Wednesday, May 24, 2017

How To Save Money If Your Flight Gets Delayed Or Rescheduled

Delayed flights don’t always happen, but they can cost you a lot when they do. Here’s how Singaporeans can save money if their flights get rescheduled.
Airlines are notorious for last minute changes. This can happen due to overbooking, weather conditions, or even changes in airport charges. Getting your flight delayed or rescheduled can be quite a headache. Besides affecting your travel plans, flight changes will also impact your wallet, especially if it gets pushed back by 12 or more hours. Here’s how to save money when it happens.


Demand to Get Compensated
Airlines generally have a “don’t ask, don’t give” policy. You have to take the initiative, and demand compensation from your airline. Never trust them to do it of their own accord. One advantage to pressuring the airline is that, even if you don’t get compensated in cash, you might get a freebie. This can be a discount on your next flight with them (assuming you want to use them again), or complimentary items from their catalogue. Do note that your airline’s actual legal obligations may be different. For example, some of them clearly specify that you accept the risk of flight changes, and that they’re not obliged to offer any compensation (check the terms and conditions before you buy). However, some good airlines may offer compensation anyway, as a matter of maintaining good customer relations. If you don’t ask and push for it however, you tend to get nothing.
 
Check If Your Travel Insurance Covers Flight Delays
Many travellers, amid a haze of anger and exhaustion, tend to forget about their travel insurance – which can come free with the right credit card. Remember, travel insurance isn’t just about medical expenses and lost luggage. Some policies also cover delays. While most travel insurance policies do not cover schedule changes, some cover delays or cancellations in case of bad weather or if the delay is more than 24 hours. If you’re uncertain, call to ask. And if you haven’t gone on your trip yet, consider buying a policy that covers these circumstances. If you’re self-employed, being unable to go home and run your business for a day or two can cost a lot of money.
 
Call Your Airline Directly to Settle Things
Here’s a special tip from us: the automated instructions that airlines send out are often a waste of time. When your flight is rescheduled, always call the airline directly and raise your issues. You’ll sometimes be able to book an alternative flight on the call, faster than the other people standing in line. You may also get alternatives that are not immediately offered on automated instructions – for example, you may be given the opportunity to leave three days later, but with full compensation for a hotel room (if you’re on vacation and not in a rush to get home, this might be even better than an alternative flight tomorrow, with no accommodations for tonight).
 
Call Your Credit Card Concierge
Sometimes, the delay would just cost you too much. Perhaps you have a concert to attend, and you already paid for the tickets. Or perhaps you have a vital business meeting to get to. If your airline can’t move fast enough, your last resort can be your credit card concierge (if you have one). Call them and let them know your situation; they’re often able to get you last minute flights, which you can’t get on your own. As an aside, the same concierge can also be asked to help with accommodations. For example, get the concierge to look for the cheapest hotel that’s close to the airport; this will save you having to Google things on top your current problem.
 
Using Airbnb? See If Your Host Can Extend Your Stay
Some Airbnb hosts will be open to giving you an extension, if there are no other guests after you. This could be cheaper than looking for a last minute hotel, so always be sure to ask.
 
Ask Friends For Help
Obviously, the first choice should be friends who happen to live at your travel destination. See if anyone can put you up for a night or two if your flight gets rescheduled for the following day. However, don’t forget to call home and use your friends’ contacts. For all you know, your best friend back home has a former colleague who lives near you; or perhaps mum and dad know a distant cousin who’s in the area. It’s not a guarantee, but you may just have a shot at saving on a hotel room. As an aside, try to make friends abroad, wherever you go. It’s good for your social life, and very helpful in situations like these.
 
Check Flight Prices Before Accepting a Refund
If your flight is cancelled or significantly delayed, you may be entitled to a refund. When this happens, the airline will often give you a choice between an alternative flight or accepting the refund. When you are given this choice, always check the price of booking with another airline. You will sometimes save money by taking the refund and booking a new, cheaper flight, rather than taking the existing airline’s alternative.  


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Wednesday, May 3, 2017

New To Mutual Funds? Here's A Guide To Choosing The Right One

If you’re thinking about investing in mutual funds in Singapore, follow these guidelines to help you choose the right one.
 
