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Sunday, December 27, 2015

The A to Z of happiness

It is the season of giving, receiving and reflecting

Whether you celebrate Christmas or not, here are 26 ways to lead a more fulfilled life.

Avoid negativity and respond positively - Doing this gives you more time to focus on positive things.

Break old habits by forming new habits - Instead of focusing on breaking bad habits, put more energy into forming beneficial habits.

Choose your friends wisely - To be truly happy, associate yourself with those who encourage and support you.

Dare to dream - Live the life that you want. Keep the motivation to live your dream by focusing on ther positive aspects of your life.

Enthusiasm is vital - By being passionate, grateful, positive, creative, pro-active, patient and enlightened, you can accumulate more enthusiasm in your life.

Family and friends are forever - Be grateful to those who have helped you get to where you are today.

Give and receive - While giving to those whom you care about is a way of expressing your feelings towards them, you should also honour your own needs.

Happiness is within you. - By accepting who you are and letting go of your expectations, inner struggles and frustrations, you will find inner peace.

Inspire yourself and others - By being true to yourself, sticking to what you love, expressing your enthusiasm and excelling at what you do best, you will find yourself surrounded by those whom you influence.

Just do it - Accomplish what you first wanted to do. Set small goals for yourself and take one step at a time.

Keep on moving - Get it together and never give up. Perseverance is one of the most important traits you can have.

Love yourself and be loved in return
 - Celebrate your past, pamper yourself, accept your mistakes and embrace your future.

Make things happen - You are responsible for what happens in your life.  It is up to you to take the first step.

No to procrastination - Stop thinking. Start doing. Just plan and take small steps towards your goal.

Opportunities are everywhere - Make your own future. Recognise that an opportunity is the first step towards success.

Practice makes perfect - Although it may be difficult at times, deliberate practice sharpens your skills.

Quitting is not an option - Before you give up, ask yourself if you have put in enough effort and time towards achieving your goal. Have you done everything you could?

Realise your dreams - Time is precious, so come up with a realistic time frame for reaching your goals.

Smile from the heart - By spending time with positive individuals, you will get more positive energy. Better yet, be that individual.

Take chances - Go after your dream job, escape from toxic relationships and strive for what you really want in life.

Understand and respect others - By knowing what others need, we can be at peace with one another.

Value-add - As you begin to contribute more, you will notice how good it makes you feel about yourself.

Will yourself to reach your goals - Always fight for what you want and stay positive, regardless of the obstacles life may throw at you.

X-(ac)celerate in life and move forward - Driven individuals are
continuously striving to do at least one task better.

You can make a positive change every day - You have the power to control your attitude. Think about how to behave, what to say and when to say it.

Zero in on what is important - Know when to focus on what is most significant in your life.

Article by Santhanaram Jayaram, a laughter coach and director of Inspired Life Academy. Visit for more tips on stress management and laughter.

Sunday, August 30, 2015

Making the right choices with MediShield Life

Published Aug 30, 2015, 5:02 am SGT

What to look out for if you want enhanced coverage with integrated plans

Lorna Tan Invest Editor

Choosing comfort over costs in IPs

Come Nov 1, MediShield Life will be launched for all Singaporeans and permanent residents (PRs), providing welcome protection for them against medical bills for life, regardless of age or health condition.

MediShield Life replaces MediShield, a hospitalisation and surgical (H&S) insurance plan that covers patients in class B2/C wards in public hospitals.

The cover under MediShield Life is automatic and will include those currently covered by MediShield, private H&S plans, the uninsured, and those with pre-existing medical conditions.

This is a welcome enhancement as the MediShield scheme excluded pre-existing conditions and the coverage was only till the age of 92.

Like MediShield, MediShield Life is targeted at class B2/C coverage.

But it provides better protection by having higher limits for inpatient treatment, day surgery and outpatient cancer treatment, higher cancer limits, no lifetime limit and lower overall co-insurance, while maintaining the same deductible.

This means MediShield Life will pay more of the hospital bill.

Every household should have received a MediShield booklet by this month, which provides information on MediShield Life, its benefits, premiums and subsidies.

It also explains how Integrated Shield Plans (IPs) work and how the Additional Withdrawal Limits will work. Today, about six in 10 Singaporeans have IPs.

The Central Provident Fund (CPF) Board is the administrator of MediShield Life on behalf of the Ministry of Health (MOH).

The MediShield Life hotline is 1800-222-3399 and the website is


With better benefits, MediShield Life will come at a higher cost than MediShield, ranging from a small 11 per cent rise for older people to a trebling of premiums for young adults.

For example, for a person aged between 31 and 40, the annual MediShield Life premiums would be $310, up from $105 under MediShield.

But help is at hand for various segments of the population.

To help pay your premiums, the Government will provide support via premium subsidies for lower- to middle-income households, Transitional Subsidies for all Singapore citizens, Pioneer Generation premium subsidies and additional premium support for the needy.


A permanent feature for Singaporeans and PRs, these subsidies are for lower- to middle-income households. However, PRs will receive half the applicable subsidy rates of Singapore citizens.

To be eligible, the criteria are:

•Household monthly income per person of $2,600 and below;

•Living in an HDB flat or private housing with annual value of $21,000 and below;

•Do not own a second property


Given to all pioneers for life, these Singaporeans will receive subsidies between 40 and 60 per cent, depending on age.

Pioneers will also receive annual Medisave top-ups for life, ranging from $200 to $800 each year. With both the Pioneer Generation Subsidies and Medisave top-ups, all pioneers will pay less for MediShield Life than for MediShield today.


Available for the first four years of MediShield Life, Transitional Subsidies are only for Singapore citizens, regardless of household income, annual value of homes and number of properties.

In the first year, Transitional Subsidies will cover 90 per cent of the net increase in premiums, after taking into account other premium subsidies. These subsidies will reduce and cover 70 per cent, 40 per cent and 20 per cent of the net premium increase in the second, third and fourth years respectively.

To check out your estimated MediShield Life premiums and subsidies, use the premium calculator at


For those who cannot afford their premiums even after subsidies, the Government will provide additional premium support. This will ensure that no one will lose coverage.


A person may have to pay additional premiums if he has a pre-existing condition - a medical illness that he has before he is covered under MediShield or a private integrated plan. For those with serious pre-existing conditions, a flat additional premium of 30 per cent of life premiums is payable for 10 years to reflect their higher risk.

Examples of these medical illnesses include stroke, cancer, kidney failure and heart diseases.

Details on who or which conditions will be subject to this premium loading will be finalised soon.


These are private H&S plans comprising a basic MediShield component (to be converted to MediShield Life automatically on Nov 1) and an additional private insurance component. As such, there is no duplication in coverage between MediShield and IPs.

IPs provide higher protection that cover the B1/A wards of public hospitals and private hospitals.

