Dear Mr Tan,
I've read several articles that you've written where you've advocated buying the STI ETF. Thanks for taking the time to explain in simple terms the pros and cons of the issue.
I belong to the passive investing camp and believe in buying and holding a diversified basket of index-tracking, low-cost funds tracking several world markets and different asset classes. The STI ETF appears to be one such index-tracking, low-cost fund.
However, investing in the STI ETF only gives you exposure to the Singapore market, which is less than 1% of the global market. While it is a good way to participate in the local stock market, it is certainly inadequate if one wants to create and hold a diversified portfolio.
I'm interested to know if you or your readers have managed to construct a portfolio of low-cost (less than 1% expense ratio), passively managed index funds that track global market indices, investing from Singapore?
REPLY
I advise people to invest in an ETF rather than to manage their own stocks. They may forget to take up rights issue or sell the rights, leading to loss due to dilution of their shares. The dividends due to them may be paid to the wrong account. To avoid these losses, the investor has to keep track of the shares - which is quite tedious. It is better to leave these matters to the fund manager of the ETF.
Sunday, June 21, 2009
Incomplete information on shares
Dear Mr. Tan
It is easy for an ordinary share investor to be cheated when they are provided with incomplete information. Below are some examples:
1) The investors are told that a company has huge cash on hand to the tune of say several hundred millions of dollars which give the impression that the company is cash rich and hence will pay good dividend or ready for business expansion. But they are not aware that the company also has huge debt to the tune of say several billions of dollars to clear.
2) The investors are told that the current year profit of a company will exceed say $100 millions which give the impression that the company is making a lot of money. But the investors are not aware that the earning of the company is only a mere 5 cents per share because there is a total of 2 billions shares in the company.
3) The investors are told that the earning of a company has increased 100% over the past 3 years but they are not aware that the company share price has increased 500% over the same period.
4) The investors are told that a company is wining a big contract worth $50 millions which give the impression that the company business is very good. But they are not aware that the wining of a $50 millions contract is not significant to a company with annual turnover of several billions of dollars.
Pang
It is easy for an ordinary share investor to be cheated when they are provided with incomplete information. Below are some examples:
1) The investors are told that a company has huge cash on hand to the tune of say several hundred millions of dollars which give the impression that the company is cash rich and hence will pay good dividend or ready for business expansion. But they are not aware that the company also has huge debt to the tune of say several billions of dollars to clear.
2) The investors are told that the current year profit of a company will exceed say $100 millions which give the impression that the company is making a lot of money. But the investors are not aware that the earning of the company is only a mere 5 cents per share because there is a total of 2 billions shares in the company.
3) The investors are told that the earning of a company has increased 100% over the past 3 years but they are not aware that the company share price has increased 500% over the same period.
4) The investors are told that a company is wining a big contract worth $50 millions which give the impression that the company business is very good. But they are not aware that the wining of a $50 millions contract is not significant to a company with annual turnover of several billions of dollars.
Pang
Puzzle: The Two Tribes
An island is inhabited by two tribes. Members of one tribe always tell the truth, members of the other tribes always lie.
A missionary met two of the natives, one tall and the other short. "Are you a truth teller?" he asked the taller one.
"Ba" the tall native answered. The missionary recognised this as a native word meaning either yes or no, but he could not recall which. The short native spoke English, so the missionary asked him what his companion had said.
"He say 'yes' " replied the short native, "but him big liar!". Which tribe did each native belong to?
Give your answer here.
A missionary met two of the natives, one tall and the other short. "Are you a truth teller?" he asked the taller one.
"Ba" the tall native answered. The missionary recognised this as a native word meaning either yes or no, but he could not recall which. The short native spoke English, so the missionary asked him what his companion had said.
"He say 'yes' " replied the short native, "but him big liar!". Which tribe did each native belong to?
Give your answer here.
Saturday, June 20, 2009
Puzzle - The Tenth Roll
An ordinary dice (such as used in gambling) has six sides, so the probability that any one side will come out is one out of six, or 1/6.
Suppose your role a certain dice nine times. Each time the 1-dot turns up. What is the probablility that the 1-dot will turn up again onthe next roll? Is it better than 1/6, less than 1/6 or is it still 1/6?
Give your answer here.
Suppose your role a certain dice nine times. Each time the 1-dot turns up. What is the probablility that the 1-dot will turn up again onthe next roll? Is it better than 1/6, less than 1/6 or is it still 1/6?
Give your answer here.
Friday, June 19, 2009
Thursday, June 18, 2009
Independent finacial adviser - ad on CNBC
There is an advertisement by Interactive Brokers on CNBC TV. It shows an independent adviser describing her job as helping clients to monitor their investments and trading through a low cost internet platform offered by the advertiser. The adviser gives value to the clients by getting access to the suitable financial products traded on the exchange, at the lowest possible cost.
I hope that independent financial advisers will move to this business model, i.e. give value to the clients and earn a fee for their service. This fee is adequate for the time spent and is not so large as to make the client poorer off.
It is possible for a finacial adviser to make a living with this model, just as a doctor makes a living by giving medical advice for a fee.
Tan Kin Lian
I hope that independent financial advisers will move to this business model, i.e. give value to the clients and earn a fee for their service. This fee is adequate for the time spent and is not so large as to make the client poorer off.
It is possible for a finacial adviser to make a living with this model, just as a doctor makes a living by giving medical advice for a fee.
Tan Kin Lian
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