My First Time Was Painful (When I Started Investing)

Why and how I started investing

[6 min read]

Written by Sherwin Chan, edited by Jackie Tan.

How I got lucky with boredom

Before you read on, what I have written below is more on how I got started with stock investing and some snippets of suggestions inserted based on my personal experience. It won’t be a long read but neither will it be short. Hopefully, I can provide prospective investors with some peace of mind of what to expect. I’ll follow this article up with another one that will help you understand the different types of financial opportunities and how some will not suit you.

Boredom

I started investing due to boredom.

Now hear me out, it is not that I do not have the awareness that early financial planning would be beneficial in the future, but rather the reason why I first picked up a book related to investments was merely due to boredom. I started investing when I was in the army doing my national service; I was a clerk and was fortunate enough to stay out (go back home daily). Since my daily duties were not physically exhausting, by the end of the day, I had sufficient energy to engage in my hobbies – binge watching my favourite shows.

As time grew on, I got bored of the routine where I just “consume YouTube videos like there is no tomorrow” lifestyle and decided to read more educational non-fiction books instead. This led me to non-fiction books that eventually brought me to topics like economics and investments. I decided to pick up the book on “Stock Investments for Dummies” (I was a dummy then so I might as well start from the book designed for me) and was pretty apprehensive about it at first but still gave it a shot.

Me giving a shot at the book led me to spend the next four months intensely devouring its contents. I studied my book as if I was taking A Levels and learned lots of stuff from it. Now, I’m not promoting the book but merely telling you how I felt when I first dabbled in a topic that I did not know. I was like a caveman seeing the fire for the first time; everything was new and too exciting for me to pass. I’m sure that’ll be the case for you newcomers as well.

Suggestion #1: Your first book should give you the general idea of where to begin

While we are on this note about what books to start with, I suggest newcomers pick up a book that covers the different forms of investments. I started with “Stock Investing for Dummies” (more specialised to stocks) partly because I already knew I wanted to try stocks first before others, but also because I couldn’t find the “Investment for Dummies”, the more general one, and was lazy to go find it on other bookstores. For beginners, always know what choices are available to you first before picking one and going to learn more deeply about it. This means knowing what a bond is, what are ETFs, what are REITs and all the other possible investment products available out there for you. The more you know about each type, the better you can invest based on your needs. Ultimately, if you don’t know anything about investments, it’s best to start with the definition, scope and depth of it first! I will be covering more the different forms of investments in the follow-up article that will be so stay tuned!

Creating my first account

Apologies for the slight digression above but that’s how I am going to place my suggestions. They are all just snippets of useful information, that will be inserted wherever appropriate. Going back to my story…

I eventually got into the process of creating my first brokerage account with DBS Vickers Securities, and it was at this point that I felt that I should have done more. I was naïve then and just assumed that a good brand name for a company was all there is to a brokerage account; I’m not saying that my experience DBS Vickers is terrible, in fact, my experience so far with them has been positive. All I am saying is I did not do the necessary research properly before choosing my brokerage firm. I was lucky that DBS is an excellent firm with a strong reputation, but for other first-timers into the investment scene, I shall create a short to-research list about the brokerage account in the follow-up article (otherwise we would never end this article). For now, let me just share with you my experience when I created mine.

When I first wanted to create an account, I was not eligible for a full trading account (above 21 years old) and signed up under their young investor scheme (18-20 years old) instead. They explained to me what the benefits of having their trading account was and gave me a short risk-profile test and sizing my investment knowledge. Which basically went like this…

Well, the picture might have slightly simplified things but what I can say is that they do all the assess you in a natural flow of conversation that helps keep young, apprehensive investors like me at ease. They also informed me that the brokerage account is different from your usual bank account and how to top up money into it to start trading. They also explained the different avenues which they can help me improve my knowledge of investments. I eventually got my brokerage account and SGX CDP account (requirement if you wish to trade in SGX) created at one go in 15 minutes. With this, I finally had a powerful platform to start my stock picking.

Devouring information

Now doing all the above will only give you the platform to start investing. The other, more difficult portion is knowing what to buy. What I’ve learned over the past couple of years is the importance keeping up to date with industry, economic, political trends and random information off the news. During the whole course of the journey, it is essential that you know everything and anything about the stock you want to buy or already have. Only when you know the latest trends, predictions in the future can you be “in-the-know” about what stock to buy, whether the industry is expanding, threats to your company etc.

Suggestion 2: Start reading early

You don’t have to have an investment account to start knowing what is happening around the world. A lot of news event around the world occurs in a sequence of events; they don’t happen singularly. For instance, predictions you hear about quantum computing doesn’t just come from the wild imagination of a tech geek, these futurists often have seen information and news from around the world that gradually roll out. If you don’t expose yourself to this small but gradual steady stream of information, you will never be able to analyse trends yourself and must always rely on others. What I’m saying is if you’re the kind of person that doesn’t have the habit of reading news regularly, it’s difficult to follow what is happening in the world and that puts you at a considerable disadvantage over other investors in the market. You’ll always be behind the curve. So, start early!

Choosing the first stock

The first stock I picked was a company listed in SGX. It was G92: China Aviation Oil and getting to this stage where I decided my first stock took me two weeks of research. How I went about choosing my first stock was looking at things from a macro to a micro perspective. Firstly, I analysed the country and the sector that I thought had growth potential. In this case, I chose China’s booming aviation sector. After which, I decided on the industry within the sector, and this was the aviation fuel supplier business which China Aviation Oil was engaged in. I mean, planes need fuel to fly so being in the aviation fuel business would suggest that this industry would be part of the booming sector. After choosing the industry, I narrowed down to the different companies and set a price target to buy & sell. Once I felt the price was sufficiently low and had excellent earnings potential, I bought the stock.

How I chose my first stock may seem easy but trust me, it was tough. Firstly, there are many booming industries and stocks with high potential and narrowing it down to one was hard. It is always best to have a few shares in mind eventually and pick one with the most earnings potential based on the current and future market price. There is a reason why I took two weeks to do this because there were many considerations and it is okay to feel lost during all the research. After all, the companies and industries on the list are probably those that you never heard of so take your time to understand as much as you can!

Suggestion 3: Don’t limit yourself

You may have heard from your parents, investment gurus that blue-chip stocks (large established firms) are stable and provide excellent earnings. While it is true they are stable; they may not offer the BEST gains. Don’t just limit yourself to a particular type of stocks, countries, industries etc. Always keep an open mind and do your stock screening well. Always remember to do your research correctly and BELIEVE IN YOURSELF! It’s better to make mistakes when your starting capital is small than make an error in the future when your wealth is more substantial.

