It may be better to postpone your plans

It is finally publicized today on the papers that the Integrated Resort (IR) at Marina Bay cannot be completed on time. I personally think it is a good idea for them.

On one hand, there are datelines to meet, on the other hand, I'd rather the dateline is not met than to have a shoddy completion. You don't want the floors to give way after you strike a winning-7 on your jackpot machine (I'm more concerned of the safety of the people. For the record, I am against gambling).

A few days ago, I was having a conversation with a client. He intended to purchase a flat in less than a year. Half a year ago, he invested his CPF money with an insurance agent (no, not me) expecting to grow his money to an amount that can help him pay the downpayment for his flat in a year's expectation.

He definitely didn't expect the market to take a turn down. As of today, he probably lost 40-50% of his investments. A few days ago, he asks me if he should terminate the policy.

I asked him if he does that, how does that help him with his goal in buying a house in less than a year. He suggested to me to help him set up a portfolio that can help reach that goal.

I had to tell him that's not gonna work.

A better idea is for him to keep his current investment, because even if he draws it out now, it doesn't help at all. I think he should calculate how much he really needs for the house, and try to work backwards how much he needs to put today, and how long it takes. He should work on the time frame and the contribution he needs to set aside to reach that amount, and decide if he will do that. He should consider to push his house purchase further away instead of rush in, only to end up in bigger debt, and tight cash flow.

While not everything should be delayed, some things that can be delayed, then it'd better be. Like the analogy of not having the floor in the IR to give way, you don't want your finances to give way just because you chose not to secure the foundations before inviting your guests (your family!) to come in.

I made this mistake myself years ago. I can vouch that postponement is usually the better option.

How are you feeling?

Seriously. How are you feeling about financial services?

The market is giving us all a huge whipping. AIG's recent drama left many insurance policyholders skeptical and worried of the stability of insurance companies. Mortgage giants like Freddie and Fannie, and huge financial institutions like Lehman Brothers, do prove that indeed there is no such thing as certainty of existence just because you are a big company, or backed by the government.

Indeed, how is this affecting you about financial planning? Is there no other way? Is hiding money in your Milo tin effective? Is inflation really an issue to you, or do you actually admit that you have no idea what it is about?

Yes, it's scary. I admit it. It is scary.

Do you still see light in the darkness? Please, I'd really like to know how you feel.

ETFs - something worth looking out for

Ever heard of ETF? It stands for Exchange Traded Fund (I won't be defining what it is here. Instead, you can read about it here).

I thought ETFs are extremely interesting because you trade them like a stock, but they aren't as exposed to risk because they are diversified. In comparison to unit trusts, ETFs are much easier to maintain and monitor, and the charges are extremely low.

While I would think that ETFs are best suited for DIY investors who will never employ the help of financial advisors, I also think that it is good to put a reasonable amount of your investments in it. Unless you completely don't want to monitor the markets, ETFs are cost-effective, and effective.

However, in our local market, the ETF market is not as established as the States. You won't get much variety for now, and chances are if you want to diversify on broader sectors and countries, you still need a larger portfolio of unit trusts. But do stay tuned, because it is very likely that when the investors market here are more receptive to ETFs, there will be more variety of this product. Unit trusts may not completely become the thing of the past, but it sure will see a great downsizing. I know I would do that to my own portfolio when the time comes.

For more about ETFs, I thought this article is a very good read.

For the current available ETFs in our Singapore market, you can take a look here.

The Great Sale

I don't know why it hasn't dawned on you yet. There is a great sale going on in the financial markets. Here's why:

1. STI is at least 50% lower than it usually was.
2. Unit trust funds are also at a price which brings envious investors who missed the boat, to hop right in again.
3. Financial institutions are bending their backs to come up with attractive financial products that they normally wouldn't bother when they are enjoying good times (eg: single premium endowments with bonus returns)

So long as the majority fails to realize that this is a sale, the price will remain low, and financial institutions will continue to do cartwheels. But one day they will realize it, and it's those bargain hunters who will have laughed to the bank way before.

