Friday, July 30, 2010
Saturday, July 24, 2010
Thursday, July 22, 2010
Wednesday, July 21, 2010
While that might be a concern to most people, it is important to note that if your insurance agent has switched companies, he or she is not supposed to induce you to lapse or surrender your existing insurance policies and buy a new policy from them. This unethical agents are just out to earn extra commission as they no longer earn the trailer commissions that they would have earned if they had stayed with the same company. When they join a new insurance company, they start from ground zero all again and have to start building up their client base all over again. The fastest and easiest way that they go about doing this is to ask their previous clients to take up new policies with them, often citing the benefits of doing so.
Some of them might even suggest that they can continue to "take care" of you. That is not the case as the insurance policy contract that one purchases and owns is an agreement between the insurance company and you. The insurance agent is just a distributor and does not own the clients in a legal sense. When your insurance agent leaves the industry or leaves the company, the insurance company will get another insurance agent to "service" you. If all else fails, just call the customer service hotline. That is the usual way I find out information and it is much faster than going through your insurance agent.
In the insurance industry, this malpractice of replacing old policies with new policies has led to agents being caught and fired. Many have also been disillusioned by the unethical conduct and have left the industry or lamblasted the industry. However, the practice is still very widespread. I have met with many insurance agents before and all of them have at certain points in time asked me to surrender one of my existing policy to buy a "better and newer" policy from them. This happens even when I have met IFAs.
This point has been elaborated by Mr Tan KL before at his blog. In most cases, surrendering your insurance policy does not make sense. This is especially so if you are asked to buy a similar insurance policy to replace the policy that you have surrendered or lapsed.
From a monetary point of view, it is very difficult to justify surrendering a policy for another policy. Always remember to get a 2nd or 3rd opinion when in doubt so that you can make a more informed decision. Better still, ask people like me who are not in the industry and you will probably get a more informed and independent opinion. Of course, you will have to buy me coffee =) .........Just kidding..
Tuesday, July 20, 2010
Of course, cost is one of the main factors that I choose to do it locally. Besides, I cannot afford to do it on a full-time basis and most probably will have to pursue it on a part time basis.
I was just wondering whether doing a masters in my related field of work will bring about a better career progression for me. Besides, I have also been wanting to do a masters for the longest time but I just don't know whether it is worthwhile to spend the time and money on something unless there are potential benefits. The other option will be to wait for a few more years, save up enough money and then go overseas to do my masters.
Decisions, decisions, decisions....
Monday, July 19, 2010
Sunday, July 18, 2010
Friday, July 16, 2010
Thursday, July 15, 2010
I am running a poll to find out what you feel or think is the most toxic investment product out there in the market.
The poll can be found on the right hand column of this site. It is right under the picture of the pretty lady and should be located near to the top of the blog. The poll is only on for 4 more days so do let me know what you think simply by voting. Just one click and I will know the answer.
I have listed 4 choices of:
1. Land banking
3. Wine investments
This will give an idea of what people think about the various products. I will share the findings with all so do contribute your thoughts yah?
I have always been quite interested in economics. Unfortunately, I have never been trained in this subject. The closest I got was to study Economics 101 in university and that was pretty much about supply and demand lines. We hardly talked about currency appreciation and inflation.
This is my version or laymen's language of what is going on:
1. Singapore's output in terms of products and services have been pretty high over the past 2 quarters. As such, the expected GDP figures are going to be between 13 to 15 percent. GDP stands for Gross Domestic Product and is basically a measure of the country's economic output. For the long term, a healthy GDP growth is around 3 to 5 percent.
2. When GDP rises, inflation is also expected to increase. This is because firms require more workers and start bidding against one another to attract workers so as to produce a higher output. This leads to an increase in the prices of goods and services and thus leads to inflation. When GDP grows rapidly, inflation is also expected to rise rapidly. Most economists try to keep a low steady inflation rate of 2 to 6 percent. That basically means that there will ALWAYS be inflation in Singapore as it is judged that low rate of inflation is good for the economy. So do take note that inflation is not some airy fairy thing that only takes place once in a blue moon. Most countries try to keep a positive inflation as they view that deflation is bad for the economy. In that sense, we can expect inflation to be always with us.
