Financial Reviews

Panic Selling, Panic Buying

2008-10-19T15:51:00.004+08:00

The worst thing one can do is to sabotage their own financial plans by engaging in the senseless behaviour of panic selling and panic buying. The recent financial turmoil arising from the subprime crisis in the US has unnerved many investors. Just months ago, many investors were still looking at increasing their investments for fear of missing out on the attractive returns that were being dangled by the various well performing stock markets.

Why is it that we find it so much easier to invest our money when markets have headed up significantly and find it so difficult to invest our money when markets are depressed and downside is limited?

Much research had gone into analysing such investor behaviours and it largely boils down to panic buying and panic selling.

When markets are on an uptrend, the good news abound and money appears to be readily available on the tables for anyone willing to reach out for it. Investors are afraid of losing out on pocketing the potential profits with each day's delay. Speculators rush into the markets in panic buying and all sorts of equities, blue chips or not, rise across the board. Yet, when stocks are chased to sky high valuations, not many see the warning signs that whatever goes up must come down, and continue to pour cash into these already risky investments, priming themselves for major losses once the market corrects the excesses.

When the market inbalances start to even out with corrections, people rush to liquidate their investments. Granted, this is sensible behaviour for the protection of the value of the assets will enable one to re-enter the market at a later date. The problem perhaps, is knowing when to re-enter the market. When is the best time to invest again?

Panic selling results in stock valuations falling below their reasonable valuables and once investors have confidence that the valuations are extremely compelling, it should be a good time to start investing in the market again. No one knows when exactly stock markets bottom and neither will anyone know how long bearish sentiments will prevail. However, one thing history has shown us - After a period of negative sentiments and stock prices had been depressed, it is only a matter of time before stocks rebound. As long as time is on the investors' side and free cash is not being earmarked for any use in the short term, it is better to bargain pick some fundamentally solid stocks and hold on to them.

In each investor's lifetime, it is expected that there will come various opportunities whereby the market is put up for sale at fantastic bargains. The major market crashes like US Sub-Prime Crisis in 2008, SARS in 2003, dot com bubble of 2000, Asian Financial Crisis in 1997, Black Monday in 1987, Wall Street Crash in 1929... all presented superb opportunities for the brave to go against the panic selling of the masses. Investors should be rational about investing in the stock market. When the upmarket departmental store launches an exceptional sale, people rush in to grab all sorts of merchandise. When the stock market falls to extremely depressed levels, people are avoiding the market instead of picking up good discounted shares that will bring much happiness once the financial storm blows over?

In the stock market, money is not made by following the crowd. Panic selling and panic buying is not going to help grow the investment portfolio spectacularly. Exceptional returns are only available to those who are able to see beyond the fears of the common investor. Who dares win.

Investing in Bear Markets

2008-08-14T23:18:00.003+08:00

The financial meltdown arising from subprime losses may have been the first event in a multi year economy downturn. Property prices are down, foreclosures are up, banks are getting more selective in their loans and stock markets have been on a downward trend.

Is the bear market already upon us? In the near short term, it is highly probable that stock markets are going to continue their downward trend though some bounces will occur when oversold levels are perceived.

Is it time to exit the market and hold cash instead? Cash is king but such downturns are the best investment opportunities for those with spare cash on hand. Pick up stocks with solid fundamentals. During the last downturn, the market darlings were companies with strong balance sheets or a large cash pile to back them up. Blue chips that regularly paid out dividends were also highly preferred because of the stability they accorded. It even spawned unit trusts such as First State Dividend Advantage and SGAM Singapore Dividend Growth.

Pick up stock bargains now. Go contrarian and the rewards will be reap when the economy turns around and fairly valued companies shine through.

CPF Changes for an Ageing Population

2007-09-26T22:23:00.000+08:00

Prime Minister Lee unveiled quite a few proposed changes to the Central Provident Fund (CPF) Scheme during his national day rally speech and the changes have been debated in Parliament recently.

Quite a few changes have been proposed to address the ageing population the country is facing. Top of the list are measures to encourage re-employment of older workers, followed by increases in the CPF interest rates and lastly, and most controversial, measures to make savings last for life expectancy.

While official statistics show that more people are living till an older age, the cold hard facts do nothing to address the perceptions that these statistics do not apply to the individual. The common view on the ground is still that the government has once again moved the goalposts and made our money out of reach; everytime one moves near the markers where we can lay our hands on OUR money, the criteria is moved so that the marker moves that slightly further out of reach... Will people ever live to enjoy the fruits of their many years of labour, to pocket the money that had been kept out of their reach for decades.

Already, today's retirement age at 62 is being moved to 67. The age of 67 is definitely not cast in stone. In another decade or 2, will it be possible that the retirement age is moved even further to 70 years old or beyond? I doubt it not. It may even eventually reach a stage where retirement age is scrapped and people are given the option to work till the day they drop dead.

What about increasing the interest rates on CPF savings? An additional one percent on the first $60,000 in the CPF accounts will definitely be welcomed but the catch is that the initial $20,000 of the Ordinary Account can no longer be invested under the CPF Investment Scheme for higher returns. Furthermore, the Special, Retirement and Medisave Accounts (SRMA) will no longer offer fixed interest rates but instead be pegged to a long term bond rate.

