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Tuesday, June 27, 2017

How to fast-track your retirement

21/06/17, 12:18 pm

(June 21): Some people dislike working. They prefer to retire as soon as possible. This article is for them. To fast-track something is not easy. It requires one to take actions that defy conventional wisdom.

First, “Always be a business owner, not a lender”. 

The easiest way to own a business is to buy shares in the stock market. If you own a share, it means you are a business owner.

Businesses earn the highest returns. The median return on equity of Singapore listed companies is 9%. If you choose to lend money, fixed deposits give you 1% and risky corporate bonds give you 5%.

You get measly returns from being a lender, so be a business owner. Sometimes, the risk you take from buying poor-quality corporate bonds is as much as being a business owner. To retire early, own a business.

Second, “Put 100% of cash you don’t need into stocks”. 

Don’t invest in commodities, gold,land-banking, overseas properties, doughnut shops, hipster cafés, fixed deposits, bonds and flavour-of-the-month unit trusts.

If you do that, your overall portfolio average return will be 2% per year. $100,000 growing at 2% for 10 years is going to be $122,000.

Instead, putting $100,000 into stocks will net you $216,000 over 10 years at an 8% rate of return. The 8% return is the long-term average of the Singapore stock market. $122,000 versus $216,000? You decide.

Third, “Invest only in small capitalisation value stocks”. 

Small capitalisation means small companies. Value is short for “value investing”. Value means stocks that have characteristics such as low price-to-earnings ratios, low price-to-book ratios and high dividend yields. Study after study has demonstrated that they give the best returns over the long term.

If you want to achieve returns of 10% or more per annum, buy small capitalisation value stocks.

Fourth, “Be massively diversified. Own at least 100 stocks in different countries and industries”. 

Most investors have only 10 to 15 stocks. If you have 10 to 15 stocks, you will form an emotional bond with your stocks. If one of them were sick, you would not be able to sleep at night. When you have an emotional bond, you will make mistakes — such as not cutting losses when something is evidently wrong and holding on to your winners till they become losers.

Instead, have at least 100. Don’t just invest in Singapore stocks. Go regional, or even global. Invest in Hong Kong, China, Thailand, Korea and so on. Go to the country that is having a cheap sale in stocks.

Treat your stocks like a farmer treatshis 100 chickens. When they are fattened, slaughter them and bring them to the market. Do not ever give a name to your chickens, or stocks; they are not your pets.

Fifth, “To master risk, change the way you think about risk”.

When you see your share price drop, it does not mean that you participated in a risky activity and you are now paying the price. It just means that some dummy who does not understand the true value of the stock sold it, and someone smarter on the other side of the transaction who understands fair value bought it. The seller probably sold it because he is a nervous chap and he is very worried about The Donald, May, North Korea, Global Warming and the Monster Under His Bed.

Sixth, “The Way to Wealth: Value Investing”. 

Value investing means buying a stock for 50 cents when its true value is one dollar. Why would anyone sell to you for 50 cents? Either they are mad, scared, or both. Humans go berserk from time to time. When that happens, relieve their anxiety and pay them their 50 cents for a dollar’s worth of stock.

Seventh, “Penny pinch. Use that money to buy stocks”. 

You don’t need that German car. Buy stocks instead.


Monday, June 26, 2017

What you need to know about DPS coverage

Lorna Tan
Published Jun 25, 2017

The CPF Dependants' Protection Scheme can be a great help to members, but note its finer points

The Dependants' Protection Scheme (DPS) is a life insurance term plan covering many people here. But ask anyone what it covers and it is likely the details would be hazy simply because the finer points of a policy are not front of mind until something untoward happens. Here are some things that policyholders ought to know about DPS:

DPS generally covers insured members for a maximum sum assured of $46,000 up to the age of 60. It aims to provide Central Provident Fund (CPF) members and/or their families with some money to tide them over the first few years after the insured member dies, or suffers from terminal illness or total permanent disability. The coverage is worldwide.

The scheme works on an automatic opt-in basis. So unless you opt out, the annual premium is automatically deducted from your CPF account.

DPS is extended automatically to CPF members who are working Singapore citizens or permanent residents between the ages of 21 and 60 when they make their first CPF working contribution. Those who are below 21 but above the age of 16 can apply for DPS cover. The objective is to insure members as early as possible when they start working, as they are more likely to be healthy and insurable then.

