Wealth Management Singapore

April 23rd was a peak for equity markets. The market has fallen quite substantially from there, which I’m inclined to believe is a correction and a price-in of slower growth in the world economy with the problems in Europe, tensions in Korea, Chinese property assets inflation fears, slower than estimated increases in jobs in US.

Chart below shows the performance of the BRIC (Brazil, Russia, India, China) countries since the 4/23 peak. India (Sensex Index) has held up the best by quite a bit with a decline of just over 5%. Brazil’s Bovespa Index is down at -11.2%. China’s Shanghai Composite is down 15.8%, while Russia’s RTS is down the most at 16.4%. US’ S&P 500 is right in middle with a decline of 12.8%.

While the US and China have just moved to new correction lows, Russia, Brazil, and India are all above the lows they made in late May.

Adapted from Bespokeinvestment Group at www.bespokeinvest.com

May has been a volatile month. Europe’s sovereign debt risks and tensions in Korean Peninsular weighs down heavily on the financial markets while economic data has shown that the recovery is underway.

Europe

Speculation and intense debate on 2 issues, whether Greece will be forced to default and whether Euro will lose some of its weaker member countries has died down a little. However, things are still not certain a month after attacks lead to a trillion dollar bailout package. Euro skeptics say the forced spending cuts and tax increases will scuttle a recovery before it takes hold. The fiscal austerity measures will be a big drag on growth. Spain lost its AAA credit grade at Fitch Ratings, dropping one step to AA+ to a “stable” outlook.

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Thought of putting this comparison up on the website. This is still valid 1H2010. These tables show the insurance charges for Investment Linked Policies of different companies as they are printed with every benefit illustration. The insurance charges forms the major part of the cost to the policy holder, others includes administration fees, fund switching fees and so on.

There is really a difference in cost. It is not convenient to place it on the website. Contact me if you wish to know more.

I have been particularly interested in taking over neglected accounts. There are a few reasons for this. For the client, it is quite difficult to get good advise and service in the market today. Additionally, this means additional value to the client at no cost to them.

Bank customers buy thousands of dollars of investment products from Personal Bankers (who may or may not be well-versed in investments. They are trained on a sales pitch and try too get the sale). Customers are charged 5% upfront fees. However, once fees are collected, expect no advise. It is not the bank’s responsibility to monitor the investments or advise customers. Basically, customers will hear nothing except a thick prospectus sent to them every year.

Customers of advisory/insurance firms pay annual advisory and service fee of between 0.7% to 1.25% of portfolio value. However, in many cases the clients do not get any advise or updates promised and paid for. Some customers have not heard from the agent/adviser in years!

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You will have heard me mention the Greek sovereign debt problem before. In February, this issue has been weighing down the markets somewhat pending a response from European Central Bank. Last Thursday, a serious contagion forced ECB to response seriously with a huge EUR750 billion safety net to arrest the fiscal crisis and stop the turmoil from spreading to the other 15 nations that use the euro.

Bank of America – Europe Bailout

Markets have been really volatile last 2 weeks due to this issue, other issues like China’s property prices and inflation do not help in calming the market. Main story goes, after the drop last week, traders and investors gave positive response and the markets for fixed income, equity and Euro rebounded on Monday, a day after hard fought European lifeline.

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Recently, I arranged for a client to put his cash to an instrument that earns higher interest rate than the bank’s savings account. If there is a alternative that has the characteristics of to the savings account and earns more than the savings account, a lot of people will be interested if it fits their requirements. This is because the interest rates of saving accounts are very low!

The alternatives is the Cash Fund or a short-term SGD money market fund. You can get them from iFast platform through your Independent Financial Adviser. If you do not need any advise or further information, you can get it from www.fundsupermart.com.

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There is high demand from many clients for an instrument which gives them more returns than fixed deposit but just slightly more risky than common instrument. Now, there are a few alternatives to the good plain old fixed deposit. Let’s examine the returns, risks, as well as the characteristics like liquidity and convenience.

1. Bond Funds
   Bond funds invests in bonds which essentially are instruments guaranteed by the companies or government entities issuing them. Advantages of bond funds is that they are easily available and the denomination of the investment is relatively small at a thousand to a few thousand dollars. One disadvantage are bond funds do fluctuate slightly in value as underlying bonds in the fund do fluctuate in prices during their lifetime.
   
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Global economic recovery
Evidence of a global economic rebound leads the news of the past week. Reports showed a recovery in manufacturing in the U.S., China, Japan and Europe. February had experienced a correction in the market in general due to problems in Greece, stimulus exits and uncertainty over the extent of recovery.

U.S. Employment Data
Employment in March grew by the most in three years, representing a turning point for the labor market as U.S. market recovers from the deepest recession in seven decades. Payrolls rose by 162,000 workers, the third gain in the past five months and the most since March 2007. Unemployment was 9.7 percent for a third month. Jobs report makes it `pretty clear’ recession is over.

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Take avantage of Supplementary Retirement Scheme (SRS) and save on income tax like a lot of other middle aged Singaporeans. SRS was established to encourage individuals to save for their retirement by offering tax incentives. SRS is open to all Singaporeans, Singapore Permanent Residents and foreigners.

Benefits
Besides having a larger pool of savings upon retirement, members can also claim tax relief for contributions made to the SRS. Investments and gains in the SRS are tax free.

Tax will be payable only when SRS savings are withdrawn. Only 50% of the sum withdrawn will be subject to tax. Withdrawals may also be staggered over 10 years to enjoy greater tax savings.

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CPFIS Changes

Starting from 1st July 2010, the first $40,000 of members’ Special Account(SA) balances will no longer be allowed for investments. The previous limit for 2009 is $30,000.

There is no change to the requirement for members to set aside $20,000 in the Ordinary Account (OA) before they can invest their Ordinary Account monies.

Members will still be able to use sums above $40,000 in their SA to invest. If you have already bought investments under CPFIS-SA but do not have $40,000 in your SA, you will not be required to sell them. However, when you liquidate these investments, you would not be able to re-invest them unless you have at least $40,000 in your SA. Additionally, standing instructions for monthly deductions of SA into investments will cease if there is less than S40,000 in your SA.

CPF Interest Rates

CPF Interest Rates (01 Apr 2010 to 30 Jun 2010)(reviewed quarterly)
Ordinary Account – 2.50%
Special & Medisave Accounts – 4.00%

CPF Interest Rates (01 Jan 2010 to 31 Dec 2010)(reviewed yearly)
Retirement Account – 4.00%

The Government will maintain the 4% p.a. minimum rate for interest earned on all Special and Medisave Accounts (SMA) monies and Retirement Account (RA) monies until 31 December 2010. After which, a 2.5% minimum rate will apply for all CPF accounts.

In addition, an extra 1% interest will be paid on the first $60,000 of a member’s combined balances, with up to $20,000 from the OA and the rest on SMA or RA. The extra interest from the OA will go into the member’s SMA or RA to improve his retirement savings.