3. By appreciating the Singapore currency, inflation will be kept in check to the low rate. MAS is not trying to abolish inflation. Rather, it is trying to achieve the targeted inflation rate of 2 to 6 percent which is deemed healthy.
I am not an economist and I am also not from MAS. But I guess this is the linkage between GDP, inflation and currency appreciation. At least, this is the way I understand it to work =)
Wednesday, July 14, 2010
Had lunch at the Sarawak Kolo Mee place. I am not sure why they call it Kolo mee. I am not sure what Kolo is supposed to mean. Anyway, the place was almost empty. The waitress greeted me warmly and I took a seat. The last time I had eaten the Kolo Mee was like more than 3 years back. Now I understood why the place was empty. A bowl of Kolo Mee which is basically like noodles, pork bits, prawns, wanton and char siew cost over $6. Together with the drink that I ordered, lunch cost me a whopping $8.55!
Nevertheless, I must say that the Kolo Mee was really tasty. I am pretty sure they drenched it in lard oil or something cos it was really super duper tasty. But I guess I won't be eating it anytime soon simply because paying six over bucks for a small bowl of noodles doesn't make economic sense to me. I know of $2.50 wanton mee that taste just as good. There is this Pontian Wanton Mee outlet at various hawker centres which are really worth it and yummy....
Feeling aimless the past few days. My wife asks me why I am not talking to her. I also do not know what to say. I just feel like I have achieved quite a bit of the goals I have set for myself in life. In the past, it was stuff like get married, get a job, travel to Europe, study abroad, have children, buy a car, get my own flat, etc etc. And I realise that I have already sort of achieved all these goals already. Whereas my peers still have the fun and joy of looking for their life partners or are looking forward to buying a car or flat, I have already sort of BEEN THERE DONE THAT. I am just feeling so aimless.
Perhaps it is time to setting more goals. Or perhaps it is about discovering what my true purpose in life is.
I have just finished reading Ninety Eighty Four by George Orwell. I thought I read it in the past but I must have been mistaken. Because I do not remember it being so saucy. My goodness. To think that I recommended the book to my wife when we first met... hahahha.. she must have thought that I must be quite "loose". I figured that I must have skimmed read it the first time or probably just jumped right to the end of the book without reading the middle parts. Anyway, 1984 is a good read. I really liked the parts about history only existing in written records and in our minds line of argument. Wicked if you ask me.
If I don't exist on written records and I don't exist in people's minds, does it mean that I do not exist at all?
On to reading my next book : One Flew Over the Cuckoo's Nest
Tuesday, July 13, 2010
Monday, July 12, 2010
If every asset were to only appreciate then basic financial theory would be flawed. The demand would far outweigh the supply if everyone wanted to buy these assets that only went up. Unfortunately the banks lent out money to those who did not understand basic economics. For that matter banks did not understand basic economic either. The real estate market was not at equilibrium. The demand far outweighed the supply due to the fact that the banks were the outside force contributing to the demand. The definition of equilibrium is simply a state of the world where economic forces are balanced and in the absence of external influences. If the banks did not supply that external force, than the demand for assets would not have been so great, and the prices would not have escalated to the levels they did.
The real estate market got so far away from equilibrium that is having to snap back to attain a level where supply equals demand. At the moment there is little to no demand for many of these assets. This is also due to the fact that banks that once supplied endless amounts of loans to anyone who asked for them, are not loaning out money. In both instances economic theory has proven true. The demand became out of touch with equilibrium and so did the amount of loans issued. In both cases, they are in the process of correction which will take time. The current state of the market is such that there is so much supply that prices will have to come down to meet the demand. Not only are people hesitant to buy a home, but the banks that once lent money to anyone are being rather picky to those who want to take out a mortgage.
Today, loan availability is reserved for those with a steady employment history and a good credit score. The supply of available homes will hopefully continue to be bought up by investors and buyers who are able to obtain loans. If the supply remains at the highs that it is currently we should expect to see a continued falling of prices. It will come to the point where homes are cheaper to buy from the banks than they are to build. Bank homes will be coming on to the market for the next few years. Unless there are inflation pressures, the prices will fall.