Suggestion 4: Test whether your pick survives the different ways of picking a stock

My method of going from macro to micro can be a way which you choose shares. However, there are many other strategies which people employ. Pick an approach first and once you have a few companies narrowed down, test them with different strategies and see whether they survive the litmus test and is still worthy of a purchase. The stock doesn’t have to endure all approaches but the more the better. Also, don’t pick a plan that does not align with your goals and needs.

What’s next after you purchase your first stock?

Be patient. That’s the number one key. I know it is tempting to sell your stock when you see a sizable increase in its value OR a sudden decrease in value but always stick to your price objective. In the meantime, it is essential to check the value of the stock at regular intervals to monitor for sudden price changes. Sudden price changes might mean there is new information that may affect your stocks current and future value. During all these, never stop keeping yourself up to date with the latest trends and keep an eye out for the next opportunity. New information in the market can change your price objective and remember to re-evaluate the present and future value of the stock regularly.

My journey from picking up the first investment book to purchasing my first share took me a total of 4 months. It may seem long but in hindsight, the moments I had when I felt lost was invaluable because it taught me many things about how to do and not-to-do things. Trying to establish a sense of direction was arduous and painful, but I’m glad to have gone through this journey. I am now more financially independent and able to help my fellow peers. I am continually learning and from my experience, the critical thing I can share is TRUST YOURSELF.

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

 

Ask fML Advisers: What Are The Most Common Questions On Integrated Shield Plans?

fML advisers share the most common questions on integrated shield plans

[5 min read]

MediShield Life is a national health insurance scheme that protects all citizens and PRs regardless of economic status and health to cope with large hospital bills. They can also purchase Integrated Shield Plans as an upgrade to their basic plan to stay in higher class wards. We had the impression that there is plenty to add on top of our previous piece on the most common misconceptions about Integrated Shield Plans. As such, in this article fundMyLife asks another three of its financial advisers – Michelle Ngiam from Great Eastern, Roshan Belani from AIA, and Melvin Liu from Manulife – about the most common questions on Integrated Shield Plans.

Michelle Ngiam, Great Eastern

Michelle Ngiam, Great Eastern
Michelle Ngiam, Great Eastern

#1 Do I still have to pay for MediShield Life when I purchase an Integrated Shield Plan?

Yes, an Integrated Shield Plan is an upgrade of MediShield Life. Therefore, MSHL is still embedded within the IP. By paying the premium to the private insurer, you are actually paying for 2 components – MediShield Life premium and private insurance company premium. CPF still deducts the MSHL premium from your payment.

#2 I already have MediShield Life. Why do I need to purchase an Integrated Shield Plan?

MediShield Life will provide coverage for your large hospital bills in Class B2/C wards in government hospitals. If you prefer to seek treatment in Class A/B1 or in private hospitals, MediShield Life will not be able to cover the bill fully, leading to you forking out more from your MediSave account or cash.

Therefore, by upgrading your MSHL with an Integrated Shield Plan, you have the choice to cover all the way up to private hospitals. This allows you to have the option to go to any ward of your choice.

#3 Will the premiums increase once I purchase an Integrated Shield Plan?

Yes, generally premiums will increase as you get older. However, there are also a few factors at play here.

Firstly, it depends on how the insurance companies price their premiums. Most insurers also use an age-band premium scheme like MediShield Life. For example, if you are 35 years old, you will be paying the same premium as the rest of the people insured within the same age band of 31 to 40 years old. The premium will increase once you enter the next age band (in this example, 41 to 50 years old).

Secondly, they are affected by government policies regarding health insurance in Singapore. In 2015 when the government upgraded MediShield to MediShield Life (MSHL), the premiums were also increased with added benefits. With the upgrade of MSHL, insurance companies had to reprice their plans to cover the new premiums of MSHL, with enhanced benefits for better overall coverage.

Lastly, how the claims experience for the insurer has been like. In recent years, many insurers have faced rising claims and it has affected the premiums leading to premium hikes. The increases were largely focused on plans covering private hospital treatments and stays.

Roshan Belani, AIA

Roshan from AIA
Roshan Belani, AIA

#1 Am I covered for overseas treatment?

The answer is both yes and no. For most integrated shield plans, overseas treatment is only covered if it is deemed to be an emergency. At best, even if a plan allows for general overseas coverage, the benefit payable is still limited to the level of Reasonable and Customary charges in a Singapore private hospital. With this limit, say if a surgery in the US cost $20,000, had the same surgery been performed in a private hospital in Singapore at $10,000, then the claimable amount would only be based on the customary charges in Singapore, which is $10,000 in this example.

As such, it is important to determine whether overseas coverage is necessary. For most who are working in Singapore, shield plans generally provide good level of coverage for the individual based here. However, for those who are working or studying overseas, having a global plan or even a plan that is available in that country will be a great complement to the shield plan. The shield plan should still be active in case the individual decides to come home to Singapore for various reasons such as finding a job, starting a family or even retirement.

#2 Am I covered for pregnancy?

This is a question commonly asked by first-time mothers as they prepare themselves for the cost of pregnancy. To be very clear from the beginning, a pregnancy without complications with straight forward procedures will not be covered under a integrated shield plan. This is because there was no ‘risk’ or incident that required protection from per se and thus, the bill would not be reimbursed. However, should pregnancy complications arise during the pregnancy, and if it falls within the definitions as stated in the integrated shield plan, the bill would be reimbursed accordingly.

Of course there are maternity insurance plans out there that provide cover for even normal deliveries and prenatal consultations. However, they are in addition to the integrated shield plan and generally cost much higher premiums.

#3 Does the plan cover me for outpatient treatments?

Again, the answer is yes and no. For outpatient treatments, they are claimable only under two conditions: 1) Treatments and consultations eventually lead to confinement in the Hospital for hospitalisation or a surgery being done and 2) falls within the allowed number of days for pre & post hospitalisation benefit. Both conditions must be met and if either one fails, the outpatient treatments is not claimable.

To give an example of how condition 1) might not be met, an individual who fractured his foot was referred to a specialist but was told that no hospitalisation or surgery was necessary. Consultations and treatment costs for its healing would not be covered since the individual did not have to stay in the hospital or require a surgery.

