15 scoops of money for your purse
TRANSCRIPT
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H ello
Thank you for subscribing to BigFatPurse.com
I am very happy that many readers have found the website
informative. This ebook is created for you, my loyal readers.
It has been a great learning journey with you around. I have
compiled 15 scoops (or articles) that I think would provide
a very good foundation to manage your finances. It willcome in 3 parts.
Part 1 aims to change your mindset towards money.
Everything in life is a projection of your beliefs and
thoughts. Hence, this is the first thing to change if you are
not having success with money.
Part 2 aims to impart the personal finance mantras to you.
Questions like how to save, plan for insurance and housing
loans will be answered.
Part 3 is about growing your money. Why it is not wise to
buy unit trusts? Why STI ETF is the best instrument togrow your money with the best balance of risk and rewards?
I hope these 15 scoops can really help you in your finances.
Feel free to send this ebook to your family, relatives and
friends. But do not attempt to edit and/or claim it as your
work and sell for profits.
Warmest regards,
Alvin
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D isclaimer
This is to protect myself. The financial concepts and ideaspreached in this ebook are created from my perspective. It
may not be relevant to your situation and if unsure, please
consult your licensed financial advisor. The parties
quoted/mentioned in this ebook, BigFatPurse.com, and me
(Alvin), will not be held liable for any inaccurate
information or financial losses incurred.
Nonetheless, I have prepared this ebook to the best of my
ability.
1st Edition - 2010
Contact: [email protected]
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T he 15 scoops
Part 1 Stories to change the way you think aboutmoney
Scoop 1 - What do you really want in life
Scoop 2 - Today is the day you live happily ever
after
Scoop3 - Lessons from the movie: UP
Scoop 4 - How much money do you need (want)?
Scoop 5 - Money, wealth and you
Part 2 Save and protect what you have
Scoop 6 - Rule of thumb for your personal finance
Scoop 7 - How to save money
Scoop 8 - The importance of having 2 bank
accounts
Scoop 9 - Insurance should protect your worst case
scenarios
Scoop 10 - Insure yourself against Partial Disability
Scoop 11 - 6 Reasons why you should not repay
your housing loan early
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Part 3 The smartest and easiest way to grow your
money (and includes the lousy but popular way)
Scoop 12 - Why investing in mutual funds and unit
trusts may not be a good idea
Scoop 13 - Why investing in mutual funds and unit
trusts may not be a good idea Part 2
Scoop 14 - Straits Times Index Exchange Traded
Fund (STI ETF)
Scoop 15 - My STI ETF survived the subprime
crisis
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Scoop 1 - W hat do you really want in life?
Do you really know what you want in life?I believe beingrich is one of the most popular goals. But is being rich really
an end point? Or is it a means to an end? An anonymous
Mexican parable enlightens us (version from The 4 hour
workweek):
An American businessman took a vacation to a small coastal
Mexican village on doctors orders. Unable to sleep after an
urgent call from the office the first morning, he walked out
to the pier to clear his head. A small boat with just one
fisherman had docked, and inside the boat were several large
yellowfin tuna. The American complimented the Mexicanon the quality of his fish.
How long did it take you to catch them? the American
asked.
Only a little while, the Mexican replied in surprisingly
good English.
Why didnt you stay out longer and catch more fish? the
American then asked.
I have enough to support my family and give a few to
friends, the Mexican said as he unloaded them into a
basket.
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But what do you do with the rest of your time?
The Mexican looked up and smiled. I sleep late, fish a little,play with my children, take siesta with my wife, and stroll
into the village each evening, where I sip wine and play
guitar with my amigos. I have a full and busy life, senor.
The American laughed and stood tall. Sir, I am a Harvard
M.B.A. and could help you. You should spend more time
fishing, and with the proceeds, buy a bigger boat. In no
time, you could buy several boats with the increased haul.
Eventually, you would have a fleet of fishing boats.
He continued, Instead of selling your catch to a
middleman, you would sell directly to the processor,
eventually opening your own cannery. You would control
the product, processing and distribution. You would need to
leave this small coastal fishing village, and move to Mexico
City, then Los Angeles and eventually New York City,
where you will run your expanding enterprise with proper
management.
The Mexican fisherman asked, But, senor, how long will
this all take?
To which the American replied, 15-20 years. 25 tops.
But what then, senor?
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The American laughed and said,Thats the best part.
When the time is right, you would announce an IPO and
sell your company stock to the public and become very rich,
you would make millions.
Millions, senor? Then what?
Then you would retire and move to a small coastal fishing
village, where you would sleep late, fish a little, play with
your kids, take siesta with your wife, stroll to the village in
the evenings where you could sip wine and play your guitar
with your amigos
If one day you really earn your millions, what do you want
to do? The answer would most probably be what you really
want in your life.
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Scoop 2 - T oday is the day you live happily ever
after
I must confess I am one of those who cannot live in the
present. I always believe the future will be better and
how good it will to be in that position. Having the things I
will like to have and doing the things I will want to do. It
was till I read The M onk Who Sold H is Ferrari that I hadan awakening Happiness is not meant to be reserved for
the future. It is now, today that you savor every single
moment. Happiness is a journey, not a destination.
Ironically, it is by having the sense of happiness and
gratitude now that will allow you to reach your goals in life
in the future.
Here is an extract of the story Peter and the M agic Thread,
taken from The M onk Who Sold H is Ferrari, to illustrate
what it means to live at the moment:
Peter was a very lively little boy. Everyone loved him: his
family, his teachers and his friends. But he did have one
weakness.
Peter could never live in the moment.
He had not learned to enjoy the process of life. When he
was in school, he dreamed of being outside playing. When
he was outside playing he dreamed of his summer vacation.
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Peter constantly daydreamed, never taking the time to savor
the special moments that filled his days. One morning,
Peter was out walking in a forest near his home. Feeling
tired, he decided to rest on a patch of grass and eventually
dozed off. After only a few minutes of deep sleep, he heard
someone calling his name.
Peter! Peter! came the shrill voice from above.
As he slowly opened his eyes, he was startled to see a striking
woman standing above him. She must have been over a
hundred years old and her snow-white hair dangled well
below her shoulders like a matted blanket of wool. In this
womans wrinkled hand was a magical little ball with a holein the center and out of
the hole dangled a long, golden thread.
Peter, she said, this is the thread of your life. If you pull the
thread just a bit, an hour will pass in seconds. If you pull a
little harder, whole days will pass in minutes. And if you
pull with all your might, months even years will pass
by in days.
