Recently months, Singapore property market had witness a slow down in transaction volume. Although prices have remained somewhat stable, most experts in the sector have predicted that property prices are set to fall. They have indicated that property prices will fall between 10% to 15% before the end of the year.
These experts are not only from the property sector, even financial experts from Banks are singing to the same tune. They strongly recommend buyers to withhold their purchases if they can until the price drop.
From the way I see things, its going into a self fulfilling vicious cycle. Basically, prices are not moving at the moment. By encouraging buyers to hold back, demand is essentially cut. This leads to more people staying in the side line, as they do not want to buy a property that will lose value straightaway. This in turn further cuts the demand for property and a vicious cycle ensures. This is exactly the opposite of what happens in a bull market.
As no one really knows when the market will bottom, so I think the best way to approach this issue is to buy when you have a real need for it. When you are living in the property that you purchase, near term price fluctuation will be less meaningful, as you are in no hurry to sell anyway. And over the long term, I still believe that Singapore's Property market will remain strong, as long as our economy is doing well, as land is definitely a scarce product here.
Wednesday, February 26, 2014
Tuesday, February 18, 2014
Power of Compounding Interest
Investment advisors often advocate us to start investing while we are young, so that we can benefit from the power of compounding interest. But a lot of you may ask, "what is that"?
The idea behind this is very simple. After the investment of an initial principal sum, you will receive some interest from it on an annual basis. Subsequently, you will reinvest this interest in the product so that you can receive even higher interest on the next year. This cycle is repeated until you stop your investment. Lets do some simple calculation.
Imagine that you have a principal sum of $10,000 and the annual interest from your investment is 5%.
End of year 1, you will have obtained interest of $500, from a principal of $10,000.
End of year 2, you will have obtained interest of $525, from a principal of $10,500.
End of year 3, you will have obtained interest of $551, from a principal of $11,025.
End of year 4, you will have obtained interest of $578, from a principal of $11,576.
End of year 5, you will have obtained interest of $607, from a principal of $12,154.
End of year 6, you will have obtained interest of $638, from a principal of $12,761.
End of year 7, you will have obtained interest of $670, from a principal of $13,399.
End of year 8, you will have obtained interest of $703, from a principal of $14,069.
End of year 9, you will have obtained interest of $738, from a principal of $14,772.
End of year 10, you will have obtained interest of $775, from a principal of $15,510
At the end of 10 years, your principal plus interest will amount to $16,285.
This is effectively about 62% of your initial investment amount.
However, if you do not reinvest the interest, you will only be getting $5,000 of interest over 10 years, which amounts of 50% of the initial investment amount.
So comparing the 2, you will have obtained about 12% more of the original invested amount over 10 years just by reinvesting the interest! So it certainly pays to reinvest your interest if possible. The hard part is to make sure that your investment can constantly generate yield at that percentage.
The idea behind this is very simple. After the investment of an initial principal sum, you will receive some interest from it on an annual basis. Subsequently, you will reinvest this interest in the product so that you can receive even higher interest on the next year. This cycle is repeated until you stop your investment. Lets do some simple calculation.
Imagine that you have a principal sum of $10,000 and the annual interest from your investment is 5%.
End of year 1, you will have obtained interest of $500, from a principal of $10,000.
End of year 2, you will have obtained interest of $525, from a principal of $10,500.
End of year 3, you will have obtained interest of $551, from a principal of $11,025.
End of year 4, you will have obtained interest of $578, from a principal of $11,576.
End of year 5, you will have obtained interest of $607, from a principal of $12,154.
End of year 6, you will have obtained interest of $638, from a principal of $12,761.
End of year 7, you will have obtained interest of $670, from a principal of $13,399.
End of year 8, you will have obtained interest of $703, from a principal of $14,069.
End of year 9, you will have obtained interest of $738, from a principal of $14,772.
End of year 10, you will have obtained interest of $775, from a principal of $15,510
At the end of 10 years, your principal plus interest will amount to $16,285.
This is effectively about 62% of your initial investment amount.
However, if you do not reinvest the interest, you will only be getting $5,000 of interest over 10 years, which amounts of 50% of the initial investment amount.
So comparing the 2, you will have obtained about 12% more of the original invested amount over 10 years just by reinvesting the interest! So it certainly pays to reinvest your interest if possible. The hard part is to make sure that your investment can constantly generate yield at that percentage.
Tuesday, February 11, 2014
Investing in Foreign Currencies ( Forex )
Wealth manager always advocate diversification of investments and the 2 classic groups for investment diversifications are usually bonds and equities. In recent years, investors have been chasing for yield and more classes of investment products are popping into the view of everyday investors. Some examples include precious metals, art pieces, wine and foreign currencies, or forex in short.