Choosing a mutual fund is challenging, because of one unique quality in this industry: most mutual funds will underperform. It’s always a challenge picking the ones that will stay ahead over the long term. For the total beginner, here are some of the key questions to ask:
 
What is the Goal of Your Investment?
There are thousands of mutual funds available on the market, and not all of them cater to the same goals. For example, a pure equities fund may hold only stocks as assets, thus making the fund useful as a long term, retirement-oriented asset. Another fund may hold a large number of properties or bonds, and be focused on generating immediate income (this is useful for people such as retirees). Before you even start to choose a fund, you should have a clear idea of what you’re investing for. Some examples include:
    Investing to send your children abroad to study in 5-10 years
    Investing to ensure you will be ready to purchase your first home by age 35
    Investing to ensure you will have an income of at least S$2,500 a month by the time you retire at age 65
    Investing to make enough money for a car or life ambition (e.g. climbing Mount Everest) within the next five years
Depending on your purpose, different funds will have varying degrees of suitability. If you are investing over a short term (say five years, to buy a house), you might find an equity fund too volatile; stock prices can change dramatically over a short period. If you are investing over the long term, say 30 years, then a fund that holds primarily fixed income assets may have returns that are too low. Note that almost all mutual funds are aimed at an investment horizon (the amount of time you will stay invested) of at least five years.
 
Are There Load Fees?
Funds sometimes require “loading”, which refers to the way you pay for the fund. Besides the regular fees (see below), a fund may require load fees. They are either front-loading (you need to make an upfront payment), or backloading (you need to pay a lump sum toward the end of the investment horizon). It is always preferable to pick a fund with no loading, or at least with very low loads. Here’s why: Say you invest in a fund, with an initial sum of S$20,000. There is three per cent front- loading (S$600). Due to the load, your initial investment is now (S$20,000 – S$600) = S$19,400. Now if you invest the full S$20,000, at returns of around three per cent per annum, you would have around S$23,185. But if you pay the loading and invest S$19,400 over the same time and rate of return, you would only end with up with around S$22,489. That’s a difference S$2,786; so be sure to avoid loading where possible. (Note: most mutual funds that are sold to lay investors should not require loading.)
 
Look for the Total Expense Ratio
The Total Expense Ratio (TER) includes the management fees, the distribution costs, and all the other charges needed to run the fund. This may have a different name, but if you ask for the TER the salesperson will have to point it out to you. The lower the the TER, the higher your returns. For example, if the fund provides a total return of five per cent, but the TER is three per cent, you are only really getting a return of the remaining two per cent. You should always look at the fund’s performance with relation to its TER. Between a fund that provides returns of 5% and has a TER of 3% and a fund that has returns of 3.5% but a TER of just 1%, the latter is actually better.
 
Measure the Performance with Regards to the Benchmark Index
Mutual funds have a benchmark index, against which they measure their performance. For example, a mutual fund may use the Straits Times Index (ST Index) as its benchmark. If this is the case, the returns should be close to the ST Index. If the ST Index has returns of 2.7%, the fund should deliver returns of around 2.5% or 2.9%. A fund is said to have beaten the market if its returns are above the benchmark index. If the fund has returns below the benchmark index, it is said to have underperformed. Note that this is also true for negatives. If the benchmark index has returns of negative 4%, and the fund delivers returns of negative 3.8%, it has still beaten the market (it lost less than the market). Note that, as a norm, most mutual funds do not consistently beat their benchmark index.
 
Look at the 10-15 Year Performance
When comparing mutual funds, ignore histories of just one or two years. It is impossible to gauge the quality of a fund (or fund manager) based on such a short time frame. It’s akin to judging the academic results of a student by looking at just one or two of the exams they’ve taken. Look at results over 10 or 15 years, and have the salesperson explain them to you. If the fund has not been around for that long, you might want to step back and look for something else. Note that there is a common saying that past performance is not an indication of future success. However, it is also a common saying that you should not invest in something with no proven track record. As with many things in finance, both guidelines are contradictory. We will move on the side of caution and suggest you do look at past performance.
 
Check the Rules for Cashing Out
Not all mutual funds allow you to quickly cash out, should you need your money back. Some funds impose steep fees on pulling out before a certain length of time (e.g. five years), and some funds vary the number of units you can sell on a first come, first serve basis. For example, the first 100 people who want to sell can sell all their units, the second batch of 100 people can sell only half their units, and so on. Funds impose these rules because, when times are bad, there may be a rush of people who want to sell and “escape” a bad investment. This could sink the fund before it has a chance to recover. You should be clear on these rules before you buy. In particular, do not commit to a fund that will lock down your money for long periods, if there is a chance you may need the cash if you have no emergency savings.
 
