*Official* BBCWatcher club

[BBCWatcher]

Any advice on P2P lending platforms?

Which one(s)? As a lender or a borrower?

 

[Shiny Things]

I don't understand why Asian (ex-Japan) bonds are any better or worse than bonds from other continents. Has anybody got a reasonable investment strategy argument for that part?

They're not; it's just marketing.

Update: In the case of QL3 at least, I'd even say AXJ junk bond funds are explicitly worse than global junk, because the AXJ junk sector is stuffed full of atrocious sovereign credits (Sri Lanka, Mongolia) and hilariously overextended Chinese real-estate developers (Country Garden, Evergrande, Kaisa)

 

[MrHighlander]

How do the premiums compare if you look at GE’s policy with a 6 month waiting period versus Aviva’s longest waiting period?

Bear in mind you can blend policies. For example, if you’re trying to obtain $5,000 of coverage then you’re allowed to buy $3,000/month from Aviva and $2,000/month from Great Eastern, as an example. There are situations when that “dual allegiance” makes sense.

I will check up on that. Good pointer on combination of policies.

On another note, under the policy owners protection scheme, what does this mean? I extracted this from the website below:

Individual life and voluntary group life policies (with the exception of annuities):

S$500,000 for the aggregated guaranteed sum assured
S$100,000 for aggregated guaranteed surrender value
This cap is applicable per life assured per insurer.

So disability income insurance is counted as a life policy and fall under this? Is it considered 'annuities' since it is supposed to pay out monthly and thus is not subject to the cap of S$500,000?

https://www.sgmoneymatters.com/policy-owners-protection-scheme/

 

[BBCWatcher]

On another note, under the policy owners protection scheme, what does this mean? I extracted this from the website below....
So disability income insurance is counted as a life policy and fall under this?

Interestingly, disability income insurance is classified as “Accident and Health” (A&H) insurance. It’s SDIC protected and not subject to caps, according to the LIA.

If you combine policies, just make sure you’re staying within the income replacement limit. Insurers will generally coordinate in that way, so you cannot use that technique to try to cover 110% of your income, for example. And I don’t necessarily recommend a two carrier approach, but it’s possible.

 

[MrHighlander]

Thanks BBCW.

I have compared the quotes for Aviva Idealincome vis-a-vis GE Payassure for $5000 assured sum until 55. GE is $540 annual premium whilst Aviva is $375.

One other thing to note is the Aviva non working disability benefit is fixed at $500 at the start (with annual increase of 3% from the first anniversary of the policy) whilst GE is lower of $4000 or the sum assured (so its $2500).

Any thoughts ? Thanks

Interestingly, disability income insurance is classified as “Accident and Health” (A&H) insurance. It’s SDIC protected and not subject to caps, according to the LIA.

If you combine policies, just make sure you’re staying within the income replacement limit. Insurers will generally coordinate in that way, so you cannot use that technique to try to cover 110% of your income, for example. And I don’t necessarily recommend a two carrier approach, but it’s possible.

 

[BBCWatcher]

I have compared the quotes for Aviva Idealincome vis-a-vis GE Payassure for $5000 assured sum until 55. GE is $540 annual premium whilst Aviva is $375.

The Aviva quote includes the 3%/year increase during payout? And what are the waiting periods for these two policies?

One other thing to note is the Aviva non working disability benefit is fixed at $500 at the start (with annual increase of 3% from the first anniversary of the policy) whilst GE is lower of $4000 or the sum assured (so its $2500).

How many months or years of unemployment are you allowed until you fall into the "non-working" benefit terms for these two policies? And then what's the maximum bout of unemployment allowed before the policy is mooted completely? (I think GE allows up to 730 days in answer to my second question, if my memory is accurate.)

 

[K|muRa^84]

Hi BBCW, do u have any views on the credit risk profile of IB vs SCB?

 

[tangent314]

I don't understand why Asian (ex-Japan) bonds are any better or worse than bonds from other continents. Has anybody got a reasonable investment strategy argument for that part?

There's just not much to choose from if one wants a bond ETF denominated in SGD. AFAICS it's QL2, QL3 or A35. For more savvy investors that are comfortable trading on other exchanges and currencies, there are better fixed income ETF options, no doubt about that.

