I 0ften get questions from readers of my blog asking what is the cheapest way to invest.
This question is abit baffling to me sometimes as I do not really understand what exactly they are asking about. I am supposing that the question is actually twofold:
1. What investment incurs the lowest brokerage charges, sales charge or commissions?
2. What is the cheapest form of investment (cheapest in the sense of lowest monthly premium committment or lowest initial capital outlay)?
So the question on what is the cheapest way to invest perhaps is a question on what is the lowest amount of money one can invest in and at the same time incur very low charges or fees that could potentially "eat" into the initial investment amount.
Well, if you ask me, the lowest amount of money one can invest is actually in shares. This is considering the fact that you can buy like 10 shares of SingTel which together with brokerage charges will cost you less than a $100. But that is of course not very efficient as the brokerage charges will make up more than 50% of your initial investment.
For example, a person buys 10 shares of SingTel and the brokerage charges is for example $25 per trade.
If SingTel is trading at $3.00, 10 shares of Sintel will cost $30 while the brokerage charges will make the total investment cost $55! What this basically mean is that for buying 10 shares of SingTel, the investor has paid $55 which brings the average cost of purchase per share to $5.50 compared to $3.00.
What I have shown in the example above is just to show that if you put in a low amount of investment capital, it might be cheap and expensive at the same time. Cheap in the sense that you only required $55 to invest but expensive because the commissions and charges make up a huge percentage of your initial capital outlay.
Well, to cut the whole story short, one needs to balance both the intial capital outlay as well as the charges incurred. I hope to expand on this article in the near future...
So what is the cheapest way to invest? Any tips from anyone?
This blog is about financial freedom and serves to inform, educate and entertain the public on all personal finance matters. The author of this blog has been blogging for 5 over years. He was also a guest blogger at CPF's IMSavvy site (now AreYouReady site). This blog is visited by many unique readers from various countries every month. Do bookmark this blog and leave your comments.
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Flooding in Singapore...Again..
I just read the news and it confirmed my fears. Singapore was flooded again today. Apparently, flash floods hit certain areas and trees also fell at certain places.
I am not surprised. Afterall, when I went to buy my breakfast, I saw a blowhole!
Water was gushing out from a drain cover along the walking pavement and because of the pressure or something, water spurted out like a mini blowhole every few seconds.
What an interesting sight!
Hopefully none of my readers here got caught in the flood while going to work.
Lessons from Silas Marner
Silas Marner is a book written by George Eliot. I just finished this short story which I felt was a wonderful read. In this story, the life of Silas Marner is told.
Silas lives as a lonely waver near the village of Raveloe. He works hard and gains gold and reputation but shuns humanity for it treated him badly once. One night, his stash of gold is stolen and in its place, Silas finds a gift that is more precious....
The way George Eliot wrote this book was wonderful. The way she stringed together words were also perfect in my opinion. What is even more amazing is the way she uses the character of Silas to show the tendency to hoard money amongst human beings. Certain good quotes from the book as follows:
"Do we not wile away moments of inanity or fatigued waiting by repeating some trivial movement or sound, until the repetition has bred a want, which is incipient habit? That will help us to understand how the love of accumulating money grows an absorbing passion in men whose imaginations, even in the very beginning of their hoard, showed them no purpose beyond it."
"His life has reduced itself to the mere functions of weaving and hoarding, without any contemplation of an end towards which the functions tended."
George Eliot has indeed hit many money hoarders right where it hurts. Too often, we treat our work and the accumulation of wealth as the entirety of our lives without giving thought to what purpose they serve.
The end of the story is a sweet ending and I shall not reveal it lest some of you might want to read the book.
World Cup Flops
So France bows out of the world cup together with host country South Africa. Amazingly, France lost 2-1 to South Africa. Even with their Henry and Malouda and Ribery and what nots, they were unable to even get a draw with South Africa!
In this World Cup, I guess we have witnessed what are supposedly "big" name countries struggling to beat the minnows of Asia and Africa. Is this a surprising fact? Or have we just been deluded by the European countries that they are better at football?
Afterall, we are fed regular matches of the English Premier League and stuff like Champions League with footballers like Ronaldo commanding astronomical weekly salaries. We are led to believe that these European footballers are SO GOOD that they deserve their pay and also the additional slots in the World Cup. Just look at how many slots the European teams secured in the World Cup compared to the slots Asia secured and you will understand what I mean.
But perhaps the differences between the big names and the minnows are not so great afterall. As this world cup has shown, the teams can actually be quite well matched. Even North Korea manages to lose to Brazil by just 1 goal. This goes to show that the perceived superiority of European footballers might just be a perception. While Asia, Oceania, N. America and some African nations might be latecomers to the game, they have already caught up significantly with the European counterparts. One can only wonder what it would have been like if Asia was given more slots? Perhaps, we might not see any difference between the big names and the minnows afterall.
Sleepless in Singapore
I think I am suffering from insomnia. I find it difficult to sleep at night. The matter of fact is that I am not tired at all at night. Well, it just feels like my brain is still working on overdrive and I can't seem to calm myself down to sleep.
Sleeping late at night started as a habit that began in national service days and was further cemented during my university days. During those days, sleeping at 3am or 4am or sometimes even 6am at night/morning was common. This must be the reason why I am having sleep problems now.
Or perhaps, a better explanation is that, I am simply a "night" person. I am a walking zombie during the day and at night, I "wake" up. Too bad everyone is sleeping when I am awake.
Well... there is really little that one can do at night. Other than surf the net and catch up on soccer, it is really dull and boring. I sometimes wish I could inject some excitement in my life.
That is perhaps how I manage to start my blogs too. Blogging at night has a calming effect on me. It allows me to make my peace with the day that has just gone by.
Oh well, the street lights are on and I can see them from my window. Trickles of traffic still around. 3 glasses of wine hasn't made me sleepy enough to lie in bed.
