Doing investment using CPF Ordinary Account and Special Account

Hi Folks! I believe you have heard or went for seminars in teaching you on how to make use of your CPF money? As you may have know, we can do some investment using our ordinary account and special account but it has some restriction in using the money in it. It does make sense for the government to impose some limitation to prevent the CPF members from gambling their money to invest on all sorts of investment. All form of investment has risk and government do not want to bear the full responsibility if things went ugly. The subprime mortgage that happened in 2008 is a good example of how the investors reaction when their investment collapse and they could not take the loss. Therefore, certain level of control is needed. After all, we are not welfare state country. We have to do something extra to get more funding for ourselves. Having those restriction, it helps to meet the purpose of CPF, to fund for purchasing hdb flats and have money at retirement age.

Restriction:
1) Ordinary Account - As you all know, this account is more flexible to be use for your house, education or even transfer the funds to special account or to family members account. First $20k cannot be use to do any form of investment. The amount from then on can be used to purchase any stocks, unit trust, singapore bond and etc. Please take note that not all investment product can be purchased even though you can purchase almost all type of product. Most of the investment product will have a label to indicate it can be use with CPF money.

2) Special Account - Since this account is less flexible in their usage in the early stage of our life, it has higher amount that is mandatory to be kept in the account. For the first 40k, it cannot be use for any form of investment. It has also some limitation in the investment product that you can purchase.

For more comprehensive details, please click here.

When or Why use it?

Many of us may not be so lucky to earn a high income that literally capped on their ordinary account each month. If you are one of them, it may not bring any impact to you as you are able to fund almost anything. This is more applicable for those low or middle income earner who wish to enhance their CPF money through achieving more than the interest given every year. It is also can be use as a "emergency fund" since it is quite flexible to sell off the unit you own. Ordinary account is given at 2.5% each year and if you follow up with the economy, it may not in favor to us at all. Similar to you putting your money in the bank that give a very small interest every year.

If you are currently or aiming to purchase your first house in three years time, it would be good if you can consider placing some of your CPF money through an investment that provides you a good dividend. It could help you to supplement the monthly payment of your house. You would know that once you are able to stay in your new house, they would wipe out the money inside your CPF Ordinary Account. But please before you do any form of investment, seek advise once again from your insurance agent or your personal banker. They are one of the best people to give you advice on it. Putting some of the money in an investment is like setting aside some money for future use. This money would be use to fund for future needs. It really can help you in a long run. Trust me.

For those that have pass this stage, you can still consider doing this. You just need to do some homework with your partner or yourself to see if you can do so. Check your CPF account and do some calculation. You cannot depend too much on one source of income, SALARY. You need to constantly and strategically find an alternative way of how you can earn more income other than getting promoted in your organisation. This is very important so that you can keep up with the changes. Investment seems to be apart of our life now if we want to have a little bit of comfort in our life. Unless, you own a business and able to sustain the operation. I am sure you will be better off than the average people. To add on, investment using your CPF could also help to meet the retirement sum. If you look at the list, it is constantly increase to be able to meet up with the current standard of living. Based on the amount of $161,000. The payout would be roughly around $1,300. This amount may no longer be the same in the future. Below is an extraction from the CPF website:

5th birthday on or after	Full Retirement Sum
1 July 2003	$80,000
1 July 2004	$84,500
1 July 2005	$90,000
1 July 2006	$94,600
1 July 2007	$99,600
1 July 2008	$106,000
1 July 2009	$117,000
1 July 2010	$123,000
1 July 2011	$131,​000
1 July 2012	$139,000
1 July 2013	$148,000
1 July 2014	$155,000
1 July 2015	$161,000

credit: https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-scheme

It is time for you to do some consideration and restructure your finances so that you will take more ownership of your life. Remember, do not depend heavily on the government to supplement you till old age. You got to make it happen. There is a reason why skillsfuture is being created. To get yourself equip with new skills set or be updated with the latest technology that are related to your current career path.

So stay hungry always people! Always think positive and you will see the reward thereafter! Cheers!

Investment Linked Policy

Hi Folks! Today i am going to share with you on investment linked policy and how you can simply understand the rational purpose of this product. I have read in local articles whenever they interview those successful people and what are the investment product they have purchased for themselves and their loved ones. Most of them would say that the investment linked policy is their worst investment of all time. Literally some have said that they lost half of their investment. Upon looking at their age and the duration they have pumping to it, I somehow understand the behavior of the policyowner. Most people are still not familiar with this type of policy and they only see it as another tool for them to be assured with an investment in it. If you think of gaining more than what you have to put in, you need to do alot of your own revision. Do not rely too much from you banker or insurance agent. They are afterall a salesman that would have several clients in their pocket unless you are the high net worth individual. They cannot monitor solely on your portfolio even though they maybe the top in the bank industry. Anyway, It is possible to gain from this product. I have experience it and currently hold on to it. It works really well for me and also thanks to the personal banker that have done the great job!