Not being able to invest the first $20,000 of the OA is likely to impact the potential returns that can be obtained by those who are financially savvy. Utilising the money to buy into stable dividend-paying blue chips is highly likely to yield returns beyond 3.5%. The long term bond rate is also an unknown. Will it better the 4% that CPF currently pays on the SRMA? While past data appears to indicate that CPF members will be able to expect similar or better returns, the standard disclaimer that appears on brochures of financial products must be kept in mind - Past performance are not necessarily indicative of future performance.

The one proposal that really got everyone talking is that of making longevity insurance compulsory. While this is still tentative and a committee had been setup to look at it, I really hope that the committee will eventually propose that it not be implemented. The basic idea is to get every CPF member to buy into an annuity scheme so that those who do live beyond 85 will be guranteed an income for life. Yet again, there is a catch to this. The proposal in its current form will see CPF members paying for the annuity and getting nothing back if they die before the age of 85. Why should the government stipulate how I should use MY money to subsidise others whom had not planned for their own longevity? The intention behind CPF was that individuals will be self sufficient and fund their OWN retirement with the government stepping in to help those who are unable to help themselves. The oft quoted slippery slope of welfare appears to be being tested here. While sounding selfish, there is no reason why I will want to fund the longevity costs of someone whom I do not know. If I die, my assets should be directed to the benefit of those related to me, those whom I will be most concerned about.

Personally, with the exception of the longevity insurance, I am fine with the CPF changes proposed. In reality, CPF is a retirement scheme that will not suffice to fund a comfortable retirement. For those who can, they must make alternative plans to ensure a reasonable standard of living upon retirement. Eventually, with the constantly moving criteria, being able to lay our hands on the CPF money needs to be considered a bonus. But! DO NOT dictate that I should spend my hard earned money funding the needs of someone whom had not taken pains to need his own retirement needs.

POSB MySavings Account

2007-08-01T23:13:00.000+08:00

Never before have I been so keen to take up a promotion I received via email. Within 30 minutes of receiving the POSB MySavings Account emailer, I was drawn to the flexibility and higher interest rates being offered and submitted my application online for an account.

What exactly is it about MySavings Account that is so attractive? For a huge bulk of us, POSB/DBS had remained our main bank because of the legacy of POSB being a people's bank. That implies that much of our cash is lying in standard savings account earning measly 0.25% p.a. interest. MySavings Account actually offers a way out by dangling special interest rates as high as 1.5% per annum, 6 times higher.

$50 - $290 : 0.45%
$300 - $790 : 1.00%
$800 - $1,490 : 1.20%
$1,500 - $3,000: 1.50%

What's more is that there is flexibility to increase or decrease the monthly savings amount and even amend the monthly savings date anytime.

I went for the 2nd tier amount in order to enjoy the 1% interest rate but there is a small catch for those who bother to read the fine prints. Depositors who open a MySavings Account with at least $420 monthly savings amount can get a $42 dining voucher at Raffles The Plaza but the cost of the gift may be debited if the MySavings Account is closed or the monthly savings amount is reduced within a year after account opening. My advice is to start the MSA account with a monthly amount of $410 or less to avoid getting this "free" gift unless you belong to the group who is able to commit to a large monthly amount for higher interest rates. Being greedy for this "free" gift may jolly well end up making you worse off if you ever need to close the account within a year.

Fidelity Multi Asset Navigator Fund

2007-06-15T21:28:00.000+08:00

Fidelity Multi Asset Navigator Fund offers not only exposure to bonds, equities and cash, but also property and commodities to improve diversification and enhance performance. Consequently, this mutual fund is able to tap into an array of opportunities globally to which many other funds do not otherwise have access. Such a more diversified asset mix is suppose to reduce the overall risk of the portfolio without forgoing returns. An added draw of the fund is that the asset mix changes accordin to the stages of the global economic cycle. Investors need not perform fund swtiching and are able to hold onto the same fund throughout the cycle, potentially reducing the hassle and costs of investing.

The major asset allocation of this mutual fund is reviewed on a monthly basis but the fund manager is free to change the asset allocation on other days if circumstances dictate and rebalance the positions daily in order to manage cash flows.

The fund is expected to achieve asset reallocation gradually reflecting the slow movement of the economy from one phase to another. While economic models suggest four different portfolios depending on the phase of the economic cycle, the transition from one to the other will be achieved progressively rather than immediately.

This mutual fund is considered to be a low to medium risk investment based on the fact that it will have no less than 30% in bonds and cash at any time and that it also benefits from asset classes diversification. The asset mix will be adjusted to reflect the prevailing trading conditions and the Fund should therefore be more resilient to downside than pure equity-based funds. Investors will do well to note that such diversified funds also typically underperform pure equity-based funds in a bullish market.

It will do well to consider adding this mutual fund to a portfolio to gain added stability. For the more aggressive portfolio, this fund may not fit as well, potential limiting the upside achievable. It may be worthwhile to consider purchasing this fund as a defensive play when the global economic cycle has been expected to have peaked.

