Investments
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alng:
But who knows what those structural deposits and endowment plans invested on. Nowaday, who can guarantee anything? They can well deflate the money 80% and then pay you back the principal amount but you still lost 80% of purchasing power.I am rather risk averse. For $10,000 and below, I will leave it in a FD which I can break anytime when I need emergency cash. For $40,000 and if I do not foresee use of money in medium term, I will buy structural deposits or endowment plans (around 5 years) which guarantee the principle amount.
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WeiHan:
You are right that no one can guarantee. But with governance and controls in place, things are not that pessimistic. Plus it is remote that the single financial institution that I invest my money in is capable of deflating money by 80%. For structural deposits, I do know what they are investing in.
But who knows what those structural deposits and endowment plans invested on. Nowaday, who can guarantee anything? They can well deflate the money 80% and then pay you back the principal amount but you still lost 80% of purchasing power.
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alng:
The financial institution can't deflate the money. But it is a fact that in the present environment, money is quickly deflating in value. the pace can get faster. The little interest that we get in FD or endowment will not make up for the inflation which may get even worse. Maybe S$ will not suffer a 80% deflation. I am just describing a scenario that seemingly safe investments are actually not that safe because they are just papers.
You are right that no one can guarantee. But with governance and controls in place, things are not that pessimistic. Plus it is remote that the single financial institution that I invest my money in is capable of deflating money by 80%. For structural deposits, I do know what they are investing in.WeiHan:
But who knows what those structural deposits and endowment plans invested on. Nowaday, who can guarantee anything? They can well deflate the money 80% and then pay you back the principal amount but you still lost 80% of purchasing power.
Would you like to share what these structural deposits invest in? -
WeiHan:
The financial institution can't deflate the money. But it is a fact that in the present environment, money is quickly deflating in value. the pace can get faster. The little interest that we get in FD or endowment will not make up for the inflation which may get even worse. Maybe S$ will not suffer a 80% deflation. I am just describing a scenario that seemingly safe investments are actually not that safe because they are just papers.
You are right that no one can guarantee. But with governance and controls in place, things are not that pessimistic. Plus it is remote that the single financial institution that I invest my money in is capable of deflating money by 80%. For structural deposits, I do know what they are investing in.alng:
[quote=\"WeiHan\"]
But who knows what those structural deposits and endowment plans invested on. Nowaday, who can guarantee anything? They can well deflate the money 80% and then pay you back the principal amount but you still lost 80% of purchasing power.
Would you like to share what these structural deposits invest in?[/quote]I agree with both of you...
That's why I leave structural deposits out of the picture, as the guarantor needs to survive to have the guarantee be in effect.
And that's why I spent the last 4 years turning myself into my own (and those who believe in me) FC.
I am interested in the structural deposits details that alng spoke about... Would love to learn more.
Cheers! -
I am not an expert in investments or structural deposits. The Lehman brothers incident has caused a drastic drop in the demand (and thus supply) of structural deposits. The financial institutions were very quiet for a while. But I do see some offering of structural deposits over the last few months. I have not invested in any structural deposits since the Lehman brothers incident but I am keeping my options open. Over the last two years, I only have FDs in foreign banks which offer slightly higher interest rate than our local banks.
My past investments in structural deposits were invested in Singapore blue chips, government treasury bonds and companies in China. The last structural deposit I bought was a few months before the Lehman brothers incident and it was investing in an Aussie bank. I had a scare when Lehman brothers incident surfaced and there were new reports on that Aussie bank suffering some losses. But all has gone well, I got back everything they promised me. I do not invest in higher risk structural deposits, such as those investing in middle east companies and commodities. I am not familar with those areas.
As I am risk averse and do not monitor my investments, I only go for what is deemed as safer investments. But no pain no gain. I know that the low returns I get could not combat inflation rate at all. This is disservice done to the money. But do we have other choices?
One of the better investments is of course to invest in a property and collect rental income. But one must have more spare cash to invest on a longer term basis. I hope the property market will crash soon and looks like I need to tan ku ku. -
Hi all, I feel we bear a huge risk when we place the money in the bank, be it savings account or FD. This belief may run counter to the belief of risk adverse forumers that we will not lose any money placed in the bank, although we won’t earn much either. Allow me to explain (and you may feel free to disagree).
Assume that bank pays 2% on your FD, which is a generous estimate. Assume that inflation runs at 5% over the next 10 years. Assume that you have $100000 in year 1.
At the end of 5 years, you would have less than $86000 in real terms.
At the end of 10 years, you would have less than $74000 in real terms.
The above is a "sure lose" scenario. For risk adverse investors, I suggest buying some bank preferential shares, which give 5% returns on average and the share price has minimal fluctuations. In this way, at the end of 10 years, your money would still retain its current real value. -
River:
I agree that physical $ remains the same but lost in real terms which affects future purchasing power. But investments in banks preferential shares is also not a \"sure win\" scenario :-(. Without central banks controls and governance in place, it is even risky to place money in the banks.Hi all, I feel we bear a huge risk when we place the money in the bank, be it savings account or FD. This belief may run counter to the belief of risk adverse forumers that we will not lose any money placed in the bank, although we won't earn much either. Allow me to explain (and you may feel free to disagree).
