Is Travel Insurance Necessary?

I will be flying to Bali for a short getaway and I decided to cover the topic about travel insurances. Whenever you book your plane tickets, you always come to the final page of the booking where they present you with the option to add on travel insurance to your booking. You then ask yourself (as well as your travel companions) whether travel insurance is necessary. Personally, I used to skip past these pages as quickly as possible because I always told myself nothing is going to happen - what are the chances, right?

Well, that was up till I went on a trip to Phuket with one of my close friends. We rented scooters to ride around the island. Everything went smoothly, until I saw him drifting across the asphalt at one of the bends in the mountainous roads where he came to a stop by knocking his head into the guard rail. Thankfully he did not suffer any head injuries, but he had a bad case of road rash and the next few days of island hopping and snorkeling for him were ruined. I am glad we put on the cheap helmets that were provided, and also the passerby who helped us by rushing home to drive his pickup truck so we could transport the scooter to a repair shop (He followed up the next day and took us to collect the scooter - I'm not sure what we were to do without him).

Sob story aside, this taught my friend and I a very important lesson - an extremely painful one.

When we come to the topic of insurance, most people become apprehensive of the idea. However, when we come across a 1-for-1 deal at Starbucks, how many of us drop everything in hand, grab a friend and drag them to the nearest outlet? (maybe not to such extremes, but you get what I mean)

While there might be a few differences, most travel insurances generally cover the following:

• Trip cancellations (usually only pre-paid expenses can be reimbursed)
• Trip curtailment
• Travel delays
• Overseas medical expenses
• Emergency medical evacuation
• Baggage delay
• Baggage/Personal belongings

Most of the above insured pertains to the financial risk you may incur in the event of such unavoidable circumstances. However, the key point to note about a travel insurance is the medical coverage it provides you. Not only does a travel insurance compensate you for overseas medical expenses, it also provides you coverage for an emergency medical evacuation, if such a need arises.

Based on the rates by VIP Jets, a medical evacuation from Bangkok to Singapore (one way) would cost close to $25,000. This fact can be further strengthened by this article written on AIG's website where "hospital expenses and an emergency medical evacuation from Thailand to Singapore amounted to $75,000".

But I am covered by my personal medical insurance policy!

Yes, you will likely be able to make claims for medical expenses incurred overseas. However, take note that your policy might not cover certain areas and you might end up having to fork out expenses from your own wallet - such as requirements to spend a night in hospital, etc. Also, the cost of an emergency medical evacuation is often not covered.

The amount of travel insurance coverage you purchase is up to you. But a basic travel plan should be considered if you are going to travel out of Singapore. If you are still brushing off the idea of purchasing a travel insurance for your next holiday, ask yourself this:

Would I rather enjoy 2 cups of Starbucks now, and risk a $75,000 bill at the end of my holiday?

* The cost of a travel insurance for a 3d2n trip to Bali costs $13.

My Thoughts on Hotung Invesment Holdings

Hotung Investment Holdings is a investment company listed on the Singapore Stock Exchange and is based in Taiwan. In summary, it is a venture capital investment company. They focus on investing in start-ups and SMEs, majority in the biotechnology and e-commerce industries. The companies that they invest in are mainly in Taiwan and China.

Their investment ventures in China is a good thing. Taking a look at statistics, Unicorns (a term for private companies valued at more than a billion dollars) are increasing at a rapid pace internationally. The number of Unicorns located outside of US is also increasing year on year.

Percentage of Unicorns outside of US
2013	2014	2015	2016
30%	37%	53%	58%

Data extracted from CNBC

Half of the top 10 Unicorns outside of the US are located in China. This shows how China is growing to become a global innovation hub. In fact, this article by TechNode mentions that Shen Zhen might be the next Silicon Valley.

This post isn't about the world of start-ups, so let's jump into a more in-depth look at Hotung Investment Holdings. I chanced upon Hotung through POEM's fundamentals tools. Taking a look at the group's past 5 financial years, it can be observed that there is little growth.