To give an example of how condition 2) might not be met, an individual recalled having seen a specialist about 4 months (120 days) from his hospitalisation. His integrated shield plan only allowed for 100 days for pre-hospitalisation treatment. As the number of days exceeded the allowable limit (120>100), the consultation and treatment that day would not be reimbursed.

Melvin Liu, Manulife

Melvin Liu's picture
Melvin Liu, Manulife

#1 Can my hospital plan cover me for scope procedures (eg. colonscopy / endoscopy etc)?

Colonscopy/endoscopy (and similar procedures) are considered as a day surgery procedure and  will be covered under shield plans. However, it’s important to note that this will depend on whether its a routine check-up or whether it is ordered by your doctor during a consultation. It may not be covered if it is simply a health screening.

#2 Can my shield plan cover me if I am hospitalized overseas?

Overseas cover generally apply to emergency hospitalization, and for some insurers, benefits may allow for pre-arranged overseas inpatient treatment which is pre-approved by the insurer. It is best to buy additional travel insurance if going overseas.

[Editor note: We wrote something about personal accident plans when you travel overseas, so you should check that out too]

#3 I recall I have bought a hospital plan, but I can’t remember which insurance company I bought from or what plan I bought. How do I check?

You can login to your CPF account under: My Messages > Healthcare > MediShield Life/ Integrated Shield Plan. From there you should be able to see which company is your insurer. You can contact your insurer to find out the details of your plan.

fundMyLife Summary

Michelle provided the rundown on common consumer concerns on getting Integrated Shield Plans, such as what it is and whether premiums will increase. Roshan explained that Integrated Shield Plans do not cover normal pregnancies, but will kick into effect when there are complications that occur during pregnancy. He also shared that Integrated Shield Plan claims for outpatient treatments can be a bit complicated, as it depends on whether the outpatient treatment results in hospitalization/surgery and that the outpatient treatment fell within a stipulated time frame from hospitalization. Both Roshan and Melvin wrote about whether Integrated Shield Plans will help when the consumer is overseas – they both recommend that it’s wiser to get travel insurance when travelling. Melvin cautions that endoscope procedures is covered if it is ordered by a doctor, but a routine checkup is not covered. He also gave advice on how to check which company the consumer bought the Integrated Shield Plan, by going to the CPF website.

Conclusion

That’s all folks! We hope this article shed a bit more light into the most commonly asked questions on Integrated Shield Plans. If you’ve more queries on the plan or are considering to get insurance but don’t know who to ask, head on to our main site and ask our curated pool of financial advisers! Alternatively, if you’d like to connect with either  Michelle Ngiam from Great Eastern, Roshan Belani from AIA, or Melvin Liu from Manulife, just click on the link in their names and you can ask them questions directly from their profile pages.

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

Ask fML Advisers: What Are The Common Misconceptions About Integrated Shield Plans?

Financial advisers of fundMyLife share some common misconceptions about integrated shield plans

[5 min read]

According to the Ministry of Health, the MediShield Life is a national health insurance scheme that provides lifelong protection against large hospital bills. On top of MediShield Life, locals and PRs can purchase Integrated Shield Plans from six insurance companies, which provides additional coverage for higher hospital class wards. While MediShield Life is relatively straightforward, Integrated Shield Plans can be quite a tricky matter.

In the past, we wrote about the considerations to make before purchasing Integrated Shield Plans. However, we also realize that there might be clarification required before embarking on buying these plans. Who better to clarify possible misconceptions, but our very own financial advisers of fundMyLife? In this article, we ask three of our fundMyLife financial advisers – Winifred Tan, Jonathon Han from Prudential, and Ryan Teo from AXA – about the common misconceptions about Integrated Shield Plans.

Winifred Tan

Winifred Tan, Great Eastern
Winifred Tan

#1 “IP plans are the same as CPF Medishield Life plans”

Firstly, Medishield Life (MSHL) and IP plans are not exactly the same although they have some overlapping similarities. Both MSHL policies and IP policies are payable by CPF. MSHL is a compulsory hospital/surgical insurance for all Singaporeans and PRs which covers only basic hospital stays, e.g., daily room and board benefits, and basic surgeries, but with limitations on claim amount and also on type of hospital that the user can stay in (up to only public B2 ward, 6-bedder ward).

IP plans are composed of MSHL as its foundation and an additional private insurance on top of it from either of the six insurers in SG to remove all the category limits and allow users to even insure themselves for better types of hospital services e.g. Private hospital, or Public A ward (1-bedder). It is thus essential to get an Integrated Shield Plan if one has enough CPF-Medisave to afford it as it would really help when bills incurred are large, as in most cases MSHL only covers 10-20% of a bill!

#2 “Why must I get the rider? I’m still young and don’t want to waste my own cash to buy a rider which I would probably wouldn’t claim anyway”

Whether you are young or not, every hospital/surgical bill incurred will first subtract off the Deductibles and 10% co-insurance – essentially you have to co-pay this part – before you can claim using the main IP plan paid by CPF. It’s not an easy part to explain, so you can either ask me directly or drop me a message on my Facebook page. In terms of probability of going into hospitals, perhaps things like critical illnesses are rarer among younger people but what about the possibility of being active in sports or at work that you injure yourself and require a say, surgery e.g. ACL tear/burns/fractures? How about Congenital illnesses that may out of a sudden, strike in a young adult? These are the probabilities we need to guard against and having the entire package (basic main IP plan + rider) would really help you mitigate such financial risks

#3 “I have a hospital-cash/hospital-income benefit rider in my whole life plan! It’s so much cheaper than the rider of the IP plan so why should I waste money to get this when I can claim through the whole life rider?”

Firstly, the coverage is entirely different in the hospital-cash rider of the whole life plan vs a full IP package. The former only gives a small payout, i.e. $30 a day when you’re hospitalized and warded to help replace your possible income loss during the time you’re hospitalized. They do not normally pay for surgeries/outpatient treatments/followups as well. The latter really covers all of your hospital bills as well as surgery/outpatient/followups/pre-admission tests from the first dollar onwards. The latter is also more of a reimbursement of bill instead of extra payout for income-loss. Bills often can be as high as $1,000 even for minor surgeries or hospital stays. Thus, what we have to focus on, is to ensure the bills are covered for, and then work on getting the extra hospital-cash for some income replacement during the time that you’re unfit for work!