Peter grew very excited at this discovery. Id like to have it if
I may? he asked. The elderly woman quickly reached down
and gave the ball with the magic thread to the young boy.
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The next day, Peter was sitting in the classroom feeling
restless and bored. Suddenly, he remembered his new toy.
As he pulled a little bit of the golden thread, he quickly
found himself at home, playing in his garden. Realizing the
power of the magic thread, Peter soon grew tired of being a
schoolboy and longed to
be a teenager, with all the excitement that phase of life
would bring. So again he pulled out the ball and pulled hardon the golden thread.
Suddenly he was a teenager with a very pretty young
girlfriend named Elise. But Peter still wasnt content. He
had never learned to enjoy the moment and to explore the
simple wonders of every stage of his life. Instead, hedreamed of being an adult. So again he pulled on the thread
and many years whizzed by in an instant. Now he found
that he had been transformed into a middle-aged adult.
Elise was now his wife and Peter was
surrounded with a houseful of kids. But Peter also noticedsomething else. His once jet black hair had started to turn
grey. And his once youthful mother whom he loved so
dearly had grown old and frail.
Yet Peter still could not live in the moment. He had never
learned to live in the now. So, once again, he pulled on themagic thread and waited for the changes to appear. Peter
now found that he was a ninety-year-old man. His thick
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dark hair had turned white as snow and his beautiful young
wife Elise had also grown old and had passed away a few
years earlier. His wonderful children had grown up and left
home to lead lives of their own.
For the first time in his entire life, Peter realized that he had
not taken the time to embrace the wonders of living. He
had never gone fishing with his kids or taken a moonlight
stroll with Elise. He had never planted a garden or read
those wonderful books his mother had loved to read.
Instead, he had hurried through life, never resting to see all
that was good along the way.
Peter became very sad at this discovery. He decided to goout to the forest where he used to walk as a boy to clear his
head and warm his spirit. As he entered the forest, he
noticed that the little saplings of his childhood had grown
into mighty oaks. The forest itself had matured into a
paradise of nature. He lay down on a small patch of grass
and fell into a deep slumber. After only a minute, he heard
someone calling out to him.
Peter! Peter! cried the voice. He looked up in astonishment
to see that it was none other than the old woman who had
given him the ball with the magic golden thread many yearsearlier.
How have you enjoyed my special gift? she asked.
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Peter was direct in his reply. At first it was fun but now I
hate it. My whole life has passed before my eyes without
giving me the chance to enjoy it. Sure, there would have
been sad times as well as great times but I
havent had the chance to experience either. I feel empty
inside. I have missed the gift of living.
You are very ungrateful, said the old woman. Still, I will
give you one last wish.
Peter thought for an instant and then answered hastily. Id
like to go back to being a schoolboy and live my life over
again. He then returned to his deep sleep. Again he heard
someone calling his name and opened his eyes.
Who could it be this time? he wondered.
When he opened his eyes, he was absolutely delighted to see
his mother standing over his bedside. She looked young,
healthy and radiant. Peter realized that the strange womanof the forest had indeed granted his wish and he had
returned to his former life.
Hurry up Peter. You sleep too much. Your dreams will
make you late for school if you dont get up right this
minute, his mother admonished. Needless to say, Peter
dashed out of bed on this morning and began to live the
way he had hoped.
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Peter went on to live a full life, one rich with many delights,
joys and triumphs, but it all started when he stopped
sacrificing the present for the future and began to live in the
moment.
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Scoop 3 - Lessons from the movie: U P
I caught the show during a flight. Even though it is ananimation movie, I was able to relate to reality of life and I
would like to share my thoughts on them.
Leaving life goals and dreams to lower priorities
The movie is about a boy, Carl Fredrickson, who has a
common idol with childhood sweetheart, Ellie. The idol is
Charlie Muntz and he is an adventurer/explorer who went
away to Paradise Falls. Ellie has a life dream of having a
house on Paradise Falls which she made Carl to promise to
fulfil the dream. They got married and life gets pretty muchlike ordinary folks life revolves around work. Carl manned
a balloon stall while Ellie worked as a zookeeper. They made
it a point to save money so that they can fulfil the dream to
go to Paradise Falls. However, they had to use their savings
time and time again for unforseen events in life. This carried
on until one day, Ellie was ill and eventually passed away.
She left without having fulfilled her dream.
Do you have dreams that you want to do but kept
postponing them?
During my recent travel, I saw majority of the travellers are
elderlies. I was wondering is it true that you will only have
time and money to travel and see the world when you are
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old and have retired. But will an elderly be able to enjoy as
much as when he/she is more energetic during his/her youth?
There are bound to be places where elderlies will have
difficulties to go to, like diving, hiking or mountain scaling.
To put it crudely, it is like leaving sex for old age. As adults,
we centered our life around work and we put off everything
else to the back of our minds. Do we work to live? That is
the reason why achieving financial freedom is important tome. I do not want to exchange my life for money. I want to
live my life.
Forced to get out of comfort zone
After Ellie passed away, Carl was devastated. He hadnothing to live for except for the unfulfilled promise he
made with Ellie. However, he did not went ahead to work
on the promise. Instead, he was just staying home and
mulling with sadness. I t just takes too much courage and
effort to embark on the journey to Paradise Falls. It was
only when he was forced to move to old folks home that he
decided to escape.
Most of us are always in our comfort zone. The fact is we
need to get out of our comfort zone in order to grow as a
person or to achieve things in life. But it is easy to say, mostof us will not be able to get out of comfort zone just by
ourselves. Like Carl, he took the first step to leave for
Paradise Falls only when he was forced by external pressure.
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Thus, find someone who will hold you responsible for your
goals. He/she should be able to check on you and give
constant reminder to make sure you make progress towards
your goals.
Burning the bridge behind you
Once Carl went to Paradise Falls, there was no looking back.
He encountered many misfortunes and even his idol,
Charlie Muntz, was not who Carl thought he was. Despite
all these problems, he pressed on to fight his way out. He
survived and managed to place the house on Paradise Falls
(coincidentally) and fulfilling Ellies dream.
Maybe this is what burning the bridge behind you is all
about. When you know at the back of your mind that
retreating to your comfort zone is no longer an option, you
can only move on with the best of your abilities. Destroying
your retreat option may be a good option if you have
problem persevering towards your goals.