The Truth About Making Money Online

2007-06-08T23:29:00.000+08:00

Make money online. Internet business opportunity. Autopilot income. Affiliate programs. Home based business opportunities. High yield investment products. Ultimate secrets. Proven systems. Internet millionaire...

A simple search on the internet will turn up tonnes of websites that purport to be able to show you how easy it is to make money off the internet with minimum effort. Majority of them will claim to have enjoyed success and are already enjoying the fruits of their "investment" and will be willing to share their secrets of success with you for a small fee.

Behind all these claims is the reality that making money online is not as easy as it seems. The advent of online advertising channels such as Google Adsense, Adbrite, etc. has definitely made making money online much more feasible but it is still not so simple as sitting down and writing an ebook for sale, making use of Adwords to drive traffic to your website, etc.

The core reason making money online succeeds is high quality content. Yet, high quality content that is put on the internet differs from that which is traditionally published. Online content needs to be properly copywritten so that it gets the attention of search engines and ranks high organically on search results page.

A good copywriter for online content has to consider many factors when structuring and formulating the material. Only with optimised high quality content will the online presence of the content be picked up and eventually lead to returns for the site owner. This is not an easy task and few people have truly mastered the art of doing it.

Making money online is possible but keep an eye out for those who try to potray it as being effortless. Simple logic tells us that if it is truly so effortless, then countless people will already have had become millionaires. Those who potray online money making as easy are trying to make a quick buck from those gullible enough to trust them and pay for their "secret formulae". Content is king and focus on getting content right... Money will follow thereafter.

CPF Minimum Sum, Medisave Minimum Sum to Go Up

2007-06-07T20:45:00.000+08:00

From the first of next month, Singaporeans turning 55 years old will have to leave $99,600 in their CPF accounts under the Minimum Sum scheme. The amount is $5,000 more than the current minimum sum of $94,600 and will will apply to CPF members who turn 55 between 1 July 2007 and 30 June 2008.

Those who set aside the $99,600 fully in cash will receive a monthly payout of $790 from age 62 for about 20 years.

Likewise, the Medisave Minimum Sum will also be increased with the new amount being $28,500, up by $500. At the same time, the Medisave contribution ceiling will also be raised by $500 to $33,500.

As usual, many people will complain about the increase in CPF minimum sum since it is their money that has been "locked up". However, if we look deeper into the higher minimum sum, the raise in minimum sum will likely have effect on 2 different distinct groups of people, the low income and middle income groups. High income earners can be effectively exclude from any analysis since CPF is not likely to suffice to meet their retirement needs and they should have had pursued alternative wealth management opportunities.

For the low income group, the raise in minimum sum will better assist them in building a dependable source of retirement funds. With an ageing population, such self reliance during retirement has a wider impact on society as a whole. Taxes can be controlled at lower levels as the working population will not have to totally shoulder the burden of providing for the retired.

For the middle income, they have been increasingly feeling the squeeze of not getting the benefits provided to the poor while striving to attain and maintain the luxurious lifestyle so envied of the rich. In the course of this pursuit, the middle income group had frequently stretched their means to the last dollar. Of course, there is also a subgroup within this strata whom live well within their means and have little issues preparing for retirement but again, it is important to focus on the fact that CPF is a basic scheme to help in retirement and those who are able to should jolly well enhance their retirement income via other avenues.

What the raise means is actually rather trivial if we consider that CPF savings does attract interest of at least 2.5% and 4% for the Ordinary and Medisave accounts respectively. The impact of these raises is most acutely felt by those who are already nearing retirement age but for those who are still active in the workforce, the compounding effect of returns over time can be harnessed to enhance the CPF sums. 2.5% and 4% are the minimum guaranteed returns but if idle sums are properly invested into the right vehicles, it will not be difficult to double the returns of the Ordinary Account and get annualised returns of 5% or more.

Low Fee Mutual Funds

2007-05-31T11:19:00.000+08:00

Many people had put forward that investors who invest in mutual funds should seek out those that are low cost so that they are not unnecessarily paying for the services of poor performing fund managers. With such an argument, these same people are touting that investing into index funds will be one of the best option available since they are typically low cost.

Is such an investment style justified? After reviewing through the various options, I see that there is no point to deny competent fund managers an equitable renumeration if they are able to deliver value to my investments.

The aim of investing via mutual funds is that risks are diversified and the services of professionals are engaged to manage the funds. Many people expressed dissatisfaction with management fees charged because the funds had not performed up to expectations. This is a justified complaint since no one is willing to be shortchanged when they are paying good money in anticipation of proper returns.

But the truth is that there are mutual funds out there that are very consistently delivering above average returns. Investors just have to do their homework to sieve out these investment gems and invest into them. What harm is there to pay a portion of the returns obtained as renumeration when these returns are not achievable on our own when we have no time to monitor and diversify investments?

NETS Fee Hike

2007-05-24T23:43:00.000+08:00

Network for Electronic Transfers, NETS, is owned by DBS, OCBC and UOB and it has just recently announced that transaction levies are going to be upped by between 0.75 and 2 percentage points over 3 months from 1 Jul 2007. This is going to be pegged at between 1.5 and 1.8 per cent of purchases bringing the levy close to credit-card transaction fees which stand at about 2 per cent for Visa transactions and around 3 per cent for American Express.