This presents a buying opportunity to any foreign buyer that has a stronger currency that the Unites States Dollar. The exchange rate for these buyers will be able to buy them more home for the money here in America. By looking at exchange rates on the internet or a forex account, those interested in buying real estate in America can calculate the cost of the property in their own currency. Let us hope that our currency remains weak enough to attract foreign buyer to help rid of us of the supply. It is imperative for the health of our country that that real estate market is in equilibrium, and not gyrate in one direction or the other.
The following article is a guest post from Forex Fraud. While written for a United States audience, it is still relevant to Singapore in certain ways. If you wish to contribute guest posts to this site, please email firstname.lastname@example.org
Below is the first article that I contributed to CPF's IM$avvy. It discusses the current state of the financial planning industry in Singapore. I hope readers find this useful.
Being too trusting of others can sometimes work against us in financial planning. Too often, we are not skeptical enough when it comes to financial advice offered by others. Can you trust your financial planner? Is he really providing independent and unbiased advice or is he just trying to close a sale?
Advisory Business or Sales Business?
When the Financial Advisers Act was first introduced in Singapore, many thought that the financial planning industry would come up with a new breed of financial advisors who were independent and unbiased. While the fee based or fee-only model of financial advice is slowly taking off, most people in Singapore are still unwilling to pay a financial planner for the time and energy he takes to craft a financial plan. As long as the market is not ready, financial planners will continue to be compensated based on commissions.
A thin line separates the financial advisory business and the sales business. A sales person is one who derives his income from commissions. On the other hand, the financial advisory business is supposed to provide independent and unbiased advice to clients. It is important to realize that potential conflict of interests arise when financial planners earn commissions from the sale of financial products.
If your financial planner is earning a commission from you, can you trust that he will make the best financial decision for you? If a financial planner is selling you a product that you know very little about, how can you trust that the product is suitable for you?
Financial Products and Imperfect Information
I just read a book and it talked about a wallet auction.
Imagine that I pull out my wallet from my pocket and placed it on the desk in front of me. How much will you offer for the money in it? Whatever the case, any buyer of my wallet will be certainly worse off as I will only accept offers that they should not be making. I know what I am selling but the buyer does not know exactly what he or she is buying. It all boils down to information asymmetry or imperfect information.
The same theory applies to financial products. Imperfect information exists and the buyer has to overcome his lack of knowledge of the situation or of the seller. Market economies often deal with this problem through the mechanisms of advertising and reputation. As a consumer of financial products, your perception of a certain company’s reputation might influence you to purchase the product or invest in certain instruments. Or perhaps you have seen some advertisements that offer yields and gains that are too tempting to resist. Or perhaps, your friend had recommended a “reputable” financial planner that you can trust.
The reason why buyers rely on reputation and advertising is that they are not willing to spend the time to overcome the information asymmetry that exists. For example, a doctor gives me a prescription for a certain ailment. I trust his recommendation because of his reputation and credentials even though I am clueless about the medication that he has just offered me. In this case, it is unwise of me to spend 5-6 years of my time going to medical school just to breach the information asymmetry that exists between him and me.
But are financial products so complicated that we cannot take some of our own time and effort to breach this information asymmetry? Can you still trust that your financial planners will give you the best recommendations when there is a potential conflict of interests?
Trust Yourself: Financial Education
One simple way to overcome this information asymmetry would be for the consumer to become educated in financial matters such that they are better able to understand their own financial situation and make better financial decisions. This would help them better understand the financial products that they wish to purchase. For the beginner, the CPF IMSavvy website has a comprehensive list of articles that should serve as a good foundation for anyone interested in becoming more financially literate.
Are you willing to invest the time and energy to learn more about financial planning? Or do you still trust that a financial planner will do the best job for you?
Financial knowledge is not enough by itself. It is akin to knowing about healthy living and eating but still being overweight and living a very unhealthy lifestyle. When I am choosing what to eat for lunch or dinner, I know what are the healthy food choices. I know that I ought to stay away from fizzy drinks. I know that I ought to exercise alot more. Yet even when I am armed with all this knowledge, I do not act upon it. I continue to eat unhealthy food and skip my planned exercise sessions. What results (love handles, tummy, failing IPPT) is not due to my lack of knowledge about healthy living.