Staying happy always
Despite not able to travel to Paradise Falls, Ellie was not
disappointed. She had a happy life with Carl and she sticked
their pictures of happy moments in her adventure book,
that was reserved for Paradise Falls. It sounds a little
confusing now you may be thinking if she is happy with
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her life, she will not be able to leave the comfort zone and
go for her dream. To an extent, it is true. But this is because
she was dying and she knew it is no longer possible to realise
her dream ever. Knowing that, she probably had lowered
her expectations in life, and while looking back in time, she
was contented and thankful with what she had experienced.
The point is to look for things to be happy about. Do not
always look for imperfection and be unhappy about it.
There are bound to be things to be happy around you, just
that you did not realise and tend to pay more attention on
negative issues. Positiveness is necessary to propel you
towards your goal. Even if you fail to reach the stars, you
enjoyed happiness. Stay happy always.
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Scoop 4 - H ow much money do you need
(want)?
Have you ever asked yourself how much money do you
need? Everyday we are working for money, constantly
worrying about it and always hoping we can have more.
Most of us will think that we will be happy by having more
money. Is that so? How much do you need?
If you say we need money to survive, then you would not
need that much. Maslows hierachy of needs (see figure
below) specified that humans need to fulfil the basic
physiological needs like food, water, clothing and shelter in
order to think about something else. I would say most
Singaporeans would be able to afford these basic necessities.
The question is how expensive you want to eat, wear and
stay. Hawker or restaurant? Functional clothes or branded?
3 room HDB flat or Condominium? If you already have the
latter for most of the questions, you have more than fulfilledyour physiological needs. In fact, you are choosing a
particular lifestyle.
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What if you have achieved your desired lifestyle? Do you
forsee yourself being fulfilled and happy? Or when you havea condominium, you would want a landed property? If the
attention is on upgrading your lifestyle, you will never be
able to achieve fulfillment in life. I find this common to
many people around me, including myself, which my
perspective has begun to change. Life is much more than
what money can bring. If we keep thinking that money can
make us happy, we will be chasing shadows and be
disappointed at the end of the day. You should chase
money only when your basic needs cannot be fulfilled.
Because you need money to exchange for food, water,
clothes and shelter. I would assume you have fulfilled level 1since you are still alive and reading this post online. In this
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case, if you are chasing money, you are not talking about
needs, but wants. You want a desired lifestyle.
Let us revisit the Maslows hierarchy again. If you asked me,
only the first two levels (physiological and safety) require
money. Humans seek certainty and want things to be under
control. Once our basic needs are fulfilled, we look at
protecting what we have. We do indeed need more money
to be safe and secure. But how many of us do proper
financial planning, such that we get free from the money
trap? The more you earn, the more money you need to
protect your lifestyle. Most of us always complain Singapore
is so competitive and life is getting harder. This is
because our security (or current lifestyle) is threatened.Without a sound mindset and proper financial planning, we
will never be able to escape from this level.
To fulfill the level of love/belonging, most of us believe that
improving our lifestyle will improve the relationship
with our partners and family. The same
thinking applies to the levels of esteem and self-actualization.
By having a better lifestyle, we assume we will be well
respected and successful. Instead of protecting our
current lifestyle with proper financial planning, we keep
spending to improve our lifestyle. With a better lifestyle, wenow have to protect it by having more money. We get
trapped in the second level (safety). We find that we can
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never be satisfied. We always feel we do not have enough
money.
Money is not the problem. Mindset is the problem. We
need to understand and accept that having a better lifestyle
does not equate to having a better life. If we seek a better
lifestyle, when will it end? There will always be a better
lifestyle to chase after. I am not suggesting you should not
have a dream lifestyle. In fact you should. But know when
to stop. Work on your relationships. Work on your passion
in life. Warren Buffett is always a good example. Despite his
wealth, he still stays in the same house that he first bought.
Drinks coke and eat McDonalds. But he has reached the
level of self-actualization. Recently, 40 US billionairespledged half their wealth to charity. Have you ever
wondered why the rich earn more money only to give them
away? Because they have long detached themselves from
money. They no longer chase money. They no longer desire
a certain lifestyle. They want to achieve other things in lifethat cannot be achieved by money.
My point is, fulfillment in life is not about lifestyle or things
that money can buy. We have given too much credit to it.
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Scoop 5 - M oney, W ealth and You
I have heard from different sources about value creationbrings about wealth. You get richer only if you increase the
value that you give to others. Zig Ziglar said, you will get
what you want if you help enough people get what they
want. Initially, I am not sure about this principle even
when teacher Dennis mentioned about providing value andnot to aim for financial freedom as a goal. If I give
something to others, wouldnt it make me worse off? As I
continue to learn and inquire about money, that I start
to understand this principle. W hen you provide a service
or product that is needed by the society, you solve
problems and people who need the service or product
will pay you for it. T hey become better off consuming
the service or product, and you become wealthier. I t is a
win-win relationship. T he more value you can create,
the more money you can make. Hence, it is contrary to
what most people believe, in order to have more, you needto take more. Instead, in order to have more, you need to
give more.
Thanks to La Papillion for recommending Killing Sacred
Cows which gave me a better understanding of this
principle. I cannot explain better than the author, Garrett
Gunderson, so I shall quote his passages:
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Focusing on accumulating money is like wanting to harvest
the fruits of a tree while ignoring the roots. As we accept the
accumulation theory, most of us become frustrated with the
lack of fruit on our tree or lack of money in our bank
accounts. And what do we do to solve this problem? We
focus on the fruit only, rather than tracing the fruit to the
branches, then to the roots. The real solution is to nourish
the roots; then the fruit will naturally follow. This is theprinciple-based, rather than strategy-driven approach. Value
and dollars follow value creation. Dollars are the effect;
value creation is the cause.
The way for you to get what you want is to give others
what they want; to make yourself valuable to others. Whenyou create value for others, and they find it more beneficial
to live life with you than without you, you create a true
sense of security based on personal production, rather than
on external, uncontrollable factors.
Wise stewards of money have power because of their
applied knowledge and human life value; they dont derive
their power from money.
If we didnt have currency, the only way to exchange would
be the barter system. If I have wheat and you have pigs, andI want pigs and you want wheat, we can exchange wheat for
pigs, and we both walk away from the transaction wealthier
than before. I gave up something I valued less for something
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that I valued more, and so did you. But what do we do
when you dont want wheat, but I still want pigs? In that
case, you and I have no basis for exchange, because you
dont value what I have to give you in exchange.
Now put currency into the equation. If we agree upon
symbols of value (ones that other people in our society also
agree upon), I can give you currency instead of wheat in
exchange for pigs, and you can use the currency to exchange
with another person for something that you actually value.