They are managed by private insurers under different product names, namely AIA (HealthShield Gold Max), Aviva (MyShield), Great Eastern (SupremeHealth), NTUC Income (IncomeShield) and Prudential (PRUShield).

If you have an IP, your insurer will inform you of the total premium, which includes the portion for MediShield Life.

This portion will be channelled to CPF Board by your insurer. As such, there is no double payment of the MediShield Life premium.

The good news is that you will be covered up to MediShield Life benefits for any pre-existing conditions, including those excluded from your IP. You may use your Medisave to fully pay the MediShield Life component of your IP premium, including any additional premiums resulting from the cover of serious pre-existing conditions.

Medisave used for the additional private insurance component of your IP will be subject to an additional withdrawal limit set at $300 (below age 40), $600 (turning 41 to 70) and $900 (turning 71 and above). You will need to pay your MediShield Life premiums at your next policy renewal on or after November. If you are currently covered by MediShield only, the CPF Board will inform you on your premiums and subsidies at the next annual renewal.

For those who own an IP, you will be informed by your private insurer when your plan is up for annual renewal. If you are currently uninsured, the CPF Board will inform you about your new MediShield Life coverage, premiums and subsidies, as well as additional premiums (if you have the applicable serious medical conditions), by October .


Everyone has unique financial and medical circumstances and needs.

If you are deciding whether to keep or opt for IPs, here are some questions posed by Mr Apelles Poh, senior financial services director at Professional Investment Advisory Services.

•Is comfort important to you? You can enjoy more privacy with cool comfort with an IP whereas MediShield Life covers B2/C wards which have more beds and no air-conditioning.

•Is speed important to you? Mr Poh highlights that one can usually make an immediate appointment to see a specialist at a private hospital, while it could take much longer to be referred to a specialist at a public hospital by the polyclinic. If you are suffering from an aggressive medical condition, the time saved could be critical.

•Is the choice of doctors important to you? With IPs, you can choose your doctor, for example your own gynaecologist, to operate on you in a private hospital. Not so for MediShield Life.

•Is "as charged" (no sub-claim limits) and a fully covered plan important to you? With an IP, you can pay for a rider that covers both the deductible and co-insurance components of a hospital bill.

•Is covering out-of-pocket expenses incurred during pre- and post-hospital treatment important to you? MediShield Life will not cover such bills.

•Can you afford the premiums? Premiums for IPs are relatively low when one is young but they increase with age. One option is to downgrade the plan as you grow older, for example, after 65.

The Life Insurance Association Singapore (LIA) adds that with an IP, you enjoy higher annual limits on coverage and are also covered for emergency hospitalisation outside Singapore. MOH suggests that individuals keep in mind two broad factors when considering an IP.

First, the type of ward they prefer to stay in if they are hospitalised and whether they wish to choose their doctor.

Second, whether they can afford their IP premiums in the long run, as they increase with age.

The ministry also noted that while MediShield Life premiums are fully payable using Medisave, the additional private insurance component of IP premiums is only payable with Medisave up to a certain limit. Depending on your age and plan, you may need to pay part of your IP premiums in cash.

The most expensive IPs (taking into account MediShield Life premiums) can go:

•Up to $588 from ages 30 to 40, or two times MediShield Life premiums;

•Up to $2,553 from ages 66 to 70, or three times MediShield Life premiums; and

•Up to $8,058 from ages 89 to 90, or five times MediShield Life premiums.

The corresponding MediShield Life premiums for these age groups are $310, $815 and $1,500 respectively (before subsidies are applied).


Some may wish to have an option of enhanced coverage beyond MediShield Life, but in a standardised, affordable and easy-to-understand package. This is why MOH is working with insurers to develop a Standard IP with benefits pegged at class B1 wards in public hospitals.

To be launched in the first half of next year, this will allow those concerned about premiums to buy or keep an IP. The five private IP insurers have promised to freeze premiums (not applicable to riders) for a year following the launch of MediShield Life. However, premiums are expected to go up after the first year, according to LIA.

This is because IP claims have escalated by an average of 12 per cent (involving public hospital class B1 and A wards) to 17 per cent (involving private hospitals) a year in the past few years, with private hospital claims rising the fastest.

Said an LIA spokesman: "Claims for IPs have increased over time due to larger medical bills, greater healthcare consumption and greater use of newer and costlier procedures resulting from medical technological advancements."

LIA added that based on IP insurers' experience, the average bill size from private hospitals is about two to three times that of the average bill size from public hospitals. The average bill size from private hospitals is also increasing at a faster rate than those from public hospitals.

IP insurers monitor the impact of claims escalation and bill sizes very closely and review their premiums and benefits on a regular basis. The last review was in early 2013.

MOH suggests a two-prong approach to prevent the escalation of total healthcare spending.

"The first approach is to transform our model of care to be less reliant on acute hospitals, more integrated with primary care and more centred on the patient in the community and home," said an MOH spokesman to The Sunday Times.

"Healthcare delivery should allow patients to receive care that is more effective, less costly and in more appropriate settings."

The second approach is to ensure there are right incentives for healthcare providers, doctors and individuals to deliver care appropriate for what the patient needs and avoid the problem of over-consumption.

MOH added: "We want to avoid a situation where doctors order more tests than necessary because the bill will be paid by insurance. We should ensure that treatments are clinically necessary and cost-effective. The concept of co-payment also reinforces this discipline."

The ministry is also working towards improving pricing transparency for hospital services, so Singaporeans can make more informed choices. Since 2003, MOH has been publishing total hospital bill sizes for common conditions in public and private hospitals.

Last year, MOH started publishing the total operation fees in public hospitals on the MOH website.

LIA says IP insurers will seek effective and innovative ways to improve price transparency and comparison of professional fees within the healthcare industry, as well as use in-depth data analytics to scrutinise unusually high bills to better manage claims costs and keep premiums affordable for all.

Sunday, August 9, 2015

50 top money tips for financial health

Published Aug 9, 2015, 5:00 am SGT

Learn how to save, budget, get insured and plan for retirement

Lorna Tan

As we celebrate our nation's 50th birthday today, The Sunday Times highlights 50 top money tips covering a wide range of finance issues from saving and budgeting to insurance and investments in bite-size nuggets.

Understanding the basics


Start with an end in mind. What do financial independence and retirement mean to you?


This is a money road map of your current and future cash flows.

It details how you want to build, preserve and distribute them to help you achieve what you want in life.


Set realistic shorter-term goals that are achievable so that you are encouraged to pursue your vision in incremental steps.

Start with an end in mind. What do financial independence and retirement mean to you? Create a money road map of your current and future cash flows. It details how you want to build, preserve and distribute them to help you achieve what you want in life.


Create a spreadsheet with milestones of hitting your short-term and long-term financial goals, and track them.


Wants are unlimited but resources are limited. Which financial goals are most important to you now?