 
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Sunday, April 30, 2017

What Marine Le Pen And Emmanuel Macron Showdown Means For Us

If Marine Le Pen wins the French elections, it could mean fewer opportunities for Singapore businesses.
Most of the time, the only French thing Singaporeans worry about are their seating reservations at Poulet. These past few months, however, you may have noticed financial and business experts sounding a bit nervous about French Presidential candidate Marine Le Pen. Things heated up further when she and fellow Presidential candidate Emmanuel Macron became the leaders. Here’s why the results of the French elections will matter to Singapore.
 
 
A Showdown Between Populism and Globalism
French Presidential candidates Marine Le Pen and Emmanuel Macron are now the front runners and will face off against each other in the final round on 7th May. This is a significant event for two reasons. First, neither of France’s two main political parties, the left-wing Socialists and the right-wing Republicans, managed to lead. Both Le Pen and Macron are “outsiders”. Second, they’re polar opposites. Le Pen’s party, the National Front (FN), is far-right. The Macron’s party, En Marche! is somewhat more leftist. Le Pen has put together “144 commitments”, but chief among them are a promise to renegotiate France’s position in the European Union (EU). This could lead to a Frexit referendum, which sees France pulling out of the EU just as the UK did. On the other hand, Macron has denounced both Brexit and US President Donald Trump (also a populist). Macron is a globalist, and his party is a staunch supporter of free trade. Macron is currently expected to win (he is expected to capture 68 per cent of the vote, whereas Le Pen is estimated to capture 38 per cent), but remember predictions of Hillary Clinton’s win were wrong in the US Presidential elections.
 
What Do the Results of the French Elections Mean for Singapore?
As an anti-globalist, Le Pen believes in countries closing off free trade. That is, that countries should protect their domestic companies and workers, by restricting the flow of foreign workers and goods. This would make it more difficult for foreign companies to operate in France. Now, this alone is not a huge worry for Singapore. However, Le Pen’s impact on the EU is bound to cause more anxiety. With the UK soon to be out of the picture, France’s departure could spell the end of the EU. Now at present, Singapore is the EU’s biggest trading partner in ASEAN, with over 10,000(!) EU businesses established locally. Around one-third of all trade (goods and services) between the EU and the ASEAN region is from Singapore. While the EU is not as big a trading partner as, say, China, it’s fair to say we would experience lost opportunities and revenue if the EU were not around. It would certainly make it more difficult for our businesses to operate in Europe, if each state had its own tariffs and regulations (at present, the EU combines them all into a single market). In an ideological sense, Le Pen – along with Trump – also embody certain ideas that are opposed to the traditional Singaporean ethos. These leaders come off as anti-immigration, opposed to further integration with Muslim communities, and as opponents of multi-culturalism. There may be some discomfort among Singaporeans, at seeing growing support for ideals that run so contrary to ours.
 
Singapore Relies on Countries Open to Trade
As a financial hub and a port city, Singapore is reliant on a world open to trade. The more countries trade with each other, the more they need shipyards and airports. Being located along the main trade routes is a big source of revenue for many Singaporean companies. Likewise, the freedom to invest in other countries (such as, say, the freedom of French or American citizens to invest in Singaporean assets) creates capital inflows; it allows money from other countries to flow into our country. Our status as a financial hub stems from this. The significance of the Le Pen and Macron showdown is that it reflects the changing state of the world. If Le Pen wins, along with the recent events of Brexit and the Trump presidency, it will suggest the world is turning against free trade. An isolationist world means fewer opportunities for Singaporean businesses and losing trade and investment that’s vital to our country.
 
 
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Friday, April 28, 2017

5 Ways Singaporeans Can Secure Mum's Financial Future

This Mother’s Day, consider giving mum the gift of a more secure financial future.
This Mother’s Day, we at SingSaver.com.sg encourage you to go beyond having brunch out. There are many ways to show love and gratitude to mum, and this holiday can mean more than a chance to give away a bag or a nice card. If you want to give a gift that’s truly unique, why not do something to secure your mum’s financial future? It might not be as glamorous as new jewellery, but mum will thank you for it later on. Here are some steps to help ensure mum is comfy in her later years.
 
