Don't Fall for the Lure (29-Dec-09)

Most of us would at some point of time being approached by our financial advisers to invest your hard-earned CPF money into Unit Trust investment. Absolutely nothing wrong with that, but it can be disastrous if you end up with an unscrupulous one.

Yr CPF-OA account is earning you 2.5%p.a. (at the moment) while your CPF-SA is earning 4.0%p.a. (at the moment). Looking at the long term, as an IFA, I would also advise you to park some of your CPF-OA account into some good funds to enable your money to work harder for you. But before you invest, make sure yourself as a consumer knows what you are buying into.

Understand what kind of risks and returns you are exposed to. If someone offers you risk-free product with high returns, definitely something is very fishy. Remember, there is no free lunch in this world.

Key to Unit Trust investment is constantly reviewing with your reliable financial adviser and going forward with a strategy. If in doubt, pls contact me at 9876-0237 straight away.

Memories are Forever (03-Dec-09)

Happened to come across a meaningful article in 'Mind Your Body' section in today's paper and liked to share with you. A few important lines:

"Who does not know that cancer is a terrible illness & that many succumb and die from it? One in four Singaporeans will die from cancer""

"She had never smoked and had advanced stage lung cancer with brain metastases"

"However, most patients do not die from the cancer per se. Infection, especially chest inefection, is a very common cause of death"

"Death is always and certainly inevitable"

No, I am not a medical doctor here telling you how to take care of your health and avoid cancer and other illness. The moral of the story is that, IF something really unfortunate happen to you, or to the people around you, would you be ready to tackle it? Psychologically wise, perhaps never will be. BUT financially wise, this is something you can prepare while you are still healthy & in the right state of mind.

Have you got yourself a good hospital & surgical plans to limit your medical bills?

You have some insurance policies, but is it sufficient to cover all your potential liabilities?

Do you plan to leave a legacy behind if one day death occurs, be it naturally or not.

If you have many question marks & not knowing the answers, why not seek professional help and use the right instruments to solve your problems?

Probably some of you will brush this topic aside and think that everyday is a peaceful day. But I leave the decision to you. This morning, it perturbs me to read abt the 5-year old little child being killed instantly when crossing the road. Because yesterday I also had a near accident when a reckless van driver cut into my lane from a side road. CMI.

Don't Expect Interest Rates to Rise: Experts (23-Nov-09)

If you think your money is safe inside the bank, wrong. Without you knowing it, your savings mught just get eaten up by inflation silently. Savings account earned an average of 0.22%/annum in January 2009, before holding at just 0.16% from July to last month.

If your intention is to preserve the value of money, there are many options available outside the bank. Do approach me @ 9876-0237 to help you understand what other instruments are available to make your money work harder for u.

Insurance in a Time of Uncertainty (08-Nov 09)

How many of you have heard of Robert Kiyosaki's theory on "Why the Rich Gets Richer"? One method is to stay ahead, think bigger, and come out with a better plan. Key word is planning. What we all have on our hand is the same comodity called 'time'. No matter what you are doing now, time is ticking away. So do you want to make use of time to better use?

http://sg.promo.yahoo.com/managingyourmoney/expert?blogid=expert&postid=1&viewPost=1

In this article by Mr. Ben Fok, the CEO of Grandtag Financial Consultancy, and my former lecturer for my CFP course, he again highlighted on the usage of insurance as one of the tools for proper wealth management.

"The virtues of life insurance are obvious. By paying a premium to the insurer, I get to enjoy the coverage as it will step in to meet its obligations should anything untoward happen to me. Most importantly I know that all of my family's financial needs are well taken care of."

I am quite sure most of you will have some insurance policies stored in your cupboards (collecting dust), thinking: "Enough liao lar... don't waste money on further policies... spend spend spend only..."

From my professional point of view, it simply boils down to whether you are having sufficient coverage, and whether you are using the proper instruments to achieve your objectives in the first place.

