Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Friday, 5 October 2018

CPF: Better Fixed Interest than Fixed Deposit


This post will contain a tip on how to increase your CPF returns, namely in the form of interest.
One way to earn more interest from CPF is to transfer your extra money, into your CPF Special Account.

Your Ordinary Account currently earns 2.5%, Special Account and Medisave Account earn 4% interest while your normal bank Fixed Deposit earns less than 2% annually.

Real Life Example:
My mum is 49 this year. She wanted to buy a 10-year Fixed Deposit which earns less than 3% per year. I suggested that she put her money into her CPF to earn the CPF interest.

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_________________________________________________________________________________
Based on Normal Voluntary Contribution, the money will be split into the 3 accounts in the following allocation:
OA: 51.36%
SA: 21.62%
MA: 27.02%

Assuming she puts in $1,000, the allocation will be as follow:
OA: $513.60
SA: $216.20
MA: $270.2

Based on the above, my mum will get an average 3.23% interest on her $1,000 contribution.
She will not, however, get a tax deduction for the $1,000 contribution she put inside.
_________________________________________________________________________________
Based on Additional Medisave Contribution Scheme, the money will all be put into her Medisave account.
OA: 0%
SA: 0%
MA: 100%

Assuming she puts in $1,000, the allocation will be as follow:
OA: $0
SA: $0
MA: $1,000

Based on the above, my mum will get an average of 4% interest on her $1,000 contribution.
In addition, that $1,000 that she contributed into her CPF is also eligible for tax deduction.
_________________________________________________________________________________
Based on Retirement Sum Topping-Up Scheme, the money will all be put into her Special Account, or into her Retirement Account (if she is above age 55)
OA: 0%
SA: 100%
MA: 0%

Assuming she puts in $1,000, the allocation will be as follow:
OA: $0
SA: $1,000
MA: $0

Based on the above, my mum will get an average of 4% interest on her $1,000 contribution.
In addition, that $1,000 that she contributed into her CPF is also eligible for tax deduction.
_________________________________________________________________________________

She will also get to withdraw the money out when she reaches age 55.
Of course, if my mum fails to meet her minimum sum, the money that goes into her CPF will not be returned to her at the "end of the maturity" - instead, she will get it back as future monthly payouts.
But there will be other factors to consider such as how flexible you want to be able to withdraw the money.

All in all, if you wish to have a higher interest rate than Fixed Deposit, risk-free and not in need of the money being withdrawable, you can consider putting your money into your CPF, especially if you are near 55 years old - where the risk-return profile is more skewed in your favour.
Of course, if you want liquidity - the ability to withdraw the whole sum of money when you need it, this probably is not suitable for you. But, if you have way more than the required Retirement Sum, putting money into your CPF to earn the higher interest and withdraw before the Retirement Sum climbs too high sounds like a good way to make extra money.

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Monday, 24 September 2018

4 Telegram ChatBots that Helps You Save Money

Apps are no longer the next big thing. They take up space in our phones, requires us to download and continuously update them.
Instead, chatbots seem to be the next big thing.
Just a few years ago, the mantra was "there's an app for that".
Today, the mantra is "there's a chatbot for that".
Below, we share with you 4 chatbots on Telegram that can help you save and manage your money better.
The list is not comprehensive, with new chatbots being created every day!
As such, if you have any great chatbots that you use to manage your finances, feel free to comment and tell us about it!
We will add it to our list

1) Foodie Monkey Bot
This is the chatbot that sends you a list of food and drinks promo happening all around Singapore daily. Save on food and drinks sounds like a pretty good deal to me.

2) GetMedia Bot
This is the chatbot that lets you download songs and videos from youtube to your phone, saving you tons of data when you are commuting or at places without wifi - and hence saves you money.

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3) WhereIsMyMoneyBot
This is the chatbot that lets you track your expenses easily. Type the expenses you incurred and the amount and it will record. You also get a summary of your total expenses for the month and you can export the information in Excel out.