 
Top Up Your Mum’s CPF
The Central Provident Fund (CPF) contributions used to be lower in the past. This means that sine older Singaporeans may not have sufficient savings for a comfortable retirement, or are at risk of having their Medisave wiped out from a medical emergency. This is especially true of those who did not earn much until later in life. This Mother’s Day, consider making a pledge to top up your mum’s CPF. It can be a one-off sum, or a regular monthly top-up; even just S$50 a month can make a big difference over several years.
 
Pledge to Pay a Portion of the Mortgage
Every repayment on the flat eats a little more into your mum’s CPF. The HDB Concessionary Loan, for example, has an interest rate pegged at 0.1 per cent above the prevailing CPF Ordinary Account (OA) rate. Now that still isn’t enough to beat the interest on most CPF accounts (up to 3.5 per cent for the OA), but paying for the flat still chews up a big portion of mum’s retirement funds. Also, don’t forget she probably had to make a hefty down payment when first buying the flat. You can either pay back some of the mortgage by giving it to your mum in cash, topping up her CPF, or – if the financial situation is tight – even consider becoming an official co-borrower to lessen the burden.
 
Buy Mum an Endowment Plan
Most of the time, parents buy insurance plans for their children. But why not consider doing it the other way around? Consider buying a 10-year endowment plan, which will see mum get a big pay out when it matures. She can use it to boost her retirement savings, or pay off any existing loans. Alternatively, you can look at more short term goals. You may not be able to buy her a trip to Europe or a walk-in wardrobe, but a five-year endowment plan can give mum the budget for such luxuries, once it matures.
 
Get Mum a Supplementary Card
Want to help mum with the groceries, or the petrol bill? It can be inconvenient to tally up how much she needs every week (also, she’s probably hiding the real number from you, to ease your financial burdens). Consider getting her a supplementary credit card instead. She can use it when she goes shopping, even when you’re not around. You’ll also get cashback and reward points, which is a great way to save. Or you could give the reward points to mum, and let her pick from the gift list. You can find the best credit cards for different lifestyle needs on SingSaver.com.sg. Try a credit card like the OCBC 365 Card, so you can get 3% cashback on groceries and utility bills.
 
Help Mum Pay Off Her Debts
Does mum have any outstanding debts besides the mortgage? Ask if she has any credit card debt, personal loans, or credit lines with outstanding amounts. There’s a clever way to help her trim some of these debts. Say you mum has a credit card debt of S$5,000. The interest rate is around 24% per annum. You could take a cheap personal loan, at around 3% interest, to pay off mum’s debt. When you deal with the personal loan, you will be faced with much smaller repayments due to the lower interest. On top of that, this will help to improve you and your mum’s credit score.
 
A 'Thank You' To Mums
This Mother’s Day, SingSaver.com.sg would like to extend a big thanks to mums everywhere for their many sacrifices. We hope you have a meaningful Mother’s Day with the whole family. For those of you who want to treat mum, do follow us on Facebook. We’ll be updating you on the best Mother’s Day dining promos in the country.

Wednesday, April 19, 2017

Why Do HDB Loans Have Higher Interest Rates Than Bank Loans?

Many Singaporeans often get surprised when they compare HDB home loans vs bank loans. Why do HDB loans tend to have higher interest rates?
 
Money Mysteries is a column by Ryan Ong that explores the odd world of money. Where does it all go when you give it to a bank? Why does a potato sometimes cost S$200, or shipping a sofa sometimes cost S$1.99? Why is art so expensive, and how do people (legally) rip off casinos? Every week we answer these questions and investigate a new Money Mystery. One common question we get involves the difference between HDB home loans vs bank loans. Many Singaporean couples buying their homes often get surprised when they learn that banks charge much lower interest rates than HDB. How can that be, and why? We clear the confusion in this week’s Money Mysteries.
 
 
Bank Home Loans versus HDB Loans
When you take a loan to buy your flat, you can use either a bank loan or an HDB loan. The exception is when you are buying an Executive Condominium, in which case only a bank loan can be used. Now one of the main differences between the two is the interest rate. HDB Concessionary Loans have a very simple formula: the interest rate is the prevailing CPF Ordinary Account (OA) interest rate, plus 0.1%. This comes to about 2.6% per annum, a rate that has remained unchanged for a long time. Note that the CPF OA rate is reviewed quarterly, so it can technically go up. However, CPF rates do not change often. For bank loans, things get a bit more complicated. Bank loans can be based on the Singapore Interbank Offered Rate (SIBOR), Swap Offer Rate (SOR), or a bank’s Internal Board Rate (IBR), of which Fixed Deposit Home Loan Rates (FHR) are also a part. Amidst that nightmare of acronyms though, one simple fact remains: since about 2008. most bank interest rates have been at around 1.8% per annum; cheaper than the HDB rate. But why is this?
 