But lets say I have a retiring family member that has a $500k in cash savings on top of CPF Life topped up to ERS, looking to live on the interests from those cash savings on top of the CPF Life payout. Don't mind some risk, but don't want the hassle of trading on exchanges based on a drawdown strategy and converting currency. The #1 option in their mind is to buy a property and rent it out.

So the possibility is I could help them do a one time setup of a trading account, buy in these bond funds, and all they have to do is to take the dividends out of the account every quarter (or half-yearly for A35).

 

[BBCWatcher]

There's just not much to choose from if one wants a bond ETF denominated in SGD.

That's true, and it's unfortunate. In a more perfect world the Singapore dollar investment grade corporate bond market would be big enough to sustain a fund. It'd be perfectly fine to have a daily quoted unit trust (mutual fund), as long as it's low cost. It doesn't have to be exchange traded. It'd be OK to have a junk bond fund, too, but as a second priority.

AFAICS it's QL2, QL3 or A35.

A35 is Singapore dollar quoted/listed and holds predominantly Singapore dollar denominated bonds, mostly SGSes. It's a Singapore dollar bond fund, a rather good one. The only "problem" with A35 is that it has some great competition from Singapore Savings Bonds and direct holding of SGSes.

QL2 and QL3 are Singapore dollar quoted/listed, but their underlying bond holdings are predominantly or exclusively U.S. dollar denominated from what I can see. They aren't Singapore dollar bond funds, quite simply.

Does QL2 and/or QL3 offer some convenience? I guess so, but you've still got to go to a (local) broker to buy them. It doesn't seem like it'd be any more difficult to buy some CORP (the iShares global investment grade corporate bond fund listed/traded in London), as a notable example. Granted, you have one more key to hit, but CORP is easier to remember.

 

[MrHighlander]

The Aviva quote includes the 3%/year increase during payout? And what are the waiting periods for these two policies?

Hi BBCW, yes, the Aviva quote includes 3% yearly increase during payout. Both quotes have waiting period of six months.


How many months or years of unemployment are you allowed until you fall into the "non-working" benefit terms for these two policies? And then what's the maximum bout of unemployment allowed before the policy is mooted completely? (I think GE allows up to 730 days in answer to my second question, if my memory is accurate.)

For Aviva it seems from the first day of non-working period. For GE, after 180 days of non-working period. On the second question, both GE and Aviva are the same - policy will terminate if non-working for 2 years.

Thanks

 

[BBCWatcher]

For Aviva it seems from the first day of non-working period.

OK, that's rather ugly, isn't it? So if you underwrite all $5,000/month of coverage with Aviva then your coverage drops all the way down to $500/month from the first day after you leave a job (or are let go)? Ouch, that's not good if it's written that way.

Nonetheless, there are some redeeming qualities in Aviva's coverage, such as the 3%/year escalation feature. So maybe you can do something like $3,000/month from Aviva (which qualifies for their premium discount promotion) and $2,000/month from GE? That'll cost a little more than underwriting all $5,000 with Aviva, but it'd partially repair some Aviva policy defects and shouldn't cost as much as $5,000/month solely with GE. The $3,000/month would be subject to the 3%/year increase, presumably. On the other hand, the $2,000/month (plus Aviva's $500/month) would still give you much better protection during the 180 day allowed gap between jobs.

You could also consider running the Great Eastern coverage up to a higher age. I'm not a huge fan of chopping off the benefits at age 55 since you're really trying to protect the "long tail" while you're early to mid career. But if it's too expensive for you to run the payouts past age 55 for the whole $5,000/month, how about running the $2,000/month of coverage (with GE) up through age 60 or 65?

 

[MrHighlander]

OK, that's rather ugly, isn't it? So if you underwrite all $5,000/month of coverage with Aviva then your coverage drops all the way down to $500/month from the first day after you leave a job (or are let go)? Ouch, that's not good if it's written that way.

