Dear Mr Tan,
I do not know much about investments would be grateful for your advice.
I am X years old and my wife is Y years younger. We have a HDB Executive Apartment (almost paid up) and $Z in fixed deposits and NTUC's money market fund.
I need to ensure that I and my wife have enough to take care of ourselves. I am thinking about investing in unit trusts (like the Growth and Balanced Funds) or buying a life annuity from NTUC.
But some of my friends said that I would earn better returns in alternative investments. Will appreciate your advice.
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REPLY:
I suggest that you read the following FAQ:
Financial planning for Senior
You should avoid structured investment products as mentioned in this FAQ.
Alternative investments are like structured products, and can be risky. If you are not familiar with these products, it is best that you avoid them.
I suggest that you invest as follows:
* 50% in a life annuity (for your self and your wife combined)
* 50% in a balanced fund (such as that offered by NTUC Income)
Sunday, June 3, 2007
University of New South Wales
Several friends have asked for my views about the closure of the Singapore campus of the University of New South Wales.
I wish to address these two questions:
* Was it a good idea to get UNSW to operate in Singapore?
* Should the university have taken a different approach to establish its Singapore campus?
I support the initiatives to get foreign universities to operate in Singapore and make it an educational hub. Many parents from Asian countries prefer to send their children to study in Singapore, rather than western countries The environment and culture in Singapore is more conducive.
Singapore has a niche and a marketing advantage.
In my view, UNSW should have taken a different approach to establish its Singapore campus. They should have taken an "incremental approach".
They should start with some courses in collaboration with local partners and build up the student base, reputation and understanding of the market. They could have made a bigger commitment to Singapore (compared to the other universities now operating on this approach), without having to open a large physical campus at the start.
The Singapore government could have provided financial support for UNSW (in return for their larger commitment) in the form of subsidies for local and foreign students to study for these approved courses in Singapore. This will make it attractive for students to study in Singapore, rather than in Sydney.
I hope that we can learn the lesson from this temporary setback.
Recap:
1. Encourage foreign universities to make a bigger commitment to Singapore by offering more courses in Singapore and enrol a larger number of students.
2. Offer financial subsidy to local and foreign students to study in Singapore. The level of support will be lower than for study in our local universities.
I wish to address these two questions:
* Was it a good idea to get UNSW to operate in Singapore?
* Should the university have taken a different approach to establish its Singapore campus?
I support the initiatives to get foreign universities to operate in Singapore and make it an educational hub. Many parents from Asian countries prefer to send their children to study in Singapore, rather than western countries The environment and culture in Singapore is more conducive.
Singapore has a niche and a marketing advantage.
In my view, UNSW should have taken a different approach to establish its Singapore campus. They should have taken an "incremental approach".
They should start with some courses in collaboration with local partners and build up the student base, reputation and understanding of the market. They could have made a bigger commitment to Singapore (compared to the other universities now operating on this approach), without having to open a large physical campus at the start.
The Singapore government could have provided financial support for UNSW (in return for their larger commitment) in the form of subsidies for local and foreign students to study for these approved courses in Singapore. This will make it attractive for students to study in Singapore, rather than in Sydney.
I hope that we can learn the lesson from this temporary setback.
Recap:
1. Encourage foreign universities to make a bigger commitment to Singapore by offering more courses in Singapore and enrol a larger number of students.
2. Offer financial subsidy to local and foreign students to study in Singapore. The level of support will be lower than for study in our local universities.
Bold steps needed to solve the taxi shortage
Mr Paul Chan Poh Hai wrote an excellent letter, published in the Straits Times. He suggested the following bold measures to solve the taxi shortage:
1. Abolish all surcharges and make phone booking a means to direct cabs where they are needed most.
2. Increase the flag down rate and charged more for extra distance travelled
3. Allow foreign drivers, if Singaporeans don't want the job
4. Let cabbies earn more with higher productivity and hard work. Waiting for phone bookings for extra money is counter productive and nurtures a bad work habit.
I agree with all the suggestions made by Paul Chan. I have a further suggestion:
5. (By Tan Kin Lian) - charge a flat daily rate in lieu of ERP and CBD charges for taxis. This encourages them to enter the CBD when they are needed the most.
1. Abolish all surcharges and make phone booking a means to direct cabs where they are needed most.
2. Increase the flag down rate and charged more for extra distance travelled
3. Allow foreign drivers, if Singaporeans don't want the job
4. Let cabbies earn more with higher productivity and hard work. Waiting for phone bookings for extra money is counter productive and nurtures a bad work habit.
I agree with all the suggestions made by Paul Chan. I have a further suggestion:
5. (By Tan Kin Lian) - charge a flat daily rate in lieu of ERP and CBD charges for taxis. This encourages them to enter the CBD when they are needed the most.
A better taxi service
Dear Mr Tan,
I read several of your blogs where you complained about the high cost of taxi fares. Are you aware that taxi fares are more expensive in cities such as London, New York and Tokyo?