Father's Day in Singapore
Yesterday was Father's Day. Or at least it felt like Father's Day.
It was a hot and sunny day as usual and I spent my earlier part of the morning in church. I couldn't really concentrate on the sermon as my mind was wandering around. It mostly went around in circles as I thought of how I am a father now and how it was just so overwhelming.
Being a father means different thing to different people. For me, it has just been an overwhelming experience. I suddenly find myself more acutely aware of my finances and whether I am able to provide the best for my family. If I were to sum fatherhood up in a single word, it will read: RESPONSIBILITY.
I no longer get the freedom to choose my bedtime or when I wake up. I no longer get to choose how to spend the weekends and stuff. It all boils down to being a responsible father and doing activities that are best for my child. The burdens on all fathers are probably the same. And one finds that you sacrifice alot of your time, energies and not to mention money when one becomes a father. It is a very different thing from being a husband to being a father and I must say that I am still getting used to the whole process of it.
On the funny side, dinner was meant to be something special so we ordered some pizza. As the fillings on the pizza was too hot, my job involved eating the fillings on top while leaving the crust for my son to eat. How's that for fatherhood! It was really gross. Me scraping out all the fillings with my mouth and feeding my poor child the remaining crust.
Lazy Saturday Afternoon
It is a lazy saturday afternoon for me. The sun seems to be pretty hot today so it is not a good idea to go out. Wanted to go cycling at first but decided against it. Perhaps I will do that in the evening if time permits.
Ate a late breakfast, had some fried rice for lunch and drank two nice glasses of WolfBlass Moscato.
It has been a habit of mine nowadays to keep a bottle of wine in the fridge to drink over the week. Other wines don't really keep well as they tend to oxidise and turn a bit sourish after some time. I have found out that Moscato wines which are really sweet, do keep for some time while still retaining their taste.
Perfect! Life is worth enjoying while it lasts.
Now all that is left for me to do is surf the net, catch up on my soccer news and then sleep.
Analysis of Asia Junior Life Policy (Part 2)
Previously, I wrote a short analysis on one of the whole life policies that I owned. It can be found over here. Today, I shall continue with my part 2 of the analysis.
In today's analysis, we will look at participating policies and bonuses.
BONUS ALLOCATION
Main feature of a participating policy is its ability to provide stable returns while participating in the performance of a Participating Fund or Par Fund. While one does not have any control over what the par fund is invested in, one can expect to participate in the performance through bonuses which are allocated to the policy holder.
Policy benefits or bonuses depend on the following factors:
1. Investment performance
2. Claims experience
3. Expenses
4. Decision of the Appointed Actuary and approval by Board of Directors
Usually, bonuses are allocated based on the surplus of the Par Fund. When bonuses are being considered, the actuary and directors take into account average performance of the par fund over a period which is longer than one year so as to minimise short term fluctuations in asset values of the par fund.
Hope this short posting explains how bonus allocation works for all you participating policy holders out there.
In today's analysis, we will look at participating policies and bonuses.
BONUS ALLOCATION
Main feature of a participating policy is its ability to provide stable returns while participating in the performance of a Participating Fund or Par Fund. While one does not have any control over what the par fund is invested in, one can expect to participate in the performance through bonuses which are allocated to the policy holder.
Policy benefits or bonuses depend on the following factors:
1. Investment performance
2. Claims experience
3. Expenses
4. Decision of the Appointed Actuary and approval by Board of Directors
Usually, bonuses are allocated based on the surplus of the Par Fund. When bonuses are being considered, the actuary and directors take into account average performance of the par fund over a period which is longer than one year so as to minimise short term fluctuations in asset values of the par fund.
Hope this short posting explains how bonus allocation works for all you participating policy holders out there.
What Am I Saving For?
Saving money is good.
But we need to know what we are saving money for.
Is it just to see our bank accounts grow fatter? Do we have a clear purpose in our savings?
We can choose to spend our money today. Or we can save it up and spend it tomorrow. When it comes to saving, we need to know why we are not spending the money today and instead saving it up. I am writing this post to tell myself why I am not gratifying my desires NOW but instead putting money aside in a bank account.
Here are a few of my savings goal (in terms of priority) for the short term as well as long term:
Short Term Savings Goal (5 to 10 years)
1. COE for my current car when the COE expires (estimated $25K)
2. Europe holiday
3. Down deposit for 2nd property
Long Term Savings Goal (10 to 30 years)
1. Retirement
2. Child's University Education
3. 2nd Car
4. 3rd Property
This reminds me that I need to start saving for my short term goals.
But we need to know what we are saving money for.
Is it just to see our bank accounts grow fatter? Do we have a clear purpose in our savings?
We can choose to spend our money today. Or we can save it up and spend it tomorrow. When it comes to saving, we need to know why we are not spending the money today and instead saving it up. I am writing this post to tell myself why I am not gratifying my desires NOW but instead putting money aside in a bank account.
Here are a few of my savings goal (in terms of priority) for the short term as well as long term:
Short Term Savings Goal (5 to 10 years)
1. COE for my current car when the COE expires (estimated $25K)
2. Europe holiday
3. Down deposit for 2nd property
Long Term Savings Goal (10 to 30 years)
1. Retirement
2. Child's University Education
3. 2nd Car
4. 3rd Property
This reminds me that I need to start saving for my short term goals.
Analysis of Asia Junior Life Policy (TM Asia Life)
As most of my readers will know, I have a "legacy" whole life policy that I took over from my parents after I started working. My parents bought the whole life policy from an agent in the then Asia Life which is now taken over by TM Asia.
The policy name is Asia Junior Life Plus Assurance with Escalating Reversionary Bonus.
Every now and then, I will try to analyse abit of this complicated insurance plan and try to decipher each and single statement on the policy contract as well as bonus declaration statements to see what it means.
Today, I will try to interpret what I read from the Bonus Declaration Statement in Year 2010.