While around 83 per cent of Singaporean residents currently use NETS for purchases in a strong embrace of cashless transactions, many retailers are starting to advise customers to pay cash or pay more for purchases.

The levy increase appears to be against the original purpose of NETS, to offer alternative system for cashless payment.

While NETS tries to justify that it is facing increasing competition from international card schemes and the increase is necessary to maintain its viability, insisting that NETS transaction fees are still the lowest in the market, it fails to deliver good logic.

Which business raises prices when consumers are not using its products? With the advent of debit cards, cashcards and other more innovative products, NETS is under intense competition and it appears to have made the wrong strategic move in trying to maintain revenues.

More worrying is the fact that NETS is owned by DBS, OCBC and UOB. While these banks had been paying minimal interest rates for savings deposits and lending it out at high rates, pocketing handsome profits, they had opted to squeeze more profits out of retailers with this NETS levy increase. When the backlash against this increase materialises and consumers start abandoning NETS and paying in cash instead, banks are likely to start considering charging consumers for the use of the automated teller machines and cornering the consumer even more.

Consumers are on the way to the guillotine, to be placed at the mercy! Woe!

Fairprice Plus Savings Account and Credit Card

2007-05-13T22:59:00.000+08:00

FairPrice Plus is a collaboration between NTUC FairPrice Co-operative Limited (NTUC FairPrice) and Oversea-Chinese Banking Corporation Limited (OCBC Bank) with all banking products and services being provided by OCBC Bank unless stated.

This collaboration seeks to offers simple banking solutions at all FairPrice supermarkets islandwide.

This is a very new player on the banking market but it is worth taking a good look because of various interesting features...

The Fairprice Plus Savings Account provides an interest rate of 1% p.a., much higher than that offered by most banks. Futhermore, there is no minimum opening balance, monthly balance requirements and monthly service charge and with this account, there is access to over 770 OCBC and UOB ATMs islandwide!! Being able to earn 1% interest from the first dollar deposited is something that had not been available to many in a long long time.

Sounds good so far? There is more to come! The Fairprice Plus credit card offers free membership into LinkPoints loyalty program and gives 2 LinkPoints per $1 spent at FairPrice Plus Stores... It even offers 1 LinkPoint per $2 spent for VISA transactions!

FairPrice Plus hopes to stay steadfast to the values of Value, Simplicity and Transparency and I do think that this offer is a very good start. With the entry of such a competitive offering, hopefully it can help shake up the banking sector and get incumbent banks to start revising up their interest rates for basic saving accounts.

Interview With Ewen Chia

2007-05-11T13:33:00.000+08:00

There are lots of ways to make money via the Internet and making money online is an easy task which many people have had succeess. From the amatuerish ventures to those who have gained from affiliate marketing/adsense/adbrite/etc in a big way, there is a growing interest in how to harness the internet to generate the multiple streams of income automatically.

Getting another income via the Internet is very attractive because it will function 24 hours a day and 7 days a week. Even when sleeping, the online business/programme will still be operating and bringing in money. By diversifying and having multiple streams of incomes, a great buffer is created and ensures continued income. Holding a mundane job is not longer necessary as long as sufficient success via website traffic/referrals/sales/etc is achieved and brings in the money automatically.

Because of the recent request from some friends to join them under this Emailcashpro affiliate programme, I am starting to seriously look into how easy it is to make money online.

While doing my research on creating this sort of autopilot income generation, I came across this interview with Ewen Chia who is supposedly highly successful with affiliate marketing and thought that making it available here will benefit others. He had came up with well received publications such as Secret Affiliate Weapon. This interview video is huge and lasts almost 50 minutes. A suggestion is for your to have the video continue downloading while you go about your other tasks and come back to view it later as the streaming does get quite jerky if it is not downloaded first. While waiting for the video to download, you can take a look at the Secret Affiliate Weapon material that is made publicly and freely available here.

A search on Google for Ewen Chia seems to indicate that this guy really does have some sort of presence in the affiliate marketing arena and his Secret Affiliate Weapon is quite well received. While these "affiliate marketers" are selling the idea that making money on the Internet is easy, the truth is that it is not that simple to really gain the sort of success they enjoy as much hard work and strategising does go into their marketing plans.

The best way to understand how to make money online is to purchase and check out the materials offering to share the knowledge and evaluate critically if internet marketing technique such as Secret Affiliate Weapon, Ultimate Wealth Package, Affiliate Commandments, etc are really any good. I am just starting on trying to generate a stream of internet income and please do share with me if there are suggestions on how I can do better and faster.

Reliability of Online Trading

2007-05-09T16:56:00.000+08:00

It is important to get a reliable online trading platform when doing online trading of shares. As delays in trades performed can potentially lose/gain us a lot of money, always have 1 or 2 backups from which trading can still be performed. Just today, DMG's site went down with the following message...