So what does the currency represent? The value that each of
us individually want. People choose what denominations of
currency are worth to them, because they choose what theywant to buy with the currency. The value is in the minds of
people, not the currency. Money does only what we tell it to
do, and the things we tell it to do are based on the things
that we value and want.
Nobody wants currency; they want the things that can be
bought with currency. Or they want the prestige and
image that they think comes with having money.
If you want to prosper, you must stop thinking about
money and instead start thinking of ways that you can
create maximum value for as many people as possible.
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Scoop 6 - Rule of T humb for your Personal
Finance
There are a few popular rule of thumb when it comes to
managing money. I would say they do ensure you will be
financially sound if you follow them.
D o not chalk up debt more than 35% of your income
Banks use 35% as your borrowing limit when approving
your loan applications. This means that your monthly
repayment towards any form of debt should be below 35%
of your gross salary. The debts can be car installment,
housing loans, outstanding credit card bills, etc. This rule isto protect you from taking too much debts. Breaking this
rule will likely undermine your ability to save and you may
find yourself paying debts for the rest of your life.
Save at least 10% of your income
As the parable from The Richest Man In Babylon says,
For each ten coins I put in, to spend but nine. Always save
at least 10% of your income. This is actually the very first
step one should take to be well financially. The correct way
to save is to pay yourself first. Always put aside 10% of yourpay in another bank account (apart from the account that
your salary credits into) immediately when you receive it.
The account with the purpose to save should have minimal
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facilities, ie. without cheques, debit cards linking to it. This
is to make it difficult for you to withdraw the money.
D o not commit more than 10% of your income into
insurance
Do not under-insure but do not over-insure too! Many
people treat whole life insurance as a form of savings. It is
wrong! To me, insurance is a cost, it is not investment. One
should not try to kill two birds with one stone. There isnt
anything is this world that sounds so good you can have
comprehensive protection while the same pool of money
grows rapidly. Remember, buy what you need to protect as
protection is a cost. I t must be a needs driven requirement.Do not buy insurance to save (and invest). You will get
much better returns investing in STI ETF, which is simple
to understand. If you need a disciplined way to save, open a
Save as you earn account, where it will deduct monthly
contribution directly from your bank account. I am not a
believer that you can excel in both protection and
investment in one insurance policy.
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Scoop 7 - H ow to save money?
Do you find it hard to save money and that even if you havetried, the figure in your bank account always remains
stagnant? Saving money is the foundation of personal
financial planning. Even if you are a capable high salaried
personnel, you can end up poor with extravagant spending.
Thus, I hope the following tips can help you to save money.
Value money. As simple as it is, you need to value money
so that you will think thrice before parting with it. Protect it
at all cost and do not let others take away your hard earned
money easily. Once you have the correct mindset that
money is valuable, you are ready to start saving.
Pay yourself first Rich Dads popular phrase. Most
people tend to do otherwise; they would spend first and
thereafter, save the remaining. Chances are, there is nothing
left. Thus, set a target to save each time you get your
paycheck. The Richest Man in Babylon advises you to
save no less than 10% of your salary. You can open another
bank account specially for savings where you channel that
10% every month religiously. Do not touch the money in
this account unless it is an emergency. If you think that you
do not have the discipline, you can sign up for regularsavings plan with your local banks who would automatically
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channel your money to another account. In Singapore, here
are some of the options:
- MySavings account (POSB)
- FlexiDeposit (UOB)
- Monthly Savings Account (OCBC)
Live below your means. This is a classic answer to how to
be rich. Buy things that you can afford, especially the big
ticket items. You may adore the convertible sports coupe or
the penthouse in the prime location, but seriously ask
yourself whether you can afford it comfortably without a big
loan. Do not end up in huge debts that you are not able to
pay, not to even mention you will not have the capacity tosave.
Set a budget. After you set aside 10% of your paycheck for
savings, plan a budget of the remainder for regular
expenditure like your bills, transport, food and most
importantly, leave some for your entertainment and
recreation. Everyone needs to enjoy but set a budget and
make sure you keep to the amount. In this way, you will be
able to control your expenses. Remember: I f you fail to plan,
you plan to fail. Track your expenditure monthly to make
sure your budget is realistic and if it is, whether you kept toit. It would be easier to track if you make transactions with
your bank card or credit card as the bank will send you the
transaction records each month. However, be careful with
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credit cards, do not spend more than your planned budget
or above your means. One advantage of credit cards is that
you can save some money through the discounts at
merchant outlets.
When you are able to do the above, I am sure you will feel
more secure and definitely a less stressed person is a
happier person.
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Scoop 8 - T he importance of having 2 bank
accounts?
I dont know about you. But I do have 2 bank accounts.
One is known as an operating account where my salary
gets paid into as well as all my expenditures are taken from.
Here is the list of transactions are made with this account:
Income:
- Salary
Expenditure:
- Bills payment- Loan installment
- Insurance premium
- Cash withdrawal
- Share payment
- Petrol costs- Donations
The other account is truly a savings account where I divert
a portion of my salary to this account almost immediately
when my salary is paid. I keep the ATM card out of reach so
that I do not touch the money inside this account. I do not
have checks or other withdrawing facilities tied to this
account. No bill payment or insurance premium are made
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from it. It is important to make the account as inaccessible
as possible so that your money is safe. I will only use the
money for emergency situations.
This is what you should do:
Set up a new savings account with minimumbanking facilities
Divert a portion of your salary into this account themoment you get paid
Leave the ATM card at home or leave it with yourspouse (without him/her knowing your password of
course!)
Once you have saved sufficient emergency fund,continue to put money into this account
Invest when you have thousands of dollars morethan your emergency fund level
Repeatedly save and invest
Understanding the purpose alone is insufficient, you need to
take action. Open an account today and tell us that you
have done so.
For those who have an additional account already, save now
and tell us you have done so.
I will give you a pat on your back. Trust me, you will feel
good about yourself.
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Scoop 9 - Insurance should protect against your
worst case scenarios
I believe everyone should buy insurance to cover his/her
worst case scenarios and not just buy because it is likely to
happen. In fact, your worst case scenarios are likely to be
low probability events and hence, unlikely to occur. But
because they are unlikely to occur, most people areunprepared for them (just when you think you are healthy).
This causes the impact of such low probability events to
have big detrimental effects. Analogous to betting where
odds are involved, the payout for the outcome is the highest
when the probability of happening is the lowest. If you are
not insured against your worst, then you have the pay the
most price in the end.