4) WhoPayBot
This chatbot helps you split your bill among your friends easier. Allows you to split the bill without complex mathematics and helps you track who has paid. No more having friends forget about transferring the meal money now that there is a reminder set for them.

Got any more chatbots that can help us manage our finances better?
Feel free to comment them to us and we will add them to the list

Recommended Post: 3 Reasons Stocks are Better than 99 Year HDBs

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Friday, 14 September 2018

3 Reasons Stocks are Better than 99 Year HDB


Recently, we suddenly start realising that upon reaching the end of our HDB 99-year lease, we are all going to lose our homes - the HDB goes back to the government and we are not going to be getting any money back.
Suddenly, HDB feels like a rented apartment instead of our home, except instead of paying rent every month until the lease expires, I pay for it for 30 years only - and if I'm lucky, I get to sell it for a higher price than I paid.

The biggest and most important asset for most people is their house.
Have you ever wondered why most people remain either middle income or poor?
The correlation is not a coincidence.
It is exactly because of this reason - the bulk of their money are stuck in their homes.
The rich park much of their money in stocks and there are reasons why stocks are better than homes when it comes to growing your wealth.

1) Government Intervenes in the Property Markets
Our Government announced a new property cooling measure in July 2018 to cool the prices of properties in Singapore. This is because they find that the property market seems to be heating up - prices are getting higher than they should. The cooling measure is meant to reduce the rate of increase. This is actually a kind of "limit" on the gains you can have from your property investment! 

This is done so that we can all buy a house to live in Singapore. It is in the Government's best interest to ensure everyone can afford a home because it keeps them in power. If I am a buyer, I am not complaining that my Government is making housing affordable by removing rich people from bidding my house prices up. But if I am a property owner, it sucks to know that the value of my property is being "cooled" by my Government.

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2) HDB is an Appreciating Asset that You Own for 99 Years Only
As your HDB reaches the end of its 99-year lease, it goes back to the Government while you get nothing back.
The asset that you had hope to keep and leave it for your children suddenly no longer exist.
While it is yours to keep and sell within that 99 years, you lose it after 99 years.
It is not a permanent asset for you or your future generations to keep.
While it ensures that every generation gets a chance to buy a home in land-scarce Singapore, it also prevents you from passing your asset to your children and grandchildren, even though you worked hard and paid for it!

3) Government Don't Limit Stock Market Gains
When property prices reach a new high, Governments all around the world tend to step in to make sure prices fall back to normal. Imagine if property prices increased 15% year-on-year for 5 years straight - prices would have doubled, and you would be happy if you are a property owner, but you will never be able to afford a home if you are saving to buy one.

But for the stock market, Governments will not intervene if the market rose 20% year-on-year for 5 years straight. The Government will not intervene in the stock market even if it is a bubble because it is not the job of the Government to ensure the stock market does not overheat. Therefore, you stand to make higher gains in the stock market than from the property market.

Conclusion
Should you start considering to invest less in your HDB and more into stocks?
Since technically stocks are forever and you can pass it down easily.
Rich own stocks while middle-income own HDB.
99-year asset or forever asset?

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Saturday, 18 August 2018

An Overseas Clinic Visit Made Me Realise the Importance of Travel Insurance

This is a story of me going to a medical facility while on my America Road Trip and how lucky I felt when I knew I would be covered by travel insurance.

December 2017, I went on a road trip to the United States of America (USA) - it was during the winter period but not that it mattered anyway I guess.
I was on my way to the Grand Canyon when halfway through the bus ride there I started vomiting.
I vomited and felt uncomfortable in the stomach - it was miserable, especially since I was kind of confined to the single bus seat.
Every time there was a break, I would either remain on my seat to rest (if I'm lucky) or I would alight to empty the vomit bag, get a new one, then proceed to vomit more in the toilet (I have no idea how I got so much stuff to puke as well).

