For long-term investors who have no equity investments, this may be a good time to accumulate some. Equity markets may have taken a turn for the worse, but as fear takes control, some private bank strategists are maintaining their overweight calls on equities.
Strategists are telling investors to hang in there, and for those who have been undecided whether to invest in equities, this may be a good time to buy. Among promising themes, as the strategists see it, are infrastructure, banks and emerging markets.
Despite the pessimism on the US economy, long-term investors who can stay the course for three to five years are unlikely to rue their stock investments. Risk appetite indicators are showing that people are now extremely risks averse. They are at crisis levels, but investor mood tends not to stay at that level for very long.
Though a short rebound even for technical reasons may take place, the big question is, will things get worse before they get better, or is it close to the bottom? Investors who are tempted to enter the market aggressively are advised to enter the market with caution while long-term investors who have not invested in equities thus far, this may be a time to accumulate stocks. However in doing so, investors ought to diversify their portfolios. The virtues of diversification are heavily under-estimated. In most cases it is better to diversify than just sticking to a handful of stocks.
Strategist believes that the patient, long-term investor will find fantastic opportunities in the equity market now. Weathering these first three or six months of the year, and very often, equity markets will rebound in the middle of a recession.
"If you are going through hell, keep going." - Sir Winston Churchill
Monday, January 28, 2008
Thursday, January 17, 2008
Life Insurance – A Booming Industry
Singaporeans of today are more conscious of how financial planning can benefit them, especially after retirement. More readily available is consumer information on life insurance, including on retirement planning, meeting protection needs and how to go about buying the appropriate life insurance plan in consultation with a financial adviser.
Up to the end of the third quarter of 2007, the local life insurance industry paid out a total of $4.42 billion to policyholders or beneficiaries, of which $248 million was in respect of death, critical illness and disability claims and $4.18 billion in respect of policies maturity.
The life insurance industry saw an outstanding performance over the first 3 quarters of 2007, sustained by a robust economy and a buoyant stock market. New business premiums totaled $1.18 billon, an estimated 31 per cent increase over the corresponding period in 2006.
As more and more people are utilizing their CPF accounts to acquired insurance policies, total CPF sector accounted sales amounted to approximately $4 billion, representing 63 per cent of single premium sales.
Over the first half of 2007, the life insurance industry was managing assets amounting to approximately $104.2 billion, an increase of 23 per cent compared to a year ago. This is the first time the industry’s assets exceeded the $100 billion dollar mark. As at 30 September 2007, the industry has 4,836 employees and 12,986 tied representatives.
“Great works are performed, not by strength, but by perseverance.” - Samuel Johnson
Up to the end of the third quarter of 2007, the local life insurance industry paid out a total of $4.42 billion to policyholders or beneficiaries, of which $248 million was in respect of death, critical illness and disability claims and $4.18 billion in respect of policies maturity.
The life insurance industry saw an outstanding performance over the first 3 quarters of 2007, sustained by a robust economy and a buoyant stock market. New business premiums totaled $1.18 billon, an estimated 31 per cent increase over the corresponding period in 2006.
As more and more people are utilizing their CPF accounts to acquired insurance policies, total CPF sector accounted sales amounted to approximately $4 billion, representing 63 per cent of single premium sales.
Over the first half of 2007, the life insurance industry was managing assets amounting to approximately $104.2 billion, an increase of 23 per cent compared to a year ago. This is the first time the industry’s assets exceeded the $100 billion dollar mark. As at 30 September 2007, the industry has 4,836 employees and 12,986 tied representatives.
“Great works are performed, not by strength, but by perseverance.” - Samuel Johnson
Friday, January 11, 2008
Annuities, Insurance, Retirement
The Silver Industry Conference and Exhibition (Sicex) that took place recently saw issues like financing longevity, CPF schemes and annuities that provide regular draw downs upon retirement hotly discussed.