Network Error (tcp_error)
A communication error occurred: ""
The Web Server may be down, too busy, or experiencing other problems preventing it from responding to requests. You may wish to try again at a later time.

For assistance, contact your network support team.

The problem is not with my network connection since I can access other sites such as yahoo, google, POEMS, Fundsupermart, DBS Vickers Securities and iOCBC perfectly well. Always cater for contingencies when trading to avoid being unnecessarily penalised for delays in accessing the online trading platform. Be warned, be careful.

Extended Warranty - Worth it?

2007-05-08T13:22:00.000+08:00

Extended warranty is offered on many products these days and while some people found value in them, these plans are rarely a good deal.

Retailers are pushing extended warranties because it generates almost pure profit. It is a triple bet that that the product will breakdown, that the damage will be covered by the extended warranty and that the repair costs will be more than the extended warranty's cost. Considering that the value of electronic products depreciate exponentially these days, purchasing extended warranties will more frequently be money down the drain.

Where possible, charge your purchase to a credit card that extends the manufacturer's warranty and save the premium of the extended warranty. With the quality of products these days, by the time the gadget breaks down, enough will have been saved to replace the faulty product.

If an extended service plan is really percieved to be essential, read the fine print carefully and not rely on the salesperson's assurances. Extended warranty is being paid for to make your life easier, not harder. The terms will definitely be in the store's favour but you have to analyse if it truly benefits you too. When something does go wrong, the worst thing to find out is that you have paid for something that is utterly useless.

Worries About Stocks Frenzy in China

2007-04-27T16:59:00.000+08:00

China's Social Security fund, among the country's top investors, has wound down its positions in equities, highlighting concerns the nation's markets are overheated, the Financial Times said Friday.

Gao Xiqing, the fund's vice chairman said at banking conference in Beijing that he is worried about the 16-month run up in share prices in China's two bourses which forced the fund to cut stock holdings and reduce risk.

"This market seems to be defying gravity. It's got to come down at some point. We can't risk that, especially given the nature of our fund," the paper quoted Gao as saying. "The market is making me nervous."
...
In the first three months of the year punters in China opened 4.79 million new accounts, a 56-percent increase from the 3.08 million in the whole of 2006, the official Xinhua news agency reported citing government statistics.

Last week the number of new accounts in China's two exchanges in Shanghai and Shenzhen registered a record 252,000 new accounts in one day alone, the China Securities Regulatory Commission said.
==========================================

When everyone is rushing to invest in the stock markets, it is about time to time about getting out. I am increasingly getting concerned about the reports that Chinese nationals across all stratas are borrowing heavily to invest in the bouyant stock market.

Seems like my concern is being shared by certain quarters and I have to seriously think about shifting my holdings in Chinese equities somewhere else for the time being. There is no doubt that a MAJOR correction will occur in the China stock market but the question is when. Judging by the frenzy that the common people are in and the fact that China will be hosting the 2008 Olympics soon, it will be difficult to say for sure.

One time is certain though. When the China stock market does correct significantly, there is going to be much civil unrest. Amatuers to the stock market whom had borrowed heavily to speculate are going to lose their life savings. Suicide cases that mirrored the last Asian Financial Crisis will happen once more.

It will do good to spend some time to determine where to temporarily park funds which had been invested into China so as to re-enter the market after the correction.

Fundsupermart vs Dollardex

2007-04-06T08:45:00.000+08:00

One of the very frequent questions that are asked when looking for a suitable online unit trust distributor is that whether one should choose Fundsupermart (FSM) or Dollardex. This is a question that I had asked myself before and had no real answer for it. However, my choices of investment platform after a period of holding accounts with both somehow pointed in the direction of Fundsupermart.

Why Fundsupermart? Between the 2, Dollardex charges a lower sales charge which immediately translates into cost savings and hence a high investment amount. When it comes to large amounts, such small differences of 1% still constitute a significant sum. Perhaps I have been a small time investor who does not really feel the pinch of the extra amount but more likely, I am more comfortable with Fundsupermart's website and interfaces.

Fundsupermart has a nice homepage that is pleasing to my eyes. Its services had been good, having online forums, portfolio tracking, analysis and even a free quarterly magazine if your investments cross a stipulated amount. Being well established, I have not seen FSM really advertising its services, believing that it goes round through worth of mouth and its reputation.

Dollardex uses a website that is heavy on words and I find it a strain to go through such a wordy site. It has the usual functionalities but lags FSM in that it has no online forums or free magazines. Dollardex also does make use of advertising such as Google Adwords and it is not uncommon to find its advertisements appearing on the Adsense of this page.

Which one is a better choice? Personally I prefer using Fundsupermart even though it costs slightly more. However, if I get a windfall and have a large sum to invest, I will definitely go with Dollardex in order to gain the immediate cost savings.

Singaporeans are Grossly Underinsured?

2007-04-01T08:57:00.000+08:00

A recent study commissioned by the Life Insurance Association (LIA) has been completed with the conclusion that Singaporeans are grossly underinsured. While the methodology of such studies may stand up to scrutiny, I am always sceptical of studies that had been commissioned by the industry and subsequently arriving at findings that are in favour of the industry.