Ask yourself if you would rather spend the money now or save it for the future by compounding and growing it.


This is a tool to help you visualise where your money is being spent and identify where expenses can be reduced.


Share the responsibility with family members. When everyone cuts back a little, it can make a big difference.


Take out cash to last you one week of discretionary expenses and stick to it.


You will be less likely to over-spend.



If saving is difficult for you, start with 20 per cent and aim for a higher percentage when your income grows.


Try to save most of your bonuses.


Set up a Giro arrangement so that part of your monthly pay goes to a separate savings account. Better still, do not link an ATM card to this account to prevent quick access.


This is to avoid these high interest debts from ballooning out of control.


Use an app to track your expenditure on a daily and monthly basis.


People who chalk up huge debts usually blame it on their easy attitude with credit cards which charge customers up to 24 per cent a year in interest for late payments.


Compare prices and feedback in chat forums before you make that purchase.

Consider how many times you will use the item. Have a mental picture of what you already own. Will it add value to your life?


This is a marketing tactic. Do you really need to buy the item?


It is cheaper to eat at home (and healthier too) than to eat out.


Consider investing to grow your savings, once you have set aside about six months of emergency cash.



Unless your company offers portable health insurance, you owe it to yourself to be insured while you are still healthy and insurable.


The CPF Life is a national annuity scheme offering income payouts for life upon retirement. Save for and beyond it to secure your retirement.


Over the years, insurance has become bundled with investments, which introduces another layer of cost.

In some cases, it may be better to buy term (pure protection) and invest the rest.


If you have an outstanding home loan, it is prudent to buy mortgage insurance to cover you and your family should you meet any unfortunate situation.


Do you know what these terms mean: Death benefit, guaranteed and non-guaranteed benefits, surrender value, rate of returns, premium holiday and exclusions?


Expect to be given certain documents including a "Your guide to life insurance" booklet, a product summary and a benefit illustration, even if you buy on a "no advice" basis.


Use comparison portals, such as compareFirst and DIYinsurance to check out differences in features and premiums.


Have a clear idea of what you need. The cheapest product is not always the best for you. Understand the benefits, terms and conditions.


The conventional rule of thumb is to multiply your annual income by 20 years. But there are no fixed rules. Consider how much your beneficiaries would need if you are not around.


Buying insurance is a long-term commitment. Early terminations may result in you losing part of the premiums paid.



Don't let greed get in the way. It's natural to picture the best-case scenario. Discipline yourself to ask what is the worst-case scenario and if you can take the risk of it happening.


Investment-related costs like sales charges, expense ratios, fund management fees, trailer fees, hurdle rates and performance fees will eat into your returns. This is why some investors prefer low-cost index funds, which are passively managed as they track indices.


Consider how much risk you feel comfortable with. Also, do you have the capacity and do you need to take the risk?

4. RULE OF 72

To find the number of years required to double your money at a given interest rate, you divide 72 by the expected return. For example, if you want to know how long it will take to double your money at 8 per cent interest, divide 72 by eight and you get nine years.


When you understand the power of compound interest, long-term investing makes a lot of sense because the amounts will add up rapidly over the years.


Invest equal amounts regularly over a long period so as to buy more units or shares when prices are low and fewer when prices are high. The advantage is that you lower your cost of investment and reduce the risk of investing at a peak.


A national voluntary scheme which enables you to save on taxes while you build your nest egg.


It's difficult to time the market which moves in cycles. Those who time the market typically miss the run up.


As a general rule of thumb, subtract your age from 100. That is the percentage you can invest in stocks and the rest in more conservative investments like bonds.


Fine-tune your portfolio periodically by buying and selling portions of it so as to bring it back in line with your risk profile and asset allocation.

Money is a means to an end


Health is wealth. Reduce your healthcare cost by eating healthily and exercising regularly.


Spend on experiences, not things.


Cultivate friends with similar money attitudes and healthy lifestyles.


It is better to give than to receive. Besides cash donations, experience the joy of giving your time and effort.


Accumulating money without a purpose loses its meaning in the long run.


Decide who are your donee(s) in case you become mentally incapacitated.


Ensure a speedier and hassle-free distribution of your estate upon your demise.


To reduce the trauma of family members having to make a difficult decision, inform your doctor in advance that you do not want the use of any life-sustaining treatment to prolong your life in the event that you become terminally ill and unconscious and where death is imminent.


Do this daily before you sleep and you are more likely to wake up happy and positive.


To me, the meaning of life is to discover my gifts and use them to make a difference. Money simply provides more options.

Sunday, July 19, 2015

Diversification: Will it make you rich?

Dr Larry Haverkamp
July 2015

The first rule of investing is to diversify.

Why is that so important? It's because if you own a few investments, you will reduce risk without reducing returns. This is valuable, costs nothing and is what economists call "a free lunch".

If you have risky investments, like stocks or property, the best way to reduce the risks is to buy bonds. It works like this: When the economy is strong, stocks do well and interest rates rise. Because of a peculiarity of bonds (that the coupon is fixed), higher interest rates make bond prices fall.

Did you catch it? When stock prices go up, bond prices go down. Academics call it "negative covariance" and it is very good for diversification as it reduces a portfolio's volatility. Better still, it reduces risks without reducing returns. Nothing but bonds have such a large negative covariance, which makes them very special.

The drawback is bonds are a low-risk investment, so it is hard to get this excellent risk-reducing feature without opting for low risks and returns. Suppose that isn't what you want? You might want high risks and returns. Sorry, then you are out of luck. When you buy bonds, you get the good with the "possibly not-so-good" and  there is no way around it.

Except for one thing. You can also diversify over time by staggering your buying or selling.

Bill Gates does this. He sells a fixed per cent of his Microsoft stock every quarter and has been doing it for the past decade. His buddy Warren Buffett does the same. Warren gives away five per cent of his wealth every year, and incidentally, he gives it to the Bill and Melinda Gates foundation since he judges Bill Gates to be the best in philanthropy.

You can do it too. Just invest continuously in equal-sized investments. Of course, you will get even more risk reduction if you also buy bonds but it may push you into a lower risk-return category than you want. If it does, time diversification is the best you can do, but it's good enough as it smooths the ups and downs that occur over time.

The next big question is should you do it yourself (DIY) by buying shares in the market? Or should you purchase a fund, which gives instant diversification?

Professionals typically advise buying a fund. But many of these pros have a vested interest since the fund pays them a commission. Is this a conflict of interest? Ha, ha, ha. That's a good one!

If you go the fund route, you have three choices: An investment-linked product (ILP), a unit trust or an exchange-traded fund (ETF). Of these, I recommend the ETF. It is almost sure to be "passively managed", which means it is an "index fund". This is the opposite from an "actively managed fund", which is what we have for 95 per cent of the ILPs and unit trusts sold in Singapore.