Historically, bank loans are more expensive. What we’re seeing is a freak incident from the last financial crisis.
If you observe Singapore’s bank home loan rates from the late 1970s to 2008, you will the historical rate is over 3%; in some cases almost 4%. In those days, HDB loans were much cheaper than bank loans. In 2008 however, the Global Financial Crisis hit. This caused the American Federal Reserve (the central bank in America, also called the Fed) to reduce interest rates to zero. They did this to motivate more loans and spending, to kick start their damaged economy. However, the interest rate in America ultimately affects the rates in Singapore as well. Bank home loans, many of which were pegged to SIBOR in 2008, so interest rates fall to historical lows. In some cases, the rates were below 1% per annum. Due to this plunge, private bank loans suddenly became cheaper than HDB loans. Today however, the Fed is gradually raising interest rates again (there are four proposed rate hikes in 2017). This is due to America’s economy having, at least in theory, recovered. Meanwhile, the Fed cannot keep interest rates low forever, as this will cause inflation to rise uncontrollably. It’s quite possible that bank home loans will be at 2% per annum or greater by the end of 2017. This is much closer to HDB rates, albeit still lower. In the long term however (say 15 or 20 years), it’s possible – although not guaranteed – that bank loan rates will again soar higher than HDB rates.
 
Banks Like to Innovate and Try to Outdo the HDB
Remember that banks want to lend money to credible borrowers; the whole idea of the banking business is to make money via lending and interest. An HDB loan already has certain advantages over a bank loan. For example, HDB can lend you up to 90% of your flat’s value, whereas a bank can only lend you 80%. The down payment is thus bigger when you use a bank loan. If banks want to get a share of the HDB market, they need to innovate and create loan products that will attract borrowers. Some banks feel incentivised to create offers that have interest rates below the HDB loan rate, in order to tap the gigantic HDB market. Remember that over 80% of Singaporeans live in HDB flats, so there’s a lot of money a bank can make here. At any rate, this is a good situation for all of us. Singaporean homeowners have the option to go with a bank and potentially save money, if they really want to*. But if you don’t want to, you can stick to good old fashioned HDB loans.
 
*You can refinance your HDB loan into a bank loan, but not the other way around. Speak to your local bank for details.
 
 
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Thursday, April 13, 2017

How Much Of My Savings Should I Invest?

There are many ways to decide how much of your salary goes to investments. At the end, it all comes down to what your financial goals are.
 
Many Singaporeans want to know how much of their salary should go to investments. There are many approaches to deciding this. In the end, what it comes down to are your individual financial goals. If you want to retire with five houses and a yacht, you will have to invest much more aggressively than someone willing to retire in a rental flat. Here are some ways to work it out:
 
Method 1: Work Backwards From the Amount You Want
This is the most common method, and many Financial Advisors or wealth managers can do this for you. To decide how much you need to invest, you first work out how much you want to save. You then work backward from this amount. For example, let’s say you want an income of S$2,000 a month when you retire. You want it to stretch from the age of 65 to 80. You would need about $24,000 a year, or about $360,000. If that seems too easy to be true, it is: the real amount you need will be a lot higher, because of the effect of inflation. Let’s assume you are 25 years old right now, and that the rate of inflation will be more or less three per cent throughout the next 40 years (most developed countries have an inflation rate of about two to three per cent). Now over 40 years, S$360,000 will decrease in purchasing power. In fact, by the time you are 65, it will only have as much purchasing power as around S$110,360 today*. That’s not what you want; you want to have the equivalent purchasing power of S$2,000 a month today, at the time you’re retired. So you need to aim a lot higher. You’d need to have, more or less, S$1.174 million by today’s standards**, in order to have the same purchasing power as S$360,000 in 40 years. Now we can start working out how much you need to invest: Let’s say you build a balanced, diversified portfolio that earns returns of five per cent per annum***. If you can set aside $10,000 a year to invest (about S$830 a month), you could potentially reach this goal in about 39.5 years. So that being said, the general idea is to work out the amount you need post-retirement, factoring in inflation. Once you have the required retirement amount, and you know what returns your investment portfolio provides, you can decide how much you need to set aside to invest.
*retirement amount / (1 + inflation rate) ^ number of years
**retirement amount x (1 + inflation rate) ^ number of years
*** Your CPF Special Account can pay out this rate of return, and you can make voluntary contributions to enhance it
 
