When I met John Bogle in Vanguard, he told me that NASDAQ requires all products traded through the exchange to pass the test of "fair dealing".
If any product is not designed to be "fair", then NASDAQ will not allow the product to be traded.
I like this concept. I hope that a similar concept should be adopted in Singapore.
In recent years, many structured products were introduced in the Singapore that were, in my opinion, not fair to consumers.
For example there was a capital guaranteed product that earned a return of only 2.1% over 5 years (or 0.4% per year) for the investor.
If the investor had invested in government bonds (which are guaranteed by the government), the investor would have earned at last 15% for the 5 years.
According to the product structure, the investor could have earned more than 2.1% under certain conditions. It was impossible for the investor to know the chance of earning more than 2.1%. The chance must be extremely slim.
In my view, such a product could not have passed the test of "fair dealing".
Saturday, May 26, 2007
Wrong trade entered into SGX
I read that a wrong trade was entered into SGX, which caused the ST Index to drop by 400 points.
The traded wanted to sell DBS warrants at 27 cents. Instead, the trade was entered under DBS (which was traded at $24.00). The trade was done.
This problem could have been avoided by a simple check in the SGX computer system. Every trade should be checked against the last done price. Any difference of more than 5% (say) should be highlighted for the trader to confirm the trade.
If the difference is more than 10%, perhaps a second re-confirmation should be required.
The traded wanted to sell DBS warrants at 27 cents. Instead, the trade was entered under DBS (which was traded at $24.00). The trade was done.
This problem could have been avoided by a simple check in the SGX computer system. Every trade should be checked against the last done price. Any difference of more than 5% (say) should be highlighted for the trader to confirm the trade.
If the difference is more than 10%, perhaps a second re-confirmation should be required.
Building A Great Society
Everybody wants a role to build a Great Society. Here are some of Dr. Lee Kum Tatt’s experiences on this matter and how this can be achieved even now.
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Enhanced Income Fund
Dear Mr Tan,
Other than NTUC Income's Flexi-cash, do you invest in any other money market funds, like DBS Enhanced Income fund? How would you compare the two?
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REPLY:
Here is an analysis done by an expert.
The DBS Enhanced Income Fund has half of its investments are outside of Singapore. This makes it partly a currency speculation fund -- and you are betting on a weakening Singapore dollar. It is riskier than a straight money market fund.
It is also actively managed, and has a rather high expense ratio of 0.46 per cent. On top of that it charges an initial sales charge of 0.2 per cent.
Because of the foreign investments, you must also pay currency conversion costs -- (which are a hidden expense that is deducted directly from the fund's yield and not included in the expense ratio).
Other than NTUC Income's Flexi-cash, do you invest in any other money market funds, like DBS Enhanced Income fund? How would you compare the two?
------------------------
REPLY:
Here is an analysis done by an expert.
The DBS Enhanced Income Fund has half of its investments are outside of Singapore. This makes it partly a currency speculation fund -- and you are betting on a weakening Singapore dollar. It is riskier than a straight money market fund.
It is also actively managed, and has a rather high expense ratio of 0.46 per cent. On top of that it charges an initial sales charge of 0.2 per cent.
Because of the foreign investments, you must also pay currency conversion costs -- (which are a hidden expense that is deducted directly from the fund's yield and not included in the expense ratio).
$1,000 is sufficient for a retiree
Dear Mr Tan,
Your concise advice on annuity in the FAQ are gems distilled from your experience. I agree that $1000 - $1500 a month is enough for most of us during our retirement, if we had planned ahead, and dispense with the non-necessities and excesses.
If only writers are able to emulate your style of writing. I certainly gain from that.
Your concise advice on annuity in the FAQ are gems distilled from your experience. I agree that $1000 - $1500 a month is enough for most of us during our retirement, if we had planned ahead, and dispense with the non-necessities and excesses.
If only writers are able to emulate your style of writing. I certainly gain from that.
No overlap in coverage
Hi Mr Tan,
After reading your blog I am convinced we should buy term insurance and invest the difference.
At present, I have on insurance policy. I am a SAFRA member. I know that NTUC income underwrites affordable policies for SAFRA members as follows:
* SAFRA Essential Term
* SAFRA Living Care policies.
I am thinking of getting a 100k converage under the Essential Term and another 100k coverage under the Living Care policy.
What do you think of this combination? Would there be a overlap in coverage?
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REPLY:
There is no overlap. It is useful to have cover under both policies. In the event of death, your dependents can claim $200,000 under both policies. For a critical illness, you can claim foro $100,000.