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REPLY:
Taxi fares should be relative to other forms of public transport. It can be 3 or 4 times the cost of bus or train fares, but should not be higher.
Many people are forced to take taxis due to the lack of a convenient alternative. They do not know how to take the bus, because the routes are quite complicated.
We need to improve our public transport system, and make more efficient use of our resources.
I read several of your blogs where you complained about the high cost of taxi fares. Are you aware that taxi fares are more expensive in cities such as London, New York and Tokyo?
---------------------------------
REPLY:
Taxi fares should be relative to other forms of public transport. It can be 3 or 4 times the cost of bus or train fares, but should not be higher.
Many people are forced to take taxis due to the lack of a convenient alternative. They do not know how to take the bus, because the routes are quite complicated.
We need to improve our public transport system, and make more efficient use of our resources.
Buy a policy for the son
Hi, Mr Tan
I am trying to get a good policy that suitable for my son. Any commendation?
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REPLY:
I suggest that you read my FAQ on "Financial Tips for the Yong" in my website.
My preference is to invest in a large, well diversified, low cost fund, such as the Ideal plan from NTUC Income. If insurance is needed, it is better to buy a decreasing term insurance.
I am trying to get a good policy that suitable for my son. Any commendation?
---------------
REPLY:
I suggest that you read my FAQ on "Financial Tips for the Yong" in my website.
My preference is to invest in a large, well diversified, low cost fund, such as the Ideal plan from NTUC Income. If insurance is needed, it is better to buy a decreasing term insurance.
Money Market Fund
Dear Mr Tan
Please explain what's the difference between the Money Market Fund and ordinary shares. I have to buy at bid price which is very much like buying share from the market.
How is the yield (of about 3%) calculated? Some good shares provide higher yields.
Fixed deposit rate is too low. I wish to look for other investments that allow me to get easy access to my money.
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REPLY:
The money market fund is invested in money market investments, such as short term bonds and certificates of deposits. These investments currently yield about 3% per annum, and are usually for durations of less than 1 year.
When you invest in the money market, you buy units at its unit price (or net asset value). The unit price changes everyday according to the value of its underlying investments.
If you measure change in the unit price over a few weeks, you will probably find that the annualised yield is about 3% per annum. This yield may change according to the underlying investments.
The manager of the fund will take a small charge (usually less than 0.5% per annum) from the fund. Hence, you will get the net yield.
For the money market fund managed by NTUC Income, the annual charge is 0.25% per annum. There is no transaction cost or sales charge when you buy or sell the units.
Please explain what's the difference between the Money Market Fund and ordinary shares. I have to buy at bid price which is very much like buying share from the market.
How is the yield (of about 3%) calculated? Some good shares provide higher yields.
Fixed deposit rate is too low. I wish to look for other investments that allow me to get easy access to my money.
---------------------
REPLY:
The money market fund is invested in money market investments, such as short term bonds and certificates of deposits. These investments currently yield about 3% per annum, and are usually for durations of less than 1 year.
When you invest in the money market, you buy units at its unit price (or net asset value). The unit price changes everyday according to the value of its underlying investments.
If you measure change in the unit price over a few weeks, you will probably find that the annualised yield is about 3% per annum. This yield may change according to the underlying investments.
The manager of the fund will take a small charge (usually less than 0.5% per annum) from the fund. Hence, you will get the net yield.
For the money market fund managed by NTUC Income, the annual charge is 0.25% per annum. There is no transaction cost or sales charge when you buy or sell the units.
Annuity for a young person
Hi Mr Tan,
I have been reading your blog and appreciate your valuable advice on financial planning.
Will an insurance company accept a person aged 40 years old for taking up a life annuity product using cash? Can you recommend any good product?
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REPLY:
At the younger ages, I usually advise people to take the fixed term annuity or annuity certain. For example, you can take a fixed term annuity for 20 or 30 years.
The insurance company is uncertain about the mortality rates over a long period, and may not quote attractive rates due to this reason.
If you are really keen on the life annuity, I think that NTUC Income will be able to quote the annuity rate for a person at aged 40.
Can you tell me why you wish to have this type of product?
I have been reading your blog and appreciate your valuable advice on financial planning.
Will an insurance company accept a person aged 40 years old for taking up a life annuity product using cash? Can you recommend any good product?
-------------------------
REPLY:
At the younger ages, I usually advise people to take the fixed term annuity or annuity certain. For example, you can take a fixed term annuity for 20 or 30 years.
The insurance company is uncertain about the mortality rates over a long period, and may not quote attractive rates due to this reason.
If you are really keen on the life annuity, I think that NTUC Income will be able to quote the annuity rate for a person at aged 40.
Can you tell me why you wish to have this type of product?
Yield of 4% p.a. on endowment plan
Dear Mr Tan,
I bought a 13-year endowment with compound reversionarly bonus from Great Eastern. The basic sum assured was $60,000 and annual premium was $5096.
