Newly Launched Leverage Holdings Pte Ltd FORUM !

Discuss, share and read the latest information regarding Housing Loan in Singapore. Join the forum today and join the community that specially created for Singapore Housing Loan Environments.

Administer by Leverage Holdings Experts, this Forum aim to solve most of consumer / end user problems in getting the right Housing Loan in Singapore. Click here to launch >>

Top of the page

We Help You Get up to S$200,000 Business Loan without collateral!

One of the key challenges that Small and Medium Enterprises face in Singapore is the difficulty of getting financing from Banks.

We can help you get a business loan up to S$200,000 from Banks without any collateral or security!

Basic Criteria your business need to fulfill:

1. Can be Sole-proprietorship, partnership or private limited company

2. Business at least 30% owned by local.

3. At least established business for more than 1 year.

4. Have positive net worth (ie. Assets more than liabilities) but no minimum limit on net worth

5. Need not be profitable (but profitability is a plus)

6. Do not have more than 3 “returned cheques” (bounced cheques) in last 6 months

How much Unsecured loan you can get?

What can your business use the loan for?

·         ● Establish a viable business

·         ● Modernise and automate plant and equipment

·         ● Expand existing manufacturing capacity

·         ● Diversify into other product lines

·         ● Renovate existing or new business premises

·         ● Augment working capital needs like start-up costs or operational costs

What are the procedures and the costs involved?

Hassle-free for you. We will help you with the entire application process.  Only an upfront admin fee of $100 payable and a 3% Fee upon successful loan application. No other fees involved.

Why it make sense to apply a loan through us?

Our directors have close to 20 years of working experience in bank lending and approval of such loans in bank and able to value-add on how to improve your chance of getting the loan approved by bank. We have close working relationship with all the banks in Singapore (local and foreign banks) including Hong Leong Finance and help you save invaluable time and money since we will be “doing the door knocking” on your behalf, freeing up precious time for you to concentrate on growing your business.

So just email to info@businessloansg.com or call Dennis or Patricia at 6737 8801 providing your name, contact no. and your company name so that we can discuss further on a no-obligation basis.

Warmest Regards.

Dennis Ng, http://www.LeverageHoldings.com

Leverage Holdings Pte Ltd – Finance Made Easy!

Other services we provide:

1. Help you get the best deal in Housing Loan, whether for purchase or for refinancing. For all properties including HDB flats, private property, offices, factory unit and even hotels.

2. Help you get the best deal in Motor Insurance (whether passenger car or commercial vehicle) as we can get quotes from all insurers in Singapore.

3. High return low risk investment for retail investors which is approved by MAS but NOT available at banks yet.

4. Help you source for HDB approved renovators; selected trusted property agents and Bank approved law firms at NO extra cost to you!

Top of the page

Here's how to get Attractive Loans for SMEs...

Are you  a business owner? Do you know that Leverage Holdings Pte Ltd can make "financing hassle free" for you? We can help you get up to $50,000 in term loan at low attractive rates.

What’s more, you might even get the loan without providing collateral!

We don't work for the banks, we work with them. We provide professional Loan Consulting services to SMEs. We help to look into your business finances, find ways of improving them and helping you get the necessary financing from both local and foreign banks and finance companies.

Some additional information:

a)    MINIMUM QUALIFYING CRITERIA        

ü       ● Company has at least 30% local shareholding

ü       ● Company’s group fixed assets (at net book value) must not exceed $15 million

ü       ● Not more than 10 Staff

b)   TERMS OF LOAN

(eg monthly instalment for a $30,000 loan over 4 years is $691 and monthly instalment for a $50,000 loan over 4 years is $1152)

* This amount includes your company’s application of Micro Loans with other participating financial institutions.

WHAT ARE THE DOCUMENT REQUIRED?

ü       ● Application form

ü       ● Latest 2 years’ Income Tax Assessment of key promoter(s) / director(s)

ü       ● Latest 2 years’ financial statements, with at least 1 year audited for Pte Ltd Co

ü       ● Latest 3 months’ bank statements – not necessary if operating bank account is

               maintained with DBS

ü       ● Latest 3 months’ personal account statements for sole proprietor/partners – not

               necessary if the bank account is maintained with DBS/POSB

ü       ● Business Plan (for new business with less than 2 years in operation)

Top of the page

Useful Tips on Personal Credit Line (Unsecured Loans)

Useful Tips on Housing Loan (or what is typically known as Mortgages in other countries)

What are they?

Mortgages are secured loans. Your property is the collateral in this loan transaction. These loans are normally used to finance purchase of private residential property. In Singapore, financial institutions can lend up to 80% of the value of the property, inclusive of CPF contributions, for owner occupied property. The balance of 20% must be paid in cash. Before the loan is approved, the bank will get an independent surveyor to value your property. This property value is used to determine your loan amount.

For investment properties, the financing offered may vary from bank to bank.