Jonathon Han, Prudential

Jonathon Han's picture
Jonathon Han, Prudential

#1 Buying an ISP means anything to do with hospitals can be claimed

ISP are hospitalization plans. What this means is that the customer must be HOSPITALIZED in order for the plan to take effect. Should the client see a specialist – even with a referral letter – without staying in the hospital, they will not be covered for the medical bills. However, if their specialist check-up requires them to be warded for observation or medical treatment, then yes the bills will be covered.

Special circumstances can be made for customers to claim their ISP without being hospitalized, and these include A&E treatment and follow-up specialist treatment from previous hospitalization stays.

#2 Having a company insurance means I don’t need to buy an ISP

Not true. Why?

Firstly, a majority of company insurance is not as comprehensive as personal insurance. Personal health insurance can protect individuals from medical bills of up to $1.5 million a year, whereas a lot of company insurance barely crosses the $20k of medical coverage per individual per a year.

Secondly, company insurance is non-transferable. What this means is that the moment you leave the company, your coverage will stop. Some of my clients had to leave the company due to their inability to work, and leaving the company means that they no longer are covered under the corporate insurance. At this point of time, if we don’t have an ISP, we are left exposed to the mercy of the bills.

Ryan Teo, AXA

Ryan Teo's picture
Ryan Teo, AXA

 

#1 Integrated Shield Plans payment is separate from MediShield.

When you sign up for an Integrated Shield Plan, you’re still paying for the MediShield component as well. This is because Integrated Shield Plans are not separate coverage, as it is an additional top up coverage to MediShield.

#2 It is a minor matter to switch Integrated Shield Plans

Before you switch providers, you need to weigh the options that the other provider gives, especially if there was a previous surgery or pre-existing illness. Cost-wise or benefits may seem better, especially as plans improve; however, you may not enjoy the same protection you previously enjoyed for existing medical conditions. In fact, under your old plan, you may potentially pay more for the same level of coverage.

#3 No need to pay a single cent if I have full rider coverage by Integrated Shield Plans

Actually, it is not really true. You may still need to pay a cash deposit if it’s required by the hospital. Therefore, it’s useful if possible to have a letter of guarantee (LOG) as an assurance of payment offered by insurers before any hospital admission.  It can help to waive any cash deposit required by the hospital or bill payment. However, it’s still up to the discretion of the hospital to accept the letter. You may still need to fork out your own money first before applying for a claim.

fundMyLife Summary

Winifred clarified the differences and similarities between Medishield and Integrated Shield Plans. Ryan also expressed similar sentiments – it seems that consumers do mistake MediShield and Integrated Shield Plans as separate kinds of plans, when the former is a sub-component of the latter. No wonder this necessitates clarification on the MOH website. Winifred also emphasized the importance of riders, and explained the differences between hospital-cash rider of the whole life plan and the rider of a full IP package. Jonathon cautioned that not everything hospital related is claimable using Integrated Shield Plans and stressed the importance of not relying on company insurance. Ryan also debunked the myth that it is a small matter to switch insurers for Integrated Shield Plans, and talked about cash deposits during hospitalization and how Letter of Guarantees can alleviate the financial pressure.

Conclusion

We hope this article was helpful in addressing the common misconceptions about Integrated Shield Plans! If you’ve more questions on the plan or any other insurance plans, head on to our main site and ask our curated pool of financial advisers! Alternatively, if you’d like to connect with either Winifred Tan from Great Eastern, Jonathon from Prudential, or Ryan Teo from AXA, just click on the link in their names and you can ask them questions directly from their profile pages.

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

The New Rider Co-payment: Is It That Bad?

fundMyLife discusses the new rider co-payment

In the past, patients with Integrated Shield Plan riders had their hospital bills completely paid for. However, this will soon be a thing of a past. Under the new rules announced on the 8th of March 2018, riders for Integrated Shield Plans will no longer cover the entire bill. Under the rider co-payment rule, you have to pay at least 5% of the hospital bill, at a maximum of $3,000/year.

Wait, but why?

In the past, we wrote on why this phenomenon happened, and observed that cost for services increase drastically when insurance is involved. According to Ministry of Health, the average bill of someone with a rider is around 60% higher than someone without. Patients with riders tend to seek treatment in private hospitals as well, which results in the difference in average.

In addition, the asymmetry of information for medical bills allowed hospitals to charge high prices for procedures. The first response to the increasing bills was introducing the medical fee benchmark to be implemented in second half of 2018, and this forms the second major response by MOH.

What does that have to do with you, you might ask? Premiums for Integrated Shield Plans increased over the years, with higher increases affecting older policyholders and those with private hospital plans. This is bad because if the increase in premiums continue, these people won’t be able to afford the premiums later in their lives. At the risk of being reductionist, the sequence of events goes like this:

  1. High expenditure due to riders
  2. Healthcare decides to charge more – insurance companies are paying, anyways
  3. Insurance company faces loss
  4. Insurance company charges higher premiums

Inappropriate levels of health service usage lead to an overall larger healthcare expenditure. Future consumers suffer directly due to escalated premiums. All Singaporeans also suffer indirectly since healthcare expenditure affects taxes.

Financial advisers of fundMyLife share their opinion

Out of curiosity, we asked the financial advisers of fundMyLife on their opinion regarding the rider co-payment. Disclaimer: their opinions were either paraphrased for reading convenience or quoted verbatim.

Winifred Tan

Winifred believes that full coverage is the best. She sees why the Ministry of Health wanted to implement this due to rising claims and “free buffet” effect, and that there are too many people in hospitals trying to take advantage of insurance policies. However, she would rather they increase the premiums just like last year instead of co-payment.

Another point Winifred made was that it is better to, if you can afford it, buy the best of hospital plans. She shared that most people think that they won’t need it and buy cheaper riders in a bid to upgrade it in the future. However, unpredictable changes like this will happen and presumably throw people’s plans awry.

Jonathon Han, Prudential

I think people are missing the point here. The fact is that there is going to be a gradual shift from government supporting us with subsidies and schemes to a more self-reliant ecosystem whereby we pay for what we want.

There is no point crying over spilled milk and who we should blame for this episode. We shouldn’t expect a U-turn from either the insurance companies or the government for this matter.

My suggestions are objective and pragmatic:

Over few years as we progress towards an aging population, we need to scrutinize our own portfolio to see if we have enough savings. Be real with yourself you haven’t saved enough or build up enough passive income. Because with whatever changes that might happen during the coming years (I don’t think this is the end), only one thing is constant. We are going to need more money for medical and for our daily cost of living. Hence, it’s better we start our planning today.

