Top 10 lessons from the 1st year of moolahgeeks*
*T&C Apply.
I hate clickbait listicles. But I am told they drive traffic and I see they are also a bit of a year-end tradition across the internet.
Since the most important lesson I learnt this year is that running a business means you need to get comfortable with being uncomfortable, here's my first attempt at creating a listicle. In the spirit of full disclosure, there's nothing "top" about the lessons and I doubt I will get to 10 by the time I finish writing this.
Please don't unsubscribe.
This is a list of things that surprised me over the course of the year, in no particular order. These mostly relate to Singapore since we haven't yet done enough work on financial products in India.
1. Invest CPF: Unless you're saving up for a mortgage down payment or education, it makes sense to invest your CPF (OA) funds in the market. This was true even before interest rates shot up this year and now that even Singapore Government Securities yield more than the 2.5% you get on bulk of your OA, it’s a no-brainer.
In the years past, the super high transaction costs and limited investment options were a big hurdle even if you wanted to invest. Robo-advisors like Endowus and MoneyOwl now offer easy and low cost options to deploy CPF funds in globally diversified portfolios.
2. Price vs. Quality: I was surprised to see how often one had nothing to do with the other. It was most glaring with online brokers, where Interactive Brokers turned out to be almost 80% cheaper than the rest despite having the most advanced trading tools and data. But I saw it again and again - with travel Insurance, robo-advisors, credit cards - the cheaper products were often a lot better.
3. Cashback vs. Rewards: The best rewards cards are better - like way better - than the best cashback cards for high spenders ($4K/mth+). We estimated a rewards yield of 2.6%+ for the rewards cards for that level of spending vs. only 1.5-1.7% for the best cashback cards.
This was with fairly conservative assumptions on the value of rewards points, so the gap could well be larger. Even if 10-20% of your points expire unused, the best rewards cards should still be better.
At the lower end i.e. sub-S$2K/mth, the cashback cards are way better with rewards yields exceeding 3.5%.
4. Pay rent with card?: Unsurprisingly, this doesn't make sense for most people but surprisingly, for the very high spenders the math can work. You need an invite only credit card like Citi Ultima and you need to use the miles earned to fly business class. So this one is squarely for the one percenters.
5. DIY Robo: Its possible for individuals to replicate many features of a robo advisor type portfolio on their own. Although its not for the faint of heart, Interactive Brokers offers sophisticated tools that let you top up and rebalance any portfolio with minimal effort. While this doesn't let you do more advanced stuff like tax loss harvesting, larger portfolios can easily save many 10s of thousands of dollars in fees to robo advisors over a 10-15 year investing horizon.
If you're comfortable with investing your passive funds in a simple 3-4 ETF portfolio (e.g. 1 each for equity, bonds and gold, a surprisingly good option BTW) then this may not even be that hard.
6. Singapore Savings Bonds (SSBs): I was a little late to this bandwagon, but I was surprised at how innovative and genuinely customer friendly this product from MAS was. The embedded American put option really paid off in a rising rate environment and for a long time the SSBs offered a better yield that bank deposits or money markets.
With other fixed income options having caught up and global bond yields starting to come off their peaks, SSBs may no longer be a steal. But if you think there's a chance that central banks fail to tame inflation then they should still have a place in your portfolio.
7. Cheap & Fast FX: The days of paying fat spreads to transfer money overseas or when spending while traveling are over. The best money transfer services now offer very reasonable spreads for most major destinations and the best travel cards give you close to interbank rates (or even better in some cases).
You should still take some cash with you (as I learnt the hard way this month) but for the most part, we don't need to frantically look for money changers or do mental FX conversions anymore.
7A. Crypto: Obviously I could fill a whole newsletter with lessons learnt in crypto this year (and come to think of it, I did so last month), but money transfers are still not great if you want to send money outside the major countries. Conversion from and to fiat currencies is still a problem with crypto, which means its not for everyone. But I was pleasantly surprised at how well crypto transfers work - in a very limited set of circumstances they are very fast and cheap.