Those who do not wish to have this cover have to sign an opt-out form and the premium will be refunded to their CPF accounts. DPS is administered by two insurers: Great Eastern (GE) Life and NTUC Income.

DPS premiums can be paid using CPF Ordinary Account (OA) or Special Account (SA) savings. While no out-of-pocket cash is required, it also means that the policy will lapse if we have insufficient CPF savings and fail to pay the premiums using cash.

This was what happened to Mr Henry Li, 59, who died of liver cancer in December last year. His DPS policy, which was due for renewal in May last year, had lapsed as he had insufficient CPF money to pay for it and was unaware that he needed to make a cash payment.

Mr Li and his wife were living in a three-room HDB flat and their CPF savings were being used to pay the mortgage. According to his widow, Mrs Li, her husband had no intention to let his DPS policy lapse.

As his OA savings were running low, Mr Li managed to get some monies transferred from his CPF Retirement Account (RA) to his OA in April last year. He had no money in his SA. Mr Li had believed that these monies could be used for both the mortgage and the DPS premium deductions. But he was wrong.

His widow learnt only after his death that the monies transferred from her husband's RA to OA could be used only for housing payments and not DPS premium deductions. The CPF Board said it had sent a letter to Mr Li explaining this before his death, but his wife was unaware of the letter. She recalled that her husband was disoriented and had memory lapses for several months before he died.

DPS insurer GE could have rejected the DPS claim by Mrs Li on the grounds that the policy had lapsed before her husband died. Instead, it honoured the claim on the basis that Mr Li had suffered from a terminal illness before the lapse of the policy, after assessing his health reports.

Mr Patrick Kok, GE's managing director, group operations, said: "GE took into consideration many factors, including detailed hospital medical reports of the diagnosis of the late Mr Li's terminal illness and the extenuating circumstances, chief of which were the actions taken by Mr Li to ensure that his policy did not lapse by arranging for continued payment of his premium through his CPF savings, notwithstanding that he was unaware that this is not permitted."

He said that in addition to delivering on its contractual promise, GE is also committed to "honouring the spirit of the policy and to paying every legitimate claim sensitively, compassionately and efficiently".
GE informed Mrs Li that she would be receiving the full sum assured plus bonuses, which worked out to be about $53,000, after a nominal deduction for outstanding premiums.

Note that you can continue to use your OA savings for insurance premiums under the DPS and the Home Protection Scheme, after setting aside your retirement sum at age 55. However, if you do not have enough savings in your OA, it would be advisable to ensure that you have alternative funding, such as relying on cash payments instead of your CPF savings. This is to avoid the undesirable situation where your insurance plans lapse because there are insufficient CPF savings for premium deductions.

The CPF Board advises that besides OA savings, RA savings in excess of the Basic Retirement Sum can be used for housing purposes. These savings will be transferred to the OA upon request and specifically earmarked for the members' housing needs. Members above 55 can pay their DPS premiums in cash if there are insufficient OA savings.

It advises members who have problems paying their DPS premiums to approach the Board and it will assess such requests on a case-by-case basis.

The annual premiums of DPS range from $36 to $260, depending on which age band you fall into. For those below 34, the annual premium is $36. Premiums for the age band of 35 to 39 are $48; for 40 to 44, it is $84; 45 to 49 is $144; 50 to 54 is $228; and 55 to 59 is $260.

Here's what retirement adviser Providend found out after comparing DPS premiums with those of NTUC Income's iTerm plan, which offers sums assured as low as $46,000. Most term plans' sums assured start from $100,000.
Compared with iTerm, DPS is cheaper in the early phase of life. However, from the age of 45 onwards, the premium increase is significant, meaning that purchasing a private term plan could be cheaper than DPS. This assumes that you have no pre-existing illness by then.

If DPS is kept throughout your working years from age 25 till 60, the total premiums work out to be $4,180, significantly higher than those for iTerm which would be about $1,717 for a woman and $2,268 for a man.

Providend says that DPS policyholders in good health may wish to review alternative plans as they reach 40 to take advantage of the lower premiums.

For national servicemen, a good alternative or add-on is the affordable group term insurance offered by the army.

