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Fergus Tan

Money is meant to help you improve your quality of life

Fergus Tan

Senior Partner at Vision Advisory Management

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Money is meant to help you improve your quality of life

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Senior Partner at Vision Advisory Management

Fergus Tan

Senior Partner at Vision Advisory Management

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Dividends

Good news, there are a lot of options nowadays for $100 RSP. If you are below 30 years old, most banks offer a highly discounted transaction fee. For example, OCBC's blue-chip investment plan offers buying and selling at 0.88% of the transaction amount. This means if you buy $100, you would only be paying less than $1 in fees. If you are above 30 though, typically it will be at least $5 or $10 per transaction. In which case, you have other options to look at. In most unit trusts investment, you can look at $100 RSP minimum too. Depending on where you buy them, you might encounter sales charge of around 2% for a non wrap account, and as low as 1% for a wrap account with 0.5% or 1% wrap fee depending on promotions and advisor. What this means is that you can get access to advice provided transaction at $2 per transaction assuming 2% sales charge. Do note, unlike ETF and stocks, unit trusts do not charge for the selling of it. If you do decide to do a wrap account, you actually get the flexibility to switch funds at no additional costs. You were also mentioning about monthly dividends. In the case of stocks, dividends happen on their own time table, and likely to be half-yearly. For unit trusts, you can find those that pay out monthly dividends. In terms of unit trusts, you can also find interesting investment ideas, such as the BlackRock Dynamic High Income fund, which pays out 7%. NOTE!! This is not financial advice or an inducement to trade. Please seek complete financial advice before making any decision. Cheers! Fergus PS: Need more specific advice on your situation? Feel free to reach out to me on Instagram https://rplg.co/fergusig Or you can find me on facebook in the Seedly Facebook group!

Investments

Savings

FIRE Movement

Is $1k a month income sufficient to go on sabbatical? There are many routes for you to do it, and there are basically 3 main angles to approach. 1) Portfolio risk 2) Portfolio leverage 3) Drawdown Just from the numbers, to get $12k annual income, you need to achieve 8% per annum from a $150k portfolio.. Portfolio risk means you need to see the asset class to invest in, in order to get the monthly income. Example, if you were to look simply at equity dividends, very likely you are going to get somewhere between 3% to 6% per annum. If you were to look at good bonds, it would be around 1 to 3% per annum. However, you could look at high yield corporate bonds. For example, some Indonesian bonds may offer up to 8 to 10% per annum. But should you be investing 150k there? I don't think so. Likewise, if you were to do options writing, it's possible to get a premium payout of 2 to 4% per month. But this means you may not get back the capital that you put in since the risk is conversion into equity at a lower price. But it will give you the monthly income paid out. Portfolio leverage is another factor. For example, if you were able to get $100k in a personal loan through balance transfers, it is possible to put this to work at a higher rate than the interest you are paying for it. Example, I recently got offered 6 months balance transfer from Citibank at 1.1% per annum, and no processing fee. It's possible to get a 12 months one too. Hypothetically, if you are even able to get a 4% dividend payout, you are positive in ROI. The risk is that your capital is not guaranteed, and at the end of 12 months when you have to repay the loan, you might have to use up your cash capital to cover any losses in investment. Example, let's say you buy into a basket of assets, which pay a blended 5%. You use $150k cash, and $150k loan (at 2% per annum interest to make it simple). So you buy $300k of assets, which will pay $15,000 of dividends. You need to pay interest of $3,000. This means you have a cash flow of $12,000. At the end of the 12 months, your $300k of assets drop to $280k for example. You still need to return $150k of loan, thus your capital left is $130k. Of course, it's possible for your investments to be invested in something safer, but please note that in almost any investment that does more than 4% dividend payout, it is unlikely to be guaranteed in the short term. Thirdly, your option is to do a capital drawdown. For example, if your blended portfolio is 6% dividend yield. This gives 9000 in dividends. You are still short of $3k, or around 250 a month. You will then sell off assets progressively to cover the shortfall, but it means at the end of 12 months, you are likely to have less than $150k. That's again taking into account that your investments are volatile and you won't get back the $150k anyway. Cheers! Fergus PS: Need more specific advice on your situation? Feel free to reach out to me on Instagram https://rplg.co/fergusig Or you can find me on facebook in the Seedly Facebook group!