BONUS DECLARATION STATEMENT IN YEAR 2010
TM Asia was kind enough to send a pretty concise booklet on the Annual Bonus Update 2010 together with my bonus declaration statement for the year 2010.
Here are some key points that I note from the Annual Bonus Update:
1. This is the 3rd published bonus update report for TM Asia Life Singapore Ltd's Participating Fund. The annual bonus update 2010 is an update on the participating fund for the year ending 31 December 2009.
2. For 2007, gross investment returns was 12.25%. For 2008, -17.13% and for 2009, 20.05%.
3. TM Asia Life has an unmatched record of never reducing bonus rates. Since they have never reduced bonuses even during the financial crisis of 2008, we can see that insurance companies typically use a bonus smoothing technique to ensure that bonuses are paid out both in good times and bad. When times are good, they might not pay out too much bonus but instead "store" this money in the par fund so that they can have money to pay out bonuses even when the funds are not doing well. In a sense, the policy owner does not get the wild fluctuations in policy value that is associated with investment linked plans. On the downside, it also means that one cannot expect big bonuses even when the market is doing well.
4. Participating Funds can sometimes be "black holes" of investment where we know little about the assets that are being held. In the Annual Bonus report, I can see that the Top 10 Equity holdings for the Par Fund are:
The policy name is Asia Junior Life Plus Assurance with Escalating Reversionary Bonus.
Every now and then, I will try to analyse abit of this complicated insurance plan and try to decipher each and single statement on the policy contract as well as bonus declaration statements to see what it means.
Today, I will try to interpret what I read from the Bonus Declaration Statement in Year 2010.
BONUS DECLARATION STATEMENT IN YEAR 2010
TM Asia was kind enough to send a pretty concise booklet on the Annual Bonus Update 2010 together with my bonus declaration statement for the year 2010.
Here are some key points that I note from the Annual Bonus Update:
1. This is the 3rd published bonus update report for TM Asia Life Singapore Ltd's Participating Fund. The annual bonus update 2010 is an update on the participating fund for the year ending 31 December 2009.
2. For 2007, gross investment returns was 12.25%. For 2008, -17.13% and for 2009, 20.05%.
3. TM Asia Life has an unmatched record of never reducing bonus rates. Since they have never reduced bonuses even during the financial crisis of 2008, we can see that insurance companies typically use a bonus smoothing technique to ensure that bonuses are paid out both in good times and bad. When times are good, they might not pay out too much bonus but instead "store" this money in the par fund so that they can have money to pay out bonuses even when the funds are not doing well. In a sense, the policy owner does not get the wild fluctuations in policy value that is associated with investment linked plans. On the downside, it also means that one cannot expect big bonuses even when the market is doing well.
4. Participating Funds can sometimes be "black holes" of investment where we know little about the assets that are being held. In the Annual Bonus report, I can see that the Top 10 Equity holdings for the Par Fund are:
- TM Asia Equity Fund
- DBS
- UOB
- OCBC
- Singtel
- Capitaland
- Keppel Corp
- Wilmar
- Singapore Airlines
- Singapore Exchange
5. The bonus rate is $10 for every $1000 Sum Assured. I am insured for $160,000. That means that I am entitled to $1,600 bonus for the year. In ADDITION, there is a bonus added on accrued bonus (by a rate of 1%). As my accrued bonus is now $20,292.02, the bonus on bonus is $202.92. The total bonus I get for this year is thus $1600 + $202.92.
6. The accrued bonus is not the cash surrender value. This is a very important point which many people are often mistaken about. The cash surrender value comprises guaranteed plus non-guaranteed components. The accrued bonus makes up part of this non-guaranteed bonus and is pro-rated according to the number of years I have been servicing this policy. In other words, if I surrender the policy now, only 25% of my accrued bonus + guaranteed component will be paid out to me. (As the number of years increases, the bonus is increased in percentages. That is why it is called "Escalating Reversionary Bonus"). To find out what is this amount, it is best that you obtain a Benefit Illustration from TM Asia Life.
That is all for today's analysis. I will analyse the various components at a later date. As mentioned, what I am analysing is based on TM Asia Life's Asia Junior Life Policy. It might not be the same as other insurance policies that are out there. If you are interested in me doing an analysis for your policy, you can send the relevant documents to my email at sgfinancialfreedom@gmail.com. Your name and stuff will be kept confidential but I will analyse the policy and publish my findings on this blog.
What Happened to Goal 2010?
So world cup fever is here.
What happened to our Goal 2010 anyway? Why isn't Singapore in the World Cup yet?
Slovenia just beat Algeria like 1-0. Slovenia only has a population of 2 million and they have managed to enter the world cup twice already!
Singapore already has a population of close to 5 million but we are still nowhere closer to our dream.
I mean fine...we can be contented with being the Champions in women's ping pong and stuff but I still believe that the holy grail in sports for Singapore is the World Cup. Singaporeans are quite passionate about soccer. I can tell that from my facebook alone. I have never seen a facebook status that comments about any other sport OTHER than SOCCER. So soccer is really something that most Singaporeans are passionate about. Ping pong.....sorry....didn't cause much of a buzz on my facebook account as far as I can tell.
Why Isn't Singapore in the World Cup Yet?
I was actually lying in bed preparing to sleep when I started pondering over this question. It got me so agitated that I just had to get up and write about it (as well as catch the match between Serbia and Ghana).
Why aren't we in the world cup yet ? A small population is not an excuse...
Slovenia has been in the world cup TWICE. They only have 2 million people and since only males can play in the World Cup, I figured that they only have like 1 million males? So if Slovenia can make it to the World Cup, there is no reason why we can't do it too.