The problem is the costs (yearly expense ratios) of actively managed funds are always higher than passively managed ones. The higher expenses are probably not justified since the average returns of these funds are not higher.

But wait. Instead of investing in the average fund, why not go for the best? Buy a "top 10 per cent fund"! The only thing wrong with that is the top 10 per cent are not "persistent", which means each year sees a different group of funds in the top 10 per cent.

Of course, fund managers don't like these findings and rarely bring them up when advising clients. Adding to the conspiracy of silence is that ETFs don't advertise (to keep expenses low) while actively managed funds do. That's why you don't see these results in newspaper ads, on the MRT train or anywhere else.

It all points to ETFs being a far better choice than actively managed funds.

There is a third choice, which is DIY. It means you choose which stocks to buy. But is this a good idea since you don't have expertise in stock picking?

Yes. It is a good idea. That's because expertise doesn't matter in this game. Recall that actively managed funds, with lots of high-priced "experts" do not out-perform index funds and the reason is all information available to experts is already included in the stock price. The experts will out-perform only if they have special or insider information, which is rare and even if they have it, it is probably illegal to use.

Finally, is DIY better than an ETF? I think so. First, you can have more fun with DIY since you can pick 15 or more shares to eliminate volatility and you'll probably achieve average returns, just like an ETF. But who knows? You may be a great stock picker. So play around, have some fun and it won't cost much. Online brokerage costs are only 0.6 per cent for a round trip (buy and sell) for both DIY and ETFs.

The second cost is yearly expenses and it is true these are super low for ETFs. But they are not zero. For DIY, however, they are zero. You buy shares and there is no charge for holding them.

In comparison. unit trusts and ILPs are much more expensive for both annual expenses and initial commissions. An adjunct professor at SMU, Dr Haverkamp contributes this column weekly to help our readers understand money matters better.

Sunday, July 5, 2015

Avoid big losses

5 July 2015
Dr Larry Haverkamp

THE best investing advice may be the simplest: Avoid big losses. It's easy to get caught up in the excitement of a deal and then you dive into a bad one. And it is even worse if it's a scam since you not only lose your money, you feel stupid too.

Take an obvious scam like my new e-mail friend from Nigeria, Olami Onojowan, who just wrote to say he wants to give me $30 million if I will send him $500 to show my sincerity. No one would fall for that, right?

Apparently some do. A former scammer in Nigeria said he averaged seven replies for every 500 e-mails he sent out.

Your best and maybe only protection is the standard advice: "If it sounds too good to be true, it probably is". But that advice is easy for the scammers to short circuit. How? just scale back a bit and make the deal sound "almost too good to be true".

That was behind the evil genius of the biggest scam of the century (so far): The Madoff Fund. Bernie Madoff knew it would be a sure tip-off if he promised 50 per cent yearly returns. So he offered something less. He paid investors an average of 10.5 per cent per year for 17 years. Of course, it was a Pyramid scheme with the "return" to old investors coming from new investors' money.

Bernie made no guarantees, although the Madoff Fund's past returns showed a good track record with never a loss. Even in 2008, at the depths of the great recession, his fund posted gains of 5.6 per cent while the US market lost 38 per cent. (Bernie was finally caught in December 2008.)

The Madoff Fund returns were high but believable, and so the reliable rule "If it sounds too good to be true ..." failed.

Here's another one: Have you heard of crowdfunding? It is a new way to raise money using online sites like and

Need a million dollars to develop faster-than-light space travel? No problem. Post it on a crowdfunding site and try your luck. You can borrow money, or issue shares if you don't feel like repaying. The concept has caught on and it might even replace banks some-day (in the distant future). Crowdfunding always seemed to me that it had the potential for a Producers-type of scam.

Remember the movie The Producers? It's about two guys who wrote a play called Springtime for Hitler in Germany and they made it so distasteful that it couldn't possibly succeed.

These scammers sold 400 per cent ownership and sat back to wait for it to flop on opening night. To their amazement, the play was a hit and they couldn't repay even a fraction of the money, so they were sent to jail (where they immediately started scamming inmates).

It has finally happened with crowd-funding and in June this year, the US Federal Trade Commission charged Erik Chevalier with raising US$35,000 ($47,000) to fund a monopoly-like board game. It was over-subscribed and in just 30 days, Erik received US$122,000 from 1,200 eager investors.

He immediately declared that his venture had failed and apologised to investors, saying: "Every possible mistake was made, some due to my inexperience in board game publishing ...". But he kept the money anyway, which triggered the US government's charges.

The case is pending but Kickstarter said that it "cannot guarantee creators' work". It also doesn't offer refunds and proudly said: "Kickstarter creators have an incredible track record when it comes to following through on their promises..." Maybe. But this one didn't work out.

Can you call it a scam if it's legal? You be the judge.

In my opinion, gambling is the worst legal scam. People seem to think a little fling is harmless as long as it doesn't take food out of the mouths of their kids. But why do it? Why throw that money away? No one has ever won in the long run from playing games of chance.

Worse still, who understands the odds? Does anyone playing 4-D, Toto, horse racing or sports bets understand the "house advantage", which is the per cent that Singapore Pools, the race track or the casino takes from the average bet?

It is usually small but the profit comes from volume and if you play long enough, you are sure to lose your initial stake. To add to the confusion, the odds are different for each game, so it is hard to know which game offers the best odds (but "best odds" only means you will lose your money more slowly).

One more sure-lose but perfectly legal investment is jewellery. As a rule of thumb, the value of jewellery falls by 50 per cent the moment you walk out of the shop. It is a nice way of saying that a $100 gold bracelet has only $50 worth of gold. You pay mostly for "workmanship".

My wife read up on all the problems,with investing in jewellery and asked me not to buy her any more for special holidays like birthdays and anniversaries. Being a good husband, I follow those instructions.

By the way, a great place to check for major local scams is the National Crime Prevention Council's web site at:

An adjunct professor at SMU, Dr Haverkamp contributes this column weekly to help our readers understand money matters better.

Sunday, June 28, 2015

Manias, Panics and Crashes

Dr Larry Haverkamp
Jun 2015

I DON'T read many books but the title of this one looked too good to pass by. It is "Manias, Panics and Crashes" by Charles Kindleberger and is about how money makes people crazy.

A similar book with fewer but more colourful stories is "Extraordinary Popular Delusions and the Madness of Crowds", by Charles Mackay. It was first published in 1841 and, incredibly, is still a bestseller.

Sir Issas Newton (1720)
An early episode is about one of the world's greatest minds: Sir Isaac Newton. He discovered the laws of gravity but couldn't resist a quick fling with a hot stock. Unfortunately, he found stock prices confusing as he explained in 1720 when he said:I can calculate the motions of the heavenly bodies, but not the madness of people."