Lifestyle

Credit Card

Shopping

Fergus Tan
Fergus Tan, Senior Partner at Vision Advisory Management
Level 5. Genius
Answered on 29 Sep 2019
So many reasons! Essentially tech startups are subsidising the cost of transactions in order to get more users. For example, I top up my GrabPay using a UOB ONE credit card. If you fulfil certain criteria, it will give up to 10% cash rebates every quarter. When I then choose to spend using GrabPay, I might earn grab reward points. If you want to stack 1 more level, You can use Fave app to link to GrabPay. So if you pay using FavePay, you earn 10% rebate on Fave, Grab reward points, and then credit card points/rebates. That's about the best reason actually.

Property

Investments

Fergus Tan
Fergus Tan, Senior Partner at Vision Advisory Management
Level 5. Genius
Answered on 29 Sep 2019
If you are looking for the purpose of future capital appreciation, then private beats out HDB in the current market due to the government policy direction which is likely to restrain any HDB capital appreciation. If you are looking to eventually rent out your property for rental yield, then HDB will yield one of the highest yield ever. To be honest, looking at your cash flow, it's also not likely you can afford a private 1 bedroom. https://www.propertyguru.com.sg/mortgage/affordability-calculator Based on 20 years mortgage loan, 5k salary, and 10k annual bonus, with 200k in CPF, and $50k cash, your maximum affordability is $550k. This will result in a loan of $300k and a monthly mortgage of $1k. A typical 1 bedroom condo might be 600-800k, to be honest. I'm not sure about your cash savings, but you would definitely need money for renovation and what not. My suggestion is to go for a resale 4 room actually. If you are comfortable, you might actually be able to rent out for income also. This will also give you enough debt leeway if somehow you get more income and will be able to purchase a second property. Some fruit for thought... Let's say you buy a Jumbo HDB in Yishun for example. Yishun is one of the few districts that have jumbo units which are bigger than 1300sq ft and is essentially a combination of a 3rm and a 4rm HDB. Very likely, you would be able to rent it out for more than $3k. And if you were to rent out the rooms individually, possibly more. Most private property would have a rental yield of 1.5% to 4% max. But HDB can still potentially get a rental yield of 9%. If you still have the dream of living in a private condo, this could help pay for that rent.

