One of the major challenges faced by Singapore, is having an Ageing Population.
The Singapore Department of Statistics has been tracking the old-age support ratio.
It relates to the number of people who are capable of providing economic support to the number of older people who may be dependent on others’ support. It is computed as the ratio of the working-age population (e.g. aged 20-64 years) per person aged 65 years and over in Singapore.
Over the past decades, the old-age support ratio of the resident population (comprising Singapore citizens and permanent residents) has steadily decreased.
Source: SingStats.gov.sg
Factors contributing to this downward trend include rising life expectancy and falling birth rates.
Rise of the Sandwich Generation
Sandwich Generation refers to people who financially support and care for older and younger family members at the same time.
Most of those in the sandwiched group would be working individuals between ages 20 and 64. However, there are cases of retirees in their 60s and 70s who are caring for their children and grandchildren, as well as their elderly parents.
This is partially due to the increasing life expectancy of Singaporeans, as they have access to world-class health care facilities.
Source: worldbank.org
Singapore is one of the countries with the highest life expectancy in the world.
Source: worldbank.org
Unfortunately, even though Singaporeans are living longer, many spend their twilight years in poor health.
A Straits Times article mentioned that a local study has found that, the proportion of older adults with three or more chronic diseases nearly doubled from 2009 to 2017.
The article also stated that based on an ongoing survey of more than 4,500 Singaporeans and permanent residents, more Singaporeans aged 60 and above are also having difficulty carrying out daily living activities.
Source: StraitsTimes.com
What if you belong the Sandwich Generation?
If you do not have wealthy parents who don’t require your financial support, you may need to assist them in their retirement planning.
Although Singapore has several national schemes such as CPF Life, MediShield Life, CareShield Life, you should not assume that your parents have sufficient retirement funding and insurance coverage; because it will depend on their financial and health situation.
https://sgadviser.com/wp-content/uploads/2021/09/asian-senior-couple-doing-and-calculating-home-fin-PGS3KJK.jpg41606240ryanhttp://sgadviser.com/wp-content/uploads/2017/06/logo-300x138.pngryan2021-07-01 00:07:502021-09-30 00:15:34The Importance of Retirement Planning in an Ageing Society
The efficiency of capital markets is a topic often debated in the field of investment research.
In financial economics, the Efficient Market Hypothesis (EMH) is a hypothesis that states that security prices adjust rapidly and in an unbiased manner to new information.
According to the EMH, stocks always trade at their fair value on exchanges, making it impossible for investors to purchase undervalued stocks or sell stocks for inflated prices. Therefore, it should be impossible to outperform the overall market through expert stock selection or market timing; and the only way an investor can obtain higher returns is by purchasing riskier investments.
EMH believers think it is meaningless to search for undervalued stocks, or predict trends in the market through either fundamental or technical analysis.
3 Forms of Efficient Market Hypothesis
Weak Form
The weak form hypothesis assumes that security prices reflect all historical information about the trading behavior and price of the market.
The use of technical analysis, charting and regression analysis on historical data would have no predictive power, because an investor trying to examine a security’s past price and history would not be able to find information that would help him to predict future price movements.
Semi-strong Form
The semi-strong form hypothesis assumes that the market reacts quickly to the release of new public information. This includes the release of the latest set of half-yearly or annual results, earnings outlook, new acquisitions or divestitures made by the companies.
Assuming that is true, technical analysis and other charting tools would be ineffective, since examining historical relationships do not provide the investor with new information to enable him to make better predictions about the future movement of security prices.
However, an investor with the knowledge of private inform which is not known to the public, could profit from the insider news since it is not yet to be fully reflected in the security’s price.
Strong Form Hypothesis
The strong form hypothesis assumes that all relevant information about a company, both public news and private information, are already embedded in the price of the security.
Because the hypothesis assumes that any implication from the release of both public and private information are already factored in the security’s price, no investor should have any advantage over another investor in consistently achieving a better than market return.
Does the Efficient Market Hypothesis Really Hold?
Till this day, the EMH still highly controversial and often disputed.
Over the years, many tests have been conducted to verify the validity of the Efficient Market Hypothesis, but the conclusions vary. Tests generally suggest that whilst the market may not be perfectly efficient, it could reasonably be deemed as highly efficient.
While several anomalies exist (eg. January effect, or P/E ratio effect), these anomalies are not conclusive enough to rebuke the EMH since they do not work in a consistent manner across all securities.
On the other side of the arguement, there are investors and portfolio managers out there who seem to be able to outperform the market. This suggests that the market is not 100% efficient.
However, it is not always possible to produce superior returns relative to the market. Therefore, the best strategy to adopt may be based on indexing the portfolio to the market benchmark. Although the EMH has yet to be fully accepted by the finance industry, unless one is able to constantly outperform the market, the EMH theory still holds to a certain extent.