By the time I reached the Grand Canyon Lodge, I was half dead.
I alighted the bus and warmed myself in the Lodge.
After a while, I gave up! I felt too miserable that I booked a cab via the reception to drive me to the Grand Canyon Clinic - yes they do have a medical clinic there.

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I got myself checked into the clinic and waited about 45 minutes before any medical personnel could attend to me.
Once it was my turn, I was put on IV (intravenous therapy) aka tubes carrying liquid poked into my veins to transfer liquid substances into my body.
Then I had tubes carrying oxygen put into my nose so that I had air going into my body.
Apparently, the nurse said that I was experiencing altitude sickness - more about it HERE
This was how I looked like while lying on the clinic's bed

After 1.5hours of being on IV and given oxygen, I was discharged from the clinic with some medication and isotonic drink.
The bill turns out to be USD 376.12 - which translate to about SGD $500+
Honestly, that was a big bomb! That 2.5 hours visit wiped out nearly 10% of my road trip's budget!
I knew seeing a doctor in America was expensive, I just did not expect it to be this expensive!
At that moment of paying the bill, I was so glad that I actually bought travel insurance!
If I didn't have insurance, I'll probably wait until I was near death before I would go see a doctor because it is just too expensive!
A $100+ in travel insurance cost ended up saving me $400 in medical cost and nearly dying - quite worth it!

I remember going to Taiwan last time with my friends and they had food poisoning. We too went to visit their hospital and good thing they had travel insurance to cover their visit. It is a good thing I was not the who got the food poisoning as I did not buy insurance back then because I did not think I will need it.
So, it turns out it is really easy to fall sick while overseas - so buy travel insurance!
It saves lives!

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Tuesday, 14 August 2018

We Don't Lack Leaders, We Lack People With Empathy


What makes a leader? What makes a person a leader?
We follow leaders because of many reasons; because they have a strong vision; because they are charismatic; because they inspire us to do great things; because of this and that.

Great leaders like Steve Jobs, had many followers who followed him because he was a visionary, he was charismatic, and he demanded - inspired - people to do great work. We can stretch it a little and say the same can be applied to Hitler - the man literally convinced his people to go to war and risk their lives for him.
These are great leaders, and I believe there are many more of such leaders around us that we know.

I have seen and been under leaders who emits "leadership" qualities. They can give great instructions, make us work together as a team, and make us willing to push ourselves just a little more to achieve their goals.

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But does these "leadership qualities" really make a leader so great that we are willing to go to lengths for them? In the short-run, I believe these "leadership qualities" are key as they get people started, get people to work together, and push people to achieve short-term goals - like completing a project. In the long-run, however, I believe caring for people (empathy) is the key characteristic, is the true mark of a leader.

I do not think that someone who can lead is naturally a leader.
I would work really hard for a charismatic leader for 1 week to complete the project for them. But if they are not caring, not empathetic to people, I can see myself quitting once I am burnt out. Because a leader can only keep us in their 'reality distortion field' for so long before we all break free from it and realise that he/she can lead, but is not a real leader.

We lack people who care for others, who are genuinely concerned about their people's well-being, and not just their own. I am arguing for another kind of leader, the kind of leader that has a normal vision, has minimal charisma, does not really inspire us to do great work, but genuinely cares for us and our well-being, and because of that care, we are willing to work with and for them.

Recommended Post: Is Whole Life Insurance A Scam?

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Thursday, 26 July 2018

Is Whole Life Insurance A Scam?


A lot of people have written a lot about the difference between the 2.
So instead of comparing them again, we recommend you read the difference in the link below:
The Case of Term vs Whole Life Insurance

Instead, I will go into the figures.
Context:
30-year-old male non-smoker planning for $100,000 in death payouts
Quotes are figures I got from CompareFirst.
Term Life:

Whole Life:

I covered the insurance companies - but you can probably do a simple search on CompareFirst to find the insurance companies.