Insurance

Whole Life Insurance

Term Life Insurance

Fergus Tan
Fergus Tan, Senior Partner at Vision Advisory Management
Level 5. Genius
Answered on 29 Sep 2019
I think going to the basis of why get insurance might be more important... One of the key uses of insurance is to cancel liabilities. In some cases, liabilities and assets are in different stages of liquidity, hence companies have gone insolvent because there are not enough assets to take care of liabilities in the short term, although in the long term liabilities will be nett off. This is a consideration to look at, particularly if you have a lot of illiquid assets such as property. For example, mortgage insurance is crucial, because you don't want the banks to do a foreclosure sale of the house. Another use of insurance is for income replacement. In the case of critical illness, being unable to work means your primary source of income stopped. You would still need to cover your minimum needs, and not to even take into account change of lifestyle quality. Same for death actually. In that case, you are forming an income replacement fund for your dependents. For example, if your parents are in their 60s, their financial plan might have afforded them financial independence for now, but would they be reliant for you for any allowance or physical care in their 70s or 80s? It's a tough question to answer. Not to mention if eventually you get married and have kids, that's new dependents altogether. I had a married friend who just gave birth this year. She is 39 years old, and she told me she has saved enough for early retirement by 45. Looks like her plans just went off the road. The 3rd use for insurance is for alleviating minor inconvenience that is not catastrophic. Examples would be a personal accident, travel insurance, home contents, etc. They will hurt when it happens, but it won't change your lives. This includes situations where your house catches fire due to a neighbour, much like in Ang Mo Kio recently. The last use would be to leave a legacy. My belief is that we are here to leave the world a better place for the future. Our value adds to the world, so as to speak. Even though I am single and no kids, I bought a $1million term insurance when I was 32 years old, many years ago. In the unforeseen circumstance that something happens to me, I will quite definitely change my family's life. If not a wife or kid, then my sister. I've seen enough rich people to know that family background matters during the early years of a kid's development. Some people might set up a scholarship, some might donate to a charity. With regards to term and whole life, there's no answer really... There's a huge range of term products... You have those that cover till 65/70/75, and those that cover to 99. Whole life, you have those with multipliers, which are essentially embedded term insurances, and you have limited pay products. The key is understanding your final objectives and your cash flow forecast for the next 20-30 years of your life. I personally chose to buy a jumbo term for legacy purpose, but note that this covers death. In the case of CI, realistically most CI policies are NOT going to cover you for the whole of life, due to the cost. So expect to undertake the risk in your 70s or 80s if you are alive and have CI. The easiest way to look at it is that term is usually for protection over a fixed period that you know of. Whole life is the safety that covers the whole of life, regardless of when you die. Hence, a term for mortgage cover makes sense. Term for covering yourself until your kids reach 21 years old makes sense. Term for key-man insurance makes sense. Usually, people would use term to get a larger than usual coverage when their budget is not available. I personally have low CI coverage also. This is even though I had relatives (1st and 2nd-degree relatives) who have had diabetes, heart attack, leg amputation, lung cancer, Alzheimer's, blood sepsis due to UTI. I think people generally have different beliefs on CI and it's the effect on death or work. Likewise for Early CI. In most cases of early CI, you are still able to work, hence you won't need extended coverage for that. However, the cost of treatment is still pricey. It is also highly likely that if you do get a CI policy, you would want to get a multi pay anyway. The reason is that if you got CI once, you are unlikely to be able to buy a policy. However, your paradigm then would be that you are more likely to want to buy coverage. So to me, it makes sense for someone who wants to buy CI, to buy a multi pay policy. Based on your profile above, without understanding the risk you are willing to undertake, it seems to me that it may make sense for you to undertake the protection risk by having a lower coverage, and looking to increase your passive cash flow, ie diverting more of your income into investments for the purpose of attempting to replace 50-80% of your active income. You would then look to take a reduced insurance coverage just in case something really happens in the next 30 years (till 62 y/o). Up to a point where if you are willing to stay in B class wards in restructured hospitals and seek CI treatment there, you can actually undertake the risk and channel more towards investments. (And I would heavily emphasize, THIS DOES NOT CONSTITUTE PERSONAL FINANCIAL PLANNING ADVICE AS I DO NOT HAVE THE FULL FACTS. This is just what I might have done if I am in your shoes.) Personally, I suggest you talk to a few more planners. If they dress like a waiter and wants to sell you saving plans, walk out. However, if you do find the first meetup consultation helpful, consider paying a fee, or buying a meal :) If you would like to look for someone who does a deep dive into your goals, values, challenges, and experiences before talking about financial planning, feel free to reach out :) https://rplg.co/talktofergus

Property

Investments

Lifestyle

Loans

Fergus Tan
Fergus Tan, Senior Partner at Vision Advisory Management
Level 5. Genius
Answered on 29 Sep 2019
I answered a similar question here https://seedly.sg/questions/what-would-be-a-better-choice-using-lump-sum-of-money-to-pay-off-one-significant-chunk-of-debt-or-invest-that-money?aid=17194 For that, I also created a google sheet, to compare between taking a loan or paying using cash https://rplg.co/slopu In short, If your loan interest is 2.6%, and you are able to get investments at least 2.8%, technically you will come ahead by taking a loan and using the money to invest. You can make a copy of the google sheet and do your own calculations https://rplg.co/slopu But after that, it's really down to your personality and objectives. Some people might find active management of the investments a hassle. Some people feel they can't even do 2.8%, and they feel that they might have a double whammy if banks want their loan back, and their investments are illiquid. There are other intangible factors such as having liquidity just in case or seeing what is your age and all that... There's no perfect answer, but if it was me, it would be the loan any day, every day.