Ryan Teo, AXA

Private medical bills are increasing about 10-15% per annum for the past few years, so it’s little surprise that this has caused insurers plenty of concern.

But from a patient’s perspective, if the patient knows there’s insurance coverage and when the doctor recommends diagnostic tests etc, we’re not really going to say no. The main priority in our minds is just to make sure everything is okay. The cost part is taken care of by the insurance.

However, with the co-payment change, will we think twice about costs of tests? I doubt so. Health is still a priority.

A a consumer, it’s frustrating to not get full coverage or if you haven’t utilized your shield and your premiums are escalating. But it’s understandable that over the longer term, co-payment is the way forward. In fact, I think we’ll all be moving towards co-payment in the long run. 

Melvin Liu, Manulife

Melvin shared that it was easier to downgrade a rider than to upgrade it as upgrading requires medical underwriting whereas the other way does not. He recommends that you buy a better plan first to have more options available to you. On doctors who benefit from charging higher fees dues to insurance, he opined that it is challenging to figure out whether it is true or otherwise, and that good ones do want to treat the patients in the best manner possible.

Melvin said that it is easy to talk about co-payment for riders when it involves outsiders. For insurance companies, it makes sense. However, he pondered whether one holds the same opinion if his/her loved ones are the ones in hospital. He also questioned if a consumer would prefer co-payment or pay as-charged.

He also thought that there should be more innovative solutions out there such as Prudential’s PruShield, where customers enjoy premium discounts when there are no claims made whereas there is premium adjustment after claims. However, while solutions such as this is in the right direction for pricing structure, first-time buyers may reconsider getting riders in consideration of the likelihood of needing to pay higher premiums after claims.

What do others think about the rider co-payment?

We also browsed the Insurance Discussion SG Facebook Group, where a lively discussion took place. Both sides offered compelling argument for and against the new ruling. Of the few posts that we surveyed, there were thought-provoking comments. For example, a commenter mentioned why a doctor would order extra tests on a patient.

One of the many comments in the group that discussed the new rule. Source: Insurance Discussion SG.
Another comment in the same group. Source: Insurance Discussion SG.

Both comments brought valid points to the table. That said, who should we blame in this who affair? There truly isn’t a sole party to blame – affordable and fair healthcare requires the cooperation of various stakeholders. Consumers, insurance companies, and healthcare providers are all in it to make healthcare accessible for everyone.

How will this change things for consumers?

As of the moment of publishing, there are currently no plans to require existing policyholders to co-pay their hospital bills. However, this could change since insurance companies will come up with more competitive and innovative plans to encourage existing policyholders to switch.

Is it the end of healthcare that we know it for future policyholders? Not necessarily so. Medisave can cover some of this co-payment, and the ministry estimates that 1 out of 2 rider policyholder will pay SGD$100 or less for hospital bills across all ward types. However, financial planning in the future will probably have to include planning for rider co-payment, since riders no longer offer full cover.

Worried about this new rider co-payment rule? Fret not – head on to our site to ask our curated pool of trusted financial advisers on what your next move should be, if you have not purchased one.

fundMyLife is a platform that aims to empower Singaporeans to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

Ask fML Advisers: What Are The Most Common Questions On Personal Accident Plans?

fundMyLife FAs talk about common questions on personal accident plans

[5 min read]

A personal accident plan is a plan that pays out when you are injured, resulting in either death or permanent/temporary disabilities. While it is seemingly simple, there are many considerations to keep in mind when deciding what plans to purchase. As such, there are plenty of questions on personal accident plans.

Where better to hear about these questions and get answers, other than asking financial adviser themselves? We ask the financial advisers of fundMyLife on what they are often asked when it comes to this plan. In this article, Roshan Belani from AIA, Winifred Tan, and Melvin Liu from Manulife share their thoughts on common questions on personal accident plans and their perspectives.

Roshan Belani, AIA

Roshan from AIA
Roshan Belani, AIA

Before I share the most common questions on personal accident plans that clients ask me, I would like to share a personal accident claims story of my own. I was in a team bonding trip in Desaru with my colleagues, and in one of the games I fell. The fall did not hurt me, but two colleagues landing on my foot did. A colleague sent me back to Singapore, where I sought treatment in Mount Elizabeth hospital.

I suffered a hairline fracture in my 4th metatarsal but I did not stay in a ward since I did not need to undergo surgery. In total, I paid around $3,000 for:

  1. MRI scans
  2. X-ray imaging
  3. Digital imaging
  4. Follow-up treatment
  5. Crutches

The Great Eastern Personal Accident Plan helped in defraying the treatment costs. I was out of action for 2-3 months, during which I had to was fortunate enough to have my colleagues’ help with my clients. In retrospect, I would have gotten a plan that provided a weekly payout during the period when I was unable to work. A plan with a weekly payout as a result of lost income would have helped with lifestyle maintenance.

“Is my accident plan on an annual basis or per accident basis?”

This is a question that clients often ask, that whether the accident plan they purchase is on an annual basis or per accident basis. The Great Eastern plan I was on when I was injured in the team bonding exercise had a $10,000/year cover. In contrast, the personal accident plan in AIA has a $4,000/accident cover. As such, the question might arise on which plan is better than the other.

Neither are better than the other – it just depends on your own injury patterns. Ideally, you should have both as these two forms of personal accident plans as these two kinds complement each other. A per-annual basis plan helps to cover what a per-accident basis plan cannot. After all, personal accident plans are generally affordable and are designed to not hurt your budget. However, if you have to choose between either, you have to decide whether you’re clumsy or accident-prone. It would be more beneficial if you anticipate frequent injuries.

Winifred Tan

Winifred Tan, Great Eastern
Winifred Tan

“What’s the coverage like?”

Most people have the impression that personal accident plans are for serious things like car crashes or loss of certain body parts, etc. However, it also covers for temporary injuries like sprains and cuts.

“Does it cover medical expenses?”

Yes, even for Traditional Chinese Medicine (TCM), chiropractor for some policies under Great Eastern.

“Does it cover dengue and zika?”

Yes, for Great Eastern’s case.

“What kind of accidents are considered accidents?”

Anything that is external, violent, and visible means and are not self-inflicted.

“What are the common exclusions?”

Personal accident plans typically exclude jobs such as sports coaching, military, professional motorcycling. Why? It’s because they take on higher risks! Accident plans are not to be take for granted. It requires you to take precautions as well before going ahead with dangerous activities.