Financial institutions normally approve loan amounts with instalment repayments that are not more than one third of your monthly income. This amount will exclude any other outstanding instalment repayments such as car loans, and other financial commitments.

Currently, there are loan packages which provide fixed rates of up to five years while others offer floating rates that are pegged against the prime lending rate or the bank's board rates.

How do they work?

Interest calculations: Currently, there are two methods of interest rate calculation:

Monthly Rest: The interest calculations are computed on a fixed date each month. If you repay your installment earlier than this date, you do not benefit from any interest savings.

Daily Rest: The interest calculations are computed daily. This provides an incentive for you to pay promptly as any reduction in the outstanding balance results in a reduction in interest charge almost instantly. The advantage of daily rest over monthly rest is therefore a more rapidly declining interest expense.

Bridging loans: Most banks will provide a bridging loan for any mismatch in timing during the process of selling an existing property and buying a new property. This is to tie you over the gap period. However, to qualify for a bridging loan the bank will want assurances that you have sold your existing property. The interest rate for bridging loans is calculated on a daily basis and payable every month. Upon completion of the sale of the property, the bridging loan has to be repaid in full subject to a maximum period of six months.

Default: Mortgage payments that have been delayed for more than three months will be considered a default and usually the bank will step in and try to resolve the problem. The worst scenario in this case would be the forced sale of the property by the bank. During this time, you have very little bargaining power in terms of the property's selling price.

How do I find the best deal?

When shopping for the right mortgage loan, keep these tips in mind:

Match duration: Check the maximum loan term that you can get. The normal loan term is 30 to 35 years, or up to when you are 65 years old, whichever is lower.

Monthly payment projections: Compare the monthly repayment (based on different interest rate scenarios) from various providers to see if you are comfortable with the amount.

Interest rate Comparison: Check to see if the bank offers fixed rate loans and how long the fixed rate period will be, especially if you anticipate interest rates going up.

Fees: Check to see if the bank charges a processing fee, pre-payment fee, or third-party fee (such as a legal fee, valuation fee or insurance premium)

Extras: Check to see if the bank gives free fire insurance and free valuation on your property. Banks may also give legal subsidies.

Penalties: Ask to see what fees will be applied if you do partial or full redemption of your loan.

Tax Implications

The capital gains tax on property came into force in May 1996. Capital gains derived from the sale of property (both private and public) are taxable if you sell your property within 3 years of purchase. 100% of your capital gains will be considered personal income if maintain ownership one year or less, 66 2/3% is considered personal income for ownership of 2 years or less and 33 1/3% for ownership for 3 years and less. There are no capital gains tax on property held for more than 3 years.

Top of the page

Here's how to cut interest on Credit Card by over 50%...

Personal Credit eg. Ready Credit by CITIBANK, Prestige Credit by OCBC etc, can be used to cut interest on credit card by over 50%....we'll show you how.

Personal Credit can also be used to help save interest on your credit card balances:

If you have credit card balances, based on usual rate of 2% per month that bank charges, the annual effective interest rate is not 24% but actually 26.82%. Do you know that? A typical Personal Credit line interest rate is about 14%, over 40% lower. Thus, it make sense to transfer your credit card balances to Personal Credit line, an example will show this clearly:

Eg. if you have credit card balances of $5,000, by transferring to Personal Credit and repay over 5 years:

1. your monthly instalment reduced from $152 to $116.

2. total interest savings of $2,110.21 or more than 40% of your original loan amount. 

Another eg. if you have credit card balances of $20,000, by transferring to Personal Credit and repay over 5 years:

1. your monthly instalment reduced by $140 or 23% from $608 to $465. Total interest savings over 5 years is $8,580 or more than 40% of your original loan amount.

From above examples, it shows that it makes sense to transfer credit card balances to Personal Credit to cut down interest by almost 50%.

Feel free to forward this article to your friends so that more people can benefit. If you have further questions or like to contact us, email to info@LeverageHoldings.com or call us at +65 6737 8801.

Leverage Holdings Pte Ltd

info@LeverageHoldings.com

Top of the page

Why Debt is a Double-edged sword?

Debt, or borrowing, is a form of leverage

Debt enables us to "do more with less".  Leverage comes from the word “lever” in Physics. Debt is a form of financial leverage, in that you’re using the lender’s money (financial institutions). Debt is a double-edged sword, but we can make it work for us. However, if we are not careful and over-borrow beyond our ability to repay, we might end up in financial abyss.

In what way is debt a double-edged sword?

Well, if you take on more debt than we can afford to repay, should you be unable to meet the agreed debt repayment, the lender (typically a financial institution) not only would charge you late payment fees and charges but might even institute bankruptcy proceedings against you!  Thus, debt can work for or against us. Debt is just a tool and it is up to us to manage and use debt wisely.

P.S. this is part of an article written by Dennis Ng of Leverage Holdings Pte Ltd in a regional magazine "Executive Inc" 4th quarter issue of year 2003.

