The Center for Seniors started a 2 day course entitled "Senior Employment Guidance" today. There were 22 participants.
I presented a 2 hour talk, including question and answer, on "financial planning for seniors". The talk was well received. The participants found it to be very useful.
The paper for my talk is found in faq
Tuesday, May 1, 2007
My personal asset allocation
Indexfundfan wanted to know what is my personal asset allocation.
At the current time:
* property 30%
* equity 20%
* cash 50%
I have a high proportion of cash, due to my discomfort with the high level of the equity market and the low return on bonds.
My target asset allocation, when the equity and bond market corrects to a lower level, is:
* property 30%
* equity 40%
* bond 20%
* cash 10%
I may have to wait for 1 year to achieve this target allocation.
At the current time:
* property 30%
* equity 20%
* cash 50%
I have a high proportion of cash, due to my discomfort with the high level of the equity market and the low return on bonds.
My target asset allocation, when the equity and bond market corrects to a lower level, is:
* property 30%
* equity 40%
* bond 20%
* cash 10%
I may have to wait for 1 year to achieve this target allocation.
Refinance your housing loan
My friend had a housing loan where he has been paying interest of about 5% for the past few years.
He found that he could refinance his loan and enjoy a lower interest rate. This will save him a lot of money over the next few years.
He found that he could refinance his loan and enjoy a lower interest rate. This will save him a lot of money over the next few years.
Discount on motor insurance
NTUC Income offers a discount of 15% to 20% on motor insurance to union members who sign up up under the NTUC. This is a good deal. It is for a limited period only. Do not miss it.
Some structured products are good?
Hi Mr Tan
I have been following your blog for a few weeks.
You wrote about the bad features of structured products. In my opinion, not all structured products are bad. There must be some structured products in the market, which are suitable for investors. Do you agree?
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MY REPLY:
I agree with you. Maybe you are right.
So far, I have not come across any structured product that add value to the investor. Most of the products seem to take away value, due to the cost of developing, marketing and structuring the product.
During the past months, many investors have approached me for advice on the structured products that they have bought. They were confused. Why is their investment showing a loss? Will they make a gain?
I studied the structured product. It contains a lot of detailed information, but the key information is usually missing.
Although I am an actuary, I cannot understand the rationale of the product. How can an ordinary person figure it out?
Some of these cases are really sad. Here are people who worked so hard to save money for their future needs. They have been misled into investing in a product that will give a poor return for 3 to 5 years. Some even made a loss.
If I find any good structured product, I will put my money into it. And I will share my experience. (So far, I have not found any).
I have been following your blog for a few weeks.
You wrote about the bad features of structured products. In my opinion, not all structured products are bad. There must be some structured products in the market, which are suitable for investors. Do you agree?
---------------------------------------
MY REPLY:
I agree with you. Maybe you are right.
So far, I have not come across any structured product that add value to the investor. Most of the products seem to take away value, due to the cost of developing, marketing and structuring the product.
During the past months, many investors have approached me for advice on the structured products that they have bought. They were confused. Why is their investment showing a loss? Will they make a gain?
I studied the structured product. It contains a lot of detailed information, but the key information is usually missing.
Although I am an actuary, I cannot understand the rationale of the product. How can an ordinary person figure it out?
Some of these cases are really sad. Here are people who worked so hard to save money for their future needs. They have been misled into investing in a product that will give a poor return for 3 to 5 years. Some even made a loss.
If I find any good structured product, I will put my money into it. And I will share my experience. (So far, I have not found any).
Capital guaranteed products give a poor return
Many consumers were cajoled into buying capital guaranteed products. They were told verbally that these products have the potential to achieve a specified return.
After a few months, they found that the value of their investment has decreased. Why is this happening? They had approached the people who sold the product to them, but did not get any clear explanation.
Here is the simple truth.
A capital guaranteed product, locked in for 5 years, can earn a total return of about 16% over 5 years (my estimate). Structuring does not increase the yield. It only increases the expenses.
The total expenses, including sales charge, advertising cost, legal fees and annual fees, will take away 10% (my estimate). This leaves the investor with a total return of 6% over 5 years, or about 1% per year.
The value dropped during the initial years, due to the high sales charge (representing about 5% of your invested sum).
These investors have found, after waiting for 5 years, that they got back a miserable return. If they have taken some risk in the structured product, they might have got back a slightly better return (but nothing to cheer about).
If the money was invested in the stock market, the investor would have earned 50% over the past 5 years. If it was invested in capital guaranteed government bonds, the investor would have at least earned 16%.
I am very sad to see so many people receive a miserable return on their investment in structured products during the past years.
After a few months, they found that the value of their investment has decreased. Why is this happening? They had approached the people who sold the product to them, but did not get any clear explanation.
Here is the simple truth.
A capital guaranteed product, locked in for 5 years, can earn a total return of about 16% over 5 years (my estimate). Structuring does not increase the yield. It only increases the expenses.
The total expenses, including sales charge, advertising cost, legal fees and annual fees, will take away 10% (my estimate). This leaves the investor with a total return of 6% over 5 years, or about 1% per year.
The value dropped during the initial years, due to the high sales charge (representing about 5% of your invested sum).
These investors have found, after waiting for 5 years, that they got back a miserable return. If they have taken some risk in the structured product, they might have got back a slightly better return (but nothing to cheer about).
If the money was invested in the stock market, the investor would have earned 50% over the past 5 years. If it was invested in capital guaranteed government bonds, the investor would have at least earned 16%.
I am very sad to see so many people receive a miserable return on their investment in structured products during the past years.
Singapore Dance Theatre - Impressions
The Singapore Dance Theatre presents Impressions. It features three items:
* a new piece called "Negro Y Blanco" - set to music by Bach, Mozart, Eric Satie and Giovanni Battista Pergolesi - and chereograhed by Singapore Dance Theatre's Jeffrey Tan
* a Singapore Premiere of Argentinean choreographer Mauricio Wainrot's passionate "Seasons of Buenos Aires", which is set to Astor Piazolla's mesmerizing tango music
* a re-staging of Jiri Kylian's seminal piece, "Stamping Ground", a study of Aboriginal Australian dance movements.
Each piece is a snapshot of a place in time, a thought in evolution, and a movement in transition. Each piece is an impression, waiting to be explored and enjoyed by the audience.
Performances on May 18 & 19, 8pm, at University Cultural Centre. Tickets at
$48, $38 and $28 from SISTIC 6348-5555 (www.sistic.com.sg) or Singapore Dance Theatre 6338-0611.
* a new piece called "Negro Y Blanco" - set to music by Bach, Mozart, Eric Satie and Giovanni Battista Pergolesi - and chereograhed by Singapore Dance Theatre's Jeffrey Tan
* a Singapore Premiere of Argentinean choreographer Mauricio Wainrot's passionate "Seasons of Buenos Aires", which is set to Astor Piazolla's mesmerizing tango music
* a re-staging of Jiri Kylian's seminal piece, "Stamping Ground", a study of Aboriginal Australian dance movements.
Each piece is a snapshot of a place in time, a thought in evolution, and a movement in transition. Each piece is an impression, waiting to be explored and enjoyed by the audience.
Performances on May 18 & 19, 8pm, at University Cultural Centre. Tickets at
$48, $38 and $28 from SISTIC 6348-5555 (www.sistic.com.sg) or Singapore Dance Theatre 6338-0611.
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