If you're always waiting for Sheng Shiong and Harvey Norman to come up with a sale, what are you waiting for regarding this one?

Attempting to raise investors confidence

What encourages me is to see governments step in. The objective is to assure investors and to raise confidence in the market.

http://news.yahoo.com/s/afp/20081020/ts_afp/financebankingworld
Have you begun returning to the market yet?

Yep. "Dead cat bounce"

See? http://sg.news.yahoo.com/afp/20081016/tts-finance-banking-world-c1b2fc3.html

I believe there will be a day whereby it all will come crashing down foever, but fortunately, this is not that day. However, the fundamentals have changed and the world leaders are looking for a complete overhaul of the financial system. Has it happened before? Yes. So it's nothing new.

Something constructive: Diversify. It's true that if the world financial system is destroyed, everything related to it will be killed in its path. That means your banking system, maybe even government financial systems will also go under. If that happens, it doesn't matter where you put it, so let's not bother about that scenario, 'cause we'd all probably just say, "Ah well", and go plow the fields.

However, if you prefer not to self-prophecy a doomsday scenario (that is likely not to happen yet) and take care of today, separate your investments about. There are Lifestyle Funds, there are single premium endowment plans. Returns won't be double digit, but at least you can be quite certain you have returns that is quite worth the wait.

Why not?

Is this a "dead cat bounce"?

My laptop died on me yesterday. Got it fixed today.

The following article isn't fresh from the oven, but it does speak well that can help us manage our expectations regarding the market rebound.

http://www.marketwatch.com/news/story/dont-break-out-bubbly-just/story.aspx?guid={E913C56F-C1ED-4636-A62D-3F30B00D91AE}

I really don't think the bad times are over yet. But there are still alternatives.

Yahoo! News: Dow roars back from worst week ever

Something quite nice to read about finally. http://news.yahoo.com/s/ap/20081014/ap_on_bi_st_ma_re/wall_street

However, exercise caution. As quoted in the article,

"My screen is completely green, and I love that," said John Lynch, chief market analyst for Evergreen Investments in Charlotte, N.C. "But I'm not doing any backflips yet. We still have many challenges up ahead."

and

"I would say this is closer to the bottom. I can't say this is the bottom," said Bill Schultz, chief investment officer at McQueen, Ball & Associates in Bethlehem, Pa. "I think it's more relief, the rally today."

and

"I think we had enough negatives last week that if the government steps in we could have a pretty nice run," said Denis Amato, chief investment officer at Ancora Advisors. "Is it off to the races? No, I don't think so. We have a lot of stuff to work through."

Yep, I think so too.

Congratulations to those who profited from this rally. It sure is helpful when you have spare cash to risk riding this possibility. For many, it seems that it had paid off. Good for you.

Investors do the darndest thing

The market has bounced back again.
Asia: http://sg.news.yahoo.com/ap/20081013/tbs-as-world-markets-e285837.html
Wall Street: http://news.yahoo.com/s/ap/20081013/ap_on_bi_st_ma_re/wall_street

It's almost funny that when the market plunged, everyone is crying the loudest. When the market rebounds, no one seems to notice. I barely heard a whimper.

I'm talking about investors.

Like crashing and booming markets, these are cycles that repeat over and over. Every market crisis has the wise making money because the majority freaked out and pulled out when they were not supposed to, sending prices falling at the "unprecedented" lows (that's when people like Warren Buffet come in and get richer). Every time, the majority makes the same mistakes, and the wise reaps same profit the same way.

Don't get me wrong, I know how it is to lose money. I have lost money in investments before, and believe me, I started thinking irrationally and made more and more bad moves each time I did anything about it. Yet, I did know how the markets work, but I still made that mistake.

It's called emotions. Emotions are what make us human. Emotions help us appreciate joy, love and everything else that is nice. But it also has a dark side. If not managed properly, you really end up doing the stupidest things.

Don't blame yourself. You're only human. Just get better each time you mess up. It's just like this.

A very blissful morning

I had a wonderful morning today.