I guess the main reason is that we LACK FOCUS. We have diversified our attention to sports that have managed to reap rewards. This include table tennis and swimming. But are these sports really able to galvanise the entire nation? South Korea just reported having a few hundred thousand people gathering on the streets to cheer their nation on. If Singapore ever got into the World Cup, I am sure that will happen too. But somehow, somewhere, somebody decided that Singapore soccer was not going to make it and dropped the Goal 2010....
Let's be realistic here...counting on foreigners to help us get into the World Cup is not going to work out well. It might work for table tennis and swimming but it certainly will not work well for the World Cup. Football is a game about 11 people playing as a team. The best players in the world will never come to Singapore to play football. FULLSTOP. We need to stop relying on foreign talent and count on our local talent instead. The foreign talent strategy does not seem to be working well in football.
How to Get into the World Cup
What you are about to read from here onwards is going to sound ludicrous. It might even sound crazy. But this is coming at the height of football fever, so no suggestion should ever be treated as crazy.
We need to SEND OUR PLAYERS ABROAD for exposure and experience. That is what the South Koreans have been doing. And I think their strategy will pay off as many of their players are playing in European clubs now giving them the necessary exposure. They no longer "fear" their European counterparts as they have experience playing with them And we all know that this kind of exposure is very important especially on the big stage.
Here comes the tricky part. Big European clubs will not be willing to accept our Nor Alam Shahs and what nots...
Well, the answer is actually quite simple. We get GIC and Temasek to buy these clubs. (See, now you know that I am crazy. But just humour me for a while =) Since these clubs are treated like businesses, it will not be difficult to liquidate these holdings in the future. Who knows? We might even make a profit from selling these clubs in the future.
Based on my "pluck from the air" estimates, I figured that our reserves should be able to buy us a couple of good clubs in England, Italy, Spain, Germany, France and whatever league there may be in Europe. We can also buy a few lower league clubs if they are cheaper.
The next thing will then be to sponsor teenage boys (12 years old onwards) to go on attachments to these clubs for exposure. Food, lodging, pay, etc will be sponsored by these clubs so it is a win-win situation for us. My estimate is 2-3 Singaporeans per club due to the foreigner limit that is usually in place. My guess is that we will need a good 30 to 40 players to be exposed (at any one time) to European kind level of competition to ever make it for the World Cup. Based on that figures, we might need to buy 13 to 15 clubs (with perhaps 5 clubs in the championship level kind of leagues).
There will also have to be a major revamp in the Singapore sports scene. Focus will have to be given to soccer.
This might involve eliminating sports from CCAs in schools. Let boys concentrate only on soccer. This will have to be nation wide sacrifice. These boys can join 2nd or 3rd CCAs that are not soccer if they want to. But all boys in all schools will have compulsory soccer lessons and CCA. Only if they are really bad will they be kicked out of the sport.
To incentivise it, a program can be developed such that boys who make it to the very top will be exempted from National Service, given the chance to be attached to the major clubs (that are now owned by Temasek and GIC), etc, etc. In other words, we must make it really attractive monetarily for them to want to represent Singapore at the highest level.
The S-League will also need to be revamped to ensure that the "local soccer scholars" do not lose out because of the lack of international exposure. More foreign teams should be invited to join the S-League. A super league should be created with tempting prize money. Perhaps only 2 All-Singaporean teams will be allowed while the rest will be foreign teams. This will help to ensure that the S-League is also able to churn out good players who might be late bloomers compared to the "overseas soccer scholars" who have already secured their places in the Singapore owned European clubs.
Once we do this, I am sure we are set for World Cup glory in maybe 10 years time. Goal 2020 perhaps?
Am I crazy? Perhaps.. But this idea doesn't stop me from dreaming....
Notes:
1. Our small size in population does not mean we need to rely on foreign talent in the strategy outlined above. We could have 1 or 2 foreign talent if we need to but this could be best reserved for the coaching staff.
2. We might be small in physical size. But if the Koreans and Japanese can make it, I am sure Singaporean males can do it too. Football is not really ALL about size. The Spanish footballers are also quite small in size too (1.7m tall).
All About Expenditure
This post is a continuation of my previous 2 postings:
The 2nd posting (All About Income) has also been published at CPF's IM$avvy site.
As the title of this posting suggests, I will now try to give my thoughts on expenditure and how it affects your financial plan. In the first posting, I gave a simplified model that I have always used when I think about financial planning. It basically involves just 4 simple variables of income, expenditure, savings and returns on savings/investments.
The amount a person saves is largely dependent on his income and expenditure. While a person with high income and high expenditure might have low savings, a person with low income and low expenditure might actually have higher savings in absolute dollars and cents!
Take for example a person who earns $1000 per month and spends $950 per month. His savings rate is only $50 per month. On the other hand, a person who earns only $500 per month but spends $400 per month saves $100 per month. That is twice the amount of the supposedly "richer" person.
Expenditure - What Works and What Doesn't
I applaud people who are able to stick by their budgets when it comes to spending money. For me, it is close to impossible. I find it difficult to stick to any sort of budget and also find it too time consuming to calculate every single cent or dollar that I spend.
So how do I control my expenditure? The answer is I don't!
Budgeting doesn't work for me. What works for me is first determining how much I want to save. Experts call this the "Pay Yourself First" technique. After determining how much you want to save each month, you simply set aside that money (be it in a savings plan or separate bank account) whenever you receive your salary.
In this manner, whenever your salary arrives, the amount that you want to save is immediately deducted and goes into a saving plan or another savings account. All that is left in your bank account is the money that you have to spend. Hooray!
Isn't that a better way to view expenditure compared to boring budgeting? (Pardon me if you still use the budgeting method).
So by paying yourself first, you literally get to spend all the remaining money. Of course, the onus is on you to set aside the correct amount of savings that you will like to achieve each month. How much you should save depends on a wide variety of factors and it is too simplistic to give a general rule of thumb.
Current Expenditure versus Future Expenditure
I just coined the two terms above to differentiate between one's current versus future expenditure.
Current expenditure is the monthly expenses one needs to survive each month.
