Inequality in Singapore

The title of this article suggested that it is about America. But Lucky Tan is talking about Singapore and how conditions in Singapore are so much worse than in America. I agree with his views, which are quite close to my views. http://singaporemind.blogspot.com/2011/10/speeches-from-cnbccom-speakers-corner.html

Drop in US income

The full 9.8 percent drop in income from the start of the recession to this June — the most recent month in the study — appears to be the largest in several decades, according to other Census Bureau data. Gordon W. Green Jr., who wrote the report with John F. Coder, called the decline “a significant reduction in the American standard of living.”


http://www.cnbc.com//id/44840144

My comments: Income has continued to fall for most people. The gap between the rich and poor is widening. More people are finding the cost of living to be unaffordable, This is the failure of the current economic system and need to be addressed.

Earnings of US companies

Will earnings of US companies be good or bad for the reports that are coming out in the fourth quarter?  According to this report, the analysts are quite divided on this matter. I will make a guess that the earnings will be good,. Why? I remember a statement from Warren Buffet that the companies in his group are doing well, except for those involved in the housing sector.

I will take this as a test to see if this is a good indicator. It may be possible that Warren Buffett's companies are doing better than the rest of the economy, but this is not likely to be the case., I think that his companies can be a good gauge for the economy. Be watchful!

Avoid investment scams

Older people have a lot of money obtained through their hard earned savings, profit from sale of a property or from CPF withdrawal. It is easy for these people to be cheated in the investment scams that are quite common in Singapore,.

There are so many scams and many of them are being advertised regularly. It is easy for the ordinary people to be misled into thinking that, if they are allowed to be advertised, these investments are approved. It is hard for them to imagine that they could be cheated.

I know of these scams because many of the victims approached me for help - land banking, wine, guaranteed buyback arrangements. They could even be cheated by life insurance and investment linked products, as the insurance agent hide some of the essential facts from them - i.e. the high distribution cost, annual charges and high penalty on withdrawal.

When the victims complained about losing a lot of money on these scams or bad investments, IT IS TOO LATE. There is little, if any action, that can be taken to recover the loss.

I talk about these scams and bad investments in the Financial Planning Workshop organised by FISCA. I encourage the older people to attend and learn how to avoid these bad investments. 

Tips for young people

I gave a talk on "Financial Planning for the Young" at the National University of Singapore. My key points are:

1. Save 15% of your earnings after you start work
2. Keep the earnings in a bank account until you have accumulated an emergency fund of 6 months earnings
3. It will take you about 3 years to accumulate this fund. Just keep your savings liquid. Do not think about investing the money.
4. You should avoid investing the money in a life insurance policy or investment-linked policy - as you may need the money in an emergency and there is heavy penalty on early withdrawal.
5. You do not have to worry about buying life insurance until  you start a family. But, if you wish to have life insurance earlier, you should buy a term insurance and pay not more than $30 a month for $300,000 of insurance cover.
6. When you are ready to invest, you should invest in a low cost investment fund, such as the Straits Times Index ETF (exchange traded fund).
7. You should attend the 6 hour workshop organised by FISCA to get more details,

I also told the students to tell their parents and older siblings and relatives to attend the Financial Planning workshop organised by FISCA. They have money and are likely to invest in the wrong products and lose a large part of it. When they found that they were misled or cheated, it is TOO LATE for them to recover their money. They have to spend some time and a small sum of money to get educated to avoid losing BIG MONEY.

Invest for the long term - applying the idea

Recently, I decided use my spare cash, which was earning a low rate of interest, to invest in the stock market. My reasons were:

• The stock market had dropped by 20% from its peak
• I am investing for the long term, more than 10 years
• Warren Buffett had said that the companies under Berkshire Hathaway's portfolio were showing good results (except for those involved in the housing market).

A few people asked if it was safe to enter the stock market, and I gave the same view.

I was quite surprised that the stock market did recover strongly the past few days. It was unexpected. However, it does not really matter for a long term investor.

I asked my stockbroker for a list of blue chip shares and REITS showing the drop in their prices since their recent peaks and the dividend yields. I was surprised to find several blue chips that gave a yield of more than 4%. I picked a few of them for investment. The  list of blue chips and REITS can be found here.

Another good investment is the Straits Times Index ETF offered by SPDR and DBS which gives diversificaton.. 

I wish to emphasize that while the stock market may be strong for the time being, the situation could turn around easily due to the uncertainty in the global economic environment. But, if you are investing for the long term, you can ignore the short term uncertainty. The situation will be sorted out in a few years' time.

 

Top 20 REITS - October 2011

Here are the top 20 REITS available in SGX. It shows the current price, the drop from the recent high, the dividend yield and the gearing ratio. Several of the REITS look attractive as they have fallen by more than 20% from the recent high, have an acceptable gearing ratio of less than 35% and gives an attractive dividend yield. Before investing, you should consult your own stock broker.