It was noted that there have been innovations in variable and fixed annuities that provide long-term payment options retirees. Despite the fact that Asians are less receptive to these products, it is the solution to the inadequate draw down of state-mandated compulsory savings from the Central Provident Fund (CPF).
At present, a retiree accumulates a sum of money by retirement and draws down that sum to meet daily needs. This may seem adequate for life after retirement. However, enormous increase in longevity, which has reached the point where we have the expectancy of 20 to 25 years after retirement, has made this system totally inadequate. On top of this, most Singaporeans utilizes this accumulated amount on housing and insurance, due to this cultural climate here, there may be nothing left for the beneficiaries to draw down after retirement.
An annuity scheme is proposed with benefits that requires either higher premiums or lower drawdowns but that allows beneficiaries to receive the remaining payment should an elderly pass away before he reaches 85, as opposed to a pure annuity that stops payment upon early death.
Packaging annuities with medical insurance that pay for long-term care, as it makes economic sense for insurance companies since clients that require annuities would not require long-term care and vice versa. This package allows cost saving, instead of having to buy each scheme separately.
It was noted that there have been innovations in variable and fixed annuities that provide long-term payment options retirees. Despite the fact that Asians are less receptive to these products, it is the solution to the inadequate draw down of state-mandated compulsory savings from the Central Provident Fund (CPF).
At present, a retiree accumulates a sum of money by retirement and draws down that sum to meet daily needs. This may seem adequate for life after retirement. However, enormous increase in longevity, which has reached the point where we have the expectancy of 20 to 25 years after retirement, has made this system totally inadequate. On top of this, most Singaporeans utilizes this accumulated amount on housing and insurance, due to this cultural climate here, there may be nothing left for the beneficiaries to draw down after retirement.
An annuity scheme is proposed with benefits that requires either higher premiums or lower drawdowns but that allows beneficiaries to receive the remaining payment should an elderly pass away before he reaches 85, as opposed to a pure annuity that stops payment upon early death.
Packaging annuities with medical insurance that pay for long-term care, as it makes economic sense for insurance companies since clients that require annuities would not require long-term care and vice versa. This package allows cost saving, instead of having to buy each scheme separately.
Wednesday, January 9, 2008
Why invest?
In this world there are two ways to earn our income - one is to exchange labour for a salary and the other is to have our money earn more money for us.
We will eventually reach the age of retirement one day when we can no longer be part of the economically active group. How do we go on with life thinking that we are still financially independent? Will our savings in the bank be able to see us through?
Sometimes we think that money kept in a savings account and earning interest every year is investment, however, interest rates may not even keep pace with inflation. In order to beat inflation, we need to put our money in investments that earn a substantial amount of returns.
There is always risk in anything we do, investing in financial products, acquiring real estate properties, or even starting our own business establishments. Thus, we need to conduct market studies and research in order to understand the risks we are undertaking. Understanding the risks is the first step toward minimizing them.
Diversification is a commonly adopted strategy by most investors. We can do this by having investments in a range of products like stocks, investments in bonds mutual funds etc. An advantage of this is that we are able to spread our investments over a wide range of products without having to do a lot of research on different companies. This gives you diversification, and also has a professional taking care of the research end of that part of your investment portfolio.
We will eventually reach the age of retirement one day when we can no longer be part of the economically active group. How do we go on with life thinking that we are still financially independent? Will our savings in the bank be able to see us through?
Sometimes we think that money kept in a savings account and earning interest every year is investment, however, interest rates may not even keep pace with inflation. In order to beat inflation, we need to put our money in investments that earn a substantial amount of returns.
There is always risk in anything we do, investing in financial products, acquiring real estate properties, or even starting our own business establishments. Thus, we need to conduct market studies and research in order to understand the risks we are undertaking. Understanding the risks is the first step toward minimizing them.
Diversification is a commonly adopted strategy by most investors. We can do this by having investments in a range of products like stocks, investments in bonds mutual funds etc. An advantage of this is that we are able to spread our investments over a wide range of products without having to do a lot of research on different companies. This gives you diversification, and also has a professional taking care of the research end of that part of your investment portfolio.