For a change, I asked a client out for breakfast. There was no other purpose of meeting, like reviewing his financial plans, but just to find out how he is doing. It's not new to me, just that I almost never (if not, never) meet a client on weekends unless it is extremely urgent.

This wasn't the first time I had breakfast with this client on a Saturday either (except the other time really had work involved), and this isn't the first time I met him dressed in casual attire, but today is the first time I met him being just me. Not Financial Advisor me, but just me.

The things we spoke about were not new either. He talked about his work, his girlfriend, his parents, his aspirations, and I talked about my family, my God, my work, my aspirations. But today was really completely different.

After 2 hours at McDonald's, we said goodbye, and I decided to head to a nearby shopping centre which I have not been for a long time. I took my time wandering about, marvelling at the huge change of shops in there, and even more marvelling at those shops who were still there since I was a kid.

I had no thought about my work or personal life troubles. My mind was entirely on a holiday.

I was curious about almost everything I saw. I stopped by at shops and peered into the windows. I browsed at books and bought 2. I was warm and friendly to the people working in the shops, and I had little or no agenda to anything and everything I did.

I was amazed at a small CD shop in the shopping centre that sold albums I never thought I'd ever see again. I didn't have any intent to buy any, but I was on free mode, and just took my time browsing without fear of being embarrassed of taking up the shop's space. The shop owner was watching a Claire Danes movie on TV, and I decided to head home fast to catch the rest of it.

Lunch was packed and I headed home by bus (wife took the car for the day). The house was peaceful and I folded my legs on the sofa and watched the Claire Danes movie - Shopgirl - while occasionally reading the book I bought and munching my lunch. I spoke to myself about my views about the show, and laughed heartily at light moments.

Yes, today's entry has little, or not at all, anything about financial planning. In fact, the only thing about financial planning I want to speak about is, wealth is not just about the money you have. Instead, wealth is a state of mind. I have read about and met men with lots of money and having the most miserable lives that you can possibly imagine. I have read about families with money just enough to pay the bills, but they are so blissful and filled with love. As far as I am concerned, the "poor" family is far wealthier than that rich man.

Today's episode had nothing to do with money, but the state of mind that I was blessed with. Even without thoughts of money, I sure felt like the most blessed man in the whole wide world. Monday will come whereby my mind refocuses on the technical aspects of managing my clients' money. The middle of the month will come when the mailbox is flooded with bills to pay again. But till the day that I can look at all these with lesser concern about what the money I have can do, I sure think it's wiser to count my blessings of what God gives me today -- even if it's just a blissful state of mind.

You should too.

New York, New York... why you so like dat???

Nope, confidence isn't restored yet. http://news.yahoo.com/s/ap/20081009/ap_on_bi_ge/financial_meltdown

And the debt clock reaches numbers it never was designed for. http://news.yahoo.com/s/ap/20081009/ap_on_re_us/odd_national_debt_clock

And AIG's likely to get less popular with the public following yet another controversy, and now having another loan granted to them. http://news.yahoo.com/s/ap/20081009/ap_on_bi_ge/fed_aig

A breath of air

The Feds have cut interest rates. That's gonna help for a while. Hopefully the market can rebound and restore some confidence.

http://news.yahoo.com/s/ap/20081008/ap_on_bi_ge/fed_interest_rates


If you think Singapore is going to face a rough patch, count your blessings as you read about Iceland.

http://www.cbsnews.com/stories/2008/10/07/world/main4508148.shtml

Tough times ahead

I don't know what you think of the US Bailout plan. I can't think of a better way, but I don't like it.

I don't know what you think about Mr Tharman's bleak economic outlook for the quarters to come (read: years to come). I too can't think of a better way he should get things done, but I don't like it either.

I'm reminded of a popular prayer:

God, grant me the serenity to accept the things I cannot change;
The courage to change the things I can;
And the wisdom to know the difference.

I know I cannot change the way the economy moves (I'm not even sure if Paulson can!) but I can change the way I deal with it everyday.

Economy rises and falls all the time. AIA gets into trouble all the time (not that it matters that much to me anymore). But at the end of the day, the winter clears and the sun comes back. Often enough, if we had placed ourselves in self-pity, we will miss the break of spring and only come out to bask in its glory when the hot summer sun is about to roast the hair off your skin.