The same case applies to most people when it comes to financial knowledge. They might know the need to save and invest their money. They know the importance of planning for their retirement. They know the importance of insurance. The problem is not really a lack of knowledge. The problem is that they fail to act upon it. I know of people who are well-versed in terms of financial knowledge but whose financial health itself are in a "mess".
In Bloom;s Taxonomy of Learning, it has been identified that people need to acquire Knowledge (K), Skills (S) and Attitude (A). As such, we can see that knowledge is just part of the entire learning process. Having knowledge alone does not mean you will succeed. It is an interplay between the K, the S and the A.
Financial Knowledge is not enough. We need to act upon that knowledge. We need to work on our attitudes that are so ingrained within us.
Friday, July 9, 2010
- are living in a 3-room or smaller flat
- are at CPF draw down age (currently 62 years) or older
- have not enjoyed more than one housing subsidy in the past
- have not previously owned a 4 room or bigger flat, or private residential property
- have lived in the flat for at least 5 years
- have a monthly household income of $3000 or less
- Do not have any outstanding loan of more than $5000
Thursday, July 8, 2010
Wednesday, July 7, 2010
Monday, July 5, 2010
I was sitting in a hairdresser's chair recently enjoying my usual haircut when the hairdresser started chatting me up. After the usual pleasantries, she highlighted to me in a very light hearted manner that my hair or scalp was slightly oily.
(I have had oily hair for many years and I always thought that it was because I used too much gel when I was younger to style my hair. I switched to hair wax which was supposedly better but that did not stop my hair from being oily.)
After highlighting that fact, she went on to give me a diagnosis of the male pattern hair loss that I was facing and asked me questions about whether I had experience hair loss, receding hair line etc..
All this hit home quite hard as I have been pretty conscious about the fact that my hair line has indeed been creeping up my forehead and I looked a little bald from certain angles. Even some friends have told me that I looked like a fat and balding uncle on facebook (thanks to candid and unflattering pictures of me that end up on facebook without me knowing...)
That is very sad. To be 28 and going on to 29 and to look bald is not a thought that I like entertaining very much. But everytime when I look in the mirror, I am certain that my hair seems to be getting much thinner and I will one day lose all my hair.
After much sales talk, she managed to convince me to buy a bottle of shampoo for $22. It has some teatree oil extract which is supposed to be good to keep my scalp less oily. I willingly parted with the money as I believe prevention is better than cure and I am willing to spend money to prevent myself from going bald. Her sales talk that preyed on my fear of losing hair was also really good.
After a few weeks of using the product, my wife has commented that my hair is no longer oily and is smooth and nice to run her fingers through. I am still not sure about the anti-hairloss function of the shampoo and can only wait it out for a few more years to see whether it is really effective.
Hopefully this will turn out to be one of my better investments.
Saturday, July 3, 2010
The funny thing about how I read news articles is not on what they report but rather on certain aspects that probably interests noone else but me. In reading this news article, I was more interested in why the goal was to raise the median income instead of the average/mean income. The 2nd thought that formed in my head was this: Will an average Singaporean earn more or less than the median income of $3,100 per month?
The difference between median and mean
This is probably secondary school maths but I guess there is a slight difference between median and mean (or average) when used in statistics. Generally, it depends on the data set and whether the mean or the median gives you the more accurate representation of what "average" really means.
When data is symmetrically distributed, the mean is a good way of calculating the average income. The mean is simple obtained by adding all incomes together divided by the total population. However, when data is skewed either to the left or the right, it might be better to use the median income to give a more accurate reflection of what "average" is in Singapore. So the question that is left to be answered is whether the income distribution curve is skewed to the left or the right. (Of course, to measure income that is not symmetrical, the median is a much better way that the mean).
So there is the tricky part if you say that the "average Singaporean can expect his income to rise because the median income is expected to rise." Here, what it means is that median income actually represents the "average" Singaporean's income more truthfully.
So I basically answered my two thoughts in this posting.
1. To measure income which is often not symmetrically distributed, we use median income which reflects the average income much better.
2. An average Singaporean can expect to earn the median income of $3,100 in ten years time and not more or less.
Other questions that will probably go unanswered are these:
1. Is the mean income in Singapore higher or lower than the median income?
2. Which one is harder for the government to achieve? Increasing the mean income or the median income?
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