Sunday, January 6, 2008
High Return Funds – Only Time Will Tell
Been browsing through newspapers and magazines lately, stopping at any article related to making wise investments. There was an article on identifying high return funds that caught my attention. Being a layman in picking the right investment funds, it certainly gave me better understanding in how to judge the performances of funds.
Many of us had seen the following disclaimer under investment performance charts, “Performance data quoted represents past performance and does not guarantee future results.” True enough, while we are busy looking for mutual funds that we believe will do better than the market as a whole, finding funds that do really well is going to be easy. While there appears to be some relative fluctuations, certain funds are clearly ahead on average. Funds with poor records often go out of business, and soon forgotten.
However, how can we know if a fund will dissolve over the next few years. If we only look at funds that are alive today to calculate past returns we are using information nobody in the past had. Thus a certain inaccurate and bias analysis is formed, one with returns that are higher than you can expect to earn.
When analyzing a strategy for selecting stocks, mutual funds, or any other investment we should look at how it would have performed in real time. That means you cannot test it simply on the securities that exist today but must instead test any investment strategy on the securities that existed at the time it might have been used. If you want to test a mutual fund strategy that means you need to go back and try it out on the funds that existed in each period you might have wanted to use it in the past.
While the average return over a five year period may be extremely good relative to the overall market’s, it lags over the last ten or fifteen year periods, therefore making long term results are more reliable. Unless a particular strategy generates simply spectacular returns it is difficult to distinguish its returns from luck over any relatively short period of time. Thus the right conclusion to be drawn is that the average mutual fund has historically produced lower returns than a passive index fund.
“Time is a great teacher, but unfortunately it kills all its pupils.”
– Hector Louis Berlioz
Many of us had seen the following disclaimer under investment performance charts, “Performance data quoted represents past performance and does not guarantee future results.” True enough, while we are busy looking for mutual funds that we believe will do better than the market as a whole, finding funds that do really well is going to be easy. While there appears to be some relative fluctuations, certain funds are clearly ahead on average. Funds with poor records often go out of business, and soon forgotten.
However, how can we know if a fund will dissolve over the next few years. If we only look at funds that are alive today to calculate past returns we are using information nobody in the past had. Thus a certain inaccurate and bias analysis is formed, one with returns that are higher than you can expect to earn.
When analyzing a strategy for selecting stocks, mutual funds, or any other investment we should look at how it would have performed in real time. That means you cannot test it simply on the securities that exist today but must instead test any investment strategy on the securities that existed at the time it might have been used. If you want to test a mutual fund strategy that means you need to go back and try it out on the funds that existed in each period you might have wanted to use it in the past.
While the average return over a five year period may be extremely good relative to the overall market’s, it lags over the last ten or fifteen year periods, therefore making long term results are more reliable. Unless a particular strategy generates simply spectacular returns it is difficult to distinguish its returns from luck over any relatively short period of time. Thus the right conclusion to be drawn is that the average mutual fund has historically produced lower returns than a passive index fund.
“Time is a great teacher, but unfortunately it kills all its pupils.”
– Hector Louis Berlioz
Escalating Oil Prices
In a recent interview, the president of OPEC claimed that the current price of US$100 (S$143) for a barrel of crude oil is 'not necessarily very high'. According to Mr Chakib Khelil, Algeria's Energy Minister, who took over the rotating presidency of OPEC, said that current surge in oil prices must be seen in relation to the real price, taking into account inflation rates.
As I go about doing my day to day business, complains I hear everywhere are usually about the rising general price level of commodities. Taxi fares, medical bills, groceries, in fact almost everything seems to cost more lately. In the opinion of many, inflation taking place here seems to be attributed by rising oil prices. I might be missing something here, but which is causing which to rise?
In other regions around the world, rising oil prices are triggered by the increase in oil demand by China and India and Middle East whose consumption has risen immensely. Higher production costs also played a part in pushing up the oil prices.