All figures are in NT$

The financials of the company show that the figures are fluctuating around the average across the 5 years and there has not been any substantial growth. If we were to compute the growth rate of its NAV since 2012 to 2016, we get 0.73% compounded per year.

Before you close your browser and throw all idea of investing in Hotung out the window, I urge you to keep reading till the end of this post. Previously reviewed by Vatsa on his blog, the calculated growth rate of its NAV since 2009 to 2014 is 0.13%. Taking this almost non-existent growth rate into consideration, we can see that the growth rate of the comany, albeit very slowly.

Looking from a glass half full perspective, it is worth noting that the company has been consistent in maintaining its financials. Besides that, the company does not have long term debts and has a huge warchest under its bed.

The current share price SG$1.835 (as of 02 June 2017) gives:
1) Price-to-Earnings(PE) Ratio - 12.98
2) Price-to-Book(PB) Ratio - 0.57
3) Dividend Yield - 7.86%

PE ratio is currently neither over nor under-priced. Due to its venture capital business model, it is reflected through its PB ratio of 0.57 that the market has discounted the risk of its assets due to the risky business nature of the company. However, if the company is able to generate the true value of its assets, the share price of this counter should climb towards its value.

Finally, the main reason I was attracted to this stock was its dividend yield. Since 2012, the average dividend per share (DPS) is NT$3.181. For FY 2016, the company has announced a dividend of NT$3.1/share. Although below average, it still works out to be 7.86%.

Fundamentally, Hotung Investment Holdings is an attractive company to invest in given its steady financials, zero long term debt, huge amount of cash, stable high dividend yield and low PB ratio. In addition, the company is authorised to repurchase up to 9,720,378 shares (10% of issued ordinary share capital). Till date, they have been carrying out daily share buy-backs since 22 May 2017.

Given its risky business nature and little growth, it will be good to wait for its price to fall below SG$1.60. At SG$1.60, the PE ratio would be 11.32 and would yield a dividend slightly over 9%. I feel that with the above, Hotung Investment Holdings is a good stock to add to your dividend portfolio.

I am currently vested at $1.455.

Which is the Best Savings Account in Singapore?

I have written on how we should separate our savings from our spending money in my blog post on 8 Tips for a Graduate Entering Adulthood.  I hear you ask,"What is the BEST savings account in Singapore". I will run through 5 savings account in Singapore and compare which would provide you the best interest rate.

Before we move to the comparison, first we need to define the different scenarios for comparison. Based on this article from Straits Times, we will take the median gross salary to be $3,300. We take 3 different people with different monthly credit card expenditure and savings into consideration:

	Mr. A	Mr. B	Mr. C
Salary Credited	$2,640	$2,640	$2,640
Monthly CC Spend	$300	$600	$600
Savings	$20,000	$20,000	$40,000

*Assumption is made that every person can meet 3 bill payments every month

OCBC 360

Taken from OCBC website on 27 May 2017

OCBC 360 account gives a generous 1.2% interest by just crediting your salary (>$2,000). Also, the payment of 3 bills per month can be easily achieved as well (credit card bills, telecom etc). Personally I have trouble meeting the spending requirement of $500 on my credit card and I don't like having to buy an eligible financial product for the additional 1.2%. As graduates starting on our first jobs, we forgo the bonus 1% interest (for account balances >$200,000).

Based on OCBC 360 criteria, the 3 different people would earn the following interest per year:

	Mr. A	Mr. B	Mr. C
Percentage	1.55%	1.85%	1.85%
Amount	$310	$370	$740

UOB One Account

Taken from UOB website on 27 May 2017

UOB One Account has a tiered system when it comes to their interest calculation. You only need to spend $500 on your UOB credit card and credit your salary (>$2,000), or pay 3 bills monthly via GIRO. However, if your balance goes over $50,000, you only receive 0.05% for the difference in amount over $50,000. 

Take note that the requirement to spend $500 every month is a deal-breaker. If you do not meet the spending of $500 per month, you forfeit any interest you should receive.