Next, we'll share how you can make debt work for you and not against you....stay tuned...

P.S. this is part of an article written by Dennis Ng of Leverage Holdings Pte Ltd which was published in a regional magazine "Executive Inc" 4th quarter issue of year 2003

Top of the page

Is having "Debt" necessarily bad?

As you might know, I speak on the Radio Financial Planning Talkshow on Capital Radio 95.8 FM every TUESDAY 11.15 am to 12 pm. The program is further extended to incorporate a special “Q & A” session that listeners call in after the program ended on 12 pm where we will then “broadcast” their questions and my reply later on the same day between 3 pm to 4 pm.

This additional segment is introduced as many listeners in the past called in but couldn’t get through The line.  Attached below is a summary of the discussion on 31 Aug 2004.  

Topics discussed: 

1. is owing a debt/loan necessarily bad?

2. difference between Good Debt vs Bad Debt.

3. how to ensure you don’t over-borrow?

4. based on your income, how to work out maximum debt/loan to take?

5. why even if you have cash and CPF, it makes sense to take a housing loan CURRENTLY?

6. how to make money from taking up a loan?

7. how much would your loan instalment increase when interest rate rise?

8. A smarter way to shop for loans – look for “Mortgage Broker” eg. Leverage Holdings Pte Ltd www.LeverageHoldings.com

Dennis Ng, 9852 0663

www.LeverageHoldings.com  - Financing Made Easy

DJ I-Ling: in the past on various occasions listeners called in to ask:”how much debt should I borrow?” “If I have some cash or CPF, should I use the money to reduce my loan?” So today, we have invited Dennis Ng to share with us how we can actually use debt wisely and how to make debt work for us. What’s the first thing you like to share with us?

Dennis: many people, including myself when I was young, my parents used to tell me not to owe others money…….it seems like owing money or taking debt is bad…but only after I became a Financial Planner that I realized that there’s a difference between good and bad debts.

DJ I-Ling: there is good debt and bad debt, what do you exactly mean, can you explain?

Dennis: what I’m saying is that some debt is bad. What is bad debt? In my opinion, any debt you incur for “consumables” is bad….thus, I feel that one should not owe people money for consumables, such as a vacation, or buying furniture and electrical appliances. Owing credit card is an example of bad debt. Why? Becos the interest rate on credit card can be as high as 24% a year. Once you start owing credit card debts, the debts may get bigger and bigger becos of the high interest rate and you end up forever in debt..

Thus, buying consumables such as furniture and electrical appliance on credit is also bad debt.

DJ I-Ling: why is using debt to buy furniture and electrical appliance bad debt?

Dennis: well. Just imagine you use instalment credit to buy a TV set. Once you buy the TV set, even if 1 month later you want to sell the TV set, you would realise that the value of the TV set has dropped easily by 30% to 50%....so the value of the asset has dropped while you’re still paying interest on the debt….thus, you will definitely make a financial loss if you need to sell this TV…thus, this is a bad debt.

DJ I-Ling: I see. So any debt we incur to buy consumables is bad, becos the value of such consumables typically drop after purchase while still have to pay interest on the debt. So what is a good debt?

Dennis: in my opinion, a debt is considered good if you borrow money and there’s a chance that your returns can be more than the interest you paid.

DJ I-Ling: so is borrowing money to buy a house a good debt?

Dennis: borrowing money to buy a house is ok as long as we do not over-borrow. In my opinion, your housing loan instalment should not exceed 1/3 of your monthly income. Thus, if your income is $3,000, the maximum housing loan instalment you should borrow is $1,000 per month.

DJ I-Ling: so based on a person’s household income, is it possible to work out the maximum housing loan a person should take?

Dennis: definitely. In the above example, a person with household income of $3,000, housing loan instalment should not exceed $1,000. So if the loan tenor is 25 years, and the interest rate is 4%....the maximum loan this person should take is about $200,000. A person with household income of $6,000 maximum loan is $400,000 and one with $9,000 household income maximum loan is $600,000 and a person with household income of $12,000 maximum loan is $800,000.

DJ I-Ling: so a person’s monthly debt repayment should not exceed 35% of his income. If a person has CPF and Cash and can buy a house without taking up a loan, should the person take up a loan?

Dennis: in my opinion yes. You might ask if someone has enough cash and CPF to buy a house, why should he take up a loan and pay interest? Well, let me use an example to illustrate.

Example a couple has combined $300,000 in CPF and another $200,000 in cash. Firstly, we must remember that the interest rate paid on CPF Ordinary account is 2.5%...while currently, first year interest rate for loan is about 1%....so his $300,000 in CPF will earn him annual interest of $7,500. While borrowing $300,000 at 1% interest, a person only need to pay total interest of $3,000. So instead of using CPF to pay for the house, by borrowing money, this person can gain $4,500! He gained more than the interest he paid!

DJ I-Ling: so in current low interest rate environment, it is possible for a person to borrow money and gain instead!