 
Method 2: Invest Everything After the Emergency Fund
This method, while not precise, is simple to understand and follow. Using this approach, you first save 20% of your income per month to build up an emergency fund. This fund should consist of six months of your income. The emergency fund is the savings you will use to deal with emergencies. As your income rises, or you spend from the fund, you will have to top it back up to the six-month limit. Whenever the fund is at six months of your income, the 20% you’d normally save is instead used to invest. This can go into a mutual fund, blue chip stocks, index funds, etc. You will still need to pick the assets intelligently of course, and secure a good rate of return (speak to a financial professional). However, you can be assured that emergencies will not disrupt your investment – if something goes wrong, such as retrenchment, you can tap your emergency fund instead of taking money from your retirement portfolio.
 
Method 3: Fixed Ratios
This is a traditional approach, in which you fix ratios to save and invest. Typically, this is 20% of your pay for savings, and 15% for investing. This requires very little thought or planning. If you automate the process, such as by GIRO, you won’t feel the pinch of having to set aside the amounts. However, this simplicity comes with limitations. For example, you may not notice that you are saving too little for retirement, as there is no actual planned amount to reach. You may also end up saving much more than is necessary for an emergency fund. Remember that cash savings, such as leaving money in your bank account, ultimately leads to stagnation. The value of the money decreases as it’s not growing, and it won’t keep up with inflation. If you save an unnecessarily large amount, you may ultimately be losing out.
 
 
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Wednesday, April 12, 2017

The 5 Types Of Investors You'll Encounter In Singapore

Whether you’re a Prophet of Doom or a Kopitiam Investment Guru, the different types of investors in Singapore have useful quirks.
 
If you’ve been interested in personal finance long enough, you’ll eventually notice that many Singaporean investors fall into five main categories. They all have their own bizarre quirks – some of which are annoying, and some of which are actually helpful. Here are the types of investors you’re bound to encounter in Singapore:


 
Investor Type #1: The Wall Street Fan
These types have an infinite number of Warren Buffet quotes memorised, and will respond to any situation with one of them. Their entire room is packed with books like A Random Walk Down Wall Street, or The Big Short. They subscribe to email responders from Investopedia (which they actually read), can explain each component of the Capital Asset Pricing Model, will argue for hours about the efficient market hypothesis, and think the discovery of Modern Portfolio Theory is equal in importance to the discovery of, say, fire. One of their main identifiers is constant resort to wall-speak. Any money-related issue they attempt to discuss with you will be re-worded to sound like they’re writing a Forbes article. For example: “I wonder if my mutual fund is worth the fees, I can’t tell because the market was nuts late last year” would be translated to “I can’t identify Alpha due to at least three standard deviation events in Q3 / Q4 2016”. Many of them hero-worship a group of financial experts known as Quants. If you don’t know what Quants are, consider yourself lucky. The average Quant can’t even tell you how much change is in his pocket without using at least seven graphs. Good For: Getting updates on financial news, because most of them read the Business Times. If you take the time to decipher what they’re saying, they can also explain many critical topics, such as the relevance of R-Squared or the difference between physical replication and synthetic Exchange Traded Funds. Bad For: Advice on anything which requires a quick decision. They can’t come to an easy conclusion on anything, and may even consider their constant hesitation a virtue. Just between you and us, we find that many of these types are more interested in theories than actual investing. Many have spent thousands of dollars on books and courses, but haven’t set aside their first S$10 to invest. Their obsession with finding more and more information – much of it contradictory – makes them unsure where to even begin. Many of them have a bad case of information overload.
 
