Today is the last day of 2009 and it is time once again to review the return for this year. This year has been a good year for me since I bought quite near the lows of the stock market and watch my portfolio rebound with such a ferocity that was totally unexpected by me. I only started to keep track of my portfolio systematically slightly more than a year ago by keeping track of all my transactions and dividends inclusive of any corporate actions. After which, I use the Excel function of internal rate of return to compute my annualized return. My target is to achieve an annualized return of at least 20% inclusive of reinvested dividends over the next one to two decades.

Currently, my annualized return stands at 53.4%. Of course, I do not expect to achieve this kind of return in the long term. This return is partly skewed by the excellent performance of the stock market this year.

Moving on to the return of the stock market for 2010, I'm not very optimistic about the coming year. This view of mine goes against the view of many experts and the general sentiment of the stock market currently. From the beginning of 2009 until now, STI has gained a total of 58.4% and it is currently close to 3000 points. If we were to consider the optimistic view that STI will gain another 30%, it will be around 3900 points. Linking this back to economy, 3900 points was when the economy was at its peak. Given that the economy is starting to show signs of stability and the days of phenomenal growth will not be back so soon yet, I don't think that the stock market will do extremely well this coming year. Of course, my opinion can be wrong so time will tell.

I can foresee that for 2010, I will be holding on and building up my capital and will take advantage of any significant corrections in the market by adding on additional positions. Otherwise, I will probably be monitoring the companies in my portfolio and researching on new companies that meet my investment criteria.

Lastly, I wish everyone a happy new year and all the best for your investments in this coming year !

Medishield is an insurance scheme that is operated by the CPF board and this scheme is designed to prevent one from incurring huge medical expenses under certain conditions. It is designed to cover a large portion of medical bills incurred under class B2 or C wards only, in restructured or government hospitals only or selected outpatient treatment. As such, if you wish to stay in a higher class ward, you may have to incur a much larger portion of your medical bill. Furthermore, there are limits associated with the various items. Some of the details, which are taken from the CPF website, are given below.



Medishield runs on a deductible and co-payment or co-insurance system. Basically, the medical bill that is payable is divided into these two portions. Deductible is the amount which you will need to pay before Medishield will pay for your medical bill. This typically range $1,000 to $3,000 depending on the class of ward which you stay in and your age and you only pay for the full deductible once every policy year which is defined as the commencement and renewal date of your Medisheid cover.

Subsequently, you will have to pay for a portion of the remaining amount of medical bill after paying the deductible which is known as the co-payment or co-insurance. Typically, this ranges from 10% to 20% of the remaining amount of medical bill after paying off your deductible. The exact amount of the deductible and co-insurance are given in the table below, as taken from the CPF website.



So how does one get covered under the Medishield ? As taken from the CPF website, Medishield is extended automatically to eligible Singaporeans and Singapore Permanent Residents under the following situations.

(i) If their births or permanent residencies were registered after 1 December
2007;
(ii) If they are registered at national schools as at 1 May 2008, 1 May 2009, 1
May 2010, 1 May 2011, 1 May 2012, 1 May 2013 or 1 May 2014;
(iii) When they make their first CPF contribution after turning 16 years old; or
(iv) If they get married in Singapore.

Otherwise, you can apply for Medishield by logging in to your CPF account and submit an application online. This can also be done for your dependents who are below 16 years old. Do bear in mind that you will have to declare any existing and past medical conditions in submitting your application and the Medishield may not cover such conditions thus it is always important to apply when you are still healthy.

What I have done here is to give a summary of what one needs to know regarding Medishield and this is by no means, comprehensive enough. The CPF board has an excellent article regarding Medishield and its related FAQs and the link is available here.

An hospitalization and surgical plan or in short, H&S plan should be the very first insurance plan that you should buy and Medishield is a very basic type of H&S plan. There may be situations where a class B2 or C ward is not going to meet your needs adequately and you may be forced to upgrade to a higher class ward or switch to a private hospital due to reasons such as availability of better medical treatment or shortened waiting time for treatment. As such, Medishield may not much of a help as it is designed to cover a large portion of your medical bills in a class B2 or C ward only. However, there are other options available and this can includes the purchase of a Medishield-approved Integrated Shield plan which I will blog about it in the future.