What is Investment Linked Policy?

Investment linked policy requires quite abit of monitoring as it has insurance coverage component as well as investment in unit trust. This policy is being created for those who prefer to have some health protection. To be frank, if you prefer to do an investment. You should be prepared of the risk in losing some or all of your money. The investment in this policy can choose several unit trust product ranging from high risk category to regional category. The insurance coverage premium for this policy would increase as the policyowner get older as the risk of the policyowner would be higher. Generally, the policy has a time period from a minimum of 7 years and more. You can switch to another unit trust of the same risk level after the first year for free. Eventually, you will see your investment are not working hard for you because the amount that you are paying fixed every month will be allocated more to the insurance portion. The number of unit trust product you chose also matters in the allocation of the money to purchase the investment product. Even though we should diversify as much as possible to balance the risk but it would be good to understand how each of the investment work for you. Below is an illustration of a policyowner profile

Say for example,

Age: 24
Profile: middle to high risk
Duration period of holding the policy: 7 years
Invested amount every month: $500
Investment unit trust: Chose two type of unit trust
Type of risk in unit trust: High risk and emerging market

Personally, i felt that this profile would be more ideal for an individual to purchase this type of policy.

Reasons:
1) Dollar cost averaging - recommended to appreciate the volatility of the unit trust.
2) Emerging market category - it is one of the active movement in the fluctuation of the price which is reasonable to counter the ever increasing insurance premium in the policy.
3) High risk - High risk, high return. Sounds familiar? This would be strongly recommended for those that have high tolerance or the ability to recoup back their loss since they are still young
4) Chosen two type of unit trust - It is to better understand what you have pump in for each unit trust IF both of the unit trust are high risk. Some would propose to balance it with low or middle risk to balance the portfolio. AGAIN, the age should factor in.
5) Duration - Your time period in holding this policy also matters. As you gets older and holding this policy, you may have to consider your insurance portion in this policy.


Should Investment Linked Policy meant for you?

It all depends on you once again. To be frank, should you to diversify your portfolio and include ILP as part of it, you should go ahead in choosing high risk category of unit trust so that you can appreciate the "wave" of the price of each unit trust and gain something at the end of your contract policy. You would also need to monitor it by reading up news during your free time as your investment last for very long period. Make it a habit as it could affect the valuation of your current unit that you hold. Forecasting should be done to ensure you can make the next move in the unit trust you will be switching.

Advise

Sit down with your personal banker or insurance agent and try to work things out with them. Try to hear them on their explanation and advise. If you still not confident, try to consult anyone that have experience or currently holding the policy. I did the same before i invested. Get as many reference before you meet up with them on the second round. It is a long term commitment and if you fail to meet the contract term, you will be penalise with a fee and will lose your money that you have so far been pumping to it. So think, plan and decide. Cheers!

Perspective of Insurance Policies

Hi Folks! Insurance policy anyone? I am sure you may have came across an insurance agent on the streets asking you to do up a mini survey regarding your finance. Majority of us especially the young ones may not really find it of any purpose to be insured or see it as a waste of money to own it at a young age. Personally, i am one of those people back then until i study further on insurance products and how it can benefit an individual. I own several insurance policies including investment related insurance.

Firstly, to simplify the purpose of having an insurance is to give you a peace of mind be it for protection or wealth accumulation. We have to face the reality of life living in Singapore. Cost of living will eventually increase due to inflation. Insurance policy is now more practical for every individual to own irregardless of their age. I would suggest having the minimum insurance policy for yourself and that is Medical insurance. It is the kickstart for any individual to start having the policy before proceeding to have other type of insurance coverage. It would really helps alot in your medical bills. With that in mind, please read the coverage of the policy that you are purchasing. They normally have several package to cater to your needs. I personally encounter several of those people that i know feel disappointed as they could not use their insurance policy to cover their cost. If you face some issue on your personal finance, start with the minimum coverage for yourself and slowly increase your coverage as you feel more comfortable. It would be essential to have good insurance agent to assist you on this. Personally, a good insurance agent would follow up with you the minimum of every 2 years. BUT! I strongly advise you to monitor it yourself as well! It is really really really important to know what you are buying! =). You should know best of your health!=)

Just a brief highlight of the different type of insurance policy based on protection and wealth accumulation.

Type	Protection	Wealth accumulation
Term	100%	0%
Life	60%	40%
Endowment	30%	70%

To me, certain type of policy varies according to an individual finance capability. I will tell you briefly on each type of insurance policy.