Dennis: yes, currently, interest rate is the lowest in the last 40 years’ history. It is a very rare opportunity for people to borrow money at low interest rate. If you don’t grab this rare opportunity now, you might not have another opportunity to gain at low interest rates.

DJ I-Ling: in last week, you explained that the effective interest rate for car loan is about 4%, so if a person is planning to buy a car and a house at the same time. What can he do to minimize his interest?

Dennis: if a person is planning to buy a car and a house at the same time. He might consider borrowing a higher housing loan amount and reducing his car loan amount to minimize interest expense becos interest rate on car loan is higher than housing loan.

DJ I-Ling: can you use an example to illustrate?

Dennis: definitely. Let’s say a person is going to buy a car costing $70,000 and buying a house costing $400,000. Originally, he planned to borrow up to 70% for the price of the house, or $280,000. He also intend to borrow 70% on the car loan or $56,000. The maximum limit for housing loan is 80% of purchase price, so in this case, he can consider increasing housing loan to 80% of purchase price, or $320,0000 instead. Since he is borrowing additional $40,000 on his house, he can thus have more cash to pay for his car and can reduce his car loan by $40,000, from $56,000 to $16,000.   Thus, he can cut down his interest rates as interest rate on car loan is about 4% currently while interest rate on housing loan is only about 1%.  

DJ I-Ling: so by proper planning we can actually maximize our benefit from borrowing. As you mentioned, currently interest rate is very low, do you see such low interest rates to continue?

Dennis: yes, currently interest rates is at 40 years’ low. I think with economic recovery and U.S. increasing its interest rates…people need to plan for the possibility of interest rate moving higher to 3% or 4%.

DJ I-Ling: if interest rates on housing loan move to 3% or 4%, how would it impact a person?

Dennis: let me use an example to illustrate. If you take up a housing loan of $400,000 repayable over a period of 20 years. at 1% interest rate, your monthly instalment is only about $1,840. At 3% interest rate, your monthly instalment goes up to $2,218 or almost $400 more!. And if interest rate goes up to 4%, your monthly instalment will go up to $2,423 or almost $600! So if you didn’t prepare for the possibility of your monthly instalment going up by $600 in the next few years…you might end up unable to repay your housing loan when interest rates move up.

DJ I-Ling: so for those people who are planning to buy a house, when you work out your budget for monthly instalment, please make sure you’re able to afford the monthly instalment even if interest rates move up in future, so as to ensure you won’t be in the position of unable to pay your housing loans.

DJ I-Ling: different banks have different packages, other than checking with each bank individually, is there a easier way to find out and compare different banks’ packages?

Dennis: In the past, you need to check with individual banks. Now, there’re some companies which provide a 1-stop service. For example, you can come to me and I can help you generate an analysis comparing different bank packages and letting you know the pros and cons of each package. You then make your own decision. Once you decided which bank to choose, we’ll help you apply the loan. You need not go to a bank at all. As the entire service we can provide to you at your convenience, whether at your home or office.

Thank you Dennis for your sharing. Now, it’s time for listeners to call in if you have questions.

Top of the page

10 Reasons why clients choose Leverage Holdings...

The directors of Leverage have 20 years of experience in approval of loans in banks and finance companies and can help increase your chance of getting loan approved. Currently, we have a total of 52 certified consultants.

Why get a business loan through us? Here’re 10 reasons why many satisfied clients have chosen us:

1. We have access to ALL Banks and Finance companies in Singapore as we have working arrangements with all of them. Thus, we can assure that we get the BEST deal for you.

2. We provide a single point of contact for you. You don’t have to repeat your “story” to each bank/finance company.

3. We know who to talk to in each of these financial institutions. Do you know that nowadays banks have grown so big that there’re a few departments handling business loans?

4. We know the right things to say. When you get to speak to the person in the bank, is there a chance you might be saying something inappropriate that might ruin your chance of getting a loan?

5. We know what are banks looking for, we know their “lingo” and we have answers prepared even before they ask us the questions.

6. We protect your identity.  If you talk to banks directly your identity is exposed. We do not reveal your identity unless the bank/finance company say chance of loan approval is high.

7. We help you save precious time and effort so that you can free up time and energy to concentrate on your business

8. You have nothing to lose. We only charge you a fee upon loan approval. If after all the work we have done and we did not manage to get a loan for you, we’re the ones who lose (we lost time, efforts and expenses). You lost nothing since you didn’t pay us any fee upfront. NOTE: for Housing Loan, we do not charge a fee, we're paid by banks separately.

9. We are experts in what we do. We have been sought for our expert opinions and comments in newspapers including Straits Times, Business Times, Today, The Edge, Lianhe Zao Bao, Lianhe Wan Bao, Executive Inc, Capital Radio 95.8 FM, UFM 100.3 etc.