Nonetheless, there are some redeeming qualities in Aviva's coverage, such as the 3%/year escalation feature. So maybe you can do something like $3,000/month from Aviva (which qualifies for their premium discount promotion) and $2,000/month from GE? That'll cost a little more than underwriting all $5,000 with Aviva, but it'd partially repair some Aviva policy defects and shouldn't cost as much as $5,000/month solely with GE. The $3,000/month would be subject to the 3%/year increase, presumably. On the other hand, the $2,000/month (plus Aviva's $500/month) would still give you much better protection during the 180 day allowed gap between jobs.

You could also consider running the Great Eastern coverage up to a higher age. I'm not a huge fan of chopping off the benefits at age 55 since you're really trying to protect the "long tail" while you're early to mid career. But if it's too expensive for you to run the payouts past age 55 for the whole $5,000/month, how about running the $2,000/month of coverage (with GE) up through age 60 or 65?

Huge thanks for the suggestion. I like the 'diversification'

The GE non working disability payout is lower of $4000 or half of the monthly assured so if i take out S$2000 it will be just S$1000 (plus Aviva's 500/month plus the compounded 3%). Having said that, it's still not bad a 'blend'

On a related but separate note, any suggestion on direct term insurance? I have used comparefirst.sg - just pick the one that comes cheapest? Is there a need to review the terms and conditions of each direct term insurance? Tokio Marine stands out as the cheapest with A+ rating (Etiqa and FWD has similar or just a few dollars cheaper premium but significantly lower credit ratings).

 

[BBCWatcher]

One more thing to check on the DII is that the insurers aren’t going to cancel each other out during that up to 180 day unemployed period, leaving you with Great Eastern’s $1,000/month as Aviva abandons its even more meagre $500/month. That’d be extra bad.

Also, just as a reminder, I recommend choosing the longest waiting period available to keep the premiums in check, and since your emergency reserve fund and/or employer’s sick days (and short-term disability if offered) should tide you over well.

On a related but separate note, any suggestion on direct term insurance? I have used comparefirst.sg - just pick the one that comes cheapest? Is there a need to review the terms and conditions of each direct term insurance?

You should always read the policy details, but the “Direct” policies tend to be highly standardized, fortunately.

Tokio Marine stands out as the cheapest with A+ rating (Etiqa and FWD has similar or just a few dollars cheaper premium but significantly lower credit ratings).

SDIC coverage is up to $500,000 for term life insurance, and the direct policies are available with up to $400,000 of coverage. So you should be OK either way, as long as you don’t bust the cap with multiple policies with that carrier. That said, you’re right, the premium differences tend to be rather small to do business with a higher quality insurer. I think I would do that.

 

[Falcondiaz]

That's true, and it's unfortunate. In a more perfect world the Singapore dollar investment grade corporate bond market would be big enough to sustain a fund. It'd be perfectly fine to have a daily quoted unit trust (mutual fund), as long as it's low cost. It doesn't have to be exchange traded. It'd be OK to have a junk bond fund, too, but as a second priority.


A35 is Singapore dollar quoted/listed and holds predominantly Singapore dollar denominated bonds, mostly SGSes. It's a Singapore dollar bond fund, a rather good one. The only "problem" with A35 is that it has some great competition from Singapore Savings Bonds and direct holding of SGSes.

QL2 and QL3 are Singapore dollar quoted/listed, but their underlying bond holdings are predominantly or exclusively U.S. dollar denominated from what I can see. They aren't Singapore dollar bond funds, quite simply.

Does QL2 and/or QL3 offer some convenience? I guess so, but you've still got to go to a (local) broker to buy them. It doesn't seem like it'd be any more difficult to buy some CORP (the iShares global investment grade corporate bond fund listed/traded in London), as a notable example. Granted, you have one more key to hit, but CORP is easier to remember.

Hi BBCW, I've been lurking around and have seen this idea of A35 being a good but not optimal way of keeping the lower risk asset allocation of the portfolio advocated by Shiny Things and yourself. However, I still don't get how the maths work out, given that this bond asset class is there to support the portfolio in more turbulent times and perhaps even a pot to withdraw cash from to rebalance the portfolio. Could you elaborate further and perhaps share an example? My portfolio is 40-40-20 % ish ratio.

Thanks in advance.

 

[soulblader_89]

intern 1.8k. full-time 6k.