An interesting note pointed out by the OPEC president, when taking into account the above factors, US$100 is not necessarily very high. In fact current oil price is well below its 1980 record of between US$102 and US$110. Surges in price are believed to go on until the end of the first quarter of 2008, before stabilising during the second quarter.
What a way to get the year started. Lets hope the approaching Lunar New Year brings about better fortunes!
"Time heals what reason cannot." - Seneca
As I go about doing my day to day business, complains I hear everywhere are usually about the rising general price level of commodities. Taxi fares, medical bills, groceries, in fact almost everything seems to cost more lately. In the opinion of many, inflation taking place here seems to be attributed by rising oil prices. I might be missing something here, but which is causing which to rise?
In other regions around the world, rising oil prices are triggered by the increase in oil demand by China and India and Middle East whose consumption has risen immensely. Higher production costs also played a part in pushing up the oil prices.
An interesting note pointed out by the OPEC president, when taking into account the above factors, US$100 is not necessarily very high. In fact current oil price is well below its 1980 record of between US$102 and US$110. Surges in price are believed to go on until the end of the first quarter of 2008, before stabilising during the second quarter.
What a way to get the year started. Lets hope the approaching Lunar New Year brings about better fortunes!
"Time heals what reason cannot." - Seneca
Quit if you dare!
I was attending a New Year gathering few days back and it has been a while since I last met up with of my good old friends. Amidst the gang of bankers, engineers, IT programmers, senior government servants, marketing executives, I seem to be the only one striking out on my own, struggling to make my mark.
With much to catch up with, the bunch of good old friends was immersed deeply in conversations. The scope of discussions revolved around topics like married life, family planning, housing loans, latest car launch, ever rising child care and pre-education expenses and so on. The most hotly talked about topic apparently was about work, however, I could not help but noticed the least talked about thing at work was – anyone leaving his present job?
I thought to myself, has it become a taboo to talk about quitting one’s job? Are they worried that the more they talk about it the more likely it is to happen? Or is it just simply the consequences of leaving their present job is beyond disastrous?
The gathering soon became a bizarre affair in exchanging and sharing of everyone’s grievances at work, complains about the higher cost of living due to escalating oil prices, rising cost of education for the next generation, unreasonable credit card charges…a hilarious picture loomed in my mind, I could see all my friends like acrobats, balancing in one hand their houses, their newly bought cars, their beloved families and kids, their credit card bills, their bosses at work…and the other hand, trying ever so hard clinging on to their job…
When it was my turn to talk about my “profession”. I paused for a moment and said, I am jobless, left my job a few years back in pursuit of a new way of life. I could see peculiar expressions on their faces, the “oooh”s and ”aaah”s that followed were as though Ah Meng - the famous Celebrity Orang Utan at Singapore Zoo, had just made a guest appearance at the gathering.
“The ultimate measure of a man is not where he stands in moments of comfort, but where he stands at times of challenges and controversy.”
– Martin Luther King Jr.
With much to catch up with, the bunch of good old friends was immersed deeply in conversations. The scope of discussions revolved around topics like married life, family planning, housing loans, latest car launch, ever rising child care and pre-education expenses and so on. The most hotly talked about topic apparently was about work, however, I could not help but noticed the least talked about thing at work was – anyone leaving his present job?
I thought to myself, has it become a taboo to talk about quitting one’s job? Are they worried that the more they talk about it the more likely it is to happen? Or is it just simply the consequences of leaving their present job is beyond disastrous?
The gathering soon became a bizarre affair in exchanging and sharing of everyone’s grievances at work, complains about the higher cost of living due to escalating oil prices, rising cost of education for the next generation, unreasonable credit card charges…a hilarious picture loomed in my mind, I could see all my friends like acrobats, balancing in one hand their houses, their newly bought cars, their beloved families and kids, their credit card bills, their bosses at work…and the other hand, trying ever so hard clinging on to their job…
When it was my turn to talk about my “profession”. I paused for a moment and said, I am jobless, left my job a few years back in pursuit of a new way of life. I could see peculiar expressions on their faces, the “oooh”s and ”aaah”s that followed were as though Ah Meng - the famous Celebrity Orang Utan at Singapore Zoo, had just made a guest appearance at the gathering.