You can buy both policies, if you find the premium to be affordable. If it is expensive, you can insure $50,000 under each policy.
After reading your blog I am convinced we should buy term insurance and invest the difference.
At present, I have on insurance policy. I am a SAFRA member. I know that NTUC income underwrites affordable policies for SAFRA members as follows:
* SAFRA Essential Term
* SAFRA Living Care policies.
I am thinking of getting a 100k converage under the Essential Term and another 100k coverage under the Living Care policy.
What do you think of this combination? Would there be a overlap in coverage?
----------------------------
REPLY:
There is no overlap. It is useful to have cover under both policies. In the event of death, your dependents can claim $200,000 under both policies. For a critical illness, you can claim foro $100,000.
You can buy both policies, if you find the premium to be affordable. If it is expensive, you can insure $50,000 under each policy.
Appeal from a motor cyclist
Dear Mr Tan,
I encountered a ridiculous driver, who horned at me, just because I am in front of his car.
What has happened to road safety in Singapore today? It is sad to read of the father and daughter on motorcycle, died in accident last Saturday. Is there attitude problem in driving or has more drivers been having poor judgment on the road?
1. Motorist today has poor lane discipline; many do not keep a safe distance between cars.
2. There are many who imagine they are grand prix driver tailing even a car that is moving on at 90km/h.
3. In merging lane condition, such motorist must be ahead.
4. Motorist when tailing behind motorcyclist, will not bother about the speedometer, until they overtook motor cyclist.
5. Motorist who cannot even allow motor cylist riding on lane 4 (extreme left lane) of highway and attempt to over take by the left, squeezing between road shoulder and lane 4 of motorcylist.
In wet weather condition, motor cyclist is even more exposed. Please be patience and bear a thought for motorcyclist. Give motorcyclist space to manoeuvre. Treat the motorcyclist as your friend or relative.
Insurance will pay for the mistake of a driver,but it will never bring back the life of the victim and the loss to their family. Drive with loving kindness, bearing a thought for the family of each other.
Thomas Phua
Visit my blog.
I encountered a ridiculous driver, who horned at me, just because I am in front of his car.
What has happened to road safety in Singapore today? It is sad to read of the father and daughter on motorcycle, died in accident last Saturday. Is there attitude problem in driving or has more drivers been having poor judgment on the road?
1. Motorist today has poor lane discipline; many do not keep a safe distance between cars.
2. There are many who imagine they are grand prix driver tailing even a car that is moving on at 90km/h.
3. In merging lane condition, such motorist must be ahead.
4. Motorist when tailing behind motorcyclist, will not bother about the speedometer, until they overtook motor cyclist.
5. Motorist who cannot even allow motor cylist riding on lane 4 (extreme left lane) of highway and attempt to over take by the left, squeezing between road shoulder and lane 4 of motorcylist.
In wet weather condition, motor cyclist is even more exposed. Please be patience and bear a thought for motorcyclist. Give motorcyclist space to manoeuvre. Treat the motorcyclist as your friend or relative.
Insurance will pay for the mistake of a driver,but it will never bring back the life of the victim and the loss to their family. Drive with loving kindness, bearing a thought for the family of each other.
Thomas Phua
Visit my blog.
Fixed deposit with a finance company
Dear Mr Tan,
I wish to deposit $80,000 in a fixed deposit with a bank that pays the highest interest rate.
I also that the finance companies generally pay higher interest rates than the local banks. If you are a senior citizen 55 yrs old and above, you even qualify for a higher rate.
Should I put my money with the finance company?
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REPLY:
A finance company is financially less secure than a bank. That is why they have to pay a higher interest rate. But, I think that the risk of failure is quite small, in Singapore.
If you are willing to take the risk, then it should be all right. Perhaps, you should put half of your money in a finance company and the other half in a bank.
Always, spread your risk.
I wish to deposit $80,000 in a fixed deposit with a bank that pays the highest interest rate.
I also that the finance companies generally pay higher interest rates than the local banks. If you are a senior citizen 55 yrs old and above, you even qualify for a higher rate.
Should I put my money with the finance company?
----------------------------------------
REPLY:
A finance company is financially less secure than a bank. That is why they have to pay a higher interest rate. But, I think that the risk of failure is quite small, in Singapore.
If you are willing to take the risk, then it should be all right. Perhaps, you should put half of your money in a finance company and the other half in a bank.
Always, spread your risk.
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