Of course, you can choose to procastinate the process and pray hard that nothing will happen to you. But just look at the news and people around you, are you financially strong enough to absorb that kind of unforeseen risk? Can you imagine yourself losing that kind of regular income overnight due to accident.. or critical illness...or... ?

Nobody fails to plan, only plans to fail.

Do contact me @ 9876-0237 if you seriously wish to take a strong step to establish your financial goals and objectives.

Four Insurance Plans are All you need (25-Oct-09)

In this article, they highlighted the key coverages that an average person should have to have a comprehensive array of protection. Unless u are the invincible Wolverine or Superman, maybe then you do not need it.

Insurance is typically a form of risk transfer. If you happen NOT to claim from it, good for you. These premiums will serve as a form of savings in the long run (depending on which kind of policies). If you happen to claim from it, also good for you, meaning that u are using a small sum of money to 'exchange' for a bigger sum of money. No matter how I look at it, it's a win-win situation.

As a professional IFA, the priorities I would offer to my clients would be:

1) Medical Coverage

- Medical costs in Singapore have been rising more rapidly that the inflation rate. If you think your basic Medishield or company H&S plans are sufficient, think again. There are better plans out there to ensure your bill is controlled to a certain level.

2) Death / Total & Permanent Disability cover

- Nothing can compensate for the death of a loved one, but if the financial aspect is well taken care of, it makes things a little more bearable. This is especially true for people with alot of dependents like a non-working spouse, small children, or even elderly parents.

3) Critical Illness cover

- If you think u are not the unlucky one, think again, and again. From statistics, I think the chances are higher that tio-ing your weekly Toto. No doubt the H&S plans are covered majority of the "in-hospital" expenses, there are other expenses that would not be taken care of... e.g. specialized drugs, well-chair, maid, etc. And critically, it is supposed to replace your income for a reasonable span if well planned.

4) Disability cover

- This is meant to ensure a monthly income payout if you cannot perform your primary occupation because of an injury, accident or any illness. A very simple illustration would be say... an engineer who lost the use of his legs in a car accident. He would be unable to claim from the Critical Illness coverage, but would be entitled to a disability cover (+ perhaps an accident plan).

Do not undermine the importance of insurance. You perhaps just need a good adviser to explain to you the objectives behind each coverage. With proper protection, then you would be well on your way to your other aspects of wealth management.

Retire With S$1 Million – even if you haven’t started to save (22-Oct 09)

By Stephanie Thng, Funds Supermart

Start saving early and it could make a world of difference to your retirement plans. Time is your best friend as you will find in this story. Here, we assume five individuals at different stages of their life, from those earning at entry-level, to those close to retirement age. All aim to achieve a monthly income of S$2,500 during their retirement years from age 62 to 82. We also taken into account that the inflation rate stands at 3% per annum, meaning that the general cost of goods and services rises by that amount each year.

Further, we assume that whatever the investors save during their pre-retirement days will earn 8% annually. After they hit the age of 62, we assume that the return on their savings drops to 4% per annum as they take less risk in their investments. This simple illustration does not take into account your other financial needs, such as whether you have planned for your insurance needs (life or term insurance, mortgage insurance, health and hospitalization plans).

If You're 25
Savings: S$0
Monthly Salary: S$2,500
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
Housing Loan: Not Required
What You Need to Save per Month for the next 37 years: S$158.30

Planning for your retirement when you are 25 years old may seem a bit far-fetched. But the benefits of starting early cannot be underestimated. Assuming that a person starts working at 25 with a salary of S$2,500, you would need to save S$158.30 per month to ensure that your retirement income can stand at S$2,500 per month during your retirement days, which we assume will run from the age of 62 all the way to 82. Even with no savings to start with, having a regular savings plan (RSP) may be a good way to start planning. An RSP would ensure that you have the discipline to force yourself to invest – there is little room for excuses! Very often, we may be tempted to use up our savings for a travel trip or to purchase that dream car. And even for those who believe in the merits of investing, they may not have the discipline of investing regularly because they feel it is not the "right" time to invest. This could be especially true when markets are going through a bull run and some may feel that it is too expensive to go into markets. An RSP is a disciplined way to ensure that you will invest no matter markets are up, down or sideways.