Take courage, to do what you need to do. I applaud a friend who knows the bleak outlook, but chooses to take the courage to begin his plans, so he can send his newborn son comfortably to the university in 20 years time. He knows he cannot change the economy, but he sure has that wisdom, sufficient enough, to bring forth courage to bring his family to success.

I don't like to be broke

Who does?

Income comes home, then the bills come, and before you know it, a chunk of your salary disappears.

Why are we spending on these things?

Every month (or day), our expenses go out in exchange of items or services to fuel our everyday lifestyle. Assuming the equation of our income and expenses square of (meaning the expenses are not higher than the income), what we spend on for our lifestyle depends on the amount we earn.

Some people ask me how to best save their money so that they can up their lifestyle. Sometimes it's the car they want. Sometimes it's the new baby. Well there is only so much you can do by having all those savings plans, endowment plans, savings accounts, etc. But the true answer to the solution is to raise your income.

How?

If you're employed, be a better employee, get promoted, get a raise, or get a better job. If you're in business, bring it to breakthrough profit. If you're in sales, sell more, make better commissions. If you don't have a job, get one. If you can't get a job, do a business or something.

Whatever you do, don't live everyday and work everyday complaining of low cash flow. Go do something about it.

For the restless hearts that so desire to break free from this rut, this may be a good path to look at. I've screened it somewhat already. Doesn't appear to be one of those dodgy I'm-secretly-gonna-sell-you-my-$1,000-pakage kind of site.

With great loans, come great liabilities

I like a short and sweet article in the last The Sunday Times, called Be prudent, start small.

The editor wrote about people responding overwhelmingly to Pinnacle@Duxton last week. He said that while it is truly "painless" for young couples to have $1,600 a month deducted from their CPF for the house mortgage, by the end of the 30 year mortgage payment period, the couple will likely have paid $800,000 and have nothing left in the CPF for retirement.

I also agree with the editor that the current financial crisis is evidence that things can go really bad in an unexpected way. If a worldwide scale crisis doesn't occur, a personal one like losing your job can throw your family's finances off track.

While it doesn't mean that Pinnacle@Duxton or similarly high priced homes are therefore not good purchases, the editor simply advises that we should live within our means and not gamble with assets while we have questionable cash flow. We're not talking about critical illness or disability hitting, but just merely not keeping the job you thought you can keep so confidently. Haven't we heard already that there is no longer such a thing as an iron rice bowl?

As a young individual myself, many things here are very enticing. We calculate briefly (or usually don't actually calculate at all), rationalize (read: rational lies) that we can afford something, break them down into instalments, and make the purchase. Don't forget that taking ownership of something is taking responsibility. Taking a loan you cannot afford to pay is calling for trouble.

Have I made such mistakes? Sure, I did. And I am still smarting over it today. And I can assure you still, that interesting desires will still creep out over the horizon, and you can find yourself thinking of taking on yet another loan. It is difficult to control that urge, trust me. And it is also better not to take it if there is a shadow of a doubt that you may not be able to carry that liability, trust me again.

The "Retard" - Part 2

The school teacher made a farewell speech to the graduating class. At that point, the boy walked sadly down the school hall, for he had just flunk English and Math. He was thinking of dropping out of summer school, because, being labelled educable mentally retarded, it's very seldom anyone of that category completed school.

Just as he walked past the assembly hall, the boy heard the teacher say to the graduating class, "... if just one of you will believe, the world will be a better place, just because you came this way."

The class gave him a standing ovation, and a realization set into the boy.

Later, the teacher headed to his car in the parking lot, and the boy ran up from behind him.

"Mr Washington?" he called.

Mr Washington, the teacher, turned around and said, "Yes?"

"Do you remember me, Mr Washington? I'm Leslie. My brother is Wesley. We're twins - Leslie and Wesley. My momma works in the school canteen."

Mr Washington replied, "N... no, I don't remember you."