Based on UOB One criteria, the 3 different people would earn the following interest per year:

	Mr. A	Mr. B	Mr. C
Percentage	0.05%	1.75%	2.21%
Amount	$10	$350	$883

From the above calculations, it can be observed that the interest earned is maximized the closer your account balance is to the $50,000 threshold.

BOC SmartSaver

Taken from BOC website on 27 May 2017

Bank of China SmartSaver is another very attractive account. Looking at the numbers advertised, you can earn interests up to 3.75%! However, like all advertisements that look too good to be true, we need to delve deeper for a better understanding.

Card Spend Bonus Interest:

Salary Crediting Bonus Interest:

Payment Bonus Interest:

Enjoy 0.35% p.a. Payment bonus interest when you successfully complete 3 bill payments of at least S$30 each via GIRO or BOC Internet Banking/BOC Mobile Banking Bill Payment function.

Extra Savings Bonus Interest:

Enjoy 0.60% p.a. Extra bonus interest when you have fulfilled at least one of the requirements for either Card Spend, Salary Crediting or Payment bonus interest. Payment bonus is applicable to your account balance above S$60,000 subject to a maximum of S$1,000,000.

As you can see, realistically, it is hard to achieve the 3.75% interest as advertised. So how much can our four people earn? Based on BOC SmartSaver criteria, the 3 different people would earn the following interest per year:

	Mr. A	Mr. B	Mr. C
Percentage	1.15%	1.95%	1.95%
Amount	$230	$390	$780

POSB Cashback Bonus 

Taken from POSB website on 27 May 2017

POSB Cashback Bonus is extremely unique. Unlike the previous accounts, POSB gives users bonus interests based on the banking that they do. Take note that your salary credit must be at least $2,500 per month. Also, you are required to meet 3 out of the 5 above categories to be entitled to the cashback.

The drawback of POSB's Cashback Bonus is that you need to have 1 out of the 3 products offered by POSB - home loan, insurance or investments. As mentioned earlier when reviewing the OCBC 360 account, I don't like having to buy an eligible financial product (or take up a home loan) just to receive bonus cashback.

In this special case, a salary credit, credit card spend, and an insurance premium of $50 would earn the 3 different people the following cashback per year:

	Mr. A	Mr. B	Mr. C
Percentage	0.64%	0.68%	0.34%
Amount	$127.44	$134.64	$134.64

POSB Cashback Bonus is highly dependent on the amount of transactions you carry out. Looking at the cashback received, your account balance is not a factor. I would highly recommend the POSB Cashback Bonus only if you take a home loan with POSB/DBS or you have multiple financial products from them.

CIMB FastSaver Account

Taken from CIMB website on 27 May 2017

CIMB had a simple approach to their FastSaver Account - maintain a minimum of $1,000 in your account and enjoy an interest rate of 1%. There is really nothing much to say about this account. What you see advertised is what you get. Unlike the accounts mentioned above, there is no requirements for salary credit, bill payments, credit card spending or purchase of any financial products. However, when comparing CIMB's interest rates with its competitors, you got to admit that it is a little low (*hints CIMB)

Based on the advertised interest rates, the 3 different people would earn the following interest per year:

	Mr. A	Mr. B	Mr. C
Percentage	1%	1%	1%
Amount	$200	$200	$400

Conclusion

Based off the financials of a graduate entering the working industry,  we can conclude:

1) OCBC 360 Account is for you if you are unable to meet minimum credit card spending of $500/month.

2) BOC SmartSaver Account is for you if you can meet meet minimum credit card spending of $500/moth and you account balance is less than $35,000.

3) UOB One Account is for you if you if you can meet meet minimum credit card spending of $500/moth and you account balance is more than $35,000.

8 Tips for a Graduate Entering Adulthood

Hello Graduates!

If you are currently in the same position as I was few months back - sending out resumes, attending interviews after interviews, not knowing whether you'll hear from HR, or starting your first day of work - CONGRATULATIONS! You are finally spreading your wings and taking your first few steps into adulthood!