Thank you. I'm excited as well. Thanks for the advice. Yes, i'm also thinking about the HDB. But juding by it, my combined income with my SO would means exceeding the income ceiling of 12k.

Waaa intern pay alrdy 1.8 k, really is high ses, somemore gt gf

most of us dun even have a gf, not even think of buying a house

really is high ses

 

[tangent314]

Does QL2 and/or QL3 offer some convenience? I guess so, but you've still got to go to a (local) broker to buy them. It doesn't seem like it'd be any more difficult to buy some CORP (the iShares global investment grade corporate bond fund listed/traded in London), as a notable example. Granted, you have one more key to hit, but CORP is easier to remember.

Setting up the buy isn't a problem, I can do it for this person. Teaching this non-savvy person to regular convert and transfer the distributions from USD to SGD on his own is quite a bit trickier.

In any case I can't see CORP as being suitable for an SG person retiring in SG, with the distribution yield at ~2.6%. As you have mentioned, SGS (30 years?) seems to be the better option for the amount, although it might be a while before a 30-year SGS becomes available for auction again. QL2 (~4%) and QL3 (~6%) at least have distribution yields that look interesting if someone is looking into something significantly higher than SGS...

As we've lamented many times before, it would be ideal if there was a SG Corporate Bond Fund that SG domiciled, SGD denominated, holding SGD bonds. But we don't, so we will have to choose between various less ideal options.

 

[BBCWatcher]

However, I still don't get how the maths work out, given that this bond asset class is there to support the portfolio in more turbulent times and perhaps even a pot to withdraw cash from to rebalance the portfolio. Could you elaborate further and perhaps share an example?

I'm not sure I understand the question.

A35 is a respectable bond fund, and I kind of like it. However, I think you can accomplish the same investment goals that A35 supports using Singapore Savings Bonds and, perhaps, other Singapore Government Securities (SGSes) purchased directly from the government -- and at lower cost. If you want to use a little bit of A35 as a "rounding" fund, above SSB/SGS allocations for rebalancing purposes, that'd work.

I think ST and I agree that you shouldn't be too fanatical about rebalancing. It's not any sort of emergency if your stocks are 80.3% of your portfolio when you'd like them to be 80%.

 

[EagleToThesSky]

Vanguard's "Target" series of mutual funds are available in the United States and appropriate for U.S. persons. They are index funds designed for "fire and forget" saving, since they follow a pre-determined program based on the target date. For example, if you buy (and keep buying) Vanguard Target 2035, it stays invested in index funds of 80% stocks and 20% bonds, then starting in 2028 (7 years until the target) it gradually, automatically adjusts the ratio so that it's 30% stocks and 70% bonds in 2035. From then on you use it for regular monthly withdrawals (ideally 4% or less) for retirement.

So it's all automatic, all pre-programmed. You just plow money in every month for decades, hopefully, then switch to a gradual drawdown (4% or less per year) in retirement.

Unfortunately they don't seem to be available outside the U.S., but the programs they follow are still interesting and useful references.


I don't like QL3 since it's a junk (non-investment grade) bond fund and Asia-focused, and that combination doesn't make much sense to me, particularly the former.

I think for a retiree in Singapore interested in bonds I'd mix SSBs (and potentially other SGSes, either directly or via A35), CPF (including CPF LIFE income), and (with some care) the London-listed ETF with the symbol CORP. CORP is a global investment grade corporate bond index fund, so it's higher quality with bonds denominated in a broader range of the world's currencies. And I think CORP has better trading volume/narrower bid-ask spreads than QL3 likely does. (Please check that.) And I'd probably have ~70% in bonds and bond-likes with ~30% in stocks during a long retirement drawdown phase. CORP (or QL3 for that matter) would only be a relatively small slice of the bond holdings.

Key assumptions here include retirement in Singapore and non-U.S. personhood.

I understand that investment in US bonds is not subject to WHT. Is there any good US bonds you would recommend?

 

[OngHuatHuat]

Hi BBC I intend to get this 400 k with CI plan from aviva to protect my mortgage loans, any comment on this plan from aviva, it is the cheapest available on that website.

 

[OngHuatHuat]

I am 34 next birthday.