While the research found that the average Singapore adult may be underinsured by as much as $362,000 and LIA has stated that premiums of less than $4 a day to buy a term plan to cover this shortfall is possible, the reality of it is that at $4 a day for a 40-year male non-smoker, the premium of a 25-year term policy, the monthly premium is going to be around $120. An additional outlay of $120 per month is definitely something that will impact the budgeting of 40-year old male with financial commitments for the family.

If inflation, lifestyle changes and other variables are catered for, the proposed term policy coverage will be much much less in 26 year's time and additional policies will have to be purchased along the way to ensure the coverage keeps pace with inflation, lifestyle changes, etc. Insurance is a long term commitment, a long term financial planning and it is definitely necessary to keep in mind that life expectancy has been on the increase.

For the underinsured, it is perhaps more prudent to consider taking up term policies as an interim approach to address the gap in their coverage while taking the time to evaluate a proper whole life policy that holds some value that can be cashed out to fund retirement needs eventually.

Take time out to evaluate such long term commitments, trust no one but yourself to take care of your family and yourself. Question and make informed decisions.

DWS Global Agribusiness Fund

2007-03-21T21:10:00.000+08:00

DollarDEX has just introduced a new fund, the DWS Global Agribusiness Fund. This Fund is theme-based globally and intends to invest from agricultural commodities to consumer products. It invests into promising companies in land and plantation, seed and fertilizer, planting, harvesting, protecting and irrigation, food processing and manufacturing companies, offering investors the opportunity to capture value at various points along the "food chain".

Consider the following statistics:

There are now 80 million new mouths to feed every year.
By 2030, the United Nations estimates that demand for agricultural products will be about 60% higher than today.
Developing markets are seeing an increase in annual protein intake of 11% to 15%
We now have about half the arable land per person that we had 40 years ago.
In 2030, China's meat consumption will be more than double the 1997 levels of 41kg.

The DWS Global Agribusiness Fund is basically a play on the fact that it is expected to be increasingly difficult to feed the world with the resources we have. Unless something really catastrophic occurs to wipe out much of the human population on Earth, the global population will definitely continue its exponential growth. This growth will encroach onto arable land and eventually reduce the ratio of arable land per person.

The Fund therefore invests into the most basic of the Maslow's hierachy of needs, food. However, it goes one step further to invest along all parts of the agribusiness chain to broaden the opportunities available to be tapped.

The DWS Global Agribusiness Fund presently has a significant exposure to agricultural products and those sectors that deal most directly with its production. This positions the Fund well to reap solid gains from its core theme of "feeding the world". However, it must also be noted that agriculture had traditionally been one of the most volatile industries, exposed to Mother Nature's capricious ways. A pure equity fund, inherently volatile, coupled with the highly volatile nature of the underlying businesses, this Fund potentially belongs amongst the riskier of the choice of equities funds.

I like the theme of this Fund. While it is a risky bet, the fact that it is going to be increasingly difficult to feed the world cannot be denied. It becomes most appreciable to those who live in areas that are lacking in arable land and have to import most of the food required for subsistence. However, this Fund definitely should be held only as part of a well diversified portfolio and the duration of hold should be long term so that the ups and downs can be well ridden out.

CPFIS Performance

2007-02-27T08:57:00.000+08:00

"Retirement savings products turned in higher average gains in the fourth quarter of 2006, after strong growth in stock markets worldwide boosted the performance of investment funds.
More than 90 per cent of unit trusts and investment-linked insurance products (ILPs) in the CPF Investment Scheme (CPFIS) saw positive absolute returns for the three months to December, according to the latest report by Standard & Poor's (S&P) Fund Services."
- Stock advance lifts CPF savings products , 27 Feb 2007, Business Times Singapore

It is heartening to read such news in the papers even though I do not invest my CPF monies via the CPFIS after I was not able to better the interest rates offered.

Many people will be motivated by such news to actively look for investment products to beef up their retirement funds but past performance is not indicative of future performance and more likely than not, the easy money had already been made after the stock market run-up in recent months.

Recency of data will also affect our judgement and it should still not be difficult to look back a little more and realise that until recently, many people's investments via the CPFIS had not performed satisfactorily.

A rising tide lifts all boats and it is no big wonder that CPF savings products had turned in a good report card for the last quarter. However, there is a need to look beyond whatever euphoria there is and appreciate that market risks today are higher and potential gains in the well performing markets may not last for much long.

Calculated risks and diversification is key to ensuring we get good returns on our monies and eventually enjoy a comfortable retirement.

Investing in Vietnam: Lion Capital Vietnam Fund

2007-02-20T12:19:00.000+08:00

Lion Capital Vietnam Fund will "invest in Authorised Investments which are equities, equity-related instruments (including, without limitation, interests in property funds) and securities in Vietnamese incorporated companies or institutions, as well as in companies or institutions which although not incorporated in Vietnam, have operations in, exposure to, or derive part of their revenue from Vietnam, and the Indo-China Region (which includes, but is not limited to, Cambodia, Laos and Myanmar)."

Vietnam is presently experiencing a boom in its stock market and many people are getting excited about investing in Vietnam. However, such optimism is perhaps dangerous if our bets are not hedged.