One downside to DPS is that the cover ceases at the age of 60. As term insurance is meant to cover the policyholder in his working years, the scheme should take note of the current higher retirement age by aligning it with the payout eligibility age for the national annuity scheme CPF Life, which is 65 for those born in 1954 and later.

Unlike DPS, most conventional term plans now provide cover till at least age 70 and up to age 99.

If you have opted out of DPS, you can apply to be insured at a later stage with either Income or GE directly. You will be subject to medical underwriting then.

Given that term insurance rates have fallen owing to a low mortality rate, it is time to review and make DPS more relevant. This is particularly so as we are enjoying longer lifespans and the CPF Life payout eligibility age will be 65 for CPF members born in or after 1954.

The CPF Board could also review and allow CPF RA monies to be used to pay DPS premiums till age 60, thus reducing the danger of policies lapsing. Nevertheless, until the scheme is enhanced, for many Singaporeans who do not have adequate life cover, DPS is still a real benefit to families who are left behind to fend for themselves when a breadwinner dies or becomes disabled.

Given that term insurance rates have fallen owing to a low mortality rate, it is time to review and make DPS more relevant. This is particularly so when we are enjoying longer lifespans and the CPF Life payout eligibility age will be 65 for CPF members born in or after 1954. The CPF Board could also review and allow CPF RA monies to be used to pay DPS premiums till age 60, thus reducing the danger of policies lapsing.

Friday, June 9, 2017

Hill Street Tai Wah Pork Noodle stall is No. 1 in the Top 50 World Street Food Masters list

Published Jun 7, 2017
Kenneth Goh

SINGAPORE - The one-Michelin-starred Hill Street Tai Wah Pork Noodle stall in Crawford Lane has emerged tops in this year's Top 50 World Street Food Masters list.

The list, which ranks street food eateries around the world, is put together by
the World Street Food Congress that was held in Manila in the Philippines. The
five-day event wrapped up on June 4.

The judging panel said of Hill Street Tai Wah Pork Noodle: "They are the first
family behind this Singapore-invented dish and the second-generation owner,
already in his 60s, has now received worldwide attention as one of the first
street food hawkers to obtain a Michelin Star. The sambal and black
vinegar-laced pork noodle is the stuff addiction is made of and the wait for an
order is about 90 minutes today."

The panel included food commentators, writers and professionals, who looked at
criteria such as ingredients, food hygiene, and quality and flavour of food.
They also factored in the eateries' ability to create job opportunities for the
displaced and disadvantaged in their respective countries.

Joining Hill Street Tai Wah Pork Noodle on the list are 13 other Singapore

They are Chey Sua Fried Carrot Cake in Lorong 1 Toa Payoh (No. 10), Master Tang Wanton Mee in Sixth Avenue (No. 16), An Ji Sang Mee in Chinatown Complex Food Centre (No. 24), Tan's Kueh Tutu in Havelock Road (No. 26), KEK Seafood in Bukit Merah Lane 1 (No. 28), Hoy Yong Cze Cha Seafood in Clementi Avenue 2 (No. 30), Sin Kee Famous Chicken Rice in Holland Drive (No. 33), Hwa Heng Beef Noodle in Bendemeer Road (No. 40), Kim's Fried Hokkien Mee in Jalan Eunos (No. 42), Soon Wah Fishball Kway Teow Mee in Newton Circus Food Centre (No. 44), Heng Kee Curry Chicken Noodle in Hong Lim Food Centre (No. 45), Ambeng Cafe in Upper Changi Road (No. 48) and Ah Lim Oyster Omelette in Berseh Food Centre (No. 50).

The judges also lauded these eateries, which they call "one-dish entrepreneurs".
They said the eateries sell food that are " comforting to their communities" and

Other countries in the list include the United States, Thailand, Mexico,
Malaysia, Indonesia, Vietnam, China, the Philippines and India. The other stalls
that make up the top five are Franklin's BBQ in Texas, Che Paek Pu Ob Woon Sen in Bangkok which sells seafood glass noodles, Aling Lucing Sisig in Pampanga, the Philippines, and noodle stall Pak Sadi Soto Ambengan in Jakarta.

The World Street Food Congress is organised by Singapore food company
Makansutra, which is founded by KF Seetoh. The congress' council members include American celebrity chef Anthony Bourdain, veteran Indonesian chef William Wongso and Danish chef Claus Meyer.