Tea with Matthew Seah: Exchange Traded Funds (ETFs).

ASSI's most prolific guest blogger, Matthew Seah, readily agreed to contribute this guest blog when I asked him if he could do it. Such an obliging and intelligent fellow.

During the 4th “Evening with AK and friends” session, a young man mentioned cash-based and synthetic ETFs. After some discussion, AK shot an arrow for me to do a guest blog on ETFs, so here it is.

Firstly, exchange traded funds (ETF) are investment funds that can be traded on the stock exchange, hence the term ‘exchange traded’.

The main objective of an ETF is to replicate the performance of a basket of stocks of an underlying benchmark. An ETF is a passively managed fund and generally charge lower fees compared to actively managed funds. Hence the kind of returns you can expect from investing in an ETF is equal to the performance of the underlying benchmark minus management fees.


Alright! Now ETFs can be categorised into 2 broad types: cash-based or synthetic.

Synthetic ETF

Synthetic ETFs are more complex than cash-based ETFs. Synthetic ETFs creates a similar benchmark with the use of derivatives such as options, forwards, swaps and participatory notes. Like with all derivatives, synthetic ETFs are all Specified Investment Products (SIPs) on SGX.

As the use of derivatives are complex and often non-transparent in nature, MAS has kindly restricted trading of synthetic ETFs by requiring investors to go through customer knowledge assessment before they can trade synthetic ETFs.

Cash-based ETF

Cash-based ETFs are simple funds that allocate whatever capital pooled into the fund into a similar portfolio as the underlying benchmark. For example, the capital in Nikko AM STI ETF is used to invest in the 30 STI components stocks according to the weightage of each stock in the STI.

This is a preferred form for the safety seeking investor, as no third party credit risk is involved.


So what are the added risks involved in synthetic ETFs not found in cash-based ETFs?

Synthetic ETFs enter into contracts with third parties, or counterparties, when using derivative products. Hence there is counterparty risk where the counterparty might default on their obligations. Thus, your returns will depend on the ability of the counterparty to honour its commitments to the ETF.

With derivatives, leverage may be used to increase returns. While leverage may generate higher returns, it could also cause the ETF to lose more than the market.

Conflict of interest may occur when the counterparty and the ETF are from the same financial institution.

You can find out more about how ETFs are structured and their risks here.


How do I know if the ETF is synthetic or cash based?

Highlighted red is where you can determine if an ETF is synthetic or not. A ‘X@’ in the SIP column would indicate that the ETF is synthetic.

A ‘@’ indicate that the ETF is an SIP and customer knowledge assessment is required.

An empty box, i.e. ABF SG Bond ETF, indicates that the ETF is a cash-based ETF.

Why do ETFs use derivative products?

1. Some markets like many emerging markets are inaccessible to the ETF, hence derivative products have to be used in order to gain access to the stocks.
2. Derivatives when used properly, are hedging tools and can reduce risks and improve portfolio management for the ETF.

Lastly, as a result of doing some search for more information, I have found that the MAS converted some ETFs, previously classified as SIPs, to excluded investment product (EIPs). The ETFs that were converted to EIPs will be predominantly cash-based and only use derivatives for efficient portfolio management including the hedging of risks.

Therefore, you would expect those with only a ‘@’ to eventually convert into an EIP under the new framework.

Here is the list of ETFs I found online:

"Following strong market feedback that earlier versions of the Specified Investment Products (SIP) regime had been overly broad, the Monetary Authority of Singapore (MAS) has tweaked its rules to exclude simple funds from the often cumbersome safeguards required to invest in more complex products.

"In a bid to encourage investments in exchange traded funds (ETFs), Singapore Exchange (SGX) will also waive ETF clearing fees from June 1 to Dec 31, 2015.

"Under the previous rules, products such as gold exchange traded funds and funds that invested in a particular country were treated the same way as leveraged products or those that tracked synthetic benchmarks. Under the SIP framework, investors who wanted to buy those products had to be assessed by their financial institutions for their ability to understand those products. A lack of competency or experience in understanding those products would require additional safeguards to be put in place before the investment could be allowed.

"But the new rules, which took effect on Wednesday, carved out exemptions from the SIP requirements for funds that trade in gold as well as those that use derivatives only for hedging or efficient portfolio management purposes."