He was talking about a market bubble in a stock called South Sea Company. He wasn't going to get caught when the bubble burst so he sold his shares at a 100 per cent return on his investment, earning a profit of 7,000 British pounds. It was a lot of money in those days and Sir Isaac was feeling pretty good about his investing skills when tragedy struck: The stock continued to rise.

At that point, greed got the better of this great man who expressed frustration that the stock market continued to go higher even though he had declared it over-bought and sold his shares. The audacity! His solution was to buy it again and - bad luck - that was just before the bubble burst. The shares fell to zero and Sir Issac Newton ended up losing 20,000 pounds, which was most of his fortune.

He couldn't forget this tragedy and found that it even interfered with his scientific concentration, which Isaac Newton considered most important. He resolved to use his mind to completely block out the experience and for the rest of his life, could not bear anyone to mention the name South Sea Company in his presence.

Tulip mania (1638)
An even earlier speculative bubble in Holland in the 1630s was called -tulip mania". The Dutch people's love affair with tulips began around this time, and it is easy to understand since the flowers had beautiful deep colours, never before seen in Holland. They were not only beautiful, but also rare since it took seven to 12 years to grow a tulip from a tulip bulb,

Accounting records from 1637 at the height of the mania show that a single tulip bulb sold for the sum of the following:
3,600 kilograms of wheat
7,200 kilograms of rye
Four fat oxen
Eight fat swine
Twelve fat sheep
Two hogsheads of wine
3,800 litres of beer
Two tons of butter
450 kilos of cheese
A complete bed A suit of clothes
A silver drinking cup

It totalled 2,500 florins which is $400,000 today - and keep in mind this was for only one tulip bulb.
An amusing anecdote of the time is about a new servant who was immediately sacked upon discovery of his having eaten a tulip bulb that he mistook for an onion.

Like most manias, this one had a sudden ending. The bubble burst in 1638 when tulip bulb prices collapsed to just 1 per cent of their previous highs. Fortunes were lost and Holland fell into a recession the following year.

Modern-day manias
Do you think we are smarter now? think again. Today's manias are more frequent and devastating.

Japan's bubble: An easy one to measure was Japan in the 1980s. I lived in Hawaii at the time and remember the story of a new Japanese property billionaire who vacationed in Hawaii in 1987. He purchased a few homes during his holiday by driving around the capital of Honolulu and telling his staff which properties to buy after viewing them from his car.

The Nikkei 225 stock index hit its high of 38,000 in December Then it crashed and has never recovered, Today, it trades at 20,000, which is about half its former high. US housing bubble: The most recent mania has been the US housing bubble. It caused the great recession of 2008/09" from which we are still recovering.

The excesses of that time make for entertaining stories, like banks which made "no money down loans" that had 100 per financing. There were also "no doc" loans which required no personal documentation such as a buyer's income, It was considered unimportant.

None of this was a problem since rising home prices seemed to be a sure thing, as US Central Bank Chairman Ben Bernanke said in July 2005 "We've never had a decline in house prices on a nationwide basis."

He was correct. In the previous 200 years, US home prices had only gone up, never down. But that came to an end only three years alter Chaitrwin bernanke said it wouldn't happen. US home prices fell by one third and sent the US into its deepest recession the Great Depression in 1929.

The next mania? No one knows when it will be, but it will happen. The world has never gone longer than 12 years without one, and it invariably leads to a recession

It's been six years since they last one.

An adjunct professor at SMU, Dr Haverkamp contributes this column weekly to help our readers understand money matters better.

Tuesday, March 31, 2015

Remembering Lee Kuan Yew

"I have spent my life, so much of it, building up this country. There's nothing more I need to do.
At the end of the day, what have I got? A successful Singapore. What have I given up? My life."

The Great Singapore Queue from docthwong on Vimeo.

Frontline 2015 - EP1 Queue for 8 Hours (Chinese)

Mr Lee's final gift: One united people
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MPs laud the man who cared

Dr Ng Eng Hen said Mr Lee never had the time for the question of how history would judge him. Once, he replied: "I'll be dead by then."

"Mr Lee, we would like to tell you that Singaporeans have decided," said Dr Ng. "Thousands upon thousands have lined the streets. They queued for hours under the hot sun to pay their respects here. They did so spontaneously (in) an outpouring of gratitude and admiration for what you have done for their lives." He added: "They have pronounced the final judgment on your life's work. It is a great work that has surpassed all expectations. It is called Singapore, and filled with Singaporeans who love and revere you."

'Build on his legacy' 
"Some say that he was ruthless, unforgiving, unrelenting. But the children of his political foes had rights and opportunities like any other children. They were able to enter professions, able to become lawyers, doctors, public servants - because, this is Singapore.

 Did he do well for Singapore? Look around us. We can say what we will, history shall be the judge. 

History will judge those who act, and history will judge those who only speak. As for me, I am convinced that if I were born in Singapore in an earlier era, or if I were born in a similar era but in another Asian country, I would not, being a girl with a disability coming from a poor family with no connections, I would not have been able to go to school, enter a profession and serve the community today. 

Shortly after he took office, he said he had the lives of a few million people to account for. He said Singapore would survive. By any measure, Singapore has more than survived. Today, we are a reckoned player in the international scene. 

Today, our lives have improved, and Singaporeans have a strong foundation upon which to work hard, to make life better for ourselves and our children. 

He has completed his sojourn with us. But his journey, and the journey that he and our forefathers began, has not ended. That journey will continue. This is our Singapore. And we will build it, and we will protect it." - 

Nominated MP Chia Yong Yong, a wheelchair-user, on how people here can do well, regardless of their background

Lee Kuan Yew: Legacy in numbers
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A lion among leaders: Tributes from global leaders
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In his own words: Lee Kuan Yew never shied away from saying exactly what he thought
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A lasting legacy: Key socio-economic policies Lee Kuan Yew launched or oversaw
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The Singapore that Lee Kuan Yew built
The Singapore that Lee Kuan Yew built

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Interesting Articles

By gum, the West is wrong about Singapore

Calvin Cheng rebuts critics on Singapore trading freedom for economic success

Lee Kuan Yew, truly the father of Changi airport

Singapore's Chief Gardener

The love of his life

Devoted husband and caring father


On Time Magazine Cover

Monday, March 23, 2015

Help people choose right healthcare plan

By Salma Khalik, Senior Health Correspondent
Mar 23, 2015
The Straits Times

WITH the launch of MediShield Life later this year, everyone can expect to pay significantly more in health insurance premiums, regardless of

whether they are on the basic scheme or on one of the private Integrated Shield Plans (IPs) offered by five insurance companies.

Those on the basic scheme need not worry as the entire premium will be payable with Medisave money. Those in the middle- to lower-income

brackets will also get permanent subsidies to help them defray the cost of the higher premiums.

But the last time MediShield rates went up, in 2013, some IP premiums shot up by more than 100 per cent - more than $1,000 in dollar

increase for some - even though the actual MediShield increases were lower.