10. We therefore can increase your chance of loan approval.

Please feel free to call us at 6737 8801 or 63399 255 to arrange for a no-obligation discussion.

Top of the page

How to make Debt work for you?

How can we make debt work for you?

Debt can be used to boost our investment returns. For example, if we buy a property costing $1 million, if we use all our money to buy and the property’s price appreciated to say $1.2 million, our return on investment is 20 per cent. (assuming net of transaction cost).

However, if we use only 30 per cent of our own money and a 70 per cent bank loan, our invested capital is only $300,000. Assuming interest an payment of about $50,000 for the loan, we would end up with a net capital gain of $150,000 when the price appreciated to $1.2 million. Since our invested capital is only $300,000, a net capital gain of $150,000 works out to a return on investment of 50 per cent or 250 per cent higher!

Top of the page

Do you know your CPF investment s are not covered by CPF Nomination?

Recently, someone suggested doing away with CPF nomination. Actually, this would actually cause more problems (for details, refer to my letter to Straits Times Forum which was published in Straits Times online Forum, the url is:

http://straitstimes.asia1.com.sg/forum/story/0,5562,351987,00.html (article is at end of email).

These are what I like to share:

1. firstly, if you have not made a CPF Nomination, please do so soonest possible. Without doing so, it will take more time and cost your family money (a few thousands of dollars just for them to get your CPF money).

2. Note that any CPF nomination made before marriage is annulled. After marriage, you need to make a fresh CPF nomination. However, divorce does not annul a CPF nomination.

3. After you have CPF nomination, you should also get a Will written. A lot of people have misconception that writing a Will is only for the Rich. Not true, because without writing a Will, your family will end up need to spend more time (can be more than 1 year, I’ve seen real cases which took more than 5 years) and more money (without Will, more legal costs involved and legal cost can typically range from at least $3,000 to $5,000 (I’ve seen cases of more than $50,000 spent).

Other things you might not be aware of:

1. if you have CPF investment account, whatever you invested under this CPFIS is not covered by CPF nomination, you need to cover this in your Will.

2. joint tenancy property you don’t need to Will it because the survivor owns the entire property, none of the joint owners can decide otherwise.

3. if you have children below age 21, writing a Will is a MUST. Why? Without a Will, if both parents are gone, there’ll be fight and argument on who should be guardian of the children.

4. In the past, writing a Will can be cumbersome, we have made it hassle free for you in simple steps below:

Step 1 we explain what are things you need to decide (no extra charges)

Step 2 you tell us your instruction, we can do this even at your home or office or anywhere in Singapore

Step 3 your instructions drafted by in-house lawyer of Will specialist firm. (This firm does nothing except writing Wills and providing will custody.

Step 4 we arrange 2 witnesses for you (no extra charges) to sign the Will and will help you register with Will registry (for free, no extra charges).

Step 5 arrange safe custody at CISCO (optional, charges imposed by CISCO).

It is NEVER too early to write your Will. Don’t leave it till it is too late to do so.

For those who might be interested to find out more, just call Dennis at 6737 8801 or email info@businessloansg.com for a no-obligation discussion.

Top of the page

Capital Guarantee plus 6% to 9% Annual Returns!

After the "Durian" G22 by DBS, I understand now OCBC is selling a plan known as "Pineapple"......what will they think of next?

Basically, for the G22, it provides compounded annual returns of about 2.5% over a period of 8 years or total returns of 22%.

For those people who want "capital guarantee", there's actually a more attractive choice than what's being offered by the banks.

This investment has the following attractive features:

1. 80% to 110% Capital Guarantee (provided by Financial Institutions with ratings of A or better by S & P.

2. NETT annual returns of 6% to 9%.

3. total returns for 8 years can be 50% to 72%

(Note you can choose any tenor you like from 3 years to 15 years. Quoting 8 years here just to show you how much more attractive is the returns compared to "durian" or "pineapple".)

What's more? There's no annual additional annual fees and charges to reduce your returns.

You can choose FIXED maturity period of as short as 3 years to 15 years (up to your preference) and backed by strong Financial Instututions rated by Standard & Poors with good credit ratings of A and better.

Note: advantage of Fixed Maturity period: you know exactly when you can get back your money plus returns!

If you like to find out more, you can call Dennis at 6737 8801 or email to us at info@LeverageHoldings.com

Many Happy Returns!

Top of the page

Which is a better deal? ILP or Unit Trust?

Yours sincerely,

Dennis Ng, 9852 0663

A Comparison of ILP against Unit Trust

Lower Cost - Because No Trustee Fees and Prospectus Fees

But there are some savings when you invest in an ILP fund that's not feeding into a unit trust. An ILP doesn't charge a trustee fee and doesn't have to print prospectuses. How large a saving that is will depend on how heavy the ILP's policy or admin fee is, as a percentage of your investment, when seen against unit trusts which only charge you the bid/offer spread.

