Tuesday, April 6, 2010
Investing and the casino
This article is quite frank. It says that investing is like the casino. The lessons from the casino can be applied to investing. I agree.
Lost & Found Service
I have launched the Lost & Found website.
I sent this media release, but the newspapers did not cover it. I have approached several transport companies and educational institutions to tell them about this service and to encourage them to report the lost & found items in this website, to make it easy for the items to be matched. Two of them have responded positively.
The Police called my office to tell me that under the law, I am not allowed to keep the found item. They said that the found item has to be reported to a neighborhood police station and kept in a central store. This works fine for me and save me the hassle. I will post more details about this service in the website.
I hope that my readers can help to promote this website through Facebook and other social media.
Tan Kin Lian
I sent this media release, but the newspapers did not cover it. I have approached several transport companies and educational institutions to tell them about this service and to encourage them to report the lost & found items in this website, to make it easy for the items to be matched. Two of them have responded positively.
The Police called my office to tell me that under the law, I am not allowed to keep the found item. They said that the found item has to be reported to a neighborhood police station and kept in a central store. This works fine for me and save me the hassle. I will post more details about this service in the website.
I hope that my readers can help to promote this website through Facebook and other social media.
Tan Kin Lian
Affordable housing
Read this article in the blog: Diary of a Singapore Mind
My comment:
The problem has reach a stage which is difficult to solve. Housing price is too high. People are unclear about how to treat housing - is it an investment or a cost of living? One party blames the other party.
My preferred approach is to create a new type of housing based on controlled price, i.e. cost plus. This can be adjusted with inflation and reduced by depreciation. Give people a choice whether they wish to treat housing as an investment (i.e. based on the current market pricing) or as a cost of living (i.e. based on the controlled pricing).
My comment:
The problem has reach a stage which is difficult to solve. Housing price is too high. People are unclear about how to treat housing - is it an investment or a cost of living? One party blames the other party.
My preferred approach is to create a new type of housing based on controlled price, i.e. cost plus. This can be adjusted with inflation and reduced by depreciation. Give people a choice whether they wish to treat housing as an investment (i.e. based on the current market pricing) or as a cost of living (i.e. based on the controlled pricing).
Tell a blatant lie
The benefit illustration of a life insurance policy showed the distribution cost to be 7.3% of the total premium paid over 25 years. If the total premium amounted to $100,000, the distribution cost was $7,300. The insurance agent twisted the figures and said that the cost was only $292 a year and amount to 0.3% of the invested sum (i.e. similar to the cost of investing in a exchange traded fund).
This is a blatant lie, as the annual cost of $292 is still 7.3% of the annual investment of $4,000. The agent twisted the figure to confuse the clients.
How many agents adopt this type of dishonest way to sell their high cost life insurance policy? Is this type of blatant lie being taught to the insurance agent by their training managers?
Do you know which agent you can trust, and which agent to avoid? It is important for consumers to be educated and avoid falling into this type of trap. Spend $12 to buy my book, Practical Guide on Financial Planning, and learn a better way to manage your savings and investments through an exchange traded fund. Do not spend $7.300 as distribution cost in a financial product that gives you poor value.
Tan Kin Lian
This is a blatant lie, as the annual cost of $292 is still 7.3% of the annual investment of $4,000. The agent twisted the figure to confuse the clients.
How many agents adopt this type of dishonest way to sell their high cost life insurance policy? Is this type of blatant lie being taught to the insurance agent by their training managers?
Do you know which agent you can trust, and which agent to avoid? It is important for consumers to be educated and avoid falling into this type of trap. Spend $12 to buy my book, Practical Guide on Financial Planning, and learn a better way to manage your savings and investments through an exchange traded fund. Do not spend $7.300 as distribution cost in a financial product that gives you poor value.
Tan Kin Lian
Group insurance from Aviva
Aviva has offered attract group insurance - term, critical illness and personal accident - to their existing policyholders under the SAF scheme and their spouses. I have looked at the premium rates and found them to be quite attractive.
I have recommended to consumers to buy term insurance (including critical illness and personal accident riders) and to invest their savings in a low cost investment fund. The group insurance offered by Aviva under the SAF scheme is suitable and get my endorsement.
If you are not an existing policyholder under the Aviva SAF scheme, you can get similar group insurance under the SAFRA scheme offered by NTUC Income - if you are a SAFRA member (and most Singaporeans are).