This will likely happen again with the higher MediShield Life premiums the IPs have to pay on behalf of their policyholders - since it became

compulsory in 2005 for all IPs to incorporate the national healthcare insurance.

It therefore becomes even more important that people choose the health plan that best suits them. Buying too expensive a plan would mean

wasting Medisave money unnecessarily.

That is why the Ministry of Health (MOH) must be lauded for introducing a two-tier scheme for payment of health insurance premiums.

The first tier pays for the MediShield Life portion of the premium. The second tier for the add-on IP portion.

This second tier is unlikely to completely pay the entire IP portion for the more expensive schemes pegged at A-class treatment at public

hospitals or private hospital care.

This means that the majority, if not all, of IP policyholders will have to pay part of their premiums in cash - bringing their attention annually to

the amount they are paying in premiums.

Today, the vast majority of IP holders whose entire premium is paid for with Medisave have no idea what they are paying in premiums.

That is, until the premium tops the $800 cap on Medisave payment. At that point, many are shocked to realise the amount they have been

disbursing, unknowingly, for their health insurance coverage.

The change in the amount of Medisave that can be used for IPs will vary with age - which likely means that even the young on more expensive

schemes will have to pay part of their premiums in cash - making them fully cognizant of what they are paying.

Today, this usually hits home only when they are in their 50s or 60s when their premiums are higher than the amount of Medisave money they

can use, and a cash top-up is needed.

The MediShield Life Review Committee found that some people "have overstretched themselves to buy the most expensive product for higher


This is borne out by their finding that seven in 10 people with insurance coverage pegged at public hospital A-class wards opted for lower-

class wards when they actually needed hospital care.

Similarly, six in 10 with private hospital insurance plans opted for public hospital care.

The committee said this mismatch of insurance coverage and usage stemmed largely from poor understanding of their health plans and what

they covered.
It suggested pegging Medisave coverage of IP premiums at B1 coverage, and recommended that this level of cover be standardised across

all five insurance companies providing IPs.
While in theory this is a good suggestion as it will cover only the lowest IP category, it will likelly see many people opt for it simply because

premiums for this category of IP can be entirely paid for with Medisave for their whole lives, and not because it is what is best suited for them.
Pegging the Additional Withdrawal Limit to slightly below the B1 premiums - say at 90 per cent - means some cash outlay.

This way no one, except for those on the compulsory basic MediShield, can totally ignore the amount of premiums that need to be paid every


In other words, choosing even a B1 class coverage is a decision they made consciously, and not a default simply because premiums can be

entirely covered by Medisave.

It is also fairer to all if everyone on an IP has to pay some of the premium in cash, even if for some, the amount is very small. People who find

it difficult paying the cash outlay have obviously chosen the wrong cover.

By choosing the cover best suited to their financial circumstances, they would also ensure that Medisave money goes further. That is

especially important for people who have retired and are no longer growing their Medisave accounts.

Having insurers spell out how much of the premiums is for MediShield Life and how much is for the IP portion; and similarly how much of

claims come from the basic scheme and how much from the add-on IP, will help people decide if they are getting value for money on their IPs.

While it might be a hassle for people who can clearly afford the best, and have hefty Medisave accounts they would like to use for this, their

inconvenience is a small matter against the millions of dollars insurance firms have been raking in from people who have bought coverage way

above their need, or their ability to pay.

Many of the people who have IPs do not have hefty Medisave accounts. Some do not even meet the Medisave minimum sum of $43,500

required at the age of 55.

For them to buy upmarket insurance coverage is obviously a mistake, for they are unlikely to be able to afford to pay their share of big

hospital bills in that class of ward. Many do realise that, which is why more than half end up in a lower ward than their insurance allows.

Insurance, like the provision of healthcare itself, is an uneven playing field with knowledge residing almost entirely with the supplier. Giving

consumers more information is a good way of balancing this inequality and allows for real informed choices.

Making them pay in cash, no matter how small the sum, is a good way of forcing people to choose rationally.

Monday, March 2, 2015

The road to riches isn't just paved with keys of condos

02 Mar 2015 16:41
The Business Times

AS the Central Provident Fund (CPF), Singapore's pension scheme, was in the news recently, I was having a debate with a colleague on whether restrictions should be placed on the use of CPF savings to buy property, especially private property. It was not financially smart to commit that money - meant for retirement savings - to buy a pricey apartment, I said.

She responded: "Why deny people the chance to break into the upper classes? You'll exacerbate inequality if you prevent people from buying private property."

But the bigger issue is retirement adequacy, which is the original goal of the CPF - and remains the main goal - I argued. After wiping out your CPF savings to help pay for the S$240,000 downpayment on a S$1.2 million home, as well as your monthly CPF Ordinary Account contribution to help pay for the $4,000-a-month 30-year mortgage (on a 3 per cent interest rate), how much will you have left by the time you're 55 when you have to pay for CPF Life? You might still be paying the mortgage by then. Will you still have a job?

People can choose to pay their mortgage in cash instead of using their monthly CPF contributions, she countered. And the mortgage won't necessarily last 30 years if people pre-pay after some more years of working and saving. Salaries can still go up. And as for prudence concerns, loan curbs are already in place.

What is important, she maintained, is that people be allowed to use the CPF to help with the lump-sum downpayment first. And as for whether CPF should be allowed to be used to buy private property, that ship has sailed a long time ago - in 1981, to be exact, when the Residential Properties Scheme was introduced to let people do so.

The CPF has become such a big part of most people's savings that people expect to be able to use it to pay for whatever they wish, including an expensive piece of physical property.

Property always goes up? But so do other assets
It takes a brave and politically suicidal government, perhaps, to reintroduce restrictions on the CPF's use.

A strong argument can be made for the use of CPF to finance government Housing Board (HDB) flats for people to stay in. There are socio-economic benefits to home ownership. Political stability is arguably fostered. Build-to-order (BTO) flats, priced cheaper than the resale market, have generally gone up in value when they can be sold.

Yet the same story of price appreciation cannot be said of private property, which people also buy for investment purposes.

Despite a slowdown in the housing market, the urge to buy private property remains extremely strong today. Many people are waiting for prices to crash or, at least, correct by a larger amount, so they can jump in. Others have already bought their condos in the low interest rate environment. Some have stretched their finances to do so.

There are two premises to their views: First, private property prices will always go up; and second, it is therefore the best investment one can make.

Is that so?
It depends on the time period and measure used.

Statistics on the Singapore Exchange (SGX) website compiled from Bloomberg show that if you take a 10-year view from 2005 to 2014, property, as measured by the URA Private Property Price Index, has returned an average of 6.1 per cent a year. Blue chip Singapore stocks, as measured by the Straits Times Index (STI), returned 5.3 per cent a year, which is slightly lower. Both indices exclude rent or dividends.

