The Most Important Asset Class

What is the most important asset class?

Equities? (stocks)
Fixed-income? (bonds)
Cash equivalents? (money market instruments)

Think again. What generates the capital that is used to purchase these asset classes?
You!

In Buy Term Insurance, and Invest the Rest, I mentioned my term insurance coverage which comes up to around $400,000 in total. Not the best case scenario yet, but it is about the best I can do at the moment.

Term Insurance provides coverage of financial responsibilities in the event of (a) death or (b) total and permanent disability. When the worst case scenario happens, the least I can do is to enable my family to be debt free (cover all loans etc), while the remaining sum of money will help to partially make up for lost income.

Critical illness insurance or critical illness cover is an insurance product, where the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the critical illnesses listed in the insurance policy.

My Coverage = SGD$325,000

[1] NTUC Family Insurance Policy (Living Benefit) = $200,000

The Family Insurance Policy from NTUC Income is in fact an empty policy in which you can place any riders to provide the specific coverage that you want. Instead of a Term rider, I chose to include the Living Benefit rider, which pays the sum assured upon either (a) death, (b) permanent total disability or (c) diagnosis of a specified dread disease to tide over a period of prolonged illness and loss of income.

[2] SAF Living Care = $100,000

I believe that my coverage isn't sufficient, which is why I chose this low cost option to beef up my Critical Illness coverage as an interim solution. Up to age 45, the premium is pretty affordable at $10 per $100,000. Moving forward, the challenge would be to find a way that provides Critical Illness coverage above age 45.

[3] AIA WholeLife Policy = $25,000

The policy wasn't my choice, it was one of those that my parents bought for me when I was young, and happened to have term coverage. Anyway, I'm not inclined towards buying whole life policies, but it makes no financial sense to cancel it now, so I might as well see it through maturity I guess.

CPF Investment Account for Index Investing - Part 2

After emptying my CPF coffers for the purchase of my HDB apartment, it took a little while before my CPF monies slowly built up in excess of S$20,000. Yesterday, I dropped off an application form to POSB to open a CPFIS-OA account.

Continuing off from the previous post on CPF Investment Scheme - Ordinary Account (CPFIS-OA), it seemed like the webpages of the different banks have contradicting information. Thus, I decided that the CPF official website would be able to provide the authoritative source of information and came up with the below for CPFIS-OA.

Up to 100% of investible savings can be invested in
Fixed Deposits
Singapore Government Bonds
Statutory Board Bonds
Bonds Guaranteed by Singapore Government
Deferred Annuities
Endowment Insurance Policies
Investment-linked Insurance Products
Unit Trusts
Exchange Traded Funds - This is what we're interested in!
Fund Management Accounts
 
Up to 35% of investible savings can be invested in
Shares
Corporate Bonds
 
Up to 10% of investible savings can be invested in
Gold

If I have S$30,000 sitting in my CPF Ordinary Account, then I can invest S$10,000 into ETFs. Currently, there are only two ETFs allowed - SPDR Straits Times Index ETF and ABF Singapore Bond Index Fund.

Nikko AM Singapore STI ETF Ex-Dividend Dates

When a company declares a dividend, it sets a record date when you must be on the company's books as a shareholder to receive the dividend. Companies also use this date to determine who is sent proxy statements, financial reports, and other information.

Looking at Singapore Exchange, the previous ex-dividend dates for Nikko AM Singapore STI ETF (G3B) in April were 27 Apr 2012, 29 Apr 2011 and 29 Apr 2010. Take note if you're planning a purchase!

Then again, true to what I think this blog should be achieving, which is to kick-start your thinking process rather than telling people what to do, do check out this article and see for yourself what does dividend really means to you.

What you receive as dividends (regardless low 1% dividend yield or high dividend 50% yield) will be discounted off right at the market open on the ex-dividend date.

As a shareholder, a dividend payout no matter how big or small has no impact on your net worth.

Source : Philip-Teo.com

Interested to find out more? Then check out the article!

Singapore 2012 Online Brokerage Leader : Philip Securities

Capturing 31 percent of the market, Philip's online trading platform POEMS came in #1. Standard Chartered's low cost model came in 8th with 5 percent despite joining the fray only in June 2011. Looks like Standard Chartered will continue to capture more market share?

For more details check on The Business Times!
Source : The Business Times

Making The Most Of Index Investing

Objective : Achieve Index Returns

To me, there are two key ways to get the most out of index investing.

1. The Simple Act of Re-balancing

I don't invest all my spare funds into STI ETF. I keep a sizable portion (30%) of my money as cash, and invest the rest (70%) into ETF. A bond ETF would have been better than cash for low correlation with stocks but the 1,000 lot size makes it pretty inflexible.