D efining the worst case scenarios
Worst case scenarios can be very subjective and differs from
person to person, but there should be some similarities.
Defining your worst case scenarios is equivalent to defining
your needs, instead of your financial planner defining the
needs for you.
For illustration purposes, here are my worst case scenarios:
Scenario 1 I contracted major illness/disability such that I
am not able to work and have to depend on family.
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Scenario 2 I died and my dependents financial future
becomes uncertain.
Scenario 3 As a single child, my parents contracted major
illness/disability such that their medical costs become a toll
on my finances.
Protection against the worst
After defining my worst case scenarios, I should find out
what insurance policies are available for protection against
such cases:
Scenario 1 A whole life or a term life policy with critical
illness and total permanent disability clauses would be able
to compensate for major illness and total permanent
disability. It is impossible to cover all illnesses but like what
we went through initially, we should cover the worst cases.
Illnesses that are low in probability usually incur high
medical costs compare kidney failure to flu. The problemwith insurance products is that there is no one policy that
can cover all your protection needs. Hence, there are holes
in every policy that you need to augment with other policies.
The disadvantages of a whole/term life policy in relations to
critical illness and total permanent disability:
- critical illness cover is pretty useless if you do not opt for
early payout. This is because critical illness payout is paid in
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the final stages of your illnesses such that your probability of
recovery or even survival is low. This means that from the
first detection of the illness, the insurance does not pay you,
but only pays when you are about to die. And in fact, your
dependents can receive death payments after you die. So
having a critical illness coverage only helps in receiving the
payout a little earlier before your death.
The solution is to get the best shield plan available. The
shield plan will be able to cover a substantial amount of
hospital treatment and warding when you are contracted
with the illness. With the shield plan, you will not be
financially strained with prolong treatment. If you can only
afford to get one policy, then it should be the shield plan.
- total permanent disability (T PD ) only pays when you
lose a pair of limbs and is irrecoverable. What you can do is
to buy an accident plan, where it has different payout
percentage of the sum assured for disability of different parts
of your body. In this case, you can claim if you lose a leg or
an eye and need not be a pair. However, an accident plan is
only claimable if your injury or disability is sustained during
an accident. Alternatively, you can buy a partial disability
income policy, such that in the event you cannot work, be it
due to accident or illness, you can be compensated monthly.Even if you are wheel chaired but can recover, you can still
claim.
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Scenario 2 Likewise, a whole/term life policy would cover
for my worst case scenario 2. The money is to help the
dependents after a stream of income is lost in the family.
You do not need this if you have no dependents.
Scenario 3 - Shield plan becomes very important to my
parents to cover hospital bills. In addition, Eldershield can
be bought in case they lost their ability to carry out daily
functions and require private nurse to look after them.
As you can see, the approach is to insure yourself against
worst case scenarios that will have the biggest impact on
your life. There is no point in looking at the gains when
buying an insurance policy. For example, if you are lookingat something that is high probability in nature, like falling
sick with common flu, sore throat, fever, etc, that can be
cured by a general practitioner, and you are insured for this
rather than getting an accident plan. You may claim 100
times for years to come, but one day, you get into a car
accident and lost your leg and you do not get a single cent.
Visitng the general practitioner is a high probability event,
but you can afford the costs. Getting hit by car is low
probability event, but the costs of treatment may be costly. I
understand the example is a little far fetch but I just want to
bring across the point clearly. You should insured againstthe worst and not buy insurance based on returns or rewards.
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Scoop 10 - I nsure yourself against Partial
D isability
Currently, only Aviva and Great Eastern offer partial
disability income. The difference is that Aviva offers a
standalone policy while Great Eastern offers as a rider to a
whole life policy. Read on to find out why it is important
and why you need it.
W hat is partial disability income?
An excerpt from an article in Business T imesexplains it well:
A properly designed disability income programme ensuresa monthly income payout if you cannot perform your
primary occupation because of an injury, accident or any
illness which need not be one of the 30 major illnesses
named by the insurer.
Your earning ability is your most valuable asset as you arethe goose who lays the golden eggs. Most insurance policies
only pay when the golden goose drops dead or is critically ill,
but this is not enough. What we need to do is to insure the
gooses ability to lay the golden eggs. For example, no
insurance plan pays a teacher if she loses her voice and hasto quit teaching. Loss of voice does not meet the definition
of TPD, but is sufficient to trigger disability income payouts.
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Similarly, no insurance plan pays a pilot if he is grounded
for his diabetic condition.
Most people insure their car and home, not realising their
lifetime income potential could be many times the value of
their home. If you have enough assets to replace your
income, income may not matter anymore. Until then,
disability income cover provides an important safety net
against financial disaster. It should be a part of all prudent
financial planning strategies.
W hat I did?
I got a whole life policy with the disability income rider.
The sum assured is calculated such that when the partial
disability rider ends at age 55, the life policy can be
terminated and the money returned is enough to cover the
entire premium paid. This means that I get free coverage till
55!
W hat you need to take note:
It is important to note that the disability income is pegged
at 75% of your current salary. Even if your salary increases
in the future, the disability income will still remain the same
at the time you purchased the policy.disability income.
What you can do is to add on another income protection
plan to top up the increase in your income. This is especially
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important if you took on more obligations or liabilities
when you income increases as income protection essentially
provides for ones fixed recurring expenses.
Secondly, the payout is only made after 2 to 6 months
(depending on your occupation class) from the moment one
stops working. So one has to survive on emergency savings
in the bank during the interim period.
There are 3 factors to consider when taking on an income
protection plan.
1) Term of coverage (till age 55, 60 or 65)
2) Monthly payout (Max of 75% of salary)
3) Pre-Benefit period (60,90 or 180) days.
It is important to check with your employer how long a
period you will continued to be paid if you are disabled and
not able to carry on to perform your role in your
designation as that will be crucial to determine the pre-
benefit period.
One will not be able to received benefit payout from both
employees benefit and also an insurer to an amount morethan 75% of last drawn salary.
Conclusion
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There are instances where your life, critical illness and
accident policy do not cover. Partial disability income will
payout as long as you are not able to work due to physical
impairment, whether permanent or temporary. If the
physical impairment is not due to an accident, you cannot
claim the accident policy. If the disability is not permanent,
you cannot claim the life policy. If you do not suffer from
critical illness, you cannot claim the critical rider to your lifepolicy. But the cruel fact is that you cannot work because of
your physical impairment, and you have to stay at home for
maybe the next 2 years. Partial disability income will payout
to you during this tough period. If you do not have this
protection, you will not receive a single cent from all your
insurance policies.