Future expenditure is the expected future expenses that one expects to incur.
As you can see, it is actually quite easy to forecast or predict current expenditure but really difficult to predict future expenditure.
For current expenditure, what you can do is simply add up all the money that flows out of your pocket each month. This would include things like food, grocery, loans, bills, etc, etc. Add all this together and it should give you a rough gauge of your current expenditure.
Future expenditure is a little more tricky especially if you are trying to predict expenditure many years down the road. A simple case of future expenditure could be the case of motor insurance. One usually pays motor or car insurance in one lump sum each year. This might vary from year to year (depending on whether you get into accidents and stuff). If you do not cater enough money for this future expenditure, you might be surprised to see a big drop in your bank account whenever the motor insurance is due.
A more complex case of future expenditure would be your monthly expenditure during your retirement years. As some of us are probably still very far from retirement, it might be difficult for us to gauge how much we might really need. Sometimes, unexpected events like illnesses can occur and might increase our future expenditure. On the whole, experts believe that people need roughly 50 to 60 percent of their last drawn salary during their retirement years. Again, that is hard to predict for the younger folks who just started working as we have no idea what our last drawn salary will be when we retire!
Anyway, to make things really simple, what I do is just make sure that my monthly current expenditure remains roughly the same each year. In this way, I am better able to predict my future expenditure and thus determine the savings rate that I hope to achieve. Savings and expenditure are actually closely linked. If you are not saving much, it is most probably because you are spending too much.
If you can't remember a word that you have just read, just remember this simple message:
Pay Yourself First and Spend the REST!
Why Interest Rates Rise
Interest rates of bonds are rising in the bond market. That means that people are more confident in the economy. Why is there this correlation?
The Federal Reserve Chairman Ben Bernake says he does not expect the US economy to fall back into another recession.
This boosts people's confidence in stocks and thus reduces the demand for safer investment instruments like bonds and treasury notes. In order to attract investors to bonds, the issuers of bonds thus need to raise the interest rate or coupon rate to make it competitive and lucrative enough for investors to invest in them. Otherwise, these investors would rather invest their money in the stock market.
Hope this provides a simple explanation on why interest rates rise when the economy is doing well.
Question:
As interest rates rise, can we also expect the interest rates or deposit rates in our banks to rise?
The Federal Reserve Chairman Ben Bernake says he does not expect the US economy to fall back into another recession.
This boosts people's confidence in stocks and thus reduces the demand for safer investment instruments like bonds and treasury notes. In order to attract investors to bonds, the issuers of bonds thus need to raise the interest rate or coupon rate to make it competitive and lucrative enough for investors to invest in them. Otherwise, these investors would rather invest their money in the stock market.
Hope this provides a simple explanation on why interest rates rise when the economy is doing well.
Question:
As interest rates rise, can we also expect the interest rates or deposit rates in our banks to rise?
Are You A "Loser" for Eating Alone?
I saw this short article on Straits Times regarding eating alone.
In Singapore culture, it is deemed embarrassing to be seen eating alone. In fact, I think most people would rather skip their meals if they have to eat alone.
Is it true?
Based on my personal experience, I have certainly felt that way before. In the past, when I was still working in an office, we would all go and eat lunch together at the cafeteria nearby. Sometimes, due to work committments, my usual lunch kakis would be out of office and I was left alone. It was really "embarrassing" in a sense to be seen eating alone in the cafeteria where there were many other acquaintances / colleagues around. These are of course the people that you don't usually mix around with because they are from different branches and departments.
Many times, I found that I resorted to packing my lunch and eating at my desk rather than be seen eating alone.
Nowadays, I have overcomed that fear. Perhaps it is because I no longer work in an office. I certainly don't mind eating alone. But there is still that nagging fear that I might meet someone I know and it might be an "embarrassing" situation.
Do you dare to eat alone?
In Singapore culture, it is deemed embarrassing to be seen eating alone. In fact, I think most people would rather skip their meals if they have to eat alone.
Is it true?
Based on my personal experience, I have certainly felt that way before. In the past, when I was still working in an office, we would all go and eat lunch together at the cafeteria nearby. Sometimes, due to work committments, my usual lunch kakis would be out of office and I was left alone. It was really "embarrassing" in a sense to be seen eating alone in the cafeteria where there were many other acquaintances / colleagues around. These are of course the people that you don't usually mix around with because they are from different branches and departments.
Many times, I found that I resorted to packing my lunch and eating at my desk rather than be seen eating alone.
Nowadays, I have overcomed that fear. Perhaps it is because I no longer work in an office. I certainly don't mind eating alone. But there is still that nagging fear that I might meet someone I know and it might be an "embarrassing" situation.
Do you dare to eat alone?
What Happened to Michael Fay?
I read with interest the news on a Swiss man who has been charged with vandalising the MRT trains at the train depot in Singapore. 33 year old Oliver Fricker has been released on a bail of $100,000 even though his passport is still impounded. His accomplice who is British is apparently already out of Singapore.
This reminded me of the Michael Fay incident back in 1994 where there was this whole big hoo haa when Singapore decided to cane a 18 year old American (who was reportedly suffering from ADHD) after he vandalised cars and stole road signs.
So what happened to Michael Fay?
After much pleading from the US, Singapore still proceeded to cane him at Queenstown Remand Prison. President Ong Teng Cheong however reduced the number of strokes of cane from 6 to 4. Still, the United States media had a field day thrashing Singapore's supposedly draconian laws, almost labelling us as a repressive state for scarring a poor boy for non-violent act.
When he was released from prison, Michael Fay flew back to the United States to be with his biological father. He had moved to Singapore earlier to join his biological mother and step-dad.
After that, he went on various television interviews and claimed that he was "tortured" and did not actually vandalise any cars. He admitted to stealing road signs but not to vandalism. Subsequently, he was involved in substance abuse and also possession of marijuana. He was also involved in reckless driving and stuff in Florida.