If you enjoyed this article, please share it with your friends on social media.
Have you ever made any big ticket purchases before (eg. cars, property, etc)?
Before you spent your money, did you ever considered leasing (or renting) instead of buying?
Leasing is often considered because it is cheaper in the short run, if an individual cannot afford to buy the car or home.
Another reason is the convenience that it brings, because you have the option to rent another car or property after the lease has expired.
So which is the better option? Leasing or buying? Let us compare the advantages and disadvantages.
Advantages of Leasing
1. Lower monthly payments – The individual only pays for the use of the asset for a specific period. Therefore the monthly payments are usually lower, compared to a purchase loan.
2. Less up-front cash deposit – Leases require less, or sometimes no down payment.
3. Fewer maintenance problems – Usually, the landlord or leasing company will cover the costs of major repairs and maintenance caused by wear and tear.
4. Opportunity to acquire financing – If an individual is a first time buyer or has bad credit rating, sometimes leasing is the only way an individual may be able to acquire financing for his needs.
5. More choices available – An individual may take advantage of the choices available, for example, he may change the model of his leased car every few years or he may decide to relocate his residance every few years.
6. Less hassle – At the end of a lease, there is no hassle trying to get rid of a used car, for example. An individual can just return the car and walk away.
Disadvantages of Leasing
1. Long-term cost of leasing is more than the cost of buying – A lessee may find that it more cost effective to purchase the asset from the start, as his total outlay at the end of the leasing period may be cost more than he expected.
2. High insurance costs – Sometimes the lessor requires the lessee to take out insurance policies to cover himself.
3. Excess wear and tear clauses – For example, car rental companies may be very particular about the conditions of the car when the lessee returns it at the end of the lease period. If the condition is poor, the lessor may keep the “refundable security deposit” to offset the costs of repair. This may also apply when leasing a home.
4. Accidents may trigger early termination (particularly for car leasing) – Car lease may be terminated if an accident occurs, in which the lessee may be obliged to pay off the lease. Car insurance covers the damages, but not the cost of paying off the lease.
5. Penalty for getting out of the lease early – There may be a penalty for getting out of a lease early. A lease is a contract and if it is broken, there are penalties for breach of contract. The lessee’s credit rating may be tainted, causing him to perhaps, pay more for future loans at higher interest.
If you enjoyed this article, please share it with those whom may find it useful.
https://sgadviser.com/wp-content/uploads/2021/09/asian-businessman-doing-financial-transactions-by-XB6N8UV.jpg34565184ryanhttp://sgadviser.com/wp-content/uploads/2017/06/logo-300x138.pngryan2021-05-01 23:56:202021-09-29 23:59:21Is It Better to Buy or Lease?
The Importance of Retirement Planning in an Ageing Society
Financial PlanningOne of the major challenges faced by Singapore, is having an Ageing Population.
The Singapore Department of Statistics has been tracking the old-age support ratio.
It relates to the number of people who are capable of providing economic support to the number of older people who may be dependent on others’ support. It is computed as the ratio of the working-age population (e.g. aged 20-64 years) per person aged 65 years and over in Singapore.
Over the past decades, the old-age support ratio of the resident population (comprising Singapore citizens and permanent residents) has steadily decreased.
Source: SingStats.gov.sg
Factors contributing to this downward trend include rising life expectancy and falling birth rates.
Rise of the Sandwich Generation
Sandwich Generation refers to people who financially support and care for older and younger family members at the same time.
Most of those in the sandwiched group would be working individuals between ages 20 and 64. However, there are cases of retirees in their 60s and 70s who are caring for their children and grandchildren, as well as their elderly parents.
This is partially due to the increasing life expectancy of Singaporeans, as they have access to world-class health care facilities.
Source: worldbank.org
Singapore is one of the countries with the highest life expectancy in the world.
Source: worldbank.org
Unfortunately, even though Singaporeans are living longer, many spend their twilight years in poor health.
A Straits Times article mentioned that a local study has found that, the proportion of older adults with three or more chronic diseases nearly doubled from 2009 to 2017.
The article also stated that based on an ongoing survey of more than 4,500 Singaporeans and permanent residents, more Singaporeans aged 60 and above are also having difficulty carrying out daily living activities.
Source: StraitsTimes.com
What if you belong the Sandwich Generation?
If you do not have wealthy parents who don’t require your financial support, you may need to assist them in their retirement planning.
Although Singapore has several national schemes such as CPF Life, MediShield Life, CareShield Life, you should not assume that your parents have sufficient retirement funding and insurance coverage; because it will depend on their financial and health situation.
Does the Efficient Market Hypothesis actually work?
InvestmentThe efficiency of capital markets is a topic often debated in the field of investment research.
In financial economics, the Efficient Market Hypothesis (EMH) is a hypothesis that states that security prices adjust rapidly and in an unbiased manner to new information.