If you like to find out how it will mend the hole in your
protection, you can approach Alfred Toh, who is the kind
guy who emphasized the importance of partial disability
income to me.
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Scoop 11 - 6 Reasons W hy You Should N O T
Repay Your H ousing Loan Early
Dennis Ng from www.HousingLoanSG.com, a leading
Mortgage Consultancy portal, has been helping and
advising many people with regards to housing loan. One of
his advice is not to repay your housing loan early, even if
you have the capability to do so. Why? You must bethinking it is so contrary to what was often preached be
debt free as soon as possible! Dennis does have very valid
points:
1) I t is the cheapest loan
Housing loan is the cheapest loan you can ever get from
banks. The interest is about 3-4% and you compare it to car
loan (7%), unsecured personal loan (14%) and credit card
loan (24%). You can see the contrasting difference! Dont
you think you should leverage on the cheapest loan available
to you?
2) Your networth remains the same
Repaying your housing loan early does not increase your net
worth. This is because you are just taking your cash fromyour bank and putting it into the house. Worse, you are
actually freezing your cash.
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3) Losing your life and money
Having mortgage insurance can help you in the event ofdeath or total disability, where your loan will be paid off by
the insurance. The cash or CPF monies can be left for your
beneficiaries. If you have repaid the loan using your cash
and CPF, you would have lost this advantage.
4) Opportunity Cost
With the cash in hand, you can invest and generate better
returns. Rather than being cash strapped, you have the
purchasing power to pick up real bargain stocks when the
market crashes. Again, it will not be possible if you have
your money locked in the house.
5) U se Interest O ffset Loan
With an interest offset loan, you can earn interest on your
cash to offset 100% of your housing loan interest you payon your loan. This equates to repaying your loan, but with
the liquidity of your cash where you can deploy when good
investment opportunity arises.
6) Buy Single Premium Endowment
If you do not know how to invest and would want to avoid
all risky products, you can buy a single premium
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endowment, maybe for 20 years at 3.5% annual return.
This would be able to offset your housing loan interest.
I have also posted questions to him and they are all
documented here:
1) I t is indeed a great i nsight you have provided. H owever, I
feel that most people do not have the luxury to choose to repay
their house early. They are often cash strapped and can only
meet monthly repayment schedule. The problem i s to even get to
the position of having the ability to repay housing loan early.
Do you agree?
I dont quite agree. There are quite a number of people who
are in a position to make lump sum repayment to Housing
Loan, some do it every year, using the Bonus they receive.
My main message is even if you have extra Cash/CPF to
make Prepayment to your Housing Loan, you should
refrain from doing so, because Housing Loan is possibly theONLY Good Debt available to almost everyone, and one
can speed up ones path to Financial Freedom by keeping
ones Home Loan.
I define Good Debt as a debt whereby it is possible for you
to get a higher return than the interest you pay on the loan.
Using this definition, the other common Good Debt is
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Business Loan, however, this is only applicable to people
who are in business.
5 years ago I had about S$250,000 in Cash. I owed about
S$200,000 in Housing Loan then. Im glad I chose to invest
S$200,000 of my cash instead of paying off my Housing
Loan. Over the last 5 years, because of the Major uptrend in
stocks and property, I managed to turn the S$200,000 into
about S$800,000 by leveraging on the Bull market in stocks
and later, property. (I also saved total of about S$200,000 in
the last 5 years, thus, I managed to reach my first million in
year 2008, in the midst of a Financial Crisis.
If I had used the S$200,000 to pay off my Housing Loan.Today, Ill be financially very far behind compared to my
current status.
I observe that most Singaporeans do not have much money
to retire because firstly, they over-commit, then they took
the next 20 to 30 years using their precious Cash/CPF to
pay off their Housing Loan. Thus, ending up Asset Rich
(fully-paid house) and Cash Poor when they reach age 60. ie.
buying a bigger house than they can comfortably afford.
Some also made the mistake of buying property near market
peak. Those who made the mistake of buying near the peak
in the previous property bull market in 1996 and saw prices
crashed by over 40% had to wait for close to 10 years for
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prices to recover to their purchase price. They did not
realize that the single Mistake they made (buying High) set
them back by 10 years of precious time.
Imagine another person who did not make the mistake
would be 10 years ahead of them, and because of the Power
of Compouding, once youre behind financially by 10 years,
you can never really catch up.
2) You mentioned about Interest Offset Loan. Would you be
able to elaborate further on how it works and how to go about
applying for it?
Basically, they allow you to put money into a Current
Account linked to the Housing Loan. The unique thing is
that the Current Account pays the same interest rate as what
they charge you on the Housing Loan. Ie. if bank charge
you 3% on your Housing Loan, they will pay you 3% on
any amount you deposit in the Current account as well.
Thus, if you owe S$1 million in Housing Loan and placed
S$1 million in the current account linked to the Housing
Loan, effectively youre paying 0%, (similar benefit to
paying off the Housing Loan). However, you have the
benefit of liquidity, should you need to use part or all of
the money in the current account, you are free to withdraw
anytime and youre only charged Housing Loan interest
rates.
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3) Lastly, buying a single premium endowment wouldnt it be
as good as locking your money somewhere else than in your
house? I believe there is penalty for redeeming the endowment
early. I feel it is not a good alternative to repaying housing loan
early, unless I am wrong.
Of course, a single endowment policy is not exactly a
fantastic investment alternative. I used it as an example in
case
people give the excuse that they do not know how to invest,
thus rather than risk losing their money investing, they
rather use their Cash/CPF to pay off their Housing Loan.
The good thing about Endowment policy is you can match
the time frame of the Asset (Endowment) with your
Liability (Housing Loan). The good news is that due to
power of compounding, over a long time of say 20 years,
even an annual compounded returns of 3.5% can work out
to quite a lot.
Eg. a S$300,000 earning 3.5% annual compounded interest
would grow to S$679,655 over 20 years. and S$842,038
over 30 years!
If people say they dont know how to pick stocks, another
alternative they can consider is to invest their money into
Exchange Traded Funds (ETF). ETF are basically funds
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that are traded like stocks in a stock exchange. Advantage is
you can track the performance of an index by a small
investment outlay eg. S$1,000, and the annual fees are
much lower than typical Unit Trusts. One example is STI
ETF.
Most people look at things too short term. Eg they only
compare the Housing Loan interest they pay over the next 3
years, vs the returns they get, 3.5% over 3 years. However,
they did not realize that over a longer period of time, say 30
years, things would look very differently.