Term insurance which is purely on personal protection against injury or permanent disability. It is the cheapest form of protection for an individual due to low monthly premium which is also translate to a low disbursement upon making claim by the policy owner.

Life insurance which is very popular among the middle and high income earners, the policy premium is relatively high. It is normally being used to inherit some monetary to their children or spouse to overcome their daily financial means if anything happen to the policyowner.

Endowment policy is popular among low risk policyowner who prefer to put aside some money for rainy days and have some protection as well. The policy often offer higher interest rate return as compare to fixed deposit in the bank. As usual, please read the term and condition on it. There is always underlying reason why they are willing to give you the perks.

Once again, PLEASE do not be lazy to read any policy that you are planning to purchase be it for yourself or for your loved ones.

Benefits of having an insurance agent

Having an insurance agent is just like having your own personal secretary that would help you to do up the necessary paper for your insurance policy. You should be thankful if your insurance agent would keep in contact with you. This shows their interest in your well-being. It is essential to get a sincere insurance agent to manage your policy and your family.
Some brief pointers on the benefits of having an insurance agent:

1) Policy expert as they should know best.
2) Will provide you any update on changes of the policy or new product that best suits the policyowner.
3)  They will do the necessary follow up if you happen to make a claim or do some amendments on your policy.
4) Can be your family personal insurance agent under one roof.
5) They will visit you at your convenient time and location.

Hope this helps you to be more receptive and be more open on insurance product whenever your current insurance agent or any of insurance agent approach you. It may be useful for you so it is worth listening. FYI, I am no relation or get any incentive from any insurance company on writing this as this is all based on my opnion and insights. Cheers!

Companies going for IPO

Hi Folks! Many of you may have heard in the newspaper or in the radio regarding companies going IPO. IPO is a short form of Initial Public Offering. Companies that prefer to be listed in the securities exchange are requesting for funding for their company expansion. This would then allow the retail investor to become a shareholder of the company.

Why do they want to issue more shares?

You may have wonder why would they prefer to open to the retail investors when there are other alternative to seek for funding. Generally, you need to think in businessman point of view. For example, a company has good business model and it can expand further. It projected to generate double to the amount that the company is earning. The company has good credit rating. The company can choose to take a loan from the bank or get listed to seek funding from retail investor. Consideration by the company is essential to determine which best suits their needs. If the company feels that 80% possibility that the expansion would be successful, it would be best to go ahead getting a loan from bank(only if they offer a good interest rate). If the company feels that the possibility would be lower, it would be best to be listed at securities exchange. But please bear in mind, this is not always the case. This is just one of the possibilities. You still need to read the company portfolio and profile if the company ever wanted to be listed in the securities exchange. You may sometime get the hint of why they required further funding. Best of all, if you ever wanted to try to bid in the IPO, try find those who actively investing or online. I am sure people will share their opinion of the company. This would give you an add on for your judgement to decide before bidding. Very very important.

Items that you wish to read/do before bidding?

1) Company prospectus (Reasons for listing) - you can find it in SGX website.
2) Online review by other blogger - you can get a summary of the company profile and their judgment.
3) Business Times - It is a good source to get some additional highlights.
4) Own Finance - Make sure you have the money being put aside for investment. Never ever use your savings that you require for day to day. Remember, it is not a get rich quick method.

How do i bid companies going for IPO?

2014 was quite a hit for companies to be listed in Singapore Exchange. There are a couple of well known companies that shows interest. This year has been quite slow and you may not see it often. If you have open your investment account, you will also be given the CDP account. CDP account is essential for you to bid for the IPO price. You need to head down to any of the ATM that you have an account with the bank. It would be a one time "registration" and you would not need to key in anymore on your next bidding. BUT....if you previously use DBS to "register" your cdp account. You would need to do the same if you are using either UOB or OCBC ATM. I would normally bid using two banks if i have a strong feeling that it is a good buy or i can sell at the first day of opening. There will be a fee of $2 dollar for every bidding. Normally, the open bidding would last for a week. Advisable to bid on the first and second day because probability is higher to get your shares(Based on my experience). The outcome results will normally out a few days after the closing of the bidding. You would be able to know the results through your account.

Hope this helps!=))

Opening an Investment account

Hi Folks! I will be sharing with you today on the procedures of opening an investment account. I will try to make it idiot proof so that you can literally go on your own to get started.

Before you start investing, you must be mentally and financially prepared for the risk that you will be taking. Generally, I use it to keep up with the inflation. I would recommend that new investors to start off with blue chip companies before you progress to more highly volatile investment products.

As addressed in my previous post, you need to open an account from any of the local banks securities or private securities companies. It is strongly advisable to open in person at their store as they can assist you to fill up the long and exhaustive list on the form. I will list the available securities companies for you to open an account.