CPF

HDB BTO

Mortgage loan is one of the cheaper loans you can find. And in the case of BTO/HDB, you can never refinance the loan. In general, I would suggest you do not voluntarily contribute at this point. In the past, there will be people who would even buy investments with CPF-OA to lock up the money, let the downpayment happen, then sell the investments. I don't think you should do that either though. The biggest reason is that you would want to keep excess CPF-OA monies, and cash on hand, in case of any emergencies like job loss, or being unable to service the mortgage. In the case of keeping cash on hand, you would probably need it for various stuff, such as renovation, daily expenses, etc. Best to sit down and draw out your budget. Understand how much reserve buffer you have, and anticipate any near term large expenditure. If you would like, you can schedule a goalsmapper session with me, and you would get a chart similar to the one attached. https://rplg.co/gmconsult !
Answer image preview

Lifestyle

Investments

Fergus Tan
Fergus Tan, Senior Partner at Vision Advisory Management
Level 5. Genius
Answered on 29 Sep 2019
It's a tough question, due to the complex nature of the spillover effects of an event like F1 into tourism, and many other multiplier effects. On the baseline first, an F1 street race can cost between $40-60million to host. (All amounts in USD) This is purely for staffing, stands, road paving, insurance, etc. There's then the licensing fees and all, because well, F1 teams need money to eat. In general, the F1 teams receive more than $1billion over the course of the year and 20 races. The actual licensing fee charged in Singapore is not known, but money comes from somewhere. In the first race in 2008, the known statistic was that the race costs S$150million, and the Singapore government paid 60% of the bill. https://en.wikipedia.org/wiki/SingaporeGrandPrix Very fascinatingly, the total attendance is actually quite telling of the economic mood over the years, and the last 3 years it has actually risen. So where do the other revenues come from? CESS is one of the more significant income sources for the government. During the F1 period, all gazetted businesses have to pay an additional 30% tax https://www.stb.gov.sg/content/dam/stb/documents/industries/hotel/2019%20Cess%20Act%20GuideFinal.pdf https://www.straitstimes.com/politics/parliament-more-businesses-to-be-liable-to-pay-tourism-event-tax Based on past collections, this is about $10-15 million a year. It's not stated if the Singapore government takes a share of the event promotor's profit, but let's assume it's no. Tickets can range from $200 to 1.5k for the 3-day event but note the expense of running such an event include the multiple concerts and what not https://f1destinations.com/the-definitive-ranking-of-2019-formula-1-ticket-prices/ So tangibly, the Singapore government only makes perhaps $20million, out of an annual expenditure of $90 million. There are also multiple disruptions, and deployment of police, security, and spillover time wasted and inconvenience to people working around the area. But there's also the intangible benefits, such as increased brand recognition of Singapore as a tourism destination, potentially longer tourist trips who decide to stay after the F1 period, as well as baseline support for the economy. To draw a parallel example, the public transport in Singapore is actually not a lucrative business. But you need the public transport business in order to have a sizable business so that you can venture into profitable spaces such as taxis, private charters, retail, advertisement, engineering services, etc. The way I see it, F1 helps increase the competency of Singapore companies, so that they gain the skillset to venture overseas to run similar events, or to grow their profits from other complementary areas. Lastly, tourism receipts technically don't benefit the Singapore government directly, but it does help the businesses here get more revenue, and eventually, that helps create a more vibrant economy. This might be a good read https://www.reuters.com/sponsored/article/ten-years-on-f1-success-still-paying-dividends-for-singapore

