Transactions for Sept '16 + accidental lifehack

Continued my DCA into the STI index. Another 100 shares for the month. Using the transactions capture from SGXcafe. :)

Incidentally, i chanced upon an accidental life hack from for a small amount of free cash flow. So i signed up for an insurance policy using the OCBC Cashflo card which breaks any purchases into monthly installments. And then because another policy came up which i preferred.... i freelooked the old policy (and got the cash refund from the insurance company in 1 lump sum).

End result - i got interest free installment from the insurance company. It wasn't my intention, but it is indeed an accidental life hack for a small amount of cash flow.

Insurance Review

Been busy recently trying to renovate my house.... costs of renovation is definitely way different from what i remember when i did up my house 8-9 years ago! My curtains and lights are double of what i spent previously. Although regrettably my record keeping the last time has been far from ideal, so wasn't able to do up a very comparison.

Any how.... due to the taking on of additional liabilities (and with getting older), decided to do an insurance review. I guess with age, one feels more afraid, with more things to lose... hence unwilling to take on risks which I can pass off to others.

Hospitalization and Surgical:
With the launch of AXA shield plans, i think it is currently one of the best shield plans around, with the highest annual policy limit (1 million per year), and longest pre and post hospitalization benefits. Meaning, one can claim for certain hospitalization visits after 365 days from discharge. I am currently with Aviva, and may be switching to AXA while i am healthy and still able to switch.

Critical illness:
I have Great Eastern's critical illness plan at the moment, but was quoted a similar one for AIA but at close to $1k cheaper per annum. The differences are, to me marketing tactics by GE to charge a premium.
 - For example, a shorter survival period of 7 days compared to 30 days. If one were to come down with a CI and passes away within 7 days... the CI will not pay out, true.

However, the purpose of CI is to help defray the costs of medication/differences in lifestyle after being diagnosed. If one were to die within 7 days, then the purpose of CI payout will not be required. The death benefit from my term life would pay out. The argument is that the premiums paid for CI policy would be 'wasted'. However, that's the purpose of buying insurance - i always treat it as an expense. People don't like to see wastage, and hence the sales of 'life policies' where you get what you paid for your premiums back is always higher. People fail to realize that a life policy is just a bundle of 'wastages + lending the insurance co to invest for you and return it back to you at a low rate of return'.

Death Benefit/TPD:
Increased it quite significantly, given the taking on of additional liabilities. IF something happens to me, i would not want my family to be saddled with a huge mortgage. The term life policy comes with TPD, so I am covered for that as well.

I got this instead of a reducing balance policy as i think the difference in price is not that material, and if i have additional obligations in the future, i would need to top up my coverage next time anyway.

Disability Income:
I added this as this is part of the holistic insurance package review. I feel that we should look at insurance needs as part of a holistic strategy... and this was how i viewed it. If i fall sick and needs to be warded, my H&S would kick in and pay for the bills. But if i cannot work due to the sickness, this disability income will kick in and pay for my monthly expenses (and mortgage).
If it is due to CI, i will be able to use the CI lump sum to pay for whatever bills that the H&S do not cover. This might include new drugs under approval which could prove effective, but not approved by H&S as yet.

I think i'm almost done, except for a personal accident plan.

Prestige Life Rewards

I was introduced to this new and wonderful product by a Great Eastern Agent. Don't invest in property, invest in Prestige Life Rewards (PLR) by Great Eastern. This works like property investment, only better!

Wow - is it true?



Because this agent is a friend, I am open to hearing more, and I was promised an analysis between property investment and PLR. As I have a HDB, the comparison will be between the 2.

As I receive the analysis, I opened it up, and was immediately sold by the great benefits of this product. Let me share it with you.

Actually I was being sarcastic. These kind of "analysis" actually pisses me off more than anything.

The analysis is quite biased and did not present a balanced view of both products. There is only the supposedly good points of the product and the cons of property investment – to me, this is more a sales pitch than any fair analysis

For example, and just to name a few:

(1) There was mention of an upcoming oversupply of HDB flats. This failed to mention the governments intent of increasing population in Singapore.

(2) Failure to mention that we are in a rising interest rate environment, which would adversely affect the product (given the element of premium financing).

(3) ABSD was mentioned that is incurred in purchasing a property – a noticeable omission was the mention the equivalent distribution cost associated with purchasing the PLR?
This to me gives a very indication of where the 'advisor's' interest lies - whether in providing an unbiased comparison of 2 products, or only interested in talking up 1 particular tied product. I think the answer is very obvious.

Fortunately, I also received the Benefits Illustration. This is a product that has an element of premium financing. That is, I put in an initial $800,000 (based on my property value) for a total premium paid to Great Eastern of $2,392,912

So I compared the cash bonus (or passive income goes the sales pitch) vs the net rental

It is obvious to me that rental income from the HDB yields overall better passive income. And I need to remind myself that the passive income from PLR has the added advantage of leveraging, and the indicative rate is the higher end rate with 2% borrowing cost constant. How true is that? I will leave you to judge.

For transparency, I am using a monthly rental of $2,500 - given a 5 room HDB in Bukit Merah, rental increasing at 2% p.a, y.o.y. In URA's website, we can see that the rental at 2007 is approximate $2,000 vs $3,000 in 2016. Instead of the 4% increase, I used a more conservative rate of 2%.

The surrender value of the HDB (sale in this case), vs the PLR is quite different though as there is an element of leverage. If all goes well at the end of 40 years (at 4.75% rate by Great Eastern), the surrender value is $2,615,066. Would my HDB be worth the same 40 years later? Probably not. However, this is not an apple to apple comparison, given the leverage involved.

What would be more comparable is if I sold my HDB and purchased 2 properties with leverage. In that case, I am sure the pay-off changes again.

Is it a good product? Did I bite?

No - qualitatively, I doubt that the motivation of the 'advisor' is for my well-being. Quantitatively, PLR takes a higher risk profile as an asset and still fail to beat the passive income element.

I did not thank the agent for introducing this product as I felt like I wasted time analysing on an inferior product. Thinking back - perhaps I should thank the agent, because it gave me a topic to write upon.

It really drives home the point of how no one cares for your money more than yourself.

Compare and Contrast - Insurance

The internet is really powerful nowadays.

Due to my upcoming trip to the UK, extending a few days after a business trip, i need to source for a travel insurance.

Etiqa had a 50% off promotion for travel insurance purchased directly from them, and it must have been one of the cheapest (if not cheapest) available.

Of course, there are differences between coverages etc, but overall, i think this is the best deal available.

Shopping around did save me a couple of dollars this time round!

[although the trip to the UK will likely blow off any savings available]