Assume that bank pays 2% on your FD, which is a generous estimate. Assume that inflation runs at 5% over the next 10 years. Assume that you have $100000 in year 1.
At the end of 5 years, you would have less than $86000 in real terms.
At the end of 10 years, you would have less than $74000 in real terms.
The above is a \"sure lose\" scenario. For risk adverse investors, I suggest buying some bank preferential shares, which give 5% returns on average and the share price has minimal fluctuations. In this way, at the end of 10 years, your money would still retain its current real value.
How about investment in government bonds? I am not talking about US or Europen governments here. Haha! -
alng:
You are right, banks may fail too, in which case our deposits and shares will have zero value. :shock:
I agree that physical $ remains the same but lost in real terms which affects future purchasing power. But investments in banks preferential shares is also not a \"sure win\" scenario :-(. Without central banks controls and governance in place, it is even risky to place money in the banks.River:
Hi all, I feel we bear a huge risk when we place the money in the bank, be it savings account or FD. This belief may run counter to the belief of risk adverse forumers that we will not lose any money placed in the bank, although we won't earn much either. Allow me to explain (and you may feel free to disagree).
Assume that bank pays 2% on your FD, which is a generous estimate. Assume that inflation runs at 5% over the next 10 years. Assume that you have $100000 in year 1.
At the end of 5 years, you would have less than $86000 in real terms.
At the end of 10 years, you would have less than $74000 in real terms.
The above is a \"sure lose\" scenario. For risk adverse investors, I suggest buying some bank preferential shares, which give 5% returns on average and the share price has minimal fluctuations. In this way, at the end of 10 years, your money would still retain its current real value.
How about investment in government bonds? I am not talking about US or Europen governments here. Haha!
Bonds are safe in general, but they carry a small risk of the government failing or defaulting too, like banks.
I make some comparisons below between bonds and bank preferential shares.
1) Bonds have zero price fluctuations, as compared to minimal price fluctuations of preferential shares.
2) Bonds require a holding period of a few years, whereas preferential shares can be traded freely on the stock market.
3) Many bonds require minimum investments of S$100000 or more, whereas a unit of preferential shares can be purchased for around S$10000.
4) Bonds and preferential shares have similar ROI.
Please let me know if I missed out any crucial points. -
daddy2007:
awesome advice. now to get off my bum and get some ETFs via fundsupermart(?) to minimise costs...Just to offer my 2 cents of view. Not comprehensive though
Depending on who you speak to, you will be introduced to different types of investment vehicle
If you approached financial advisors from insurance companies, they will probably sell you endownment policy or ILP (to invest in Unit Trust)
If you approached those \"independent\" financial advisors, they will be selling their platform and get you to invest in Unit Trusts. Their charging model will be either through a annual \"consultation\" fee or wrap fee whereby they will deduct certain amouont (typically 1%) off your investment portfolio
If you want to take charge of your investment, you can do it DIY via some traditional investment vehicles. There are pros & cons in using all these vehicles
1. You can invest in Unit Trusts which can be purchased from those online platform such as Fundsupermart or DollarDex.
2. You can invest in broad market indexes. Currently there are ETFs offered from the various Stock Exchanges
3. You can invest in shares say in local market. Either investing in those blue chip companies (e.g SPH, DBS, SIA etc) or those SME shares. Real Estate Investment Trust (REIT) is also getting popular whereby you get to own offices, commercial buildings or shopping malls and get regular divdends as income
There are several things to consider
Do you prefer Passive or Active Investment/Management
Are you prepare to hold your investment (a.k.a investing) or if you likes to trade (buy/sell) frequently (when you think you have the time, talent or an edge over other people)
If investing in shares, what stategy you want to adopt? Go for fundamentals to study the company balance sheets or go for technical analysis whereby using indicators to determine when to buy/sell shares
You have to also decide if you want to invest for capital appreciation or to get passive income
There is also this school of thought of how to construct one's portfolio (a.k.a Modern Portfolio Theory) whereby one will allocate certain portion of bonds and certain portion on equities
But before you start investing, it is good to know your risk profile. Whether you are conservative (those cannot stand losing capital), moderate (willing to take some losses) or aggressive (willing to take higher risk for higher gain). Basically it is about risk-adjusted returns
Don't be surprised that you think you belongs to certain profile and when the crunch time comes (e.g massive market selloff), you cannot tolerate it
Basically investing is about Risk Management. Based on one's risk profile, how to protect one's capital and how/when to cut lost
Don’t invest to beat the markets, get rich, or earn the highest possible return. Invest to meet our goals, whether it’s buying a home, putting the kid through tertiary education, or paying for our own retirement
It is very important to know your investment costs and keep them low -
alng:
SG Govt bonds perhaps, for the risk adverse?
How about investment in government bonds? I am not talking about US or Europen governments here. Haha!
There are others from emerging markets, which give high returns, but risk is another issue altogether.
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