Here are 8 financial tips on entering adulthood as a graduate:

1) Start Handling Your Own Finances

If your parents have been paying your telephone bills, insurance policies, allowances, etc., it is time to take charge. Budget allowances for yourself every month, how much you are going to spend, save and invest. You can micro-budget to how much you will spend for different activities - food, shopping, transport etc. However, for me, I just give myself a lump sum budget every month and make sure I don't overspend.

2) Dream Big, Yet Be Down-to-Earth

“Be practical as well as generous in your ideals. Keep your eyes on the stars, but remember to keep your feet on the ground.” - Theodore Roosevelt 

Have aspirations, goals and find out what drives and motivate you. You may have a certain company or a certain role in mind after graduating, but don't forget, there are thousands of graduates like yourself - you might not get what you want right after graduation, but don't let this deter you or cloud your view, consider other opportunities! There are many paths you can take to achieve your goal.

3) Separate Your Savings From Your Spending

Like all Singaporeans, we all have a POSB Account ever since we can remember. Growing up, we use this account for everything, spending, saving, some of you - investing. As you step into adulthood, keeping your savings with your spending money is going to tempt you to spend more than you budget for. Have at least two accounts - one for saving, the other for spending.

For Savings: I use OCBC 360 Account - 1.5% interest per year (credit salary + pay 3 bills).
For Spending: I use my POSB Account (ATMs are plentiful all around the island).

4) Sign Up For Credit Cards

"Credit cards?! So many people end up with huge credit card debts!"

This is what you hear a lot of the time. Taking note of Point (1), plan out a monthly budget and stick to it. Stay committed to your budget, don't give in to temptation. There are many credit cards you can compare online that give good rebates/rewards (perhaps a post at a later date).

5) Stay Protected

Insurance policies. Don't listen to people who tell you insurance is a waste of money. Also, don't listen to that agent who tells you what policy you should buy. Instead, understand your financial situation and evaluate for yourself based on your needs. You don't want to be paying a premium of $10,000 when you earn $40,000 a year.

This is also the time to review the policies that your parents might have bought for you. Ask yourself:
- Do these policies still fulfill your needs?
- Are there better or cheaper products on the market for you?

6) Prepare for Rainy Days

Apocalypse, World War, Retrenchment or anything that could cause you to lose your rice bowl. A good rule of the thumb would be to ensure that you have about 6-12 months of your monthly expenses kept away as an emergency fund. DO NOT USE THIS FUND FOR ANYTHING (not for investment, not for buying a house, and certainly not for buying that beautiful convertible). I place my emergency fund in my OCBC 360 Account to get bonus interest on it.

7) Pay Your Bills On Time

Telephone Bills, Credit Cards, make sure to pay them on time, you don't want to end up paying extra on late payment charges.

8) Invest Your Extra Money

Have that extra cash? Invest! Use your extra money to make money, don't let it idle in the bank. Investing does carry risks, therefore it is best to evaluate your risk appetite and also ensure that you are not dependent on the cash that you may lose. Before deciding on the medium you plan to invest in, understand it and the different strategies you may adopt.

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As a fresh graduate, it is time to rise and conquer the world! You have little financial baggage, nothing is holding you back, the possibilities are endless!

Any Monkey Can Beat the Stock Market!

In his classic 1973 book, A Random Walk Down Wall Street, Burton Malkiel states that "a blindfolded monkey throwing darts at a newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by experts".

The article by Research Affiliates highlighted that 100 random, equal-weighted 30-stock portfolios were pick out by monkeys. In summary, the 100 random portfolios outperformed the index by 1.60% per year, on average!

Paradoxes aside, if monkeys can outperform the index, why can't the average person?

Using the SPDR Straits Times Index ETF (ES3) as a benchmark, the performance of the ETF (including dividends) is 7.28% per year since its inception on 11 April 2002. Taking this benchmark into consideration, the goal of my portfolio is to generate an average annual return of 7% per year.

My strategy is to build wealth through both value and dividend growth stock investments. By incorporating both high quality dividend growth investments as well as value-oriented investments, I believe market-beating returns can be achieved (through patience and focus on quality at the right prices).