Investor Type #2: Allergic to Finance
These investors know they’re investing, because they have “a guy” who handles it for them. They don’t know what they’re investing in, they just know they are and don’t want to think about it. These investors loathe having to sit down and talk numbers. Every time they see an equation, they get a splitting migraine. Talking to them about retirement planning or emergency funds is like explaining astrophysics to your cat – there’s no interest and no chance. They hate “dealing with that money stuff”, and most won’t even know how much is in their CPF, or how much they pay for their mortgage. Good For: Selling financial products to, because most don’t know or care about commissions or management fees. Also, they are good for a free lunch – if their wealth manager invests their money into a company, and an Annual General Meeting is held, they will go just to ta-pau the buffet food. They will be in and out with the food in 15 minutes, whereas every other investor will be asking questions for hours. Bad For: Getting any kind of financial advice. Most of them buy financial products because a relative sold it to them, not because they actually know how to check the performance.
 
Investor Type #3: Taxi Uncle / Security Guard / Kopitiam Investment Guru
These investors come in two flavours. The first is a hard working Singaporean trying to get a big break, often through stock trading. The other is a retiree or financially well-off, who don’t actually care too much about their job (it’s just for something to do), and make a healthy side-income in the markets. These types have a “street” education in finance. They learn things by putting their money in places where they really shouldn’t, and by identifying and imitating success stories. They know key concepts like value investing, or how to read a company’s fundamentals. But they can’t explain it using the actual terminology (e.g. they know what a P/E ratio is and how it works, but may not know that the letters P/E stand for “Price to Earnings”). Most tend to be traders rather than investors, and they often have a higher risk appetite. In extreme cases, they think SGX is just a more socially acceptable casino. Good For: Explaining to you the various indicators and ratios. Even if they don’t know the exact words, they can tell you what the ratios mean in a practical sense. Sometimes, that’s better than having the right (incomprehensible) terminology. Many have real experience in getting burnt, and they understand the emotional and psychological effects in a way that more academic types never will. A lecturer in Banking and Finance can explain risk appetite, but these investors know what it’s like to lose sleep when you just lost S$30,000 in one day.
 
Investor Type #4: The Avant-Garde Investor
This type of investors love innovation and feel clever from doing things no one else has discovered yet. If finance were music, these are the people who listened to Foster the People before the Pumped Up Kicks song, or liked your favourite band before they were mainstream. Avant-garde investors talk about financial products that make financial professionals frown, and ask, “Since when has this been a thing?” These types were the first to jump on peer-to-peer lending platforms, like MoolahSense, when it first appeared. They’ll talk about group private insurance (a new trend where people band together to form an insurance pool, rather than go to an actual insurer), cryptocurrencies like Bitcoin, or investing in Iberian ham instead of gold. That’s right; they’re the hipsters of the financial world. (The also like to mock banks and traditional mutual funds or insurers, which they see as a bunch of overpaid dinosaurs.) Good For: Finding out new ways to invest, which are at least entertaining even if they’re not useful. Many also love to point out flaws in traditional investment products, so they’re good for an informed (if pessimistic) opinion. Bad for: This group of investors tend to like fads, which do happen in finance; at one point it was Bitcoin, at another it was classic car funds. Most of these investors are interested in products which are different, not necessarily better. They assets they once swore by might be forgotten by next year.
 
Investor Type #5: The Prophet of Doom
These investors typically dismiss all financial products that are not tangible. If it’s not physical gold, or property, or something they can hold on to, then they don’t trust it. They especially hate fiat currencies (paper money), and believe this to be a giant scam run by governments. These investors are constantly predicting the economy – local or global – is going to crash. Which, since the market does so every few years, is actually a pretty easy prediction. Nonetheless, they will exaggerate the impact of the “coming” crash (All the money will become worthless and civilisation will collapse! We’ll have to eat our own kidneys for nutrition!) Whereas the Avant-Garde investor merely sneers at banks, The Prophets of Doom tend to see banks and financial institutions as manifestations of pure evil. Not all of them, but many. Good For: Detailed explanation on safe-haven assets, such as gold. Many of these investors are also good at pointing out flaws in financial products. Run your endowment plan by them for a second opinion. Bad For: Your morale and long term plans. When they start preaching disaster, remember some have been predicting the end of the financial world for decades now (and it still hasn’t happened).
 
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Sunday, April 2, 2017

Beware The Unexpected Costs Of Being A Landlord In Singapore

Before becoming a landlord in Singapore, consider these 4 ways you could incur additional expenses.
 