Yet the property figures might be skewed. The mid-2000s saw a long period of stagnation for Singapore property. By taking 10-year returns now, we are benchmarking returns from a low base. By contrast, the STI had begun rising from their 2003 lows by 2005.

Measure property returns from the last major market top at end-1996 to end-2014, and returns will average just under 1 per cent a year. Measure them after the Asian financial crisis, at end-1998 to end-2014, and property returns average 4.6 per cent a year.

Meanwhile, on a shorter, two-year time horizon, the STI comes out ahead. It returned 3.1 per cent a year on average, while property has lost 1.5 per cent a year in 2013 and 2014.

Yet the STI lost to pretty much every developed or Asian market. The S&P 500 index returned 25.1 per cent a year in Singapore dollar terms, the FTSE 100 returned 7.6 per cent, the Nikkei 225 returned 14.3 per cent, India's Nifty index returned 15.4 per cent, and the top 50 A-shares on the Shanghai Stock Exchange, 18.3 per cent.

If you had spent a fortune buying a private property in Singapore two years ago, you would have regretted it. You bought at a temporary top. If you had put the money in US stocks, you would have made over half your money back.

Peak to peak: property versus stocks
Statistics can be used to prove almost anything. But it is clear that based on Singapore's experience with property in the last 20 years, buying a property is anything but a sure bet to riches. It took 14 years after the last market top in mid-1996 before prices in mid-2010 surpassed their old levels.

Of course, go back 40 years and prices increased more than 16 times at an average annual increase of 7.3 per cent a year.

Yet stock perma-bulls also have history on their side. US stocks, which we have the biggest set of data for, have returned 5-7 per cent a year in the long run of up to 80 years. On that grand, historical scale, what looks like a flat period of returns (see charts) actually represent a boom.

Where returns are concerned between property and stocks, we have a tie.

Complicating the issue is how there are so many different types of property, from mass-market to high-end, with different rental markets and locations. Everybody who bought property would have had a different experience.

It would not be surprising if there are people who bought at the last market top almost 20 years ago, and have just broken even. Others might have reaped big rewards.

Property, just like stocks, foster a get-rich-quick mentality.

Singapore property prices more than tripled between 1989 and 1996, and almost doubled between the end of the financial crisis in 2009 and the last market top in 2013. The story for stocks can be equally dramatic. For five years in the 1990s, the S&P 500 gained 20 to 30 per cent a year, an increase of almost four times.

Taxi and bus company ComfortDelGro, a blue chip that many investors know well, notably gained 50 per cent in 2014.

People fear buying assets at a peak. So how long does it take before the last peak gets surpassed for property versus stocks?

Singapore property took 14 years before prices went past the 1996 top. The STI took seven years to go past the 1999 top in 2006.

It's been more than seven years since the last top in 2007, and the STI is still below where it was then.
The question for most property investors is whether we have reached a price peak a year ago that might not be seen again for some time. As for the US, the S&P 500 took seven years to go past its early-2000 top, and less than six years to go past the 2007 top.

Yet history also offers a cautionary tale. Those who bought US stocks at their 1929 peak had to wait 25 years before values recovered.

It seems that both Singapore property and stocks can stagnate for a long time, possibly beyond the time horizon which investors are prepared to wait it out.

Asset class characteristics
Investors comparing stocks with property have to keep in mind differences between the two asset classes.

Price drivers differ. For stocks, price changes are usually driven by investor expectations on the stock's underlying business. For property, prices depend on interest rates, the state of the economy, disposable incomes, and land supply.

Investment cost is a bigger issue for property. While one can invest in a company with just a few hundred to a few thousand dollars, physical property requires a substantially bigger commitment, as well as the assumption of debt.

Property investors also have to watch out for interest rates, which will affect their mortgage payments. On a S$1 million, 30-year loan, a 2 percentage point interest rate increase means mortgage payments go up by S$1,000 each month. On the flip side, you don't need to commit as much of your own money to reap the rewards of a property bull run.

The ease of purchase differs. Where one can buy a stock any time during trading hours, it can take months before a purchase or sale in a property is closed.

Liquidity might matter. Property is not easily bought and sold, though the same can be said of certain small-sized stocks in the market. If sellers need cash urgently from the sale of their property, they will have to offer a discount. Yet if you want to liquidate your blue chip holdings immediately, you can easily do so and get your money back at a price that is fairly, efficiently determined.

Yield characteristics differ. It is more troublesome to squeeze yield from your property. To rent out a place, you need to advertise online or go through an agent, negotiate the right price, entertain viewings, and finally prepare a contract to sign.

Landlords need to maintain their property and be on hand to address issues such as damaged furniture, leaking pipes, electrical faults or Internet subscriptions.

By contrast, getting a yield from a stock requires no work on the part of the investor. If the business is profitable, and dividends are declared, money is automatically deposited into your bank account.

Another way to evaluate the two asset classes is by their volatility, or how much prices fluctuate. If the price of an asset changes rapidly, with large price movements, the asset might not be a suitable investment for an investor that cannot stand the thought of his investment losing value.

This is the issue with stocks in general. Most stocks change hands thousands of times a day, each trade being an opportunity to sniff out a fair price.

By contrast, property tends to be less volatile. Assets can get traded only once every few years. You will not know exactly how much your property is worth. This is not necessarily a bad thing from a psychological point of view: If prices are falling, you won't know how much your net worth has decreased by until you have to sell.

Price transparency is thus different in both markets. In the stock market, prices are clearly displayed and updated every second. Historical data is readily available. By contrast, the property market is opaque because many factors go into determining even the price of units in adjacent developments.

Because physical properties get traded infrequently, buyers and sellers generally refer to the last-traded price of a similar unit nearby, before making adjustments based on the floor, view, location, and other tangibles and intangibles.

Nobody really does a discounted cash flow calculation based on expected rental income and risk to come up with a shoebox apartment's value.

Finally, stocks are risky because companies can go bankrupt, leaving shareholders with nothing. By contrast, the value of a property will not fall to zero.

However, because people usually take out debt to buy property, the risk is that you cannot meet your monthly mortgage payments. If that happens, the bank that lent you money will have the right to reclaim your property and sell it off.

You can always try to sell your property to someone else in the hope of making a profit from the transaction after paying back the debt you owe the bank. Unfortunately, it is also likely that the property is worth less than what you bought it for, or what you owe the bank. In this case, you will be left with nothing.

In reality, if you are staying in the property you bought, the banks or HDB are likely to allow you to renegotiate your loan on a case-by-case basis. Repossession is a last resort.

Intangibles matter
Given its illiquidity, high costs and lack of transparent pricing, property does not seem to be a suitable investment for beginner investors. They can buy a place to stay within their means, but buying for investment is another matter.