According to the EMH, stocks always trade at their fair value on exchanges, making it impossible for investors to purchase undervalued stocks or sell stocks for inflated prices. Therefore, it should be impossible to outperform the overall market through expert stock selection or market timing; and the only way an investor can obtain higher returns is by purchasing riskier investments.
EMH believers think it is meaningless to search for undervalued stocks, or predict trends in the market through either fundamental or technical analysis.
3 Forms of Efficient Market Hypothesis
Weak Form
The weak form hypothesis assumes that security prices reflect all historical information about the trading behavior and price of the market.
The use of technical analysis, charting and regression analysis on historical data would have no predictive power, because an investor trying to examine a security’s past price and history would not be able to find information that would help him to predict future price movements.
Semi-strong Form
The semi-strong form hypothesis assumes that the market reacts quickly to the release of new public information. This includes the release of the latest set of half-yearly or annual results, earnings outlook, new acquisitions or divestitures made by the companies.
Assuming that is true, technical analysis and other charting tools would be ineffective, since examining historical relationships do not provide the investor with new information to enable him to make better predictions about the future movement of security prices.
However, an investor with the knowledge of private inform which is not known to the public, could profit from the insider news since it is not yet to be fully reflected in the security’s price.
Strong Form Hypothesis
The strong form hypothesis assumes that all relevant information about a company, both public news and private information, are already embedded in the price of the security.
Because the hypothesis assumes that any implication from the release of both public and private information are already factored in the security’s price, no investor should have any advantage over another investor in consistently achieving a better than market return.
Does the Efficient Market Hypothesis Really Hold?
Till this day, the EMH still highly controversial and often disputed.
Over the years, many tests have been conducted to verify the validity of the Efficient Market Hypothesis, but the conclusions vary. Tests generally suggest that whilst the market may not be perfectly efficient, it could reasonably be deemed as highly efficient.
While several anomalies exist (eg. January effect, or P/E ratio effect), these anomalies are not conclusive enough to rebuke the EMH since they do not work in a consistent manner across all securities.
On the other side of the arguement, there are investors and portfolio managers out there who seem to be able to outperform the market. This suggests that the market is not 100% efficient.
However, it is not always possible to produce superior returns relative to the market. Therefore, the best strategy to adopt may be based on indexing the portfolio to the market benchmark. Although the EMH has yet to be fully accepted by the finance industry, unless one is able to constantly outperform the market, the EMH theory still holds to a certain extent.
If you enjoyed this article, please share it with your friends on social media.
Is It Better to Buy or Lease?
PropertyHave you ever made any big ticket purchases before (eg. cars, property, etc)?
Before you spent your money, did you ever considered leasing (or renting) instead of buying?
Leasing is often considered because it is cheaper in the short run, if an individual cannot afford to buy the car or home.
Another reason is the convenience that it brings, because you have the option to rent another car or property after the lease has expired.
So which is the better option? Leasing or buying? Let us compare the advantages and disadvantages.
Advantages of Leasing
1. Lower monthly payments – The individual only pays for the use of the asset for a specific period. Therefore the monthly payments are usually lower, compared to a purchase loan.
2. Less up-front cash deposit – Leases require less, or sometimes no down payment.
3. Fewer maintenance problems – Usually, the landlord or leasing company will cover the costs of major repairs and maintenance caused by wear and tear.
4. Opportunity to acquire financing – If an individual is a first time buyer or has bad credit rating, sometimes leasing is the only way an individual may be able to acquire financing for his needs.
5. More choices available – An individual may take advantage of the choices available, for example, he may change the model of his leased car every few years or he may decide to relocate his residance every few years.
6. Less hassle – At the end of a lease, there is no hassle trying to get rid of a used car, for example. An individual can just return the car and walk away.
Disadvantages of Leasing
1. Long-term cost of leasing is more than the cost of buying – A lessee may find that it more cost effective to purchase the asset from the start, as his total outlay at the end of the leasing period may be cost more than he expected.
2. High insurance costs – Sometimes the lessor requires the lessee to take out insurance policies to cover himself.
3. Excess wear and tear clauses – For example, car rental companies may be very particular about the conditions of the car when the lessee returns it at the end of the lease period. If the condition is poor, the lessor may keep the “refundable security deposit” to offset the costs of repair. This may also apply when leasing a home.
4. Accidents may trigger early termination (particularly for car leasing) – Car lease may be terminated if an accident occurs, in which the lessee may be obliged to pay off the lease. Car insurance covers the damages, but not the cost of paying off the lease.
5. Penalty for getting out of the lease early – There may be a penalty for getting out of a lease early. A lease is a contract and if it is broken, there are penalties for breach of contract. The lessee’s credit rating may be tainted, causing him to perhaps, pay more for future loans at higher interest.
If you enjoyed this article, please share it with those whom may find it useful.