Career

Investments

Savings

Insurance

Fergus Tan
Fergus Tan
Level 5. Genius
Answered on 25 Sep 2019
The financial planning industry has matured significantly since the FAIR review in the last 5-6 years. Basically there are 4 main areas 1) Tied Agencies. There are like great eastern, prudential, etc. A tied agency represents a single insurer because they are an agent of the insurer. But by being an exclusive distributor, they typically receive higher compensation, as well as intangible incentives. Hence, it could be office expenses, incentive trips, etc. The biggest benefit of being in a tied agency is that the brand name is typically well known. This can be useful when you are dealing with high net worth because their concern isn't about the absolute maximum return, but sometimes it's about the peace of mind and the general experience. 2) Financial Advisory Firms These have splintered off to many different types over the years... Initially called Independent Financial Advisors, MAS restricted the use of the word independent due to abuse. How it usually starts is that a director from a tied agency decided they wanted to own the supply chain, so they come together with other directors to set up such a firm. Usually, they can represent multiple insurers and investment platforms. In terms of compensation, there are also 3 models, namely commissioned based, fee-based, and fee only. Fee-based means they charge a fee for consultation, but they will still keep the commissioned. In this space, you would have boutique FAs, mass-market FAs (like Finexis, PIAS, financial alliance, IPP, etc), hybrid FA (like Aviva FA, Manulife FA), and what I personally term, fake FA (which is basically tied agencies who call themselves FA, but doesn't distribute other life insurer's products) 3) Investment Advisory These are more likely to be focused on the investment aspect of things. Most of the time, these were the evolution of the stockbrokers, or unit trust providers. Not a particularly big group in Singapore. If anything, this group will look for HNW client in order for their time to be worthwhile. Venture Funds, PE funds, Family offices will also fall into this space. 4) Banks No matter what people say, banks as a consumer financial sales business are still good money. You basically represent the bank in dealing with clients, and clients trust the bank simply for its brand name. There's no right or wrong place to start to be honest. Tied agencies are most likely to have the most structured training that can give you a good commissioned income. FA is most likely to force you to learn the fastest. They are also less homogenous, so the culture of the branch/organisation you join is more likely to be the reason. If your director likes to do digital media, then more likely than not, that's the route you will go. If the director does client seminars, then that's what you follow. Investment advisory might be a space you can go into given your masters in finance and accounting. It's a tough space to break into, and you most likely have to start as an analyst to crunch numbers or take a night desk. For the banks, you have to take the risk that you start near the bottom. In personal banking, or wealth banking. If you are lucky, you meet good clients, get assigned to good branches, and you promote fast. If you are not, then you'll leave soon anyway. Banks generally have good training, but they are not as sales-oriented as a tied agency. More likely than not, it is to train you to follow a certain mould. My suggestion, meet up with different directors. You will get a lot of stories and you can see their style. There's no 1 right way to success. So you have to see which one fits you the best. Good luck!

Insurance

Investments

Savings

Fergus Tan
Fergus Tan
Level 5. Genius
Answered on 25 Sep 2019
It's hard to say for sure because there are not enough facts. Before any financial advice is provided, it's important to understand your money mindset, as well as your life situation and experiences. This would include your age and any foreseeable financial goals. You mentioned it is not your priority or capacity? So it might be beneficial to start from there. The concept of life-centred planning is something that's big in the USA but quite new to Asia. The purpose of money is really to improve your quality of life, and it's not something you should sacrifice your daily life just to save for retirement. Getting clarity on retirement needs is important, simply because the number can be blown up to a huge number. You mentioned that your fundamental protection is covered, so based on the way you say it, I have a feeling you are fairly young, probably mid 20s or so, maybe even younger. If that's the case, I would consider skipping ANY endowment products. I believe the objective in your 60s is to have passive income that sustains your living standards. This can come from annuities, investment dividends, or even businesses. It's hard to tell what is your tolerance to volatility, but what I would suggest is to meet a couple more financial planners to just get recommendations. Don't be afraid to meet them and walk away without buying. Guns are illegal in Singapore anyway, so don't sign anything if you don't feel it is right. HDB is a low target in Singapore. Unlike in most countries, the government actually makes it really easy for a married couple to buy. In fact, I would even say you don't really need too much financial planning to hit that goal. A condo is a different story altogether. In a nutshell, go meet financial planners in person. Nobody can give you a piece of decent advice online.
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