Great Eastern's Fees Lower Compared to AIA and Prudential

Great Eastern's fees appear reasonable. Its policy fee, particularly if you go through the GreatLink Achiever plan, is just $2 a month. This is waived for the first three years, and continues to be waived thereafter if your investment value is at least $15,000.

AIA charges an admin fee of $100 plus 1.5 per cent of the single premium. In effect this works out to be a load of over 6.5 per cent (including bid-offer spread), though the firm waives this if you invest more than $10,000.

Prudential's PruLink Investor Account charges an admin fee of between 1.6 and 5.75 per cent, plus policy fees on your top-ups which can be a substantial sum. All that is on top of the 5 per cent bid/offer spread. So with Pru, your worst case appears to be a total load of as much as 10.75 per cent, and that doesn't even include policy fee.

Low Premiums for Insurance Coverage compared to Traditional Life Insurance

An obvious difference between ILPs and unit trusts is the insurance coverage that ILPs offer. The standard coverage is between 125 and 150 per cent of your single premium. The cost of coverage will depend on your age and is usually inexpensive.

Numbers worked out show that a 35 year old male non-smoker, who invests $100,000 in a single premium plan will enjoy a sum assured of $125,000. The actual insurance charge in the first year is an affordable $15.50.

Note that the insurance charge will rise as you get older. But the charge is usually waived once the value of the investment exceeds the sum assured.

Lower Expense Ratio Compared to Unit Trust

Another cost differential is the expense ratios which in this case tend to be higher in unit trusts. Mercer's just-released data for funds' performance for the first quarter show that the CPF-approved unit trusts have an average expense ratio of 2.15 per cent, compared to 1.5 per cent for ILPs.

One big reason for this is that advertising expenses are usually charged to a unit trust over a period of three to five years. This can be a large cost item, which can weigh heavily, particularly if the fund launch wasn't particularly successful and the fund size is relatively small.

Insurers, on the other hand, do not charge ad expenses to underlying ILP funds. Instead ad costs are charged on a higher level, as an expense incurred by its overall linked business.

Top of the page

Are you ready to invest on your own?

The news of a local female personality who ended up in bankruptcy after losing over S$300,000 punting in the stock market drove me to pen my thoughts below.

Investing through buying/selling stocks directly is one of the various investment vehicles available.  There're other vehicles, eg. Endowment Insurance, Unit Trusts, Investment-linked products, Bonds, Stock futures, Put and Call Options etc.

Just like there're many different type of vehicles eg. bicyle, motorcycle, sports car, lorry, sports car etc. Like vehicles, different investment vehicle also differ in terms of characteristics and risk/return tradeoff.

If you do not have a driving licence and you won a Sports car in a lucky draw, would you just hop into the Sports car and speed away?  “Of course not!” you might say.” However, when it comes to investing, many people just grab their money and plunge into the stock market without knowing much about investing at all Thus, it's not surprising that many people "crash" when they did this and end up in financial abyss.

For people who do not have the time and interest to learn about investing, I suggest that a safer way to invest will be get someone to "drive" the vehicle for you eg. invest indirectly via a Unit Trust, Investment-linked Funds etc.

But if you want to invest directly, then please do not repeat the mistakes of many before you, "learn to earn".  We don't necessary have to learn by "getting burnt".  We can learn about investing from other experienced and successful investors, from books, from attending seminars and investment courses.  That is a "cheaper" and smarter way to learn and to obtain your stock investing “licence” before you invest in the stocks.

Top of the page

No big deal:capital guaranteed funds

RECENTLY, some financial institutions including insurance companies, have launched capital guaranteed funds. And you may be thinking: "Wah, they guarantee I won't lose my capital and maybe make some money, sounds like a really good deal." But is it such a good deal?  Something you should get excited about?

To figure this out, you need first to understand what they need to do to ensure your capital is preserved. There's no magic. All they do is invest the bulk of the money -- say, 70 per cent – in fixed-income securities and money-market instruments. Only a small portion -- say, 30 per cent - is invested in equities to enhance yields. In fact, you can achieve the same result by parking most of your money in fixed deposits and endowment insurance, and putting a small portion in a unit trust or investment-linked fund.

Financial institutions are trying to play on people's sentiment. . .their craving for something new.  So with the recent volatility of stock markets, they are launching capital guaranteed funds. Don't delude yourself. Such funds are nothing to get excited about.

Top of the page

Question and Answer on Stocks, Bonds, Unit Trust and how to invest our CPF

A guy by the pen name of Stockwinner88 asked me some questions about investing our CPF money. Extracted here both the Questions and the answers for your reference as these may be some of the questions you have too.

 
Stockwinner88:  you said , “For OA, I think investing in shares will be a good idea. any views?”

Dennis:  One man's food may be another man's poison. If you're savvy in investing and stock picking, then perhaps direct investing in stocks and shares may reap you good returns. However, statistics from CPF Board shows that most people lose money when they invest their CPF funds in the stock market.