“The ultimate measure of a man is not where he stands in moments of comfort, but where he stands at times of challenges and controversy.”
– Martin Luther King Jr.
Saturday, January 5, 2008
Who Moved My Cheese, again.
I first read this story a few years back when I just left my full time job at a financial institution. Thereafter, I went on setting up my own business, which failed eventually. Further attempts met with the same fate till recently, I came across the same story, again, in which I hope to trigger new inspiration.
I remembered while reading the story years back, I was sneering at the attitude and behaviour of the two little humans and their refusal to move on when their beloved cheese was gone. However, it always seems a lot easier when you are looking over the maze rather than scurrying in it. I told myself, it was the mice who moved on and got the cheese, so must I!
There and then, I drew up my business plans, sought help from my family and friends, started my first establishment - a small one-man-operated tuition agency. Initially, I was full of drive and optimism. However, I soon realized sniffing and scurrying for cheese out in the maze-like world was not as simple as I thought it would be. The money did not find me just like the cheese not finding the two little whiny humans. Business did not come knocking on my door.
Soon, I could no longer sustain my expenses and financial commitments. I started using up my savings bit by bit. I understand perfectly well that the reserves will be depleted and soon I may find myself in a dire financial position. Anxiety and fear started to kick in. I looked at myself, jobless, clueless, moneyless…
Ok, a change of plan, then another plan and another, in fact the plans kept changing before they were executed. Until the day I thought to myself, perhaps, I should just call it quits and get a job, resign to slogging my whole life away like many of those out there. This was the moment when I realized I had become one of the whiny little humans!
Thus, I picked myself up, drew up new business plans, exploring different business opportunities, consolidating whatever financial resources I am left with, hopefully I get my numbers right this time! I believe if the cheese kept moving, we have to move along to find new cheese. Despite the fear of repeating mistakes of the past, the uncertainties that lies in the arduous and daunting journey ahead, I will brave the twisting and turning maze till I find my cheese!
“Our greatest glory is not in never falling, but in rising every time we fall.”
- Confucius
I remembered while reading the story years back, I was sneering at the attitude and behaviour of the two little humans and their refusal to move on when their beloved cheese was gone. However, it always seems a lot easier when you are looking over the maze rather than scurrying in it. I told myself, it was the mice who moved on and got the cheese, so must I!
There and then, I drew up my business plans, sought help from my family and friends, started my first establishment - a small one-man-operated tuition agency. Initially, I was full of drive and optimism. However, I soon realized sniffing and scurrying for cheese out in the maze-like world was not as simple as I thought it would be. The money did not find me just like the cheese not finding the two little whiny humans. Business did not come knocking on my door.
Soon, I could no longer sustain my expenses and financial commitments. I started using up my savings bit by bit. I understand perfectly well that the reserves will be depleted and soon I may find myself in a dire financial position. Anxiety and fear started to kick in. I looked at myself, jobless, clueless, moneyless…
Ok, a change of plan, then another plan and another, in fact the plans kept changing before they were executed. Until the day I thought to myself, perhaps, I should just call it quits and get a job, resign to slogging my whole life away like many of those out there. This was the moment when I realized I had become one of the whiny little humans!
Thus, I picked myself up, drew up new business plans, exploring different business opportunities, consolidating whatever financial resources I am left with, hopefully I get my numbers right this time! I believe if the cheese kept moving, we have to move along to find new cheese. Despite the fear of repeating mistakes of the past, the uncertainties that lies in the arduous and daunting journey ahead, I will brave the twisting and turning maze till I find my cheese!
“Our greatest glory is not in never falling, but in rising every time we fall.”
- Confucius
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