Vietnam's stock market is presently still very small and statistically, a small market is inherently volatile and gains in a few good stocks skew the investment numbers. Vietnam is very much just starting to develop and still largely lacks transparency, credible institutions, a functioning financial sector, and clear legal rules and regulations. Investing into Vietnam itself will require the investor to keep his eyes wide open and ears primed for importance information.

I believe that investing in Vietnam is currently a highly speculative move and Lion Capital Vietnam Fund's mandate includes firms with exposure to, or derive part of their revenue from Vietnam, and the Indo-China Region, not just stocks listed there. This will definitely help to diversify the risks somewhat but since it is still primarily a single country fund, it will be prudent to expect a larger degree of volatility.

While the gains are potentially good, the associated risks do put me off taking up the Lion Capital Vietnam Fund at the present moment.

SGAM Global Luxury & Lifestyle Fund

2007-02-14T00:22:00.000+08:00

SGAM Global Luxury & Lifestyle Fund is an interesting new product that has just caught my attention. Being the first of its kind open-ended equity fund for the Singapore retail market that invests in premium luxury and lifestyle companies on a global scale, it is unique in the concept. However, no matter how innovative an unit trust is, it is still necessary to evaluate if it is just hype or investing in it is truly a good option.

The gap between the rich and the poor has been widening and the rich are getting much richer. This is evident in the emerging markets of China and India where the middle class is growing rapidly and high net worth individuals are also sky rocketing.

Luxury goods are a favourite with those who are recently affluent, helping to reaffirm their successes, and impressive growth in sales for luxury goods have already been noted. SGAM Global Luxury & Lifestyle Fund further has the advantage that demand for luxury goods are usually price inelastic and profits can be maintained.

SGAM Global Luxury & Lifestyle Fund does not appear to fit in with my investment philosophy at the moment and I think I will give it a miss. But it definitely feels good to be owning a piece of companies selling the luxury goods than be the one contributing to the companies' bottomline. It will be interesting to see how SGAM Global Luxury & Lifestyle Fund performs against the benchmark index in time to come.

Cash Fund by Fundsupermart

2007-02-09T10:23:00.000+08:00

Fundsupermart has just recently launch a cash deposit fund by a Prudential Fund Manager. This Cash Fund operates by consolidating monies from investors and placing them in various fixed deposits with several banks. Through such an approach, the Cash Fund is able to obtain a higher net interest rate.

The predecessor to the Cash Fund is the Cash Account and many people had asked if it is sensible to switch over to the Cash Fund which is promising higher returns. I believe that the Cash Fund is worth the efforts but it really depends on the person. Personally, I prefer to keep my existing Cash Account monies as they are and invest fresh funds into the Cash Fund. That way, I will still be able to enjoy the higher interest rates of an almost savings account equivalent and also to gain higher returns for the new injections that are going into the Cash Fund.

For people like me who have been investing, the considerations to go for Cash Account or Cash Fund is largely due to personal situations. However, there still exists a large group of people out there who are happy putting their spare cash on their own into savings accounts and gaining paltry interest. If you are one belonging to the latter, it really is time for you to check out Fundsupermart's offering immediately!

Stanchart Platinum Access Card

2006-12-23T18:35:00.000+08:00

Be careful and read the fine print when using financial tools such as credit cards. Below is a warning about the new product that Standard Chartered has pushed out lately, Platinum Access card.

---------------- Original -------------------------
Beware of the high interest rates and extra costs when you live on credit

Recently, Stanchart launched its new Platinum Access card aimed at young working professionals in Singapore.

This allows the cardholders to spread the cost of their purchases above $100 over two years or more.

This is worrisome from two perspectives. Firstly, it is clearly encouraging the young professionals to live beyond their means. This is contrary to sound financial planning that the government advocates for all Singaporeans.

Secondly, the true cost of using the service is not fully revealed.

This will mislead many who will end up with heavy debts.

Firstly, the 5% per annum rate that is charged on the amount of purchases is not clearly highlighted as a flat rate basis.

The bank, however, did mention that the effective rate would work out to be 9.32% p.a.

Credit cardholders must also realise that there is a 6% administrative fee chargeable immediately. This will raise the effective rate to close to 16% p.a.

Under the present system, cardholders can decide not to roll over the balance if their cash flow allows them to do so. The 24% p.a. interest will then cease to be chargeable.

As for the Stanchart's new Platinum Access card, the 16% p.a. effective interest rate is already charged for 24 months.

An administrative charge of $50 will also be levied if the cardholders cancel the payment of instalments when they repay the full amount owed for a purchase.

This will rocket the effective interest rate way beyond 24% especially for purchases of relatively small amount. This means that you are effectively locked in for the full period and remain indebted to the bank even when you have the liquidity to free yourself from the debt.

Cardholders must also realise that if the repayment period is shortened, the administrative fee of 6% and the 5% p.a. flat interest charged for the entire 24 months will cause the effective rate to increase even further.

For example, let's assume the purchase is for $1,000. The administrative fee payable is $60 and the interest chargeable for the two years will be $100 (ie. 5% p.a. for two years on $1,000).