What is our objective? Our objective should be to ensure
that when we reach aged 60, we are financially better off.Most people only look at short term, eg. can I make money
in 1 years time? And this is one main reason why many
people fall into scams, because most people are too
impatient and want to get Rich Quick.
Most Get Rich Quick schemes turn out to be Scams. The
sad fact is that it seems like people do not seem to be
smarter over time. Charles Ponzi conned people about 100
years ago, now people are still falling into similar Ponzi
scams, 100 years later.
Therefore, I strongly believe that if people can be taught to
increase their level of Financial Literacy and financially
knowledge, they will be able to retire comfortably. I myself
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only earn an average income of S$6,000 in the last 15 years,
or total of S$1.08 million. (For your information, my
starting pay in 1993 was only S$1,500). However, over the
same time period, I managed to save, invest and accumulate
S$1 million, excluding my house, by aged 39. Thus, I hope
that by sharing my knowledge and experience, I can inspire
more people that it is possible for an average middle class
Singaporean to retire by age 40.
This year I planned to launch seminars and workshops to
teach H ow to Save, Invest and Accumulate Your Fi rst M i llion
Dollars, because I firmly believe that if I give people a fish,
it can only fill them for one day, but if I teach them how to
fish, they will never go hungry again.
Dennis Ng is an active contributor to the media, especially
on My Paper and 95.8 FM Capital Radio. He is a qualified
CFP, Accountant and ex-banker. He co-founded
LEVERAGE HOLDINGS Pte Ltd, a leading loan
consulting firm in Singapore. For more information, visit
www.HousingLoanSG.com
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Scoop 12 - W hy investing in mutual funds or
unit trusts may not be a good idea?
Be careful when agents try to sell you mutual funds
(equivalent to unit trusts in Singapore). Since you do not
have the expertise and time to invest on your own, you may
feel it is better off to leave your money with the professional
fund managers who do it full time. It seems like an easy wayout, but there are important issues that you need to
understand before you think it is the best way for you to
invest.
1) M ost actively managed funds cannot beat the
benchmark or the index over the long run.
John Bogle, the founder of Vanguard funds and a strong
supporter of index funds, analysed the performance of US
mutual funds in the 36 year period from 1970-2006. At the
start of 1970 there were 355 equity funds. By 2006, only
three out of the original 355 funds beat the index
consistently over the 36 year period. Hence, your chance of
picking the 3 winners is 0.8% and how slim is that? You can
easily beat 352 funds by buying the index fund.
2) H igh fund management fees eats into your earnings.
This is one of the reasons why it is so difficult for funds to
beat the index because the annual management fees (2-3%)
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reduces your returns. Moreover, the fees are fixed no matter
how the fund performs even if the fund had a negative
return, the manager still gets paid. Overtime, compound
interest can aid you but on the other hand, your annual
fund management fees can compound against you as well.
3) Randomness of the market.
Burton Malkiel (author of the once controversial book, A
Random Walk Down Wall Street) and many other
efficient market believers feel that you cannot predict the
market and profit from it. Fund managers are therefore, no
different from monkeys throwing darts to select the stocks
to buy. They may have their own investment system andphilosophy, but they cannot disprove the luck factor in their
success or failure. The randomness was further addressed by
Nassim Taleb in his book, Fooled by Randomness. He
mentioned that randomness very much determines the
success or failure of managers. To answer how some
managers managed to be spot on in stocks, he drew the
analogy of coin throwing where everyone has a 50% chance
of the correct answer. For e.g., we begin with 100 managers,
after 1 throw, 50 managers (50%) were right. After second
throw, 25third, 12 fourth, 6. fifth 3. Thus, this is a
simplified example of how the top 3 funds can be spot onfor 5 years in a row. So how long more can they sustain
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their luck? It can be the moment you put your money in,
they start to choose the wrong side of the coin.
4) Restrictions for fund managers.
Fund managers have restrictions on what they can invest in
according to the promise and description of their respective
funds. Even if a golden opportunity comes knocking, they
may not be able to seize it due to these restrictions. Secondly,
if a particular sector or country is undergoing a downturn,
they may have to stay invested as stated in their fund
objectives. An additional problem also arised when the
popular fund gets too big they have too much money and
they cannot just sit on the cash. They are thus pressured tokeep the money invested even when there are no good
options. In the end, they may end up with second rated
investments. It just goes to say, the restrictions and pressures
are piled on top of the effect of randomness to make
managers more difficult to beat the market.
5) Sales charges.
Like management fees, sale charges (when you buy and sell)
eats your earnings away. It is true that there are few funds
that can beat the market each year (and it is often true that
this years top 5 funds will not be the next years top 5). You
may believe that you just need to identify these top funds
each year, you can earn big gains. As we know that there are
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hundreds of funds out there, your chances of finding the top
performing ones are slim. Coupled with the fact that you
buy sell frequently, you incur many sales charges, which
greatly reduces your returns even if you managed to pick
one or two correct ones.
In the future, if someone tries to sell you mutual funds,
maybe you can pose these challenges to them. I think if theycan defend their products convincingly, they deserve your
investment.
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Scoop 12 - W hy investing in mutual funds or
unit trusts may not be a good idea part 2
Followers of bigfatpurse will know that I am not a definitely
not a fan of mutual funds or unit trusts. I stated my reasons
in this earlier post: Why investing in mutual funds or unit
trusts may not be a good idea. It rekindled my thoughts
about mutual funds when I was reading Peter Lynchs OneUp on Wall Street, who as a fund manager, believes an
investment professional may not do as well as an ordinary
retail investor. In his book, he provided elaboration that was
not covered in my post and it was his view from the inside
that made it even more convincing.
Analysts may not be qualified afterall
Peter was hired at Fidelity (a fund management company)
as an intern while he was at Wharton University. He
sounded very critical against the investment professionals
like the research analysts (which I believe not all are bad)
Summer interns such as me, with no experience in
corporate finance or accounting, were put to work
researching companies and writing reports, the same as the
regular analysts. The whole intimidating business was
suddenly demystified even liberal arts majors could
analyze a stock.
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He even called professional investing an oxymoron but
redeemed himself speaking of a handful successful ones like
John Templeton, Warren Buffett and a few others.
Professionals are slow to recognize business success than
commoners
He argued that it takes a longer than desired time to identify
a business that has tremendous growth potential. He termed
it Street lag. Under the current system, a stock isnt truly
attractive until a number of large institutions have
recognized its suitability and an equal number of respected
Wall Street analysts have put it on the recommended list.