(Source: The Business Times, 30 April 2015.)

Thank you, Matthew!

Related post:
The 4th Evening with AK and friends: A success!

Should I sell my investment to lock in gains? A perspective.

A conversation with a reader:

Reader says...

Thank you for a great post again, this time with the Singapore Savings Bond, you always have a clear way to put it - your opinion vs general and helps people like me to make my own decision. 

I've been your blog reader for few years, and haven't written or comment at your blog for a while. 

I had bought into some Singapore Reits over the years for passive income, and this email I'd like to seek your sharing of experience in "selling" of Reits. 

I have a long term view for Reits, and keep it for income, but this particular one is putting me to a spot now - sell now or hold. First Reit. 

I bought it at around $1 and it has now appreciated to 40% and DPU is consistent for past years, they have further acquisitions and developments in Indonesia in upcoming future.  





But at this stage, at a capital appreciation of more than 40% , I'm considering if I should sell it off because I made this rough computation in my head as: 

with a 8% yearly dividend yield, if I sold off at 40% capital appreciation, it covers the next 5 years of dividend, and if crisis comes within these 5 years, I could then buy it again and accumulate again as passive income (provided all else remains equal that it is still a good company to invest in). 

But then questions put me at a stop - what if price never falls any much lower, how to calculate the $$ value of both options - hold and collect dividend vs sell off and buy back later at x $ price. 

Last week I met a several people at the AGM sharing about such problem or challenge in making decision - how to decide to hold and collect the dividend or take in the capital appreciation and put in the money somewhere else? 

A senior guy for e.g had bought in Ascendas when it was $0.60 and sold off at $1.50 and never imagined it would raise up to over $2 now. so he has no conclusion or idea why and when to hold or sell of a Reit. 

hope to hear more of sharing your experiences of strategies to sell and take in profit, and thank you in advance, for time to read this long post. :) 

AK says... 

Always question our motivations. 

Are we investing or are we trading?




If we are investing for income, if the investment is still doing the job we expect it to do, generating attractive income for us, then, there is really no reason to sell unless we feel that there is another investment out there that can do a better job.

As for wondering if the market will crash in the next 5 years, no one knows for sure. 

That is in the realms of speculation.

In the meantime, income generated from my investments fill my war chest. 




If there should be a meaningful decline in prices, all else remaining equal, I will be able to load up using my war chest.

Of course, for people who mix investing and trading, if a stock is up from $1 to $1.50, for example, they could consider selling two thirds of their investment to recover their capital. 

Their remaining position is free.

Don't mind me. I am just talking to myself.





Now the reader will start talking to herself. It is a contagious disease:

Reader says... 

Thank you AK for the response! 

I can always trust you to put it in clear steps and points. now my brain is able to do some talking to myself, after what you talk to yourself :D 

looking forward to your posts.

Related posts:
1. When to BUY, HOLD or SELL?
2. A simple way to a double digit yielding portfolio.
3. Singapore Savings Bond: Good or not?
4. Do not love unless it is worth the loving.

So, you want to be financially free too but wonder how?

This blog post is really written with one person in mind. OK, there could be others like him. So, it is written with him and his like minded buddies in mind.



On 17 May, I shared the following on my FB wall:

Someone who was introduced to my blog wrote to me to say that it is difficult to have enough savings for investment as his salary increments will at most keep pace with inflation.

Of course, I gave him the usual talk on wants and needs but he said that he couldn't reduce his expenses for various reasons. (AK doesn't really believe this but close one eye lah.)

Anyway, he felt depressed after reading my blog. Alamak!

Save 100% of your take home pay. What?

So, cannot reduce expenses, how? I asked him to read Chapter 3 of this free "e-book".

I could have just given him the link to that single relevant blog post but I want him to read these 7 chapters (i.e. blog posts) together. Yes, AK is sneaky.

Don't depend on wage increases for higher income.



Journey to financial freedom is not a race.

Yesterday, this person contacted me and said he has read the "e-book" and he thinks that people like me are just "plain super". He didn't think he would be up to the challenge. He was wondering if there were easier ways available. So, what's new? Duh.