“How long does it take to claim?”

2-3 weeks, if everything – documents in general – is furnished in order for claims.

“What is the claim period from the date of accident?”

Within 90 days after the accident, and normally we allow follow-up claims up to 365 days form the accident.

Melvin Liu, Manulife

Melvin Liu's picture
Melvin Liu, Manulife

“Is personal accident plan the same as life insurance, etc?”

There are two groups of people when it comes to personal accident plans. The first are people who know what they want and why they are getting this plan. The second group of people are relatively more clueless, and confuse personal accident plans with other plans. Personal accident plans are useful because they complement other insurance plans for out-patient treatment and consultation.

“Is it useful to renew the personal accident plan?”

People ask this because they need to renew the plan annually even though they did not claim anything. I would encourage them to do so, since the premiums are affordable and it is truly useful when they need to claim for something. Even I myself have a personal accident plan for my own daughter.

I notice that consumers often do not have questions about personal accident plans, and are receptive to whatever I share with them.

fundMyLife Summary

Roshan first recounted a story on how he got hurt, and how his personal accident plan helped. He also discussed the differences between plans that have an annual limit, and plans that have a limit per accident. Winifred shared common questions on personal accident plans that she encountered with consumers, and provided useful clarification for each of those questions. Finally, Melvin mentioned a common misconception that consumers often have – mistaking personal accident plans with other plans – and encouraged yearly renewal of the plan due to benefits.

In general, from our conversation with some of the advisers, we had an impression that consumers ask many questions on personal accident plans. In addition, they commented that consumers often reply on their company’s group accident plans and do not scrutinize the details unless they need to claim for something.

Actionables:

  1. For freelancers, consider getting a personal accident plan as it will immensely help you when you injure yourself.
  2. If you have a corporate group personal accident plan, read the fine print and see if you have adequate coverage.

If you’ve more questions on personal accident plans or any other insurance plans, head on to our main site and ask our curated pool of financial advisers! Alternatively, if you’d like to connect with either Roshan Belani from AIA, Winifred Tan, or Melvin Liu from Manulife, just click on the link in their names and you can ask them questions directly from their profile pages.

fundMyLife is a platform that aims to empower Singaporeans to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

Ask fML Advisers: What Are Your Opinions on Endowment Plans?

[5 min read]

Usually marketed as a form of “forced savings”, endowment plans are long-term plans designed to help you achieve a certain financial goal over a time period. We have written at length on endowment plans, and what to do if you ever think of selling them. However, while we hear a lot of stories from friends and family about endowment plans, what do financial advisers themselves think?

In this article, we asked three financial advisers of fundMyLife – Melvin from Manulife, Jonathon from Prudential, and Ryan from AXA – on what they think of endowment plans, such as interesting case studies and common misconceptions. Without further ado, here’s what they have to say:

Melvin Liu, Manulife

Melvin Liu's picture
Melvin Liu, Manulife

What is your opinion on endowment plans?

At least half of the people I encountered have the general impression that the returns are guaranteed, that they are safe and likely to hit the projected returns. They forgot that they were told that the projections are not guaranteed, only to remember when I reminded them.

When I look at endowment plans, I study three things:

  1. Guaranteed Cash Values/Projected Yield to Maturity
  2. Liquidity/coupon paying features
  3. Intention and suitability of clients for considering endowments as an option

In general, I noticed that endowment plans have evolved over the past five years and not all endowments are the same since each may differ in features such as premium-paying periods, liquidity options and protection features. The plans nowadays are competitive and the guaranteed amount upon maturity aims to be on par if not higher than total premiums paid.

My personal opinion is that people really need to understand why they are purchasing endowments in the first place. In addition, people generally should not plan to withdraw cash benefits (where applicable) from their endowment plan before maturity, unless its necessary.

What are some interesting stories that you’d like to share with us? 

There were two cases I was involved in.

In the first case, it involved a 21-year old lady who was seeking my advice on an endowment plan she recently purchased which she was having 2nd thoughts about her choice. She was contributing a substantial amount of her monthly income, i.e. $750/month, to a 25-year premium paying endowment plan. She got this particular endowment plan from someone she met at a roadshow. Moreover, she was a Malaysian working in Singapore, and having to sustain her premiums for a good 25 years here might sound challenging due to many potential uncertainties, to which she agreed. After consideration, she deliberated between keeping it for another 2 years or so when she could surrender it to take back some cash, or to surrender it straightaway after paying for about 6 months. I showed her objectively the difference in the amount she would lose if she hung on for another 2 years vs surrendering immediately, i.e. $16k+ vs $4.5k respectively, and let her make the call. She eventually managed to resolve it with the agent, and I didn’t probe further on her decision.

In the second case, I was advising a 50-year old lady on her plan to have a regular stream of income in about 2 years time for her retirement. She was surprised that I advised her that she did not need any plans after I reviewed and advised that she was ready to retire with the sum of money she already had. However, she nonetheless was keen to see what options she had to put her in a better financial position while meeting her income needs with a lower risk. We worked out a few options and suggested that she could prepaid an endowment plan in a lump sum so that she can start getting guaranteed cash coupons as retirement income from the second year onwards while maintaining her desired lump sum balance for security and/or legacy.

Endowments are generally more suited for those who wish to take on a lower risk, prefer having a guaranteed cash value component and have a specific time period to save and cash out for their needs.

However, endowments are often promoted also because they are easy to sell and easily positioned as forced savings e.g., for young adults who are starting to work. Like any financial plan, endowments should be recommended as an option only if it meets the client’s needs and not just simply a way to save money.

Jonathon Han, Prudential

Jonathon Han's picture
Jonathon Han, Prudential

What is your opinion on endowment plans?

A major misconception that people have regarding endowment plans is that they think that these plans are lousy. People often compare endowments with investments, which is like comparing apples with oranges – they are different asset classes with different risk categories.

Endowments are good to grow money at a secure rate for timed events, for example an education fund for children or a retirement fund. If you choose to invest in the stock market instead, the time horizon involved, e.g., 20 years, means that you risk a situation where you disappoint your children because the markets are not doing well.

Important point: besides using endowments for retirement and children’s education, it can also be used to build capital towards buying a second property. The advantage of using endowments over investments is that endowments are less susceptible to market fluctuations. On the other hand, property prices and the stock market are correlated; in the event of a market downturn, both stock and property prices fall which defeats the purpose of investing for a second property in the first place.