$1,094 per year in premium difference
In total, you pay $3,570 in premiums for Term, and $46,761 in premiums for Whole, a big $43,191 difference.
Had you took that $1,094 difference in annual premiums and invested it in an index fund that has a long-term returns of 6% annually, that pot of money would have grown into $120,815.65 by the end of the 34 years - and it would be a lot more if you survive longer than the 34 years.

To make it an even fairer argument, you invest that same $1,094 premium difference into an index fund that gives you a long-term average return of 4.75%. That too will grow your money to $92,747.59 by the end of the 34th year - still $25,700 more than what the insurance company gives you. Why the big difference you may ask?

Because most of these returns are derived from the insurance companies investing the money into stocks and bonds that you and I can buy as well, and if stocks and bonds give you an average long-term return of 6%, they have to minus away fees and costs before they give you the returns. So net-net you probably are getting only 4% to 5% returns each year from buying an insurance plan (the returns could be worse).

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Important Point to Note:
When buying life insurance, don't be cheated into the mindset that "if I bought whole life insurance, by the end of the time if I do die, I can get the guaranteed amount + additional investment returns."
More often than not, you will get better investment returns if you bought a term-life insurance, pay lower premiums, and invest the premium difference into say an index fund that gives you an average 6% annual returns (which is fairly low returns already).

People often think that "if I bought a $1,100 annual premium whole life insurance, after 40 years, I can get $100,000 (guaranteed) PLUS additional returns from the plan (unguaranteed portion), making my insurance a lot more worthwhile".

The fact is, if you had bought the $100 term-life insurance for 40 years, and invested that extra $1,000 in an index fund that pays you a long-term average of 6%, by the end of 40 years, the insurance plan would have lapsed and you get no money back - yes, $40,000 goes into the insurance company's pocket. But hey, the $1,000 you invested in the market that gives you a 6% return each year would have grown to about $164,000 - more than the $40,000 premiums you have made, and also more than the $67,000 given by the insurance company as 'cash value'.

The Psychology Behind Whole Life Insurance Plans
The reason people buy whole life is that it is hard for people to get over the fact that after paying tens of thousands in insurance premiums over decades, they are not getting anything back. This is a psychological trick that can end up costing you money in the long-term.
So, think twice before committing to a Whole Life Insurance Plan.

The 2 Advantages of Whole Life Insurance Plans

  1. Your beneficiaries will definitely get a payout because (touch wood) everyone will eventually pass away. Whole Life insurance is forever, hence it is a definite payout
  2. If you do not have the discipline of saving aside that extra $1,000 each year to invest in the stock market through a passive index fund, and let it stay in there for 40 years, then maybe whole life insurance is not be a bad plan for you because it ensures that you will definitely pay that extra $1,000 and it will invest and grow the money on your behalf (just at a lower return).


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Image Source: NTUC Income

Friday, 6 July 2018

5% Travel Insurance Discount with FWD


At Investment Stab, we are always finding ways to help you save money, earn money, earn more money, and learn about money.
And we have just this offer right here today:
5% discount on your insurance premiums with FWD Insurance!

Simply click on the link below and you will be brought to the FWD website with a promocode to reduce your insurance premiums by 5%!
https://www.fwd.com.sg/?ref=180619MAOFyDcU

Nope, this is not a sponsored post.
Story about how this 5% discount came about:
Our content coordinator went on an overseas trip recently to Japan and bought travel insurance online via https://www.gobear.com/sg.

Here is why it is important to get travel insurance: Do I Really Need Travel Insurance?

He ended up choosing FWD because of price and coverage.
After buying the insurance, FWD offered a 5% discount promocode for him and his friends to use.
He figured it would be great to share it with our readers - EVERYONE SHOULD GET 5% OFF.
And that's why we are sharing this great promo code with you.
Utilise it well! :D

Recommended Post:Free $5 with DBS PayLah

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