Hi Mr Tan,
I received an email about Jubilee Series 8 Notes. In the factsheet, it is stated that principal is 100% protected if held until maturity date. May I know the difference between Capital Protected and Capital Guaranteed? What other risks that I should be made aware of?
I received this reply from the marketing officer:
Good News as the interest rate has been revised from the original 2.7% to currently 3.15%. Its selling out fast. Please call my mobile phone now. Principal protected - there is a condition. You have to hold this note till maturity date of 2.5 years. Principal guaranteed - misleading that its guaranteed at all times under all conditions, even upon early termination. No hidden risks. Only thing is have to hold till maturity to avoid principal loss. Interest rate is guaranteed.
JP
REPLY
From my reading, "principal protected" means that it is "not guaranteed". So, I do not really understand what "principal protected" really means. Someone explained to me previously that it means "we will do our best to protect your principal, but we do not give any guarantee". I always avoid investments that I do not understand.
I avoid structured financial products. I do not let the issuer of the structured product take away my investment gain through their high charges. My views are explained in this FAQ:
http://www.tankinlian.com/faq/sinvest.html
I prefer to invest in Government bonds (low risk, 3% or more), or well rated corporate bonds (4-5%) or shares (high risk, high reward). I pay low cost and get the actual return (commenusrate with risk).
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Tuesday, June 10, 2008
Public Facilities need to be improved
Read my article in The Online Citizen:
www.theonlinecitizen.com
http://theonlinecitizen.com/2008/06/public-facilities-need-to-be-improved/#comments
www.theonlinecitizen.com
http://theonlinecitizen.com/2008/06/public-facilities-need-to-be-improved/#comments
New Zealand Dollar Deposit
Dear Mr. Tan,
I will like to have some advise from you. Now NZ$ exchange rate is 1.0447 bank rate for deposit in FD. Do you think is it the right time to deposit NZ$ fixed deposit now? Thanks.
M
REPLY
I am sorry that this is not my area of expertise. It is difficult to time the market.
I have some of my money on NZD deposit. I think that the current level (which represents a fall from the recent high) should be okay, and the interest rate is above 8% per annum. All the best.
I will like to have some advise from you. Now NZ$ exchange rate is 1.0447 bank rate for deposit in FD. Do you think is it the right time to deposit NZ$ fixed deposit now? Thanks.
M
REPLY
I am sorry that this is not my area of expertise. It is difficult to time the market.
I have some of my money on NZD deposit. I think that the current level (which represents a fall from the recent high) should be okay, and the interest rate is above 8% per annum. All the best.
Comment - risk of high terminal bonus
Hello --
It is an excellent point, Mr. Tan.
Obviously, terminal bonuses are higher than annual bonuses. Doing that -- pushing most of the bonuses to the end the policy -- puts the policyholders' fund at risk IF the courts would decide the company cannot simply walk away from its obligation to pay its terminal bonus, as promised.
That is what happened in the case of Equitable Life in UK. Equitable couldn't pay and it went broke.
Are Singapore insurers also at risk?
Well, it depends. In the case of NTUC Income, it gave its assurance at its recent AGM (May 30) that it would not walk away from its terminal bonus. It would pay it.
In a way, that is good for policyholders.
On the other hand, such a statement sounds very much like "an obligation".
Requiring NTUC Income to keep its promises (to meet its obligations) could be expensive for the company.
As mentioned, it was prohibitively expensive for Equitable Life in UK.
Sincerely,
Larry Haverkamp
It is an excellent point, Mr. Tan.
Obviously, terminal bonuses are higher than annual bonuses. Doing that -- pushing most of the bonuses to the end the policy -- puts the policyholders' fund at risk IF the courts would decide the company cannot simply walk away from its obligation to pay its terminal bonus, as promised.
That is what happened in the case of Equitable Life in UK. Equitable couldn't pay and it went broke.
Are Singapore insurers also at risk?
Well, it depends. In the case of NTUC Income, it gave its assurance at its recent AGM (May 30) that it would not walk away from its terminal bonus. It would pay it.
In a way, that is good for policyholders.
On the other hand, such a statement sounds very much like "an obligation".
Requiring NTUC Income to keep its promises (to meet its obligations) could be expensive for the company.
As mentioned, it was prohibitively expensive for Equitable Life in UK.
Sincerely,
Larry Haverkamp
Danger of unfunded terminal bonus
The collapse of Equitable Life in UK was quoted as the reason to restructure the bonus of Income. The consultant recommended that the annual bonus rate was too high and supported the restructure to a lower rate of annual bonus, to be compensated by a higher rate of terminal bonus.
Tan Yew Ming, a local actuary, studied the report on the collapse of Equitable Life. He found that the problem of Equitable Life was the high rate of terminal bonus promised to policyholders that were not reserved.
When the court decided that Equitable Life had to pay the terminal bonus, Equitable Life faced financial difficulties and had to cease transacting new business. This concluson was also reported by BBC in a commentary.
If Equitable Life had declared a higher rate of annual bonus, they are required to set aside reserve for the bonus. This would have given them a stronger financial position.
I hope that Income will study this matter carefully and avoid the risk faced by Equitable Life, i.e. promise high terminal bonus rates that are not funded.
Tan Yew Ming, a local actuary, studied the report on the collapse of Equitable Life. He found that the problem of Equitable Life was the high rate of terminal bonus promised to policyholders that were not reserved.
When the court decided that Equitable Life had to pay the terminal bonus, Equitable Life faced financial difficulties and had to cease transacting new business. This concluson was also reported by BBC in a commentary.
If Equitable Life had declared a higher rate of annual bonus, they are required to set aside reserve for the bonus. This would have given them a stronger financial position.
I hope that Income will study this matter carefully and avoid the risk faced by Equitable Life, i.e. promise high terminal bonus rates that are not funded.
Heavy burden of debts
A few young people have approached me for help to solve their heavy burden of debts. They owed $20,000 or more, on credit card and other borrowings. They are not able to repay the debts.
I advised them to consult this organisation: Credit Counselling Singapore
http://www.ccs.org.sg/
Some of the debtors told me that they had already tried this channel, but the assistance was limited.
I wish to share this advice with many year people. Avoid borrowing on credit cards or other sources. Save now and spend later. You can lend the past savings to yourself in the future, and save on 24% interest.
Read this FAQ:
http://www.tankinlian.com/faq/return.html
I advised them to consult this organisation: Credit Counselling Singapore
http://www.ccs.org.sg/
Some of the debtors told me that they had already tried this channel, but the assistance was limited.
I wish to share this advice with many year people. Avoid borrowing on credit cards or other sources. Save now and spend later. You can lend the past savings to yourself in the future, and save on 24% interest.
Read this FAQ:
http://www.tankinlian.com/faq/return.html
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