1) DBS Vickers
2) OCBC securities
3) UOB Kay Hian
4) Lim and Tan
5) POEMS

Each of them has its own perks and promotion when you open an account and you are not limit to open only one account. For me, i would open two account that suits me best. Please note that it is free of charge when opening an account. They would help you to open an account with them as well as CDP account. CDP account is just to safeguard all your investment that you are currently holding. It is acting like a bank that you store your assets. Once you open an account, you will receive a letter from them within 2-3 weeks. The letter will guide you in your registration to their platform and you can start trading! They will give you a capping limit in the amount that you can invest and it varies for each individual according to the declaration of your monthly income.

CPF & SRS investment account

I will add this portion as well just in case you may prefer to use your intangible money from cpf to trade or SRS money for retirement. You can only open the account in the local bank and you can only open one account. Unlike the securities account which you can open multiple account from different companies. Once your account is open, you can only purchase certain stocks and unit trust. You cannot trade on your first $20,000 in your ordinary account. Please note that if the investment that you have purchased issued dividend payment, it maybe reinvested or credit back to your account.

I hope it helps you to have some understanding!

See you again!

Dollar Cost Averaging Vs Lump Sum investment

Hi viewers, I understand that you may have read some post from other bloggers or forums indicating on the topic that i would like to share with you guys. As far as concern, i would try to simplified the understanding of how investment works and from here, you would be able to get more ideas what your future personal banker or insurance agent would share with you. So i would just share two forms of investment and mode of payments to keep it short and sweet! It is also based on my own findings as well. But please bear in mind, your investment decision is solely on your own discretion. =)

Let me start by simplifying on the understanding of the two mode of payment: Dollar Cost Averaging & Lump Sum 

Dollar Cost Averaging

It seems to be popular among the young ones who do not have strong purchasing power or earnings. The purpose of this mode is to allow the investors to pump in a specific amount of money every month to the investment product. It also allows to appreciate the volatility of the price of the investment product. This mode of payment would come with a price. It normally charge a fee that is rather high.

Pros: 

1) Consistent purchase of the units every month.

2) Allows the investor to understand the product they purchase due to the volatility of the price every month.

3) May potentially break even.

4) Monthly minimum amount of $100.

5) Do not need constant monitoring.

Cons:

1) High fees.

2) Fixed date to purchase the units.

3) Monthly amount of atleast $400 and above to find it worthy on paying the fees(varies according to the person)

Lump Sum

Lump Sum has been the normal mode of payment. It is much in favor for those experience investors as it allows them to bid for the best price. This is of course requires the investor to have a better understanding on the movement of the price or the company nature of business

Pros: 

1) Able to purchase at your preferred price.

2) Fees are affordable based on the quantity of unit.

Cons:

1) More Monitoring required from the investor.

2) Requires a big sum of money.

Next! I will share with you two of the investment products that offers both mode of payment as it maybe lengthy for someone to read through everything if i were to add more products.=P

The two form of investment product would be: Unit Trust & Singapore Stocks

Singapore Stocks & ETF

Since January last year, SGX has decided to reduce the shares purchases from one lot(1000 shares) to 100 shares per transaction. It helps alot of new investors to enter the market and increase the current investor portfolio. Interestingly, two of the local banks have came out with an interesting approach to garner more young investor(inclusive myself) on investing through dollar cost averaging since 2013 even though there are private companies that offer similar service. The local banks are quite successful in their publicity in creating awareness on the importance of investing at the early age. It seems quite catchy for some people as the stocks or ETF that are offer are based on blue chip companies. Personally, i have use both banks service since the start of their launch. I choose to diversify not only my portfolio but also my mode of purchasing so that i would be able to appreciate on the various services given by companies. Purchasing stocks on a lump sum would require to open through their securities such as DBS Vickers, Maybank Kim Eng, OCBC Securities, Lim and Tan, POEMS and UOB Kay Hian. Each of the securities has its own promotion. Choose based on your comfortability and they will assign you with a remisier to assist you.

Unit Trust

I have used services from banks and online platform to purchase unit trust. I would not dictate any of the unit trust that i currently holding as it would definitely bring no benefits at all on my initial purpose of this blog. Unit trust is a portfolio of assets of a different risk level that cater to different appetite of investors. Personally, i would recommend you to approach by the professionals be it insurance agent or personal banker to perform the risk assessment test before you start any form of investment. I hear alot of horror stories of those who invested and could not swallow the risk of losing some of their money. It is strongly advisable to know your risk appetite. Always try to diversify your unit trust product and not stuck to one product throughout your investment. In my future post, i will share more details.

As promise to keep it short and hope it is simplified for you to understand. I will write more items from Initial Public Offering(IPO) stocks, insurance product and daily personal finance. Will also give some updates on interesting workshops.

So stay tune and have a good weekend!