I know that it always is the hardest at the beginning. This is true. However, it will get easier over time. This is also true. It is whether we have the courage to take the first step and the determination to continue putting one foot in front of the other. It is a journey. Nothing is going to change if we stay at the same spot, feeling too fatalistic to make the move.

Many people have told me that my blog has changed the lives of many people for the better. It is just that I don't know about them as most people are not as talkative as I am. It was only in the last 1 or 2 years that many more readers have come forward to share their personal stories of transformation with me. I am glad.

I would like to do something for this person who is still feeling depressed and others like him. I would like to share bits of several chats I had with another reader in FB in recent weeks:

From what I know, W is someone who has parents and young children to care for. I believe that his financial burden is not light but he has the courage and determination to take the necessary steps to improve his financial health with an eye on generating passive income to help supplement his earned income. 

His is a story of a hardworking ordinary Singaporean who wants and is working towards a better life for himself and his family.

Some people say that the grit that Singapore's pioneer generation had is barely visible in the Singaporeans of today.

They say that the "can do" attitude is dying. They say that Singaporeans are spoilt and have grown soft. There is some truth in all the statements but we have a choice.

We have a choice to prove them wrong.

W has made his choice.

You have to make yours.

Related posts:
1. AK's birthday wish was for everyone to be wealthier.
2. "I used to think that the PAP was eating our money."
3. Tea with Matthew Seah: POSB Invest Saver account.

Should he do a VC or a MS Top Up to his CPF?

E-mail from reader:

Hello AK,

Hope this finds you well.

Firstly, thank you for sharing your knowledge with the readers! 

Been reading up on your blog posts since last year to improve my financial literacy and I have gained a lot.





Just a short introduction, I am 20 this year awaiting for my enlistment to NS. 

I intend to settle down at the age of 28 and hence, would need to save up quite an amount to afford for the wedding and a HDB flat. 

After reading your blog, I decided to make voluntary contribution to my CPF account starting next year to prepare for a sum of money. 

For example, contributing to OA from age 21 to 28 and thereafter, contribute to the SA till I retire which I aim for it to be at 55 years old.





Can you share with me your opinion on this plan of mine as I want to cover any loopholes as much as possible in my planning. 

Also, is it possible to just make a voluntary contribution to a specific account such as OA and not to all 3 accounts? 

I tried searching for the information on the CPF website but it was quite difficult for me to navigate around it.

Thank you for taking time out to read this and I look forward to your future blog posts!
Regards,N

Money tree? I go for low hanging fruits.

My reply:

Hi N,

Welcome to my blog. :)

Using cash, you could choose to do either a MS Top Up to your SA or a VC to your OA, SA and MA. 

A MS Top Up to your SA requires more serious consideration because you won't be able to use the money for housing unlike money in the OA. 

However, it would be more rewarding with much higher interest rate of 4% to 5% if your objective is to save early for retirement. 





The magic of compounding is amazing, given more time.

However, if you are not sure and it is hard to be sure when you are only 20, it is best not to do a MS Top Up yet. 

Doing VC to all three accounts will give you more flexibility and enjoy 2.5% to 5% in interest rates at the same time. 

A percentage of the money in the OA could be used for approved investments too while money in the MA could be drawn upon in case of hospitalisation (and MA is also used to pay for our H&S insurance plan).

When you start life as a working adult a couple of years later, you might want to consider doing an OA to SA transfer. 

This will not be an out of pocket exercise. 

It is money in your CPF OA that is being moved. 





You might choose to do this for the first 3 or 4 years. 

It will give your SA a boost and the magic of compounding will do the rest for the next 30 years. 

Of course, you might have to push back your plan to settle down by 3 or 4 years, in such a case.

Think carefully your own circumstances and what you want in future. 






The CPF is a useful tool in planning for a more comfortable and secure retirement but there are competing uses for our financial resources. 

I am only sharing what has worked for me in my blog. :)

Best wishes,
AK

Note:
VC = Voluntary Contributions
MS Top Up = Minimum Sum Top Up






Related posts:
1. A lot of money in the CPF-SA...
2. How did AK amass so much money in CPF-OA?
3. Beef up to attain financial freedom sooner.

Misled into earning 6.30% interest in 4 years?

Almost a year ago, I had a blog post titled "How to earn 6.30% interest in 4 years?"

Back then, I said I found