The second major misconception is that endowments have poor returns. The perceived low rate of returns is due to the financial adviser allocating too much percentage of the premiums to protection instead of investments. Ideally, you should find someone who can advise and allocate the investment-protection proportion correctly. In fact, it is possible that certain endowment plans can beat Singapore Savings Bond and fixed deposits.

Currently, most insurance companies have endowment plans where you can withdraw money after 2 years. However, if you choose to withdraw the money instead of re-investing for further compounding, the returns might be much lower at maturity. As such, I advise clients to take up fixed endowments but pay less premiums for a relatively higher rate of return compared to those cashback endowment plans.

The third misconception is a lot of practitioners introduce the projected 4.75% investment rate you see in the Benefits Illustration as interest, THIS IS NOT ACCURATE. The effective annual interest rate is also something consumers might find it hard to calculate unless they have an access to a financial calculator.

What are your thoughts on picking a good endowment plan?

I believe 80% of people who buy endowments are happy because they serve a good purpose for their needs. Please note that not all endowments are designed to be withdrawal before their maturity. There might be a serious misconception among customer who buy endowment plans from banks that these endowment plans are fully liquid, please bear in mind that endowment plans are never as liquid as compared to your current account.

Secondly, it is important to study the performance of the insurance companies selling the endowment. Endowments are paid of out a participating fund and if it does well, insurance companies have more funds to allocate to policyholders, i.e. 90% surplus to policyholders and 10% to shareholders. As such, it is useful to pick major insurance companies with good track-record of participating funds – you find the information online. Note: past performance is not indicator of future outcomes.

Lastly, decide whether you want the endowment plan to be fixed or flexible. Don’t ask for flexibility unless you need it since it reduces returns in the long term. You should decide also if you need to add on riders for the protection component. However, keep in mind that the cash value of the protection does not increase over time.

Ryan Teo, AXA

Ryan Teo's picture
Ryan Teo, AXA

What is your opinion on endowment plans?

People often have the misconception that the returns are guaranteed. Another misconception that people have is that they mistake returns in the Benefits Illustration with interest rate which are two completely different things.

In general, endowments are pretty standardised. I take into account the length of the policy when it comes to endowments. What I advise people looking into savings plans but have concerns about liquidity, is to invest 1/3 of their funds into the Singapore Savings Bond and the remainder into an endowment plan. This arrangement provides liquidity.

Endowments generally have a trade-off between returns and flexibility. For example, for plans with cashback, the total maturity may be higher but guaranteed sum may be lower than premiums paid.

A thing to take note: inflation should be considered when it comes to endowment plans. At the break-even point, i.e. the point where the surrender value is the same as premiums paid, the duration of the plan also implies that technically the consumer loses a bit of money due to inflation.

fundMyLife Summary

The major misconception that the public have for endowment is that the sum assured is, well, 100% assured. The advisers caution the importance of understanding what you’re in for when it comes to endowments and know exactly why you’re getting what you’re getting.

Melvin shared what he looks for in endowment plans and recounted two interesting client stories – one who benefits from getting an endowment and the other, not so. Jonathon listed three major misconceptions that the consumers have regarding endowments and provides his thoughts on picking a suitable endowment. Finally, Ryan Teo noted the tradeoffs when it comes to flexibility and returns in endowment plans.

If you’ve more questions on endowment or any other insurance plans, head on to our main site and ask our curated pool of financial advisers! Alternatively, if you’d like to connect with either Melvin from Manulife, Jonathon from Prudential, or Ryan from AXA, just click on the link in their names and you can ask them questions directly from their profile pages.

fundMyLife is a platform that aims to empower Singaporeans to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

Ask fML Advisers: What Are Your Opinions On Critical Illness?

Critical illness insurance can be a lifesaver, since you are paid a lump sum if you are diagnosed with any of the 37 critical illnesses. We have written quite a bit of this topic, but why not hear it from the advisers themselves?

We asked three advisers of fundMyLife (check out their profiles!) – Jennifer from Manulife, Roshan from AIA, and Winifred – on their thoughts regarding critical illness insurance and what they think are common misconceptions. Here’s what they have to say.

Jennifer Neo, Manulife

Jennifer Neo's picture
Jennifer Neo, Manulife

What are your thoughts and perspectives on critical illness insurance?

In the past, I took up two orphan clients – clients without a servicing adviser – referred to me by a friend from a different company. They owned two plans: Living Choice and Universal Care, taken up in 1997. 20 years later, in 2017, the wife was diagnosed with Parkinson’s disease, a long-term degenerative disorder of the central nervous system that mainly affects the motor system. It could reach a stage of paralysis where the legs are stiff frozen, limiting mobility.

At the time of her claim, she was a 53-year old housewife. She was mentally shaken but physically she was still fine. Naturally, one would be worried or scared after knowing what the stages of this sickness are and how it could eventually cause difficulties, such as swallowing and even talking or expressing herself. At this point, when one is physically disabled, he/she would need a caregiver to assist in their daily living.

The couple was very thankful that I helped them in the process of checking the claims status. I could sense their gratitude, expressed in simple terms of gifting me a box of CNY biscuits and angpao as it was during CNY period last year.

For critical illness, you should buy it when you don’t need it, so that when you need it, you will have it. When you are young, you should prepare whenever you can. When you take responsibility for yourself in your younger days, your dependents will be free from the financial responsibility of taking care of your medical bills. Otherwise, they might be the one shouldering the bills on top of supporting themselves.

I would urge young adults to think and look into your critical illness coverage. For example, do you have $50,000 in your bank account? If you don’t, it’s a good time to look into covering yourself with a critical illness plan that can cover you with a lump sum to take care of yourself when the critical illnesses strike.

Two facts to share:

  1. When you buy it at your younger age, you pay lesser! And most likely you would have the good health to buy it. There is a cost of waiting –the older you are, the higher the premiums will be.
  2. And the second cost is there is no guarantee of coverage. A health issue could strike any time leaving you not being eligible for coverage. Waiting just a few years to buy could result in not getting coverage at all. Don’t wait until your health changes because when that happens, the insurance companies might not want to take you on.

Roshan Belani, AIA Financial Advisers

Roshan from AIA
Roshan Belani, AIA

What are your thoughts and perspectives on critical illness insurance?

The wife of a good client of mine was diagnosed with Stage II cancer. The client’s family was quite big, with 4 daughters. Fortunately, they had a hospitalization plan that covered most of the medical fees and an early critical illness plan that provided a lump sum payout. While the wife of the client was a stay-at-home mother, they came to know of an experimental drug that was being used in a clinical trial. Experimental drugs are usually not covered by hospitalization plans.