For the low cost investments, it is best to invest in the STI ETF managed by State Street (lot size is 1,000 shares or about $2900) or the fund managed by DBS (lot size is 100 shares or about $290). The transaction cost and expense ratios are quite similar in both cases. The DBS fund has the advantage of being in smaller lots. (Note: there is a minimum brokerage of 40% and a higher brokerage rate for smaller transactions, so it is not feasible to invest in 100 shares lot of DBS STI ETF. It is better to invest in the Statestreet 1000 shares lot.)
If you buy term insurance for protection and invest in a low cost investment fund, you will get a much higher return from this investment strategy compared to the high cost life insurance policies that are offered in the market now. This concept is explained in my book, Practical Guide on Financial Planning ($12) available here.
Tan Kin Lian
I have recommended to consumers to buy term insurance (including critical illness and personal accident riders) and to invest their savings in a low cost investment fund. The group insurance offered by Aviva under the SAF scheme is suitable and get my endorsement.
If you are not an existing policyholder under the Aviva SAF scheme, you can get similar group insurance under the SAFRA scheme offered by NTUC Income - if you are a SAFRA member (and most Singaporeans are).
For the low cost investments, it is best to invest in the STI ETF managed by State Street (lot size is 1,000 shares or about $2900) or the fund managed by DBS (lot size is 100 shares or about $290). The transaction cost and expense ratios are quite similar in both cases. The DBS fund has the advantage of being in smaller lots. (Note: there is a minimum brokerage of 40% and a higher brokerage rate for smaller transactions, so it is not feasible to invest in 100 shares lot of DBS STI ETF. It is better to invest in the Statestreet 1000 shares lot.)
If you buy term insurance for protection and invest in a low cost investment fund, you will get a much higher return from this investment strategy compared to the high cost life insurance policies that are offered in the market now. This concept is explained in my book, Practical Guide on Financial Planning ($12) available here.
Tan Kin Lian
Platform fee on Fundsupermart (2)
Some investors are unhappy with the platform fee of 0.5% that is being imposed by Fund Supermart. They have two options of responding:
- move to another platform, e.g. Dollar Dex or POEMS]
- sell their unit trusts
They should consider the second option for the following reasons:
- they probably make a profit from the high stockmarket prices now
- by selling the funds, the fund managers may ask FSM to remove their platform fee.
The underlying unit trusts already pay a share of their annual fee to FSM. It is not fair for FSM to add a new layer of fee.
- move to another platform, e.g. Dollar Dex or POEMS]
- sell their unit trusts
They should consider the second option for the following reasons:
- they probably make a profit from the high stockmarket prices now
- by selling the funds, the fund managers may ask FSM to remove their platform fee.
The underlying unit trusts already pay a share of their annual fee to FSM. It is not fair for FSM to add a new layer of fee.
Deflation
When the Japanese economy busted at the end of the 1980s, it went through a deflation that has lasted nearly 20 years. Some commentators said that the US economy may go through a period of deflation but they are optimistic that the economy is more robust and will recover. I am less optimistic. I think that the underlying weakness of the free market system , which contributed to asset bubbles, may affect the US economy as badly as it had affected the Japan economy.
During a period of economy growth, people are willing to borrow and invest in assets, leading to inflation. During a period of deflation, people are not willing to borrow and invest and the excess capacity will take a long time to be utilized. More people will remain unemployed and this will worsen the deflationary cycle.
The second world war ended the deflation of the 1930s. We may need a third world war to end this deflation. But it is also possible to find a more peaceful solution - and that requires to restructure the global economic system into a more socialist type, using the Keynesian approach or its modern version.
Tan Kin Lian
During a period of economy growth, people are willing to borrow and invest in assets, leading to inflation. During a period of deflation, people are not willing to borrow and invest and the excess capacity will take a long time to be utilized. More people will remain unemployed and this will worsen the deflationary cycle.
The second world war ended the deflation of the 1930s. We may need a third world war to end this deflation. But it is also possible to find a more peaceful solution - and that requires to restructure the global economic system into a more socialist type, using the Keynesian approach or its modern version.
Tan Kin Lian
Chance for change in Singapore
Read this article by Yoong Siew Wah.
My comment:
I believe that change will be good for Singapore. Several of the old economic and social policies have not been good for the people and need to be changed.
My comment:
I believe that change will be good for Singapore. Several of the old economic and social policies have not been good for the people and need to be changed.
More business for taxi drivers
A taxi company boss told me that the business for taxi drivers has picked up significantly since the opening of the Sentosa integrated resort (aka casino). The average earnings of taxi drivers has increased to $2,500 compared to $2,000 previously. Some taxi companies have applied to the Government for work permits for taxi drivers from overseas - due to shortage of locals willing to be taxi drivers. I hope that more unemployed workers will come forward to try driving a taxi.
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