However, I always advocate having a "balanced" portfolio and the CPF Board also recognise the importance of this and made changes to CPF rules. From 1 Jan 2001 onwards, maximum funds in Ordinary account that can be invested in stocks is reduced to 35%. Therefore, for the remaining 65%, you may consider investing in Unit Trust, Investment-linked Insurance and even Fixed Deposit-like Insurance plans which give you about 4% annual compounded returns, compared to 2.5% if you leave your funds idle in CPF.

Stockwinner88: for SA, that's a bit tricky, for the 4% interest is quite hard to beat. I was thinking of investing in UT like China/Japan/Tech funds, as no pain no gain. any views?

Dennis: CPF Special a/c funds can only be used in lower risk investments. What you mention are either Country specific funds (eg. China, Japan, India funds) or Industry specific funds (Tech funds)....such funds are normally deemed higher risk and you cannot use CPF Special account money to invest in them.

Even if you can use CPF Special account funds to invest in such funds, personally I will recommend that in approaching Unit Trust investing, we should also build a strong foundation (ie. have broadly diversified funds eg. global funds first, before we consider whether to invest in narrowly focused funds (eg. country specific and industry specific funds).

Stockwinner88: for SA, a safer way is to invest in certain bonds, am I right?

Dennis: It's important to note that Bonds are not risk free - you may suffer capital loss (more than interest coupon earn) if you sell your bonds before its maturity date.

Furthermore, for most retail investors who do not have much funds to invest, remember that for bonds, you're paid interest coupon every 6 months. eg. if you have $20,000 in bonds, you get paid (e.g. interest rate is 3%) $300 every 6 months, it may be difficult for you to put this interest coupon of only $300 into another investment alternative that give you 3% returns.....therefore, in the long run, you may get a compounded return of less than 3%.

Stockwinner88:  To benefit from compounding interest, it means investing regularly with a certain fixed amount, am I right?

Dennis:  compound interest simply means earning interest on principal plus interest.

In the long run, it has a snowball effect and helps to boost your returns higher than another person who does not know the power of compounding and "allow sufficient time" for Power of Compounding to do its "magic". Therefore, the power of compounding only depends on 2 factors:

 1. Time (longer the time, higher the power of compounding)
 2. Rate of return (higher the return, the higher the power of compounding).

However, please note that higher potential return usually means higher risk, therefore, there's a risk-return trade-off here.

Whether you invest using the Lump sum method or regular savings method has no impact on the power of compounding.

Stockwinner88: Sorry to sound like a "new bird", but it's my first time going into this area. Please give me your guidance. Thanks in advance.

Dennis:  We're all here to share and learn from one another.  You’re always welcome if you have any further doubts or questions.

Cheers

Dennis Ng
Making Sense of Financial Planning
In An Era of Confusing Messages

Top of the page

An A to Z guide of some of the commonly used terms in the stock market

Top of the page

You Can Lose Money in Capital Guaranteed Fund

Capital Guaranteed Funds which have been very popular are not exactly as good as it seems. Typically, the returns is low and very limited upside expected. In fact, you might even lose money investing in a Capital Guaranteed Fund and it had already happened.

The first Capital Guaranteed Fund in S'pore matured last year. Those who invested in that fund got back US$0.9841 per unit. What it means is that if someone had invested $10,000 in the fund when it was launched, he only got back $9,841 upon maturity of the fund....worse than keeping the fund under the pillow.

The problem is consumers are given too little or incorrect information by the financial institutions and the so-called "Personal Financial Consultants" at these institutions may not even know what they're talking about and they are under pressure to promote new fund launches.

That's why it's very important to seek financial advice from a competent Financial Consultant because poor advice can be worse than no advice and many financial mistakes are irreversible.

Feel free to forward the mail to your friends if you find this information useful.
Cheers!

Dennis Ng

Top of the page

Want to get 6% to 9% Annual Returns?

1. Capital Guarantee can be 80% to 100% capital guarantee, you choose your own level of guarantee

2. higher returns without higher risks – NETT annual returns is 6% to  9%

3. fixed maturity eg. to plan for retirement or children education

4. no additional annual fees and charges to reduce returns.

Top of the page

Here's how to get High NETT Annual returns of 6% to 9%.....

If you’re risk averse, you want 100% Capital Guarantee but you’re fed up with the marketing of structured deposits and other Capital Guaranteed Funds which by now you know are not really good deals.

What other choices do you have?

There’re actually ways to get 100% Capital Guarantee plus getting annual returns of 6% to 9%.   Best of all, there’s no health or age requirement. Anyone above 21 can invest.

This is an investment which has these following Unique features:

It can also be tailored to accumulate savings for objectives such as loan repayment, tertiary education funding and even retirement planning.  

To find out more, please call Dennis or Patricia at 6737 8801 (O) for a no-obligation discussion. Alternatively, you can email to: info@LeverageHoldings.com

Top of the page

Is Fear blinding you to see the Opportunities in the crisis?