Stock investors can implement strategies such as buying more of a blue chip stock they have assessed to be able to thrive, when the stock is hit by negative sentiment and is trading cheaply against historical norms. You can't really dollar-cost average houses, buying an additional one every month into the dips.

However, people buy property for non-financial reasons. Own a condo and you think you move one rung up the social hierarchy.

You own a tangible asset that you can touch, and the opportunity to enjoy amenities such as a swimming pool and BBQ pit.

If you are buying a place to stay in, then financial reasons matter less. The emotional value you get from owning a place goes beyond the rental you would otherwise have paid every month. People buy property to pass on to their children, as well as to diversify their wealth and hedge against inflation.

Ultimately, young investors have to understand various aspects of both the stock and property market before they decide which path to take with their money.

Both are not mutually exclusive.

But if you do buy a property, be honest - don't think of it as an investment. The purchase is likely not a purely financial transaction. There is no guarantee that you will make a profit.

Property price returns, like the stock market, look attractive only if your time horizon is long enough and if Singapore remains the financial and commercial centre it is today. But in a declining market, you are likely to get worried after just two years.

Sunday, February 15, 2015

Knowing yourself is key in new economy

To succeed, workers have to work harder to know what they are good at

 FEB 15, 2015
The Straits Times

 In his TED talk, British education expert Ken Robinson tells a story about a little girl who got into trouble because she was always restless in class, so restless her teacher called her mother in and told her there was something wrong with her daughter.

 The mother took the girl to a doctor who turned out to be unusually perceptive. During the consultation, he asked to speak to the mother privately, then he turned on the radio as they left the room. They watched as the little girl got up and danced.

 The doctor turned to the mother and said: "There is nothing wrong with your daughter. She is a dancer."

 Later, when the mother enrolled her daughter in a dance school, the little girl exclaimed: "Finally, people like me! They have to move to think."

 The girl grew up to become Dame Gillian Lynne, a British ballerina, theatre director and choreographer of blockbuster musicals Cats and The Phantom Of The Opera.

 Sir Ken Robinson uses her story to critique conventional education systems, but there is another important lesson. Imagine if Dame Gillian Lynne had not met the doctor who helped her discover something fundamental about herself - that what brought her to life and gave her joy was her body, and movement. She might have spent years feeling inadequate. Instead, she flourished in the world of dance and theatre.

 Born in 1926 - she is 89 this year - the world she grew up in was very different from today's. But the link between self-discovery and success may well be more important now, and for more people, than during those pre-war years.

 For work - whether in the home or outside it - has become for many people in the developed world much more than a source of income. It is also a way for them to express themselves, use their gifts and skills, and contribute to the communities they live in. People long for work that will engage and energise them, and give their lives meaning.

 But even as expectations of work rise, employment security and predictability plummet.

 Technology is transforming how people make, supply, buy and sell goods and services in ways that few could have predicted just a decade ago, and thereby reshaping economic structures. In a recent report on The Future of Work, The Economist observed that "the idea that having a good job means being an employee of a particular company is a legacy of a period that stretched from about 1880 to 1980".

 Computerisation and improved communications have paved the way for outsourcing, automation and the rise of a new economy variously described as "sharing", "frugal" or "on-demand". That economy, in turn, generates savings for consumers and, yes, jobs - but jobs that are, more likely than not, short-term, freelance in nature and done by independent contractors.

 That spells far-reaching change for workers and governments, which must rethink pensions, health care and other benefits tied to employers.

 But the biggest challenge by far may be in education, where it is becoming increasingly difficult to prepare students for the world of work. The speed at which knowledge becomes outdated and economic volatility, which makes it difficult to predict what jobs will look like when students graduate, combine to make education an exercise fraught with risk.

 In an attempt to meet these challenges, the Singapore Government has set in motion new approaches. Two campaigns have been in the spotlight lately: Aspire and SkillsFuture.

 Both centre on the aim to develop a quality system of education and training responsive to evolving industry needs, and promoting employer recognition and career development based on the mastery of skills.

 But another paradigm shift which has to take place, to quote The Economist, is for schools to "produce self-reliant citizens instead of loyal employees". Perhaps in the recent past, a majority of workers could afford to rely on the firm and the state to provide them with secure employment that supported a decent standard of living for most of their lives. Not any more.

 Disruption is the new normal. In the face of uncertainty and risk, ignorance is less of an option than it used to be. To succeed, people have to be more prepared than previously, and arm themselves with information, skills and self-knowledge.

They have to work harder to understand the employment landscape and keep up with change, so they have a handle on where opportunities lie and what their options are. They also need to understand themselves better.

 They need to work harder to discover what drives them, what would push them to invest the time and effort needed to master a new skill and persevere in a field of work, so as to excel, create and innovate. Each person is unique and what animates one may deaden another.

 On the plus side, the workers of the future will be better equipped to do all of the above as a majority will have tertiary education. Those who do not will need help to navigate the new job landscape, and they will stand a better chance of getting that help if the ones who can are generating the resources needed to provide it.

 Guess what Dame Gillian Lynne is up to now that she is in her 80s?

 Well, last year, despite two metal hips and an ankle held together by screws, she released on DVD a fitness regime for seniors entitled Longevity Through Exercise. She still directs and choreographs.

 Asked to sum up her philosophy of life and career, she said: "I don't think I could stand the boredom if I hadn't had the discipline of being a dancer, a director and a choreographer. I love any regime that recognises that health is part physical, a lot mental, and does not depend on heavy use of drugs. My life is one big battle. Perhaps that's what keeps me young."


Thursday, January 1, 2015

The mathematics of how money grows

Rule of 72 - the doubling effect

'Rules of 72' is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to double.

For example, the rule of 72 states that $1 invested at 10% will take 7.2 years (72/10=7.2) to grow to $2.

$100K@3%                                > $200K
Bonds/Unit trusts @3-5% p.a. > 24 years

$100K@6%                                                     > $200K > $400K
Index funds/ETFs/Blue chips @ 6-7% p.a.       > 12 years > 24 years

$100K@12%                                               > $200K  > $400K    > $800K    > $1,600K
A basket of value stocks@ 10-12% p.a.        > 6 years > 12 years  > 18 years  > 24 years

By the way, Fixed Deposits will take 72 years to double at 1% interest.


Hard facts
Every $200,000 will grow to $800,000 in 12 years' time at 12% compounded yearly.
$800,000 will give you $40,000 yearly retirement income @5% withdrawal rate.
That will be $3,333 a month of lifetime income.
You will not outlive your money and you can still leave an estate for your loved ones.

Key Questions
At what rate is your portfolio currently growing?
Is 10% per annum achievable?

Find the answers at

Studies done by Teh Hooi Ling show that buying a basket of value stocks, based on metrics like dividend yield, price-earnings and price-to-book ratios, can deliver returns upwards of 10% p.a.

Teh Hooi Ling, CFA
Head of Research, Executive Director