The Nudge
If you don't have an Integrated Shield Plan, consider signing up for one.
Integrated Shield Plans (IP) are medical insurance plans in Singapore that offers coverage for in-patient treatments i.e. for hospitalization.
The Integrated Shield Plans provide better coverage than the MediShield Life, which is the basic health insurance plan available to all Singapore Citizens and PRs. The MediShield Life plan pays for treatment in class B2 & C wards (group wards with 6-8 people in each room) and has relatively low benefit caps.
On the other hand, the Integrated Plans can offer coverage up to class A wards (private wards) and can have much higher benefits for most treatments. People with employment passes are also eligible to buy the Integrated Shield Plans.
These plans are very well integrated with all the major hospitals in Singapore. My son recently needed a minor procedure and all I needed to do was provide my ID and tell them that I had an Integrated Shield Plan for him. No other payment or paperwork was needed at the time. It could not be more convenient.
While I am still waiting for the claim to be processed, I have had great experience with claims in the past (famous last words?).
I think it makes sense to sign up for these plan even if your employer offers great health insurance. That's because the Integrated Plans do not cover pre-existing conditions, unlike the MediShield or plans offered by your employers. So the sooner you sign up, the more likely you are to get comprehensive coverage. Get one for your kids.
If your new employer doesn't offer great coverage or if you need to spend some time unemployed, the Integrated Shield Plans provide a lot of comfort.
7 insurers in Singapore offer these plans and the annual premiums are very reasonable considering the high cost of treatments in Singapore.
My family has been on one of these for more than 10 years now (including when my then employer offered great health insurance) and they have been worth every penny.
I hope to evaluate and find the best Integrated Shield Plan in Singapore on moolahgeeks soon but the new year is a good time for you to sign up for one anyway. You can always switch to moolahgeeks recommendation later.
This month on moolahgeeks
After launching the beta version of the India site in late October, we have spent nearly all of the last two months getting it ready for prime time.
We started with credit cards as our first review but the Indian market is a very different beast compared to Singapore. While there are about 70 credit cards offered in Singapore by all major Banks put together, in India just SBI Card offers 71.
There is also a much larger number of credit card providers in India, while the quality of data available and the helpfulness of customer service teams could be… better.
Still, we have made a lot of progress towards finding the best credit cards in India and I hope that the more complex problem means that our work will be even more useful. Here are the links to what we have done so far.
HDFC Bank SBI Card Kotak Mahindra
ICICI Bank Axis Bank Standard Chartered
Citibank HSBC American Express
I know many of you reading this are in India. Please go through some of those posts and I am sure most of you will see a big jump in the rewards you earn every year from your cards.
In the rush to get the India site live, the Singapore site has received a little less TLC recently.
This piece on the best insurance plan for Domestic Helpers should still be useful for a lot of people. The products are very similar to each other so pricing and customer reviews were key for these policies.
The cheapest policy is nearly 40% cheaper than the average policy, so if your helpers policy is up for renewal, you may want to take a look at that piece. I also discovered that FWD has a nifty add-on that could save you a fair bit on the mandatory 6 monthly medical examinations.
Around the Web
Why Does No One Click on Links? Most of you don't actually need to click on this one but should click the ones below.
A couple of threads on recent AI developments. AI has been the next big thing since before I was in school but this time seems different? It is not hard to imagine actual use cases and the pace of development in the last few months has been breath taking. This short post perfectly captures my view. No matter what you do, if you haven't heard about ChatGPT, GPT 3.5, Stable Diffusion and Dall-E, you should read those threads and learn more. Sadly no one clicks on the links.
Popular Personal Financial Advice versus the Professors Great summary of what the popular personal finance authors advice vs. the academic theory for a wide range of personal finance decisions. The single area of unanimous agreement? Invest only in passive index funds.