What Will Happen to Fricker?
So if an 18 year old American teenager who supposedly came from a broken family and had ADHD was actually sentenced to jail and given 4 strokes of the cane, what will happen to Fricker?
33 years old isn't exactly young.
Perhaps his punishment might be even more severe. But then we can only wait and see....
Cure Hiccups
I was hicupping the whole of yesterday. It was really irritating.
Knowing that hiccups is caused by too little carbon dioxide (I read it somewhere), I tried to hold my breath, hoping that it will remove my hiccups. But it didn't and so I kept hiccuping.
Then I came across this amazing 30 second cure for hiccups. I totally did not believe it but when I tried it, it worked like magic and my hiccups was gone. This must be the best cure that exist today. Here is how I did it:
Step 1 : Inhale air with your mouth until your lungs are full. Keep the air in there.
Step 2: Start swallowing. It is just the act of swallowing. You don't really have to be swallowing anything. Remember to still keep the air inside your lungs.
Step 3: Inhale some more air even though it is just a wee bit of air since your lungs are still full from step 1 and then do the swallowing thing again (repeat step 2).
Holding your breath alone does not seem to work well. You need to do the swallowing thing. Don't ask me why.
My hiccups was gone in less than 30 seconds just by using this method. This is the best method I have discovered in my 28 years of living! It was so good that I just had to blog about it.
The Fear of Something Specific is More Real than the Fear of Something General
As humans, we fear the specific more than the general.
I stumbled upon this thought while reading Al Gore's "Assault on Reason". In one of the chapters, he gave the example of how people would rather buy air travel insurance that covers specifically terrorist threats compared to just a normal air travel insurance (which by the way, also covers terrorist threats).
Somehow, it seems that people are more afraid when they know the specifics of what they have to be afraid of.
Air travel insurance.... No way... But air travel insurance that covers terrorist attacks...Now, that paints a picture in the mind of the consumer and the fear of this improbable event becomes more real (Remember September 11?).
The fear of something specific - something we can visualise - is often more real than the fear of something general.
That is why we see advertisements about critical illness insurance that mentions specific illnesses like cancer. Critical illness just seems too general and nobody really knows what critical illness means anyway. But highlight the specifics and you sort of create a visual image in the person's head. Let me show you 2 scenarios that helps bring out a person's fear when the specifics are highlighted.
Scenario #1
Insurance agent: Let me show you this plan which gives you coverage for critical illness.
Consumer: I don't think I need insurance. (Thinking in his head: What on Earth is critical illness?? Better not ask.. Later I look stupid)
Scenario #2
Insurance agent: Let me show you this plan which provides coverage against Cancer, Heart Attack, Stroke...
Consumer: Wah... okay..how much does it cost?
The above just highlights two simple scenarios. It could be the same insurance product that is being recommended but when one highlights the specifics (cancer, heart attack, stroke, etc), the fear suddenly becomes real. The insurance agent has painted a picture in the person's mind of a specific scenario that could happen to him in the future.
Funny isn't it? Our mind (and ears) sometimes do play funny tricks on us.
The author is really amused that humans often fear the specifics more than the general even though the general could include the specifics. (Hope that does not confuse you). However, he too finds himself falling into this trap.
4th Cheque from Google's Adsense
I received my 4th cheque from participating in Google's Adsense program.
It is not a lot really but still works out to be some"kopi lui" to keep me motivated to keep on blogging. Since people have been saying that I have been too transparent with my finances, I guess I won't reveal how much I got this time. All I will say is that it is the biggest cheque I have received thus far.
What I like about the cheque is that it seems to be mailed from all the way from the United States. The cheque is green in color and is very different from other personal cheques that I have received. On the cheque, everything is printed out. The best thing of course is the currency exchange rate. With the exchange rate now at 1US$ to 1.4S$, it works out to be quite a neat sum. Enough to eat a good meal =)
And in case you are thinking that this blog is making lots of money, it is not. It is some other site of mine that is actually raking in most of the money. Though I spend lots of time on this site, it still hasn't been that "productive" in that sense of the word.
It is not a lot really but still works out to be some"kopi lui" to keep me motivated to keep on blogging. Since people have been saying that I have been too transparent with my finances, I guess I won't reveal how much I got this time. All I will say is that it is the biggest cheque I have received thus far.
What I like about the cheque is that it seems to be mailed from all the way from the United States. The cheque is green in color and is very different from other personal cheques that I have received. On the cheque, everything is printed out. The best thing of course is the currency exchange rate. With the exchange rate now at 1US$ to 1.4S$, it works out to be quite a neat sum. Enough to eat a good meal =)
And in case you are thinking that this blog is making lots of money, it is not. It is some other site of mine that is actually raking in most of the money. Though I spend lots of time on this site, it still hasn't been that "productive" in that sense of the word.
NTUC I-Term Policy: The Cheapest in Singapore?
I was alerted by a reader of my blog that Aviva's SAF Group Term Policy might not be the cheapest around in Singapore. In fact, he pointed out that Philips Capital was selling some term insurance on its site. So I did a check and realised that he could be right afterall! The policy is actually called I-Term and is underwritten by NTUC Income and distributed by Philips Capital.
I had bought Aviva's SAF Group Term Policy some years back. Looking at the NTUC I-Term Policy now, I think that it is indeed a competitive product that might be much cheaper than other term policies around. Please do your own research as this is just based on my gut feel and opinion.
NTUC I-Term Policy
NTUC's term policy is a pure protection plan that provides coverage for death, total permanent disability and terminal illness. Terminal illness should not be confused with critical illness. Suicide is excluded for the first year of coverage. For TPD, the payouts are over a period of 5 years (10% for the 1st 4 years and the remaining 60% on the 5th year). This is pretty common amongst all insurance plans.