In this article, we will look at the possible ways of investing in forex (short form for foreign exchange). Forex is the largest market in the world with the longest trading hours. In fact, the exchange rate for various currency pairs produces quotes for 24 hours every weekday. What I will try to discuss is to invest and not speculate in forex, so forex trading platforms will not be covered.
As with all investment, you will need to understand it and have a long term view of the product to have success in investing, and of course, having a long investment time horizon will also help. In a very simplistic view, if you believe that a certain country is likely to enjoy economic boom, the currency will most likely appreciate and it will be good to invest in it.
But of course, the world does not operate in a simple environment. There will be intervention by government to control their currency through price pegging, interest rate manipulation or implementing monetary policies. So you will need to adjust your views accordingly.
Another method is to open a foreign currency fix deposit account with your local banks. They also offer better interest rates when compare to the foreign currency savings account. So this is worth considering if you want to hold on to that foreign currency for quite some time. This is also useful for people who needs to spend in that currency in the future, such as paying for education fees.
For the more affluent, there is also dual currency investment, where it lets investor enjoy extra yield based on their view of the currency movement. This is usually not available to normal retailer due to the nature of higher risk
In this article, we will look at the possible ways of investing in forex (short form for foreign exchange). Forex is the largest market in the world with the longest trading hours. In fact, the exchange rate for various currency pairs produces quotes for 24 hours every weekday. What I will try to discuss is to invest and not speculate in forex, so forex trading platforms will not be covered.
Why invest in foreign currency?
Forex has long been recommended as an investment product with low correlation with bonds and equities . This means foreign currency price movement has very little relationship with the movement of stocks or bonds and this complements the goal of diversity for investors.As with all investment, you will need to understand it and have a long term view of the product to have success in investing, and of course, having a long investment time horizon will also help. In a very simplistic view, if you believe that a certain country is likely to enjoy economic boom, the currency will most likely appreciate and it will be good to invest in it.
But of course, the world does not operate in a simple environment. There will be intervention by government to control their currency through price pegging, interest rate manipulation or implementing monetary policies. So you will need to adjust your views accordingly.
How to invest in forex?
Many banks have introduced multi-currencies saving accounts. After you have deposited money in this account, you will be able to exchange them to another currency at the prevailing foreign exchange rate quoted by the bank. The spread rate (i.e. the different between the buying and selling price) of the banks are using very high, so its not a good platform for short term buying and selling. But if you are looking at long term appreciation of the currency, then this spread will be insignificant and this becomes a viable way.Another method is to open a foreign currency fix deposit account with your local banks. They also offer better interest rates when compare to the foreign currency savings account. So this is worth considering if you want to hold on to that foreign currency for quite some time. This is also useful for people who needs to spend in that currency in the future, such as paying for education fees.
For the more affluent, there is also dual currency investment, where it lets investor enjoy extra yield based on their view of the currency movement. This is usually not available to normal retailer due to the nature of higher risk
Monday, February 10, 2014
UOB Delight Credit Card
There is a new credit card in town for those who loves discount at the supermarket. It is called the UOB Delight Credit Card.
One of the key benefits include getting 10% SMART$ rebate when you shop at Cold Storage, Market Place, Jasons, Giant and Guardian. This is a huge increment over the next best card for supermarket, which is the SingPost Credit Card by Standard Chartered, which only offer 6%. However, as with all other such credit card, there is a monthly minimal spending before you are entitled to this huge rebate. Below is a table describing the rebate earned with the corresponding spending level
On top of this, you will be able to enjoy another 10% discount off house brand when buying things at Cold Storage, Giant and Guardian. This is the must have card if you do shop at these places frequently.
One of the key benefits include getting 10% SMART$ rebate when you shop at Cold Storage, Market Place, Jasons, Giant and Guardian. This is a huge increment over the next best card for supermarket, which is the SingPost Credit Card by Standard Chartered, which only offer 6%. However, as with all other such credit card, there is a monthly minimal spending before you are entitled to this huge rebate. Below is a table describing the rebate earned with the corresponding spending level
| Consolidated monthly spend on your UOB Delight Card | Rebate earned at Cold Storage, Market Place, Jasons, Giant and Guardian (Rebate issued in the form of SMART$) |
S$1 – S$499
|
1%
|
S$500 – S$999
| 3% |
S$1,000 and above
| 10% |
On top of this, you will be able to enjoy another 10% discount off house brand when buying things at Cold Storage, Giant and Guardian. This is the must have card if you do shop at these places frequently.
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