Unit trust fees slashed to woo investors
DBS, Fundsupermart among those which now charge just 1%
By Sylvia Paik

(Taken from the Straits Times on 19th December 2009)

A PRICE war seems to have broken out in the unit trust industry in Singapore, with at least three fund distributors now slashing their sales charges to just 1 per cent.

DBS Bank started the ball rolling in early October when it cut its sales charge on all unit trusts to 1 per cent - a move the bank says has already resulted in a two-fold increase in unit trust sales.

Last Tuesday, online fund distributor Fundsupermart.com reduced its sales charge for its 11 best performing funds over a period of three years to 1 per cent.

And The Straits Times has learnt that even though it has not advertised this, Standard Chartered Bank (Stanchart) is also offering a 1 per cent sales charge to selected customers quietly.

Unit trusts are typically sold by banks, insurers, stockbrokers and other independent financial advisers.

These distributors levy an upfront sales charge, which is deducted straightaway from the principal amount an investor puts into a unit trust.

The traditional sales charge in a face-to-face transaction with a customer is usually 5 per cent, but this has been bettered in recent years by a host of cheaper online distributors.

Most online distributors charge between 1.5 per cent and 2.5 per cent, with some going as low as 1 per cent if the customer invests a large amount of money.

At a flat 1 per cent for any investment amount, the three distributors are undercutting the competition significantly.

Mr Jeremy Soo, DBS' managing director and head of consumer banking in Singapore, said the bank slashed the upfront sales to 'give customers greater value for their investments'.

'As part of our continuous efforts to demonstrate product transparency and suitability, and to give customers greater peace of mind when investing, DBS also began offering customers 14 days to review their unit trust investment decisions - seven days more than the industry standard,' he said.

Both initiatives have been well-received by customers, Mr Soo said.

At Fundsupermart, unit trust sales are up 34 per cent since the 1 per cent sales charge was introduced. Its general manager, Mr Wong Sui Jau, said its latest promotion was not a response to DBS' price cuts.

'We have always had ad hoc promotions on and off on a regular basis, and we usually base our promotions on certain themes which are often related to our research outlook,' he said.

Stanchart, a top fund distributor here, continues to charge a sales fee of 'up to 5 per cent', said its spokesman. But The Straits Times understands that the sales charge has been reduced to 1 per cent for some customers.

In response to queries, Ms Janice Poon, who is head of the bank's advisory and segment strategy in Singapore and Malaysia, would only say that the bank reviews its fees and charges periodically.

'Currently, there is no change to our unit trust sales charges. We continue to see a healthy demand for our unit trust products,' she said.

OCBC Bank's head of wealth management in Singapore, Mr Lim Wyson, also said the bank maintains its unit trust sales charges at 'competitive levels'. It charges up to 5 per cent at its branches, but fees are lower - about 2 per cent to 3 per cent - on its online portal finatiq.com.

But cost is not the only factor in selling these investments, Mr Lim cautioned.

'We believe that customers look at factors beyond price, such as their investment strategies, past performance of the fund, track record of the fund manager, among others.'

Some seasoned unit trust investors told The Straits Times the reduced rates do make a big difference.

Mr K. Yong, who has had more than $300,000 invested in unit trusts, said: 'Basically, the unit trust distributors will all give financial advice, but we will look for the cheapest sales charge for the same unit trust.

'I am also considering other options like exchange traded funds, which are more cost-efficient as I do not need to incur any sales charges.'

But others maintained that they are willing to pay higher sales charges if their financial planners provide sound advice.

'Basically, I buy whatever my financial planner recommends, and the sales charge doesn't really bother me,' said Mr S. Cheng, who buys unit trusts for retirement planning.

sylviap@sph.com.sg

Exchange traded note launched in Singapore
(Taken from the Straits Times on the 16th December 2009)

A new product class similar to exchange traded funds (ETFs) has been launched in Singapore — the first of its kind in Asia outside Japan.