For a male of 30 years of age (non-smoker), a coverage of $100,000 will cost only $9 per month for a 5 year term and $13 per month for a 20 year term. As such, it does seem that the premiums are much lower than Aviva's SAF Group Term Policy! In addition, the premium rate is guaranteed for the term of the policy. That means that the premiums you will pay are guaranteed based on the number of years you are covering for yourself. Based on the website, you can choose between a 5 year up to a 35 year term of coverage (in increments of 5 years).
In fact, a Business Times article on August 2006 reported that I-Term was the cheapest term policy around then. I am not sure whether it is still the cheapest around in the market today.
No Minimum Entry age and Max Entry Age of 74yrs old (age last birthday)
I-Term has no minimum entry age. This means that a baby can be covered from as young as 1 year old. The maximum entry age is 74 yrs old.
A Quick Analysis
Based on first glance, I-Term indeed looks to be a value for money term insurance policy offering high coverage for low premiums. Unless someone corrects me, I would like to think that this is the cheapest term insurance I know of in the Singapore market today. Thanks to my reader for giving me the heads up on this cheap term insurance plan!
What I like about this plan is basically how it is competitively priced and how it offers a variety of terms for coverage. If I were to switch to this term insurance, I will most likely opt for the 35 year term coverage. In terms of monthly premiums, it might be cheaper than the SAF Group Term Policy that I have. In addition, it will be guaranteed renewable.
Aviva's SAF Group Term Policy provides rebates each year that help to make their term plans even more competitive when you take into account the rebates. For example, I have received this year's rebates of up to $100. So comparing premiums wise, it is a close fight between these two term plans. Nevertheless, I still think that for the benefits provided, the I-Term is rather competitive for its pricing. As my SAF Group Term Policy is lumped together with other critical illness and personal accident coverage, it is difficult for me to do an apple to apple comparison and decide whether it is truly worthwhile to switch plans at the moment.
If there is any NTUC income agent reading this blog, do let me know what the premiums are like for critical illness coverage and personal accident coverage. Who knows, I might even purchase the policy from you! =)
I had bought Aviva's SAF Group Term Policy some years back. Looking at the NTUC I-Term Policy now, I think that it is indeed a competitive product that might be much cheaper than other term policies around. Please do your own research as this is just based on my gut feel and opinion.
NTUC I-Term Policy
NTUC's term policy is a pure protection plan that provides coverage for death, total permanent disability and terminal illness. Terminal illness should not be confused with critical illness. Suicide is excluded for the first year of coverage. For TPD, the payouts are over a period of 5 years (10% for the 1st 4 years and the remaining 60% on the 5th year). This is pretty common amongst all insurance plans.
For a male of 30 years of age (non-smoker), a coverage of $100,000 will cost only $9 per month for a 5 year term and $13 per month for a 20 year term. As such, it does seem that the premiums are much lower than Aviva's SAF Group Term Policy! In addition, the premium rate is guaranteed for the term of the policy. That means that the premiums you will pay are guaranteed based on the number of years you are covering for yourself. Based on the website, you can choose between a 5 year up to a 35 year term of coverage (in increments of 5 years).
In fact, a Business Times article on August 2006 reported that I-Term was the cheapest term policy around then. I am not sure whether it is still the cheapest around in the market today.
No Minimum Entry age and Max Entry Age of 74yrs old (age last birthday)
I-Term has no minimum entry age. This means that a baby can be covered from as young as 1 year old. The maximum entry age is 74 yrs old.
A Quick Analysis
Based on first glance, I-Term indeed looks to be a value for money term insurance policy offering high coverage for low premiums. Unless someone corrects me, I would like to think that this is the cheapest term insurance I know of in the Singapore market today. Thanks to my reader for giving me the heads up on this cheap term insurance plan!
What I like about this plan is basically how it is competitively priced and how it offers a variety of terms for coverage. If I were to switch to this term insurance, I will most likely opt for the 35 year term coverage. In terms of monthly premiums, it might be cheaper than the SAF Group Term Policy that I have. In addition, it will be guaranteed renewable.
Aviva's SAF Group Term Policy provides rebates each year that help to make their term plans even more competitive when you take into account the rebates. For example, I have received this year's rebates of up to $100. So comparing premiums wise, it is a close fight between these two term plans. Nevertheless, I still think that for the benefits provided, the I-Term is rather competitive for its pricing. As my SAF Group Term Policy is lumped together with other critical illness and personal accident coverage, it is difficult for me to do an apple to apple comparison and decide whether it is truly worthwhile to switch plans at the moment.
If there is any NTUC income agent reading this blog, do let me know what the premiums are like for critical illness coverage and personal accident coverage. Who knows, I might even purchase the policy from you! =)
TM Asia Life Policy
I have an insurance policy with TM Asia. To be exact, it is a whole life policy with a plan name that is called Asia Life Plus. My parents bought it for me when I was 16 and I have been servicing it after I started working.
Recently, TM Asia declared that yearly bonus again for participating whole life policies and even though the returns on the par fund for 2009 wasn't fantastic, the bonuses declared were not reduced. TM Asia has never cut their bonus for the past 10 years. At least that is what I have heard.
After receiving the annual bonus statement, I decided to call the customer service centre for a benefit illustration of my policy. I just received the benefit illustration today.
Do note that since this policy was bought by my parents and handed over to me, I never did any comparisons with other companies then. While many people have never heard of TM Asia, it is actually quite a big company though it is relatively unheard of in Singapore. Its tied agency force is also very small as it tends to rely on IFAs to distribute its products.
A Quick Analysis
I am currently at Year 12 of my policy year meaning that I (and my parents) have paid 12 years of premiums worth a total of $22,204.80 for a coverage of $160,000 for Death and TPD. There is no critical illness coverage in this policy.
Based on the current surrender value, it is $11,200 (Guaranteed) and $4,357 (Non-Guaranteed). That adds up to a total of $15,557 in surrender value provided that the non-guaranteed component is accurate.