If you have a spare room or two, subletting is a good way generate some additional household income. Rather than letting your unused bedrooms devolve into glorified walk-in closets, rent them out to help subsidise your mortgage. After all, why pay for the entire flat when you’re really using only half of it? However, there are financial risks that come with renting out your spare bedrooms, which often arise from mismatched expectations, miscommunication, or just plain ignorance. Here are some unexpected ways being a landlord can cost you money.
 
 
 
You May Need To Spend On Storage
Before you put up your spare bedroom for rental, you may want to take a look at your storeroom. Go in there and spend some time familiarising yourself with the walls, because you may never see them again. When you sublet your room, you need to consider how much stuff your tenant is allowed to bring with them. Everything seems fine and dandy, until the day they show up at your front door with what seems like the entire inventory of the neighbourhood flea market. Tenants are not tourists – they’re here for the long term, which also means they will have some semblance of a life. With life comes needs and wants. With no universal standard on how much stuff each person should have, you could find yourself dealing with a storage problem. At the very least, this could mean that your storeroom will be filled to the brim with other people’s stuff, leaving you little to no space for your own things. If your unit does not have a storeroom, you may be forced to carve out precious space from your living room to build one. The solution would be to limit the belongings your tenant is allowed to bring. However this might cut down your pool of potential tenants, or make it impossible for you to put up two tenants in one room and charge a higher rental. But, if you neglect to have this discussion before agreeing to rent, you may find yourself having to spend money on renovations or self-service storage solutions later on.
 
You May Need to Rewire Your Home
Some days, your tenant may have a hankering for toast. Other days, for homemade herbal tea. And perhaps every Sunday morning, a taste for home-brewed soybean milk. Each of which requires a toaster, a soup pot, and some sort of mechanised bean extractor/steamer respectively to prepare. (That last thing is totally a thing, we swear.) Now, we don’t need to tell you how dangerous overloading an electrical socket is. And having snaking lines of power strips running all over the place isn’t any safer either. So it seems like your choices are limited to either electrocution or blunt-force trauma. You could institute a strict no-cooking rule, forcing your tenants to sneakily cook cup noodles in their rooms in the dead of the night. Or, you might allow your tenants to use the kitchen, so they at least don’t foul up their room and attract pests with cooking odours and food waste. No matter which you choose, you may suddenly find yourself tiptoeing around overtaxed power outlets. Hence, if you’re planning on having tenants, it might be worthwhile to put in a few more electrical sockets at sensible locations during your renovations. This will save you money on a second round of electrical works later down the road.
 
You May Find Yourself Saddled With Nonsense Payments
As the landlord – aka the owner of the property – you are liable for any damage to the common amenities, such as if the central refuse chute gets choked with bulky rubbish. If any illegal dumping or high-rise littering is traced to your unit, guess who the Town Council or HDB will come after. There’s always the chance that your tenant could have antisocial tendencies and willfully cause such problems. If that’s the case, the only way out would be to terminate the rental agreement and get another (hopefully better socialised) tenant. However, most such occurrences happen out of ignorance or miscommunication. It might be worthwhile to cultivate good relationships and open communication with your tenants. That way, they will feel comfortable enough to ask your advice on how to dispose of bulky items or to ask for certain amenities they may otherwise feel embarrassed about. A little communication goes a long way in establishing a pleasant living environment for all. It could also very well save you from paying unnecessary fines.
 
You May Need to Replace Your Appliances Sooner Than Expected
Some landlords have an irrational fear that their tenants regress into cavemen/women when no one is looking. When it comes to necessities such as the air conditioner, washing machine, dryer, and fridge, they decide to buy the cheapest model available. Their thinking goes that their tenants won’t take care of the appliances, so there’s no point spending money on quality products. That might be a mistake. Cheaper appliances are not only likely to have lower efficiency (which costs you more in electricity and water bills), they might also break down sooner. Contrary to popular belief, this is not because of repeated banging by brutish cavemen fists, but simply because they are of poorer quality. With more people living in the house, your appliances will also see higher usage. This means that appliance breakdowns will happen at a faster rate. When a necessity breaks down, the onus is on you, the landlord, to remedy the problem. Needless to say, your wallet will take a beating, either by way of repairs, or straight-up replacements. Instead, try showing your tenants how to use the appliances you will be sharing. Keeping the instruction manuals nearby will also be helpful. And if you’re still afraid that your new and expensive washing machine will be somehow savaged, make sure you spell out to your tenants that their security deposit (customarily 1 to 2 months’ rent) will be used for any repairs deemed necessary.

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