Called exchange traded notes (ETNs), the first of this new breed of product was listed by Barclays Capital on the Singapore Exchange (SGX) last Friday, with more expected in the coming years.

Denominated in US dollars, the first ETN trades in units of 100 and has a yearly fee of 0.75 per cent.

So far, there has been muted response. No trades were done yesterday. Its quoted selling price on the SGX was US$40.86.

Referring to the ETNs, Philippe El-Asmar, Barclays Capital's head of investor solutions, said: “They provide investors with simple, transparent, cost-efficient instruments that provide access to difficult-to-reach markets with the ease of trading through an exchange.”

ETNs are senior, unsecured debt securities linked to the total return of a market index. They were first offered in the United States in 2006 by Barclays Capital under its iPath ETN platform.

According to El-Asmar, iPath ETNs in the US have attracted more than US$5 billion (RM17 billion) in market capitalisation with over US$80 billion in volume traded since their inception.

The first ETN offered in Singapore is an iPath Dow Jones-UBS Commodity Index Total Return ETN, which gives retail and institutional investors a chance to gain exposure to a broad range of commodities during Asian trading hours.

Janice Kan, SGX's senior vice-president and head of product development, said: “The launch of this new product class broadens our suite of investment offerings, and will provide investors with cost-efficient access to the commodities asset class, and eventually a range of other asset classes.”

Perhaps the closest relations of ETNs are ETFs, which are baskets of stocks that typically track the performance of a stock market index. ETFs can also be theme-driven, focusing on certain asset classes or commodities such as gold or agriculture.

ETFs generally carry lower costs — zero sales charges and lower management fees — than unit trusts because they are passively managed.

They trade like stocks on the bourse, so one can buy and sell them at market prices during the trading day. They provide exposure to a variety of markets and offer greater diversification than shares.

ETFs have been growing in popularity in Singapore, with a total of 43 listed and a daily traded volume of S$18 million (RM43 million).

However, ETNs differ from ETFs in several ways. ETNs generally lapse after 30 years and do not yield dividends, whereas ETFs have no expiry date and some offer dividends.

ETNs carry no counterparty risk, unlike certain ETFs, which use derivatives. But ETNs carry an issuer credit risk, as they are debt obligations owed by the issuer to investors.

Puzzled by insurer's payout for medical claim

RECENTLY, my wife was hospitalised at Mount Alvernia Hospital for four days. Her medical bill came up to $7,995.15.

She is insured under Income's IncomeShield Plan MA, but the total payout by Income was a shocking $240.
I called Income to find out how it arrived at that sum and was told that technically the $7,995.15 was classified as "room and board", hence limiting the claim.

The $7,995.15 included a renal screen, bed charges, clinical consumables and supply, diagnostic imaging services, equipment use, laboratory services, outside hospital services, pharmacy cost, resident medical officer fees, treatment fee and doctor attendance fee.

Given a deductible of $4,000 per policy year and 10 per cent co-insurance, any man in the street would expect an insurance payout of $3,595.63. But this is not the case.

My wife has faithfully paid her premium for the past 15 years without a single claim and this is what she gets in return. I am writing this so the public is made aware of such pitfalls in their medical insurance.

For big insurance companies to cite a technicality as an excuse not to make a decent payout is in no way fair. I urge the Consumers Association of Singapore and leaders in the insurance industry to look into this loose definition of "room and board".
In my opinion, given my wife's good record, Income should honour the $3,595.63 payout as a goodwill gesture.

Lastly, I would like to ask the Central Provident Fund Board why only $450 a day can be used from Medisave for hospitalisation.

Ong Kok Lam

The above was written by a disgruntled medical policyholder by the low payout of the medical bills by NTUC Income and this was published in the forum section on the Straits Times last month. Someone by the name of paufurhs has given an excellent breakdown of the medical bill on the ST forum and why the insurer reimburse only $240 back and this is explained below.

In all "shield plans", regardless if it is CPF Medishield or the private shield plans from private insurance companies, "Room & Board" is broadly defined as expenses including meal charges, professional charges, investigations and other miscellaneous charges. In short, in includes any inpatient medical charges not relating to surgical expenses.