The bonuses become guaranteed additions to the sum assured once they are declared.
Terminal bonus on death and maturity
TM Asia whole life policy has the following feature:
Below 10 yrs : 0%
10 to 14 yrs : 25%
15 yrs: 50%
16 yrs: 100%
17 yrs: 150%
18 yrs: 200%
19 yrs : 250%
20 to 24 yrs: 300%
25 to 29 yrs : 400%
30 and above : 500%
This basically means that the non-guaranteed component for death or maturity of the policy starts to increase as the policy years go by. As my policy is only 12 years old, whatever bonuses that have been declared are still subject to 25% payout only. That means that if $10,000 in bonuses have been declared, the non-guranteed component payout is only $2,500. This bonus chart stated above relates only to claims during death and maturity (policy year 99 I am guessing). So I guess it is not really meaningful to me unless I die or I live past the age of 99.
Terminal bonus on Surrender
To add to the already confusing policy, there is another table that shows how the terminal bonus for surrendering the policy works out.
It states: "Terminal bonus on surrender as percentage of attaching bonus is illustrated from the end of 19th year onwards if applicable."
19 year: 125%
20 to 24 yr : 300%
25 to 29 yr: 400%
30 and above: 500%
Basically, at the 20th policy year ( meaning after 19 years of paying premiums), I can expect to see a big jump in the non-guaranteed component of the surrender value. This is illustrated in the benefit illustration where the non-guaranteed surrender value jumps from $8,464 to $20,858 during the 19th and 20th policy year respectively. At the 21st policy year, it almost doubles again to $42,057.
Conclusion
I have had thoughts of surrendering this policy but decided against it as I wanted to wait until the 20th policy year before making any decision. In any case, this policy serves as a good protection and savings plan for me. I know many people will recommend the proverbial Buy Term Invest the Rest mantra but this has worked well for me thus far. While it does not have Critical Illness coverage, I still have my coverage from other policies.
Many IFAs have also touted TM Asia's whole life policies as being one of the most competitive in the Singapore insurance industry. I am not sure how true that is. The only thing I know is that in terms of bonus declaration, TM Asia has been able to pay out a constant bonus over the past 10 years. Dollar for dollar and coverage wise, I would like to think that other companies might have even more competitive plans that provide better coverage at a lower premium. In fact, I think many of the whole life policies now are rather similar and competitively structured. Insurance companies often review their products so that they become better than their competitors.
Recently, TM Asia declared that yearly bonus again for participating whole life policies and even though the returns on the par fund for 2009 wasn't fantastic, the bonuses declared were not reduced. TM Asia has never cut their bonus for the past 10 years. At least that is what I have heard.
After receiving the annual bonus statement, I decided to call the customer service centre for a benefit illustration of my policy. I just received the benefit illustration today.
Do note that since this policy was bought by my parents and handed over to me, I never did any comparisons with other companies then. While many people have never heard of TM Asia, it is actually quite a big company though it is relatively unheard of in Singapore. Its tied agency force is also very small as it tends to rely on IFAs to distribute its products.
A Quick Analysis
I am currently at Year 12 of my policy year meaning that I (and my parents) have paid 12 years of premiums worth a total of $22,204.80 for a coverage of $160,000 for Death and TPD. There is no critical illness coverage in this policy.
Based on the current surrender value, it is $11,200 (Guaranteed) and $4,357 (Non-Guaranteed). That adds up to a total of $15,557 in surrender value provided that the non-guaranteed component is accurate.
The bonuses become guaranteed additions to the sum assured once they are declared.
Terminal bonus on death and maturity
TM Asia whole life policy has the following feature:
Below 10 yrs : 0%
10 to 14 yrs : 25%
15 yrs: 50%
16 yrs: 100%
17 yrs: 150%
18 yrs: 200%
19 yrs : 250%
20 to 24 yrs: 300%
25 to 29 yrs : 400%
30 and above : 500%
This basically means that the non-guaranteed component for death or maturity of the policy starts to increase as the policy years go by. As my policy is only 12 years old, whatever bonuses that have been declared are still subject to 25% payout only. That means that if $10,000 in bonuses have been declared, the non-guranteed component payout is only $2,500. This bonus chart stated above relates only to claims during death and maturity (policy year 99 I am guessing). So I guess it is not really meaningful to me unless I die or I live past the age of 99.
Terminal bonus on Surrender
To add to the already confusing policy, there is another table that shows how the terminal bonus for surrendering the policy works out.
It states: "Terminal bonus on surrender as percentage of attaching bonus is illustrated from the end of 19th year onwards if applicable."
19 year: 125%
20 to 24 yr : 300%
25 to 29 yr: 400%
30 and above: 500%
Basically, at the 20th policy year ( meaning after 19 years of paying premiums), I can expect to see a big jump in the non-guaranteed component of the surrender value. This is illustrated in the benefit illustration where the non-guaranteed surrender value jumps from $8,464 to $20,858 during the 19th and 20th policy year respectively. At the 21st policy year, it almost doubles again to $42,057.
Conclusion
I have had thoughts of surrendering this policy but decided against it as I wanted to wait until the 20th policy year before making any decision. In any case, this policy serves as a good protection and savings plan for me. I know many people will recommend the proverbial Buy Term Invest the Rest mantra but this has worked well for me thus far. While it does not have Critical Illness coverage, I still have my coverage from other policies.
Many IFAs have also touted TM Asia's whole life policies as being one of the most competitive in the Singapore insurance industry. I am not sure how true that is. The only thing I know is that in terms of bonus declaration, TM Asia has been able to pay out a constant bonus over the past 10 years. Dollar for dollar and coverage wise, I would like to think that other companies might have even more competitive plans that provide better coverage at a lower premium. In fact, I think many of the whole life policies now are rather similar and competitively structured. Insurance companies often review their products so that they become better than their competitors.