"You said to me," Leslie continued, "'Someone's opinion of you does not have to become your reality.' Do you remember me now, Sir? I was waiting on McArthur."

Mr Washington thought for a moment and replied, "Y-yes. You're one of the Brown twins."

"The speech you gave in the hall," Leslie said, "Was that speech for me, Mr Washington?"

Mr Washington was confused, "That speech was for the senior. You are a junior, Mr Brown."

"But it sounded like you were talking to me," Leslie shook, "Were you talking to me, Mr Washington?"

"I was talking to everybody, Mr Brown."

"Do you think I could make my momma proud, Mr Washington?" Leslie asked eagerly.

"It's possible, Mr Brown."

"But... but what about the fact that I don't have good grades, and I'm not as fast as everybody?"

"It just means you have to work harder, Mr Brown," and Mr Washington turned around to walk away.

"Mr Washington!" Leslie called out.

The young teacher turned around, "What do you want now?"

"Uh... I... uh..." Leslie shifted from side to side, face starting to glow with a look of determination and eagerness, "I'm the one, Mr Washington. Remember my name. I'm Mrs Mammie Brown's baby boy. I'm the one. Someday, you're going to hear about me."

Today, Mr Les Brown is a reknown motivational speaker. Before that, he was in politics and also had a career in radio deejaying. Les Brown now owns a multi-million dollar business in America.

What happened before that was that Mr Washington indeed saw Les Brown on the news on a legislature that he had proposed, and he called Les Brown and they started catching up.

"So you're the one, aren't you?" Mr Washington said, "But you were so crazy."

Les Brown replied to his beloved mentor, "Yes, I'm crazy, but I'm rich now!"


It all begins with the belief that we can get there to the goals that we want. The how, we'll figure that along the way.

The "Retard" - Part 1

Our success in life - including financial success - have a lot to do with what we think of ourselves.

Let me share with you a story:

A teacher asked a boy in school to clean the board.

Boy: I can't do that, Sir.

Teacher: Why not?

Boy: Because I am not one of your students.

Teacher: It doesn't matter. Just follow my instructions.

The boy hesitated.

Boy: I can't do that, Sir.

Teacher: Why not?

Boy: Because... *chokes* uhh... *shifts from side to side* because I'm... educable mentally retarded (meaning: students with IQs of approximately 50-75), Sir.

The teacher walked around the table to this young boy, and points his finger to his face.

Teacher: Don't you ever say that again, young man. Someone's opinion of you does not have to become your reality.

[to be continued]

Yahoo! News: Bailout passes Senate, House foes soften

The bill is approved by Senate. http://news.yahoo.com/s/ap/financial_meltdown

Still, be on your toes... It's not the final order yet. Stay tuned.

Be invested, but trod wisely.

A comforting truth

"Every adversity, every failure, every heartache carries with it the seed of an equal or greater benefit." - Napoleon Hill

Whatever you're in now - poor investments returns, problems with your insurance company, problems with your family, low in cash, sucky job, etc - remember this truthful saying by Napoleon Hill. Look for that light in the dark, or that loving hand that can and will lead you through.

Lessons learnt so far

The month of September has been a big upset for the financial market here in Singapore. Besides the US mortgage crisis, we also experienced, yet again, another AIA problem. Both investments and insurance areas in our local financial markets have been thrown to a challenge.

While September just ended, and October is unlikely to be a turning point, there are still valuable lessons that we can learn from this:

1. Diversify - everyone made losses on their investment portfolios. Those that had some money market or cash funds suffered lesser than others. In terms of insurance, the public has learnt that big brand, size and history of the company no longer guarantees stability. Diversify even your methods. Been investing lump sum? Have another account that invests on a regularly timed basis. See here.
2. We cannot time the market, but learn better how to tell the signs - I believe I have learnt a lot better in how to anticipate market peaks. When peaks come, it's probably high time to cash out or transfer to safer instruments. When everyone on the streets say, "It's a good time to buy." it's probably a good indicator to run for cover.
3. Cash liquidity - Fortunately, I've yet to have met anyone who is screaming in misery because he or she has lost all life savings in the stock market. Never ever invest your emergency fund. Emergency fund should be around 3 to 6 months of your income, for events whereby you quit, get retrenched, or fired, you still have this buffer space to make necessary adjustments.
4. Never lose sight of your goals - You have invested for a purpose. There is a point to reach. Markets will always rise and fall. Don't let today's setback make you make irrational moves and delay, or if not, derail your track to your financial goals.
5. Take ownership of your investment and insurance portfolios - Your insurance agent is the guy who sold you the insurance plans, but don't ever mistake him to be the guy solely responsible for your policies. Always know what you bought, and why you were recommended that product.
6. Surrendering your insurance plan is not punishing your agent - Sadly, many people I know surrender their insurance plans because they began to hate their agent. They don't realize that the ones hurt is themselves, not the agent.
7. Have more choices to make - Either you do your own research in the investment and insurance products in the market, or work with a professional who can recommend the various products. If you work with a tied agent or banker, that's just about all you will be sold -- THEIR products.

Is there a formula to calculate Critical Illness coverage?

I once attended a seminar that was hosted by doctors. When it came to Q&A, I asked about their views on how to calculate cancer coverage?

One of the doctors took my question, and replied that none of them had the answer. He reminded me that each cancer alone is unique, let alone each illness. However, on his experiences on working with patients, the common financial challenges his patients faced were:

1. Income losses
2. Unpaid loans and debts
3. Hospital bills
4. Chemotherapy
5. Alternate treatment (eg, Chinese treatment, medicines and herbs)
6. Medication

The doctor could not put a price tag on the above factors. Another incalculable factor is the time frame that the patient has to go through. Some stabilizes (or dies) in a year, some 5, some 10, some till old age.

The keyword to this doctor's answer is "assumption". Indeed we have to make assumptions to how much we need to cover and to lat for how long.

Generally, there are 3 main factors to plan for:

1. Income replacement - a serious illness usually takes the victim's job away. These days, there's only so much the employer can do for an ill employee. Also, you may want to consider this income replacement to cover for outstanding loans and debts. Next to ask is, how long do you think you will need? Clients usually say 3 years is reasonable, but it can be unique to you.
2. Hospitalization - A seriously ill patient usually has to go to the hospital. It may occur a few times within a year, or over many years.
3. Medication and other alternate treatment - Medicine and treatment seeked outside hospitalization is a whole new cost altogether. Often, people mistake that once they have hospital insurance, this is taken care of. Consider a heart patient who has to consume daily 5 prescribed pills, each pill costing $4.20 each - that's $21 a day, $147 a week, $630 a month, $7,560 a year! This need is required even after your working years, so insurance planning should have this particular portion covered for life.

How to counter these needs? Here are insurance products that can help:

1. Income replacement - in my professional opinion, is best catered to by term insurance. That's because term insurance is low cost, and does not cover for life. Such arrangements are more cost effective, and in the event the insured retires early, he can simply drop the plan. If he works till age 65, the coverage still stands. Term plans do not have cash value, and I don't think there is a need for that since insurance returns are not attractive anymore.
2. Hospitalization - most easily taken care of by the Shield plans and their supplementary plans. Things to consider would be whether you want the option to choose private hospitals for better comfort, faster response time, better attention, etc. and whether you are willing to pay higher premiums - whether you are hospitalized or not - for total coverage, or save on premiums and co-pay a small affordable portion if the hospitalization occurs. Shield plans also cover some cancer and kidney outpatient treatment.
3. Medication and other alternate treatment - as this need can occur after your working years, it is necessary to have it covered by a permanent life insurance. Such coverage lasts for as long as you live. It also has bonuses added to the coverage, thus serves as a hedge against inflation. While cash value is also accumulated, I personally don't see it as a critical benefit. It's usefulness could be in the event you are in severe need of money like paying off a loan or something, you can withdraw the money but in turn, surrender your plan. Today's insurance market also sees a new permanent life insurance product, whereby the policyholder only needs to pay for a limited number of years, and the coverage lasts the lifetime. This is ideal for those who value having a more free cash flow in his or her senior years.