In the gripe letter, and from the description of the expenses, it is very obvious none of the expenses are related to surgery, and so they fall under one category - "Room & Board".

For those who can't figure out how a $7K+ bill can only be entitled to only a $240 reimbursement amount, I breakdown the calculations.

All "shield plans" are integrated with CPF Medishield, thus forming a 2-tier medical insurance plan. During claims, the insurer will calculate which tier will reimburse the most of the expenses incurred, and pay out from that tier.
Incidentally, FYI, a part of the "shield plans'" premiums are paid to CPF Board for the respective Medishield tier.

The bill incurred under the alleged "Room & Board" category was $7,995.15
The limit of claim under the Incomeshield MA tier is $690 per day.
Since patient was warded for 4 days, the max. claimable amount is $2,760.
The established deductible under this tier is $4,000.
As the claimable amount is below the deductible, there will be no payout under this tier of coverage.

Move this $7,995.15 to the Medishield tier.
The limit of claim under the Medishield tier is $450 per day.
Since patient was warded for 4 days, the max. claimable amount is $1,800.
The established deductible under this tier is $1,500 (for B2 ward and above, and for claimable amount between $1,500 to $3,000).
Therefore, the sub-balance after deductible would be $300 ($1,800 - $1,500)
(At this point of calculation, the patient must already bear $7,695.15)
The established co-insurance under this tier is 20% (for B2 ward and above, and for claimable amount between $1,500 to $3,000), which is computed as $60.
Finally, the reimburseable amount under this Medishield tier is $240 ($300 - $60)

The patient bears $7,755.15 ($7,695.15 + $60)

Since the CPF Medisave Account can only be used to pay $450 per day for non-surgical inpatient bills, the patient can only use $1,800 from Medisave to pay for the hospital bill.
The remaining $5,955.15 has to be paid in cash.

This is not the first time I have seen this type of cases appearing on the ST forum. The one thing that is rather similar in these cases is that one thinks that as long they have a medical insurance plan such as Medishield, they are entitled to a stay in any type of wards in any hospitals and they expect a large part of the medical bills to be reimbursed back through the medical insurance plan. Unfortunately, this is not true. One has to match the correct plan with the correct class of ward. In this case, the Incomeshield Plan MA which was originally the Medishield Plus A, ran by the CPF Board, is geared towards the coverage of bills in an 'A' class ward and below in a restructured hospital and Mount Alvernia Hospital is a private hospital. Another point is that this plan is not an 'as charged' plan and thus there are limits to the claims for each category. As such, do make sure that you know what you are entitled to under the medical insurance plan which you have subscribed to and in the unfortunate event that you need to be admitted to a hospital, choose the correct class of ward and hospital.

There is a pretty interesting post with a few hundred comments on lioninvestor's site. The post was about a company called Genneva Gold, which exists in Malaysia and Singapore. The links to the company's website can be found here. In this post, there were a lot of comments that debate on whether this investment is true or not and there were a lot of heated arguments and debates.

In my opinion, Genneva Gold is likely to be a fradulent company. Firstly, the returns does not corresponds with the risk. It seems to be a high return and low risk investment and that is not possible at all. Secondly, the business model of Genneva Gold seems to be unsustainable. Not much is said about how is the profits of the company being generated. Without being profitable, Genneva Gold will not be able to last long.

There were a lot of interesting insights and detailed analysis made by various parties that explains on why Genneva Gold seems to be a scam. The strange thing is that many still choose to believe that Genneva Gold is workable and not a scam. This is where I think that the greed has blinded them and they choose only to look at the good side of things instead stepping back and take a serious look at this investment. Unfortunately, this is also the very same reason why I think that the majority of people are not likely to do well when it comes to the stock market.

I took this off the Schroders investor handbook as I was taking part in their investment quiz. This chart is rather interesting as it shows that poor performance years are often followed by significant rises subsequently. That's why one should rejoice when the stock market is doing poorly as it offers a chance for investors to buy in. One thing that they don't mention is that poor performance years can be followed by another year of poor performance as seen by the negative year to year returns for 1973 to 1974 and 2001 to 2002.