With so many people waiting for others to make the firstmove, its amazing that anything gets bought. He
substantiated with the example of The Limited, where many
analysts missed the stock in its early days. It was up
eighteenfold from 1979 to 1983, but only 6 analysts were
tracking it from 1981. It was only until 1985, the stock
came under the radar of the analysts and institutions chased
after it at $15, up from the initial 50 cents.
He reckoned that many commoners visiting any of the 400
The Limited stores back in 1981 would have realized its
thriving business earlier than the professionals.
T he need to keep his job
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Fund managers have big clients and bosses to answer to and
they have to justify for their fund performance and stock
selections to these people. With survival at stake, its the
rare professional who has the guts to traffic in an unknown
La Quinta. In fact, between the chance of making an
unusually large profit on an unknown company and the
assurance of losing only a small amount on an established
company, the normal mutual-fund manager, pension-fundmanager, or corporate-portfolio manager would jump at the
latter. Succes is one thing, but its more important not to
look bad if you fail. Theres an unwritten rule on Wall
Street: Youll never lose your job losing your clients money
in IBM."
If IBM goes bad and you bought it, the clients and the
bosses will ask: Whats wrong with the damn IBM lately?
But if La Quinta Motor Inns goes bad, theyll ask: Whats
wrong with you?"
In other words, fund managers find it easier to justify their
losing positions on big recognized companies than losing
positions on almost unknown companies. And it is often
that the greatest growth comes from the small companies.
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Scoop 14 - Straits T imes Index Exchange
Traded Fund (STI ETF)
If you are interested to invest in the Straits Times Index
(STI), it is available in SGX through the STI Exchange
Traded Fund (ETF). It started in 2002 and is managed by
State Street Global Advisors. STI is mainly a blue chip
(major companies) index of the top 30 companies listed inSGX. As compared to S& P 500, it is a much narrower
basket of stocks. Nonetheless, it is the most widely used
indicator for Singapore market.
The Funds investment objective is to replicate as closely as
possible, before expenses, the performance of the Straits
Times Index. As this will disallow the Fund Manager to buy
or sell based on his own judgement, it eliminates possible
human errors or emotions in investments. And because of
this mechanical investing style, the fund management fee is
low (0.3% per annum) as compared to a typical activelymanaged fund (~1.5% per annum). Another advantage of
ETF is that it can be easily traded (like stocks) via the
exchange and thus, facilitates short term trading.
Although the ETF is convenient to buy and sell, it is better
to buy and hold for the long term so as to have a longer
time horizon as an edge. I believe using the dollar cost
averaging (DCA) method (buying a fixed amount each
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month regardless of the ETF price) should be the initial and
primary method of investing. It may sound boring but it is
one of the safest and easiest, yet able to get reasonable
returns for a person who knows nothing about investing. It
eliminates the need for market timing and any form of
analysis of specific companies in the stock market. One note
to be taken seriously for DCA is that it takes great discipline
to contribute regularly in buying the counter, especiallywhen the market is not doing well. This is because the
method actually takes advantage when the counter price is
low (like a discount so you can buy more). If you are not
able to do it, then it will defeat its purpose and thus, think
thrice of the commitment level before you jump into it.
If you are interested in applying the DCA method for STI
ETF, PhillipCapital has a Shares Builder Plan (SBP) where
they accept a minimum of S$200/mth to purchase the ETF
for you. The cost of each transaction is S$6 + GST (for
investment www.poems.com.sg Financial Services Stocks& Shares Share Builders Plan. I am currently suscribing to
this plan, buying S$200 worth of STI ETF shares each
month and I decided to do it long term. (Update: I have
just increased it to S$400 in Apr 09!)
Here are some details about STI ETF:Counter Name STI ETF
Management fee 0.30% per annum (max 1%)
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1 Trading lot = 1000 shares
Currency SGD
Performance of STI ETF (taken from the funds annual
report on 30 Jun 07)
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Scoop 15 - M y ST I ET F Survived the Sub-
prime Crisis
I have mentioned that I have been putting aside $400 every
month into STI ETF, through POEMS Sharebuilder plan.
I started the investment about 2-3 years ago and only
contributed $200 per month. It was only about mid-2009
that I increased the contribution to $400.
We all know that due to the US Sub-prime crisis, the
market took a beating and plunged. My STI ETF sank too.
But I held on to the Sharebuilder plan, believing that dollar
cost averaging will work better for me in a down market.Dollar cost averaging (DCA) is to use a fixed sum of money
to buy a particular shares on a regular basis, instead of a
lump sum investment. The strategy works like how
Singaporeans go for shopping. When there is a sale,
Singaporeans will buy in bulk the items that are on discount.
Likewise, with $400 each month, I buy more when the
stock price falls, and buy less when the stock becomes more
expensive. Overtime, I get a big discount for the shares I
buy.
You may say that I could have profited more if I havebought near the low of STI but I must say I did not know
when the market will bottom and never will I in the future.
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What I must emphasized is that ordinary folks who do not
know how to time the market, can invest in this way and
gain very decent profits. Since it is so simple and relatively
safer than many other strategies or asset classes, it is highly
recommended for people who do not have the interest to
follow the market but like to profit from equities.
Lets talk about real life results: As of Dec 09 holdings, I
have 3077 shares of STI ETF and a DCA price of $2.5448
for each share. STI ETF closed at $2.99 today. This would
translate to a positive gain of $1369.63.
You may feel that the gain is small. But I want to stress that
I have a gain despite buying near the peak and went throughthe entire market crash in 2007-08. How many people have
their investment in the positive territory now?And I did not
time the market. It was robotic, the bank just GIRO my
contribution to the plan without me doing anything.
Anyone can do it! If this is the worst time, my STI ETF will
even perform better in better times.
If you are not convinced, do check out the annual reports
released by Streettracks. For your convenience, I took the
performance table from the latest 09 annual report:
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I feel that it is quite impressive if you compare to many
other managed funds or unit trusts. And the management
fee is only 0.3% per annum.
If you ask me if DBS STI ETF is better, I would say both
are the same. But I would prefer StreetTracks because it has
higher liquidity than DBS. Liquidity is important when you
want to sell your shares.
If you are interested, you can visit POEMS website and look
for the sharebuilder plan. Please note that I am not inviting
you to invest although I own the shares. I am just sharing
how this investment product is doing well for me. If you are
unsure, please consult your financial adviser before investing
in the ETF.
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