I received an amount on maturity of $88,547. This means that I earned only $22,302 or 2.6% p.a. In your opinion, is this a fair deal?
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REPLY:
Your yield is actually 4.06% p.a. You have to consider that your total premium is paid annually over 13 years, and not in a lump sum at the beginning.
It is a fairly attractive yield. You also enjoyed life insurance for the past 13 years, without making any separate payment for this coverage.
I bought a 13-year endowment with compound reversionarly bonus from Great Eastern. The basic sum assured was $60,000 and annual premium was $5096.
I received an amount on maturity of $88,547. This means that I earned only $22,302 or 2.6% p.a. In your opinion, is this a fair deal?
-----------------------
REPLY:
Your yield is actually 4.06% p.a. You have to consider that your total premium is paid annually over 13 years, and not in a lump sum at the beginning.
It is a fairly attractive yield. You also enjoyed life insurance for the past 13 years, without making any separate payment for this coverage.
NTUC Income shares
Dear Mr Tan,
My friend recently received a letter from NTUC Income that his investment with them will be paid a dividend of 6% plus a special dividend of 2%, totalling 8% for the financial year 2006.
Such high dividend payable (although not guaranteed) is possible because it is a cooperative organisation with very good management.
In your view, should I not invest in NTUC Income? How do I invest in this?
---------------------
REPLY:
Your friend bought the shares of NTUC Income. It is a safe investment, which gives an attractive return.
I understand that NTUC Income is not issuing new shares at the present time, as they have adequate share capital.
My friend recently received a letter from NTUC Income that his investment with them will be paid a dividend of 6% plus a special dividend of 2%, totalling 8% for the financial year 2006.
Such high dividend payable (although not guaranteed) is possible because it is a cooperative organisation with very good management.
In your view, should I not invest in NTUC Income? How do I invest in this?
---------------------
REPLY:
Your friend bought the shares of NTUC Income. It is a safe investment, which gives an attractive return.
I understand that NTUC Income is not issuing new shares at the present time, as they have adequate share capital.
Traded Endowment Policies
Dear Mr Tan,
I like to ask about a rare product that not popular in Singapore but was approved by MAS. It is the UK Endowment - Fixed Price Trade Endowment Policy.
This product is sold by a bank in Pound, with a minimum investment of $20k and the shortest tenor is 2 - 3 years to maturity.
I understand that the average return is 6% - 9% p.a. , the only drawback is the currency exchange. What is your view on this product?
------------------------
REPLY:
You should ask the financial intermediary (who offers this product to you) to explain the risk. Get them to put it in writing.
The risk depends on the parties involved. You must understand the risk before you make any investment.
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Edited by Tan Kin Lian
Dear Mr Tan
I noticed with interest your mention of TEPs on your blog.
I am a principal of the longest established TEP market maker in the UK. Your enquirer may be interested in the information on our website at www.policyplus.com. We also run a collective investment scheme which is MAS approved.
As you rightly say in your response, it is important for clients to be properly advised. The TEP market is certainly resurgent at present, but we would not want to see people getting into it without understanding what they are getting involved in.
There are a limited number of advisors who genuinely understand this product. If assistance is needed, we will pass on details of some we know.
I like to ask about a rare product that not popular in Singapore but was approved by MAS. It is the UK Endowment - Fixed Price Trade Endowment Policy.
This product is sold by a bank in Pound, with a minimum investment of $20k and the shortest tenor is 2 - 3 years to maturity.
I understand that the average return is 6% - 9% p.a. , the only drawback is the currency exchange. What is your view on this product?
------------------------
REPLY:
You should ask the financial intermediary (who offers this product to you) to explain the risk. Get them to put it in writing.
The risk depends on the parties involved. You must understand the risk before you make any investment.
--------------------------
Edited by Tan Kin Lian
Dear Mr Tan
I noticed with interest your mention of TEPs on your blog.
I am a principal of the longest established TEP market maker in the UK. Your enquirer may be interested in the information on our website at www.policyplus.com. We also run a collective investment scheme which is MAS approved.
As you rightly say in your response, it is important for clients to be properly advised. The TEP market is certainly resurgent at present, but we would not want to see people getting into it without understanding what they are getting involved in.
There are a limited number of advisors who genuinely understand this product. If assistance is needed, we will pass on details of some we know.
Great Barrier Reef, Australia
I will be attending a conference and taking a holiday at Hamilton Island, off the cost of Queensland, Australia. I shall be visiting the Great Barrier Reef. I just looked at Hamilton Island using Google Earth. It gives me an interesting preview of this island.
I will be away for 9 days, starting tomorrow. This will be my first visit to this part of the world. I shall be updating my blog occasionally, depending on the availablility of internet connection in the island.
I will be away for 9 days, starting tomorrow. This will be my first visit to this part of the world. I shall be updating my blog occasionally, depending on the availablility of internet connection in the island.
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