The cost of the drugs for the entire duration of the treatment was between SGD$150-200,000. The family was willing to fork out the money as the lump sum from the early critical illness plan was able to defray some of the costs – they later found out that this drug was indeed covered by insurance, providing much relief to them and their finances. In this case, the early critical illness payout worked as a peace of mind to engage costly treatment.

One misconception that I’d like to address is that people think that critical illness plans are just for working adults. However, it is not meant to be an income replacement. After all, someone has to bear the costs of medical treatment and aftercare in the household. In the client’s family that I shared above, if the drugs were not covered by MOH, the cost of the treatment would have put a huge dent in their financial plans – retirement plans, investments, and even the education for the four daughters.

Fortunately, the wife is currently receiving treatment and is getting better day after day.

Winifred Tan

Winifred Tan, Great Eastern
Winifred Tan

What are your thoughts and perspectives on critical illness insurance?

Over the years, I have observed that underwriters are quite strict. Even if the applicant is young and has not been diagnosed with any of the 37 critical illnesses, he has a chance of exclusion or extra loading (higher premiums) if there is any prior medical history. A few things that I’d like to share:

  1. Terminal illness coverage refers to a conclusive diagnosis of an illness that is expected to result in death within 12 months
  2. HIV infection is usually excluded, whereas occupationally derived HIV is covered in our hospital plans
  3. Diabetes is NOT considered a critical illness, but diabetic complications are considered
  4. Critical illness (CI) usually covers 37 conditions for later stages unless the policy is a specific early stage policy. Normally, early stage CI covers about 29 illnesses
  5. There may be a maximum amount payable for CI on all policies e.g. $2.5M
  6. Angioplasty & other invasive treatment for coronary artery do not pay out 100% of the sum assured (SA). Usually only 10% of SA
  7. Waiting Period: CI coverage usually needs a waiting period of 90 days from the day of purchase BEFORE any claims can be made (which is why it’s one of the first core components of insurance that people usually get for themselves and loved ones)
  8. Survival Period: A claimant must usually live beyond 7 days, which is also the survival period, for a CI policy to pay out (regardless of early or major stage CI coverage)

In addition, people often confuse critical illness plans with hospitalization insurance! They think it pays out for hospitalization, but it is not. Normally, I’d say that hospitalization insurance as “reimbursement of bills” and CI insurance as a complement to hospital insurance for income replacement! People also think that critical insurance looks “critical”, that is the illnesses are too major/serious to get it at a young age. That’s because they do not know about early CI as well.

fundMyLife Summary

The misconceptions that the public generally have is that critical illness plans are seen as income replacements, which should not be the case. Instead, they advise us to view the plan as a form of illness aftercare, when we need the resources to recover.

Jennifer advocated to start buying a critical illness plan early because firstly it’s cheaper and secondly there’s no telling when the consumer may not be eligible for it. Furthermore, critical illness plans can be seen as a way to reduce financial burden of recovery. Roshan’s story about his client’s wife agrees with that sentiment and he said that there’s always going to be someone in the household to bear the costs of treatment. Winifred shares important facts that one needs to consider when purchasing critical illness insurance, e.g., possibility of exclusion due to family history, survival period, waiting period, etc.

If you’ve more questions on insurance, head on to our main site and ask our curated pool of financial advisers! Alternatively, if you’d like to connect with either Jennifer from Manulife, Roshan from AIA, and Winifred, just click on the link in their names and you can ask them questions directly from their profile pages.

fundMyLife is a platform that aims to empower Singaporeans to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

Opinion: Investing is gambling, or is it?

RyanCoverPhoto

Written by Ryan Teo, edited by Jackie Tan. The opinion series is dedicated to sharing our advisers’ thoughts and opinion on personal finances. Ryan Teo is a part of fundMyLife, the platform that connects financial planning questions to the right advisers.

“Investing in the stock market is just like gambling.”

Or so the saying goes. And people develop a fear of investing from thinking that way.

It depends on our perception on how we think about it.

The problem is that a lot of people do treat the stock market like a casino, hoping to win the big bucks quickly.

Let me ask you a question

Let’s say a friend who approaches you. He says:

“Eh bro! I’m opening a cafe that’s based on the latest dessert trend from Tokyo. It’s huge in Japan. Guarantee make a lot of money one la. If you interested, you can invest $10,000 in my business.”

What will you do? Are you going to hand over the cash to him just like that? I’m sure you will expect some sort of return of investment and do some research on your own.

So you will probably ask questions such as:

  1. What are your costs/expenses?
  2. What are the type of food will you be serving?
  3. What are the profit margins?
  4. When will the business be projected to break even?
  5. What are your staff costs? And so on.

Now, the question is whether you would do the same when you invest in the stock market.

Why don’t we ask ourselves these same questions when we invest? Do you research on the business fundamentals? Most people don’t. They just take the word of friends or analysts and follow the latest stock tips.

One of the most common misconceptions is that when the share price of a company falls, it means that the business is failing.

For example, if the price of Singtel shares starts to drop every day, it doesn’t mean that a couple of shops is closing down every day.

On the contrary, it offers us the opportunity to invest or to buy a part of the business at a cheaper price. Hopefully, you can be a part of the company’s long-term goal.

Investing isn’t optional

The truth is that many people haven’t made peace with the fact that investing isn’t optional. In life, there are only two main types of income. One is from your work or business; the other is from your investments.

If you only have money from working ONE job or have ONE business, you only have ONE income stream.

When I ask others why they were not investing, the one reason that keeps repeating is fear. With the rising cost of living in Singapore, having only one stream of income is also taking a huge gamble. However, think about it this way – the wealthiest people in the world got rich by building successful businesses.

As such, people can either start a business themselves which carries a lot of risks in itself and maybe capital, or they can be a partners of a business.

Essentially, that’s what the stock market offers us – the opportunity to partially own a business.

Sure you’ve heard the saying before “Don’t put all your eggs in one basket.” So, why then do we stubbornly accept a single source of income?

Isn’t that more of a gamble?

If you have any questions to ask me, I’m happy to answer them over at fundMyLife!

fundMyLife is a platform that aims to empower the average Singaporean to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions. Follow us on our Facebook page to get exciting updates and your dose of finance knowledge! Let us know what you want to know about finances or something that you wish your friends knew!