Besides serving the purpose as a buffer during wild fluctuations in the stock market, when stock market crashes it provides you with valuable funds to BUY into STI ETF at low prices! In the reverse scenario, when stock prices surge, re-balancing forces you to sell STI ETF and take profits. It is almost like a blinking flashlight in your face when you see your portfolio percentage that is heavily skewed.

Be greedy when others are fearful. Be fearful when others are greedy.

2. Index investing is about the amount of time I have in the market, rather than timing the market

As long as the selling price (when I retire) is higher than the average price I purchase STI ETF, it will do. The assumption is that the stock market is cyclical in nature and will not remain in a depressed state for an extremely long period of time, such as in the case of Japan.

To keep the average price low, I buy into STI ETF on a monthly basis regardless of the price movements. Furthermore, STI ETF gives dividends twice yearly, further driving down the average price the longer I hold it in my portfolio.

Double Your Money In 10 Years with STI ETF

Ser Jing Chong from The Motley Fool constructs a theoretical portfolio with fuss-free maintenance. The portfolio, starting from 2003, requires a person to invest only $500 at the start of every month into the SPDR Straits Times Index ETF (SGX: ES3)!

Now, of course you know that's not enough to purchase 1 lot (1,000 shares) of SPDR Straits Times Index ETF. See what he comes up with below - it might surprise you!

Article : How To Double Your Money In 10 Years

Source : The Motley Fool (18th March 2013)
Author : Ser Jing Chong

People invest for all kinds of different reasons; some invest to see their child through university; some invest to buy their dream car or set foot on Europe for a snowy vacation; and some invest because it is just so much fun (that’s us at the Motley Fool!). But, for whatever reason that people invest, the desired outcome’s always the same – we want our money to grow.

The stock market’s actually one of the best places to grow our money and build lasting long-term wealth as we benefit from the growth of Singapore’s economy through ownership of corporate Singapore. But not everyone has the time or the ability to study individual companies and invest accordingly. For such individuals, the next best alternative would be low-cost index funds or ETFs that track market indices, a move that Warren Buffett approves of as well.

To find out more about the kind of returns an investor could have obtained, I constructed a theoretical portfolio with fuss-free maintenance. The portfolio, starting from 2003, requires a person to invest only $500 at the start of every month into the SPDR Straits Times Index ETF (SGX: ES3). The SPDR STI ETF tracks the movement of the Straits Times Index (SGX: ^STI) by holding shares in a similar composition as the index and an investor in the ETF would effectively be investing in Singapore’s stock market.

The investment strategy would be familiar to some as a form of Dollar Cost Averaging, where an investor mechanically invests a fixed sum of money into an investment instrument at regular intervals. We won’t go into the relative merits of a DCA approach vs Investing-in-a-lump-sum approach here but let’s just say that the former is a lot more achievable for regular folks like you and me.

After spending a nice weekend afternoon engaging in exciting number crunching, some interesting results for the portfolio, without accounting for any dividends, emerged. They are shown below:

• The $6,000 invested in 2003 would have turned into $13,500 by 2013 – an investor’s money would have more than doubled in 10 years, excluding dividends (which would surely have improved returns).
• To date, every year from 2003 has seen positive returns besides 2007. The returns from the year of investment to 2013 have ranged from 2003’s 125% to 2007’s -4.3%, with the lowest positive return for a full-year being 2011’s 7.8%.
• The compounded annualised return for the portfolio stands at 5.6%, after taking into account the time at which the investments take place. While that figure is hardly eye-catching, it has beaten Singapore’s average historical inflation rate of 1.7%, according to MAS. The dividends from the ETF also provide additional returns each year which can be used for re-investment, juicing returns further, or for income. The SPDR STI ETF’s current dividend yield stands at 2.42%.
• The total amount of $61,500 ($500 for 123 months) that has been invested since Jan 2003 to March 2013 would be worth $83,778 now.
• Staying invested in the stock market for long periods of time helps to improve returns. 2003 and 2004 (72.7% return) provided the best returns for the 10 year period.

STI ETF Purchase [19-Mar-2013]

I don't really have a fixed date that I execute my monthly purchase of STI ETF, though usually I'll do it at the second half of the month. Just a personal routine that's all.

Got an SMS this morning when my order was filled, which caused me to take a double-take. The day before, I had placed a limit order of 100 share(s) at S$3.32. Imagine my surprise when my order was filled at S3.15!

Today must be my lucky day!

Bought via Standard Chartered Online Trading Account

Nikko AM Singapore STI ETF Order Price : $3.32
Average Price : $3.15 !!!
Order Quantity : 100 share(s)
Order Type : Limit Order
Status : Filled

Taking a look at Yahoo! Finance for today's data, you would see the following :

Close : 3.33
Prev Close : 3.31
Open : 3.15
Bid : 3.31
Ask : 3.33