Perspective on the Market

Per-spec-tive n. (Latin per, through + specere, look)

Just over 2 years ago, investor confidence in the market’s capacity for wealth creation was at historic highs.  The strategies of “buy and hold” and “buy the dips” had rewarded investors over a 12-year bull market.  Stocks were priced to perfection as P/E multiples expanded to prior “bubble” levels.  However, faith in the “ New Economy” led us to believe this time would be different.  Those memories have since been erased by the pain of the past 28 months.  Now, investors view the market much as Charlie Brown views Lucy tempting him to once again kick the football.  In times like these, any investor’s confidence will be challenged.

1.  A view or vista.

To meet this challenge, a historical perspective of the market is needed.  While seeming unprecedented, this market represents the 4^th multi-year bear market since 1926.  The severity of the markets decline is only emotionally magnified by the fact that a generation of investors has had no experience with these big bears.

2.  A Sense of proportion.

Multi-year Bear Markets 1926 – Present  (7/23/2002)

Data is from the Ibbotson SBBI Yearbook, based on Large Cap Stocks (S&P 500).

 A look at the how the market rebounded after the 3 prior multi-year bear markets may provide us with perspective on the future.  All three prior multi-year bear markets were followed by dramatic rallies.

Data is from the Ibbotson SBBI Yearbook, based on Large Cap Stocks (S&P 500).

                  Past performance is not indicative of future results.

3a. A specific point of view in understanding things or events.

To draw these 3 prior multi-year bears into perspective, let’s look into the economic conditions attendant to each.

1929-1932 – The Great Depression Bear Market

-40% male unemployment 

-A general collapse of the U.S. banking system.  Depositors lost significant savings as banks defaulted.  This led to the creation of our modern banking system and FIDC insurance.

-Worldwide depression leads to a global plummet in GDP of devastating proportions. Deflation puts house prices in a free fall.

-Soup lines created out of necessity. 

-Crash begins in an environment of rampant speculation and overvaluation of stock prices.  No existing rules regulating margin lending leads to large losses for banks.

-Government’s restricting of the money supply, limiting liquidity, as the bank crises develop was a crucial error during this period. 

1939-1941 – WWII Bear Market

-Questions regarding the political future of democracy as totalitarian governments  (Italy and Germany) and communism (Russia and China) take hold. 

-Peace threatened globally by military buildups in Germany and Japan.

-The outbreak of War in Europe and the Pacific lead to a conclusion of inevitable U.S. involvement.

-Germany’s blitzkrieg of Poland begins on 9/1/1939.  The battle lasts only days, unnerving all.

1973-1974 – Collapse of the Nifty Fifty Bear Market

-Extreme overvaluation of the one decision “Nifty Fifty” stocks.  These 50 stocks, considered to be can’t lose investments, become extraordinarily overpriced.

-Vietnam:

            -Political upheaval over an unpopular war.

-Images of helicopters evacuating the last U.S. citizens from the rooftop of the U.S. embassy in Vietnam.

            -Political upheaval attendant to Watergate leading to Nixon’s resignation.

            -Mid-East tensions w/ standoff over Suez Canal between Israel and Egypt.

            -Economic:

                        -The abandonment of the gold standard.

-Arab oil embargo leads to wide spread inflation as the price of gasoline goes up ten fold.  Gas lines become common.

-Inflation reaches economically destabilizing proportions leading to national government price controls under President Ford’s “WIN”  (Whip Inflation Now) campaign.

3b.  The ability to see things in a true relationship.

From the perspective of economic conditions prevalent during these past multi year bear markets, the social and economic conditions of the current bear market offer a constructive contrast.  While not minimizing the challenges our country and economy faces, the market and the economy currently seem disconnected.

-2001 recession was one of the mildest recorded.  Only 1qtr negative GDP growth.  GDP in 1^st Q 2002 grew @ a 6.1% rate.

-Industrial production has increased for 6 months in a row.

            -Low unemployment – never rising above 6%.

            -Expanding home ownership.

-Low inflation – price stability of goods and services provides foundation for continued low interest rates.

-A proactive Federal Reserve policy providing liquidity for the markets and economy.

4.  Subjective evaluation of relative significance: point of view.

Probably the biggest change from the prior, multi-year bear markets is the extent of market participation by individual investors.  The popularity of mutual funds and the introduction of 401(k) plans have brought the market to the forefront of daily life.  That a new, larger generation of investor is being introduced to the dangers of a major bear market is only increasing the emotional impact of the losses.

In short, I believe the history of the markets provides us with an indication that the worst is probably behind us.  That over the next 2 ½ and 7 ½ years, the market may out perform other less risky investments (see attached data on S&P Rolling 5 and 10-year performance).

What should the individual investor do now?  The answer is to assess your current investments in accordance with your long-term goals and risks tolerances.  Make decisions based on those goals and your assessments of stock market value, not emotion. 

Top of the page