US taxpayers bear the loss

Read this story about the burden that will be shouldered by the US tax payers over the losses that are suffered by Fannie Mae and Freddie Mac: is the background to this state of affairs: The real estate market in the US was a bubble for one or two decades before it finally burst in 2008 During this period, large profits were made by developers, real … [Read more...]

Japan last decades – a surprise!

Analysts have written about Japan's lost decades, after the collapse of the property and stock market bubbles in the early 1990s. The economy was supposed to be in the doldrums.But some analysts are starting to realize that the so-called lost decades might have been a wrong description. Japan has been doing quite well, economically and socially, during these "lost decades". This is explained in … [Read more...]

High business cost in Singapore

I read that Nokia has decided to move its Asian headquarters from Singapore to Beijing, citing high operating cost and other reasons. Google choose Kuala Lumpur to be their regional base, instead of Singapore.A friend, who was in charge of planning for a large multi-national company with wafer fab operations in various countries in Asia told me that it is too costly to manufacture in Singapore. He … [Read more...]

Barking up the wrong tree

Latest: an edited version of this letter was published in the Straits Times Forum page on 4 January 2011. See EditorForum PageStraits TimesI wish to give a different angle to the points raised by Jimmy Koh ("Don't give in to pressure against new insurance test", ST 27 Dec).Mr. Koh argued that the new test is necessary "to equip … [Read more...]

More people will fall into the same trap

I received a desperate plea for help from an widow who lost a lot of money on failed investments made on the advice of the relationship manager of a bank. The victim was advised to invest in dual currency and other linked products on the assurance that they were "safe". The bad advice was given in spite of her constant reminder to the relationship manager that she did not want to take risk!I gave … [Read more...]

ST Online Forum: Get client approval for CDP access

Editor, ST Forum PageI SHARE the concern of Mr Eng Tiang Chuan ('Guard against rogue brokers'; yesterday) about allowing stockbrokers to have unrestricted access to their clients' accounts in the Central Depository (CDP).This concern can be alleviated if the access is on the specific approval of the client. At present, the client has to open a trading account with his specific stockbroker, which … [Read more...]

Challenges from the global economic system

There is a general worry that slow growth in US and Europe will cause problem to Asia, and especially to China being the largest manufacturer in the world. This could lead to unemployment and unrest.Think again. Why are we having an economic system where people have to work long hours, just to earn enough money to survive, and along the way, other people have to be unemployed? And we need to keep … [Read more...]

Effect of Deduction

Hi Mr Tan. I am signing a policy soon. But I don't understand what the effect of deduction is. It's a AXA policy called INSPIRE FLEXI 2. After reading your blog, I tried to do the calculation but am more puzzled. Attached are the 3 pages of the illustrations. I hope that you can advise me.REPLY The Effect of Deduction is the amount taken away from your future savings. You can see that this is a … [Read more...]

Investing and speculating

The Sunday Times carried a story about young people who were investing in stocks and CFD (contract for differences). Some made trading losses but are still keen to continue "investing" in the market.It is important to use the correct term to describe the activity. It should be called "trading" or "speculating" and not "investing". When one "invest" in a company, one has to study the … [Read more...]

Upgrade Medishield for elderly?

Hi Mr Tan Kin Lian , I hope you can advise me on this Medishield upgrade . Presently my wife and i are both 59 years and on basic  Medishield . I am wondering whether it is better to upgrade and even buy riders to cover the deductibles and co-insurance .  I am thinking not so much about a better bed in the hospital but whether the present basic Medishield is adequate enough to cover major … [Read more...]

Good experience with Forex Training Course

Many people had bad experience with forex training courses. They paid a high fee to get the training and lost money  in the trading activities (as the methods are not reliable). Here is an exception. This student still lost money, but he felt that the training provided was worth the money spent: Dear Mr Tan,It would be my pleasure to share my experience with you.Let me tell you upfront that I am … [Read more...]

Investing in Options

I do not like to invest in options. My reasons are: The price of the option is decided by an expert who takes the other side of the trade. This expert is likely to fix a price that will give him a profit (after allowing for the future possible outcomes). As the other party to this "bet", the retail investor is likely to make a loss. It is possible for the option issuer to manipulate the … [Read more...]

Collapse of MF Global – the lessons

Read Lucky Tan's article here.The collapse of MF Global in the USA have a direct impact on retail investors in Singapore. They have money in their accounts with this brokerage firm and are worried that they may not be able to get their money back. This brokerage firm lost a lot of money in the European bonds. It was reported that they might have transferred some of their client money to cover … [Read more...]

Confusing bonus system for life insurance policy

Dear Mr Tan, Recently I asked my friend to send me a quotation on income's vivolife policy. Something that I don't really understand is the "terminal bonus" shown. On page 9, it showed the duration and the percentage of terminal bonuses for the years 2008 - 2010. What I don't understand is a percentage of what? A percentage of the reversionary bonus that had been declared thru'out the years or … [Read more...]

PruFlexi Cash policy taken by a student

A student bought a PruFlexi Cash policy and after paying the premiums for 8 months, he asked my views about terminating the policy.I asked him to send the benefit illustration to me. The total premium for 3 years would have been $3,600 and the cash value would have been $800, giving a loss of $2,800. If he terminate the policy now, after 8 months, the loss would have been $800. It seemed to be … [Read more...]

What to look for in an endowment policy

At the CNA program on financial planning, a panel speaker said that consumers should look at the guaranteed and the non-guaranteed portion of the benefits under an endowment policy.This is only partly true. The consumer should also look at the following figures (available from the benefit illustration):a) The distribution costb) The effect of deduction.The consumer will be shocked that the … [Read more...]

Tips for young people

I gave a talk on "Financial Planning for the Young" at the National University of Singapore. My key points are: 1. Save 15% of your earnings after you start work 2. Keep the earnings in a bank account until you have accumulated an emergency fund of 6 months earnings 3. It will take you about 3 years to accumulate this fund. Just keep your savings liquid. Do not think about investing the … [Read more...]

Invest for the long term – applying the idea

Recently, I decided use my spare cash, which was earning a low rate of interest, to invest in the stock market. My reasons were: The stock market had dropped by 20% from its peak I am investing for the long term, more than 10 years Warren Buffett had said that the companies under Berkshire Hathaway's portfolio were showing good results (except for those involved in the housing … [Read more...]

Avoid investment scams

Older people have a lot of money obtained through their hard earned savings, profit from sale of a property or from CPF withdrawal. It is easy for these people to be cheated in the investment scams that are quite common in Singapore,.There are so many scams and many of them are being advertised regularly. It is easy for the ordinary people to be misled into thinking that, if they are allowed to be … [Read more...]

Distress with an investment linked policy

A consumer approached me for advice. He invested his CPF savings and regular savings in an investment-linked policy sold to him by a friend. After some time, he found that the value of his savings had depleted by nearly 40 percent. He was concerned and approached me for advice - should he terminate his policy. The friend who sold him the policy had since left the insurance company.He showed me the … [Read more...]