If You're 35
Scenario 1
Savings: S$0
Monthly Salary: S$6,000
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
Housing Loan: S$800 per month over 30 years
What You Need to Save per Month for the next 27 years: S$666.57

Scenario 2
Savings: S$40,000 (earning 1% p.a.)
Monthly Salary: S$6,000
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
Housing Loan: S$800 per month over 30 years
What You Need to Save per Month for the next 27 years: S$620.73

At the age of 35, the monthly salary is assumed to have risen to S$6,000. But being able to afford an expensive lifestyle has meant that there are no savings in the bank account, and now you have a housing loan to deal with. While things do not look very bright, it is not too late. Save S$666.57 per month and you could ensure that you have S$2,500 every month during your retirement days.

If You're 45
Scenario 1
Savings: S$0
Monthly Salary: S$8,000
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
Housing Loan: S$800 per month over 20 years
What You Need to Save per Month for the next 17 years: S$1692.34

Scenerio 2
Savings: S$40,000 (earning 1% p.a.)
Monthly Salary: S$8,000
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
Housing Loan: S$800 per month over 20 years
What You Need to Save per Month for the next 17 years: S$1582.63

At the age of 45, things will get tougher if no plans have been made yet for retirement. After all, the time horizon till the retirement age of 62 is less than 20 years. Assuming that there are no savings in the savings account, you would need to save S$1692.34 per month. And even with savings of S$40,000, you would still need to save S$1,582.63 per month.

If You're 55
Scenario 1
Savings: S$0
Monthly Salary: S$10,000
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
What You Need to Save per Month for the next 7 years: S$5319.54

Scenario 2
Savings: S$40,000 (earning 1% p.a.)
Monthly Salary: S$10,000
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
What You Need to Save per Month for the next 7 years: S$4937.02

The lesson is to start early. The later you drag your retirement planning, the higher the cost. You would need to save over S$5,000 per month (over half your salary) from the age of 55 to 62 to ensure that you have S$2,500 per month during your retirement days.

POSB Invest SingGrowth Account

Today I was queuing up at POSB settling some stuff, then just happily flipped through their pamphlets that were within my reach.

First one, one telling people how to manage their money. Very good, very in line with what I am doing at the moment, helping pple to ensure that they are well insured and putting their money hard at work.

Second one, ah-huh, the famous 'POSB Invest SingGrowth Account' that was published quite prominently in the newspaper. I always wanted to find out more about this plan, thinking how is it possible that it can give so good interest rates. After reading, then I realized how difficult it was to achieve the kind of interest rate they were promoting.

Features:
1. Guaranteed return of full principal at maturity or upon Specified Redemption Event (unless banks totally collapsed)
2. The minimum interest over 5 yrs would be 2.78+1.08+1.18++1.28+1.38 = 7.70%. Over 5 yrs, it will work out to be 1.54%

Here comes the interesting part:
3. The Specified Redemption Event occurs when the Return of each Share is at or above 15% on a Fixing Date. What a clause??!!! Why do I say that? It simply means for the Bonus Payout to occur,

ALL 4 of the shares (Singapore Telecom, UOB, SPH, SembCorp) MUST achieve more than 15% ROR. If any one of them fails to do so, NO bonus payout!

Mathematically speaking, assuming these variables are independently related, the probability of the equation would be:
P(Share X achieveing >15% ROR) = 0.5 (to put it very optimistic)
P(ALL shares achieving >15% ROR) = 0.5 x 0.5 x 0.5 x 0.5 = 0.0625!

It would be far off to put your money in a simple short term endownment plan which generates more than 1.54%/annum. Or if you are interested to know more about instruments to make your money grow harder, contact me anytime.