off-peak hours
I took the MRT at 9 pm from City Hall to Yio Chu Kang station. The train was crowded throughout the entire journey. The air conditioning was not working. It was uncomfortable.
SMRT is efficient in packing the trains during the peak and off-peak hours. This makes good profit for their shareholders. But it is at the expense of the commutters.
In other cities, the commuters expect crowded trains during the peak hours, but the train rides are quite comfortable during the off-peak hours. This is not the case in Singapore.
I hope that the key officials in the Ministry of Transport, Land Transport Authority and the Public Transport Council will take the train and experience it for themselves.
SMRT is efficient in packing the trains during the peak and off-peak hours. This makes good profit for their shareholders. But it is at the expense of the commutters.
In other cities, the commuters expect crowded trains during the peak hours, but the train rides are quite comfortable during the off-peak hours. This is not the case in Singapore.
I hope that the key officials in the Ministry of Transport, Land Transport Authority and the Public Transport Council will take the train and experience it for themselves.
Reduction in Annual Bonus
1. NTUC Income has reduced the annual bonus on its life insurance policies and compensated it by increasing the special bonus. Is this change good for policyholders?
It is better for a policyholder to have a higher rate of annual bonus, as it is vested immediately each year. The special bonus is not guaranteed and may be withdrawn at a future date, before it is paid.
In the past, there were many cases of insurance companies that used high projections to sell their policies and have reduced the special bonuses before they are due to be paid. This has caused great losses to the hapless policyholders who are denied the projected payouts, after waiting for so long.
2. Does NTUC Income have the right to change the bonus structure in this manner?
At the time of issue of the policy, NTUC Income gave a projection showing how the bonuses will be distributed in the future years. Although these bonuses are not guaranteed, there is an expectation that the future bonuses will be distributed fairly. If the investment yield is high, the bonus rates should be increased. If the yield is low, the bonus rates may be reduced.
This has become a "reasonable expectation" of the policyholders. The Monetary Authority of Singapore required life insurance companies to ensure that the "reasonable expectation" of the policyholders is respected.
NTUC Income will be acting against the "reasonable expectation" by reducing the annual bonus in a year when the investment yield is exceptionally high (i.e. above 10%). The increase in special bonus payable in the future does not give adequate compensation to the policyholders, as it is not guaranteed and is payable only after a long time in the future.
Some policyholders have to terminate the policies earlier, for various reasons. They will get a lower cash value due to the lower annual bonuses. This penalty is unfair to these policyholders.
3. Should I cancel my policies with NTUC Income, as their annual bonuses and cash values will be poor in the future?
Do not cancel your policies, as you will suffer a financial loss. As NTUC Income has unilateraly changed the bonus distribution unfairly, you can take a strong stand against this change. See below.
4. What can a policyholder do?
If you feel that you have been severely disadvantage by the reduction in annual bonus, you can send a strong letter of protest to the following:
a) chairman of the board of directors of NTUC Income
b) the Monetary Authority of Singapore
c) your Member of Parliament
If sufficient policyholders voice their unhappiness, these parties will have to take action to correct the injustice.
There is also the possibility for policyholders to get together to take collective legal action. This should be reserved as the last step.
5. How many policyholders are affected by this change?
NTUC Income has said that 310,000 policyholders are affected.
6. Does this change affect all policyholders of NTUC Income?
It affects the policyholders who took the policies in recent years, and not the policyholders who took the policies earlier. This is another source of inequity, as different groups of policyholders are treated differently on this matter.
It is better for a policyholder to have a higher rate of annual bonus, as it is vested immediately each year. The special bonus is not guaranteed and may be withdrawn at a future date, before it is paid.
In the past, there were many cases of insurance companies that used high projections to sell their policies and have reduced the special bonuses before they are due to be paid. This has caused great losses to the hapless policyholders who are denied the projected payouts, after waiting for so long.
2. Does NTUC Income have the right to change the bonus structure in this manner?
At the time of issue of the policy, NTUC Income gave a projection showing how the bonuses will be distributed in the future years. Although these bonuses are not guaranteed, there is an expectation that the future bonuses will be distributed fairly. If the investment yield is high, the bonus rates should be increased. If the yield is low, the bonus rates may be reduced.
This has become a "reasonable expectation" of the policyholders. The Monetary Authority of Singapore required life insurance companies to ensure that the "reasonable expectation" of the policyholders is respected.
NTUC Income will be acting against the "reasonable expectation" by reducing the annual bonus in a year when the investment yield is exceptionally high (i.e. above 10%). The increase in special bonus payable in the future does not give adequate compensation to the policyholders, as it is not guaranteed and is payable only after a long time in the future.
Some policyholders have to terminate the policies earlier, for various reasons. They will get a lower cash value due to the lower annual bonuses. This penalty is unfair to these policyholders.
3. Should I cancel my policies with NTUC Income, as their annual bonuses and cash values will be poor in the future?
Do not cancel your policies, as you will suffer a financial loss. As NTUC Income has unilateraly changed the bonus distribution unfairly, you can take a strong stand against this change. See below.
4. What can a policyholder do?
If you feel that you have been severely disadvantage by the reduction in annual bonus, you can send a strong letter of protest to the following:
a) chairman of the board of directors of NTUC Income
b) the Monetary Authority of Singapore
c) your Member of Parliament
If sufficient policyholders voice their unhappiness, these parties will have to take action to correct the injustice.
There is also the possibility for policyholders to get together to take collective legal action. This should be reserved as the last step.
5. How many policyholders are affected by this change?
NTUC Income has said that 310,000 policyholders are affected.
6. Does this change affect all policyholders of NTUC Income?
It affects the policyholders who took the policies in recent years, and not the policyholders who took the policies earlier. This is another source of inequity, as different groups of policyholders are treated differently on this matter.
Bus interchanges
There are 35 bus interchanges in Singapore. Some interchanges are large and have to serve more than 25 services. The commutter may have to walk a long distance to the stop for the required service. This makes a transfer to be quite inconvenient.
In the design of the new transport system, I hope that they were will be 2 to 4 local services to serve a MRT station. The stops for these services can be located within a short walking distance to the train station. This will make it convenient for commuters to make a transfer.
In the design of the new transport system, I hope that they were will be 2 to 4 local services to serve a MRT station. The stops for these services can be located within a short walking distance to the train station. This will make it convenient for commuters to make a transfer.
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