The monthly instalment is calculated at $1,100/24 = $45.83. If you decide to repay fully after one year, the remaining aggregate instalment to repay will be $550 plus the administrative fee of $50.

To calculate the effective interest for the financing of the purchase, the following are the critical numbers:

Present value = $940 (This represents the net amount that the bank actually finances after netting off the administrative fee of $60).

Payment per month = $45.83 (monthly instalment)

Number of instalment paid : 12

Amount to pay at the end of 12 months to repay fully: $600

The effective interest rate works out to be 26.5% p.a.

If the amount of purchase is $500, the effective interest rate will work out to be 31.9% p.a.

This is certainly not an attractive product for our young professionals.

Dr Johnny Tan Hung Ming
Source: ST Forum

AIA CARDWIZE

2006-10-16T08:00:00.000+08:00

Identity theft is a growing problem and that problem gets more acute when much more of our transactions today are done cashlessly using credit cards.

AIA has this product named AIA CARDWIZE that is marketed as "keeping your identity safe and secured". The strength of CARDWIZE is that it softens, notice not eliminate, the blow of dealing with identity theft and related losses, covering against additional costs related to the loss, theft or damage of the residence and car keys, and items purchased using credit card.

At first look, this appears to be a good product. I had lost my belongings to theft before and while I did not lose much valuables, I ended up spending a bigger sum replacing my identification documents, locks and much time to conduct these administrative procedures. Such a product would have greatly cushioned the impact of that incident.

What exactly does the product offer?
Identity Theft ($10, 000)
Expenses incurred from resolving identity theft up to 12 months after a claim:

Legal Expenses
Lost Wages
Loss from unauthorised account and payment to creditors

Fraudulent Charges ($5, 000)
Unauthorised charges that policyholder is responsible for on lost of stolen payment card, up to 12 hours prior to first reporting the event to payment card issuer(s).

ATM Assault and Robbery ($2, 000)

ATM Robbery - reimbursement for money withdrawn from any ATM around the world using payment card against a robbery that occurs within 15 minutes of the withdrawal.
Bodily Injury - reimbursement for reasonable emergency first aid charges for bodily injury incurred during covered ATM robbery.

Lost Wallet Coverage ($2, 000)

Replacement costs for a lost or stolen wallet and any payment cards and personal papers in it.
Application fees for replacement personal papers and/or payment cards.

Payment Card Purchase Protection ($5, 000)
Loss arising from items purchased entirely with payment card which were lost, stolen or accidentally damaged.

Keys Replacement Coverage ($2, 000)

Key Replacement - cost of replacing the keys of residence or vehicle if lost or stolen.
Break-in Replacement - cost of replacing your locks if your residence or vehicle is broken into.
Lock Out Reimbursement - cost of obtaining a locksmith if locked out of residence or vehicle due to loss or theft of keys.
Rental Car Reimbursement - cost of a rental car if vehicle keys are lost or stolen and cannot be replaced within 24 hours.

These policy benefits further come with the following notes:

Policy will only cover amount not covered by other similar insurance policy, up to coverage limits specified.
An excess of $100 applies per occurrence/claim.

There is a further special feature that I especially like. By registering existing financial accounts during signup, reporting the loss via a hotline can initiate the blocking of access to all financial accounts.

At a monthly premium of $58, is this product a good deal? Unless you are the type who frequently loses your belongings, it is not something worth considering.

No one pays annual subscriptions for credit cards these days. When the subscription is due, a call to the customer hotline usually is good enough to get the fees waived. When we are effectively paying nothing for our cards, does it make sense to pay to use it?

But isn't the coverage addressing important aspects such as identity theft, fraud, loss, etc? In all my years, I have only lost my wallet twice. Once when I was very young and once when I started working. Such a frequency of loss does not warrant a need for this protection. $58 per year and there is excess of $100 imposed! Even without losing my wallet, I will have made a loss purchasing this product.

But what about identity theft? It is indeed a growing problem but not one that has gone out of control locally. The policy gives up to 12 months after a claim but should identity theft occur, it could take much longer to resolve.

Based on my present lifestyle and risk profile, I do not think that this is a product worth buying. If you are the type who loses your stuff and loses it big time, then this product will be right for you. Remember to factor in the $100 excess and the annual premium of $58... Will you ever lose that much in a year to theft, etc?

The Origins of Financial Reviews

2006-10-15T23:04:00.000+08:00

I started this blog (http://financialreviews.blogspot.com) after many friends had seeked my advice on financial matters/products. Somehow, they liked my views because I am not a financial planner/advisor but had gained whatever knowledge I shared with them by taking a keen interest in managing my money.

Personally, I subscribe to the view that regardless of whether you have a personal financial adviser or not, it is important to play an active role in managing your money. We cannot shirk responsibility for our own financial health and expect others to take care of us, take care of our money.

Since I never really got anything except goodwill in return for all the feedback that I had given to my friends, I hope that putting up my views online and adding in some advertising will bring me a little additional income eventually.

Do drop me a comment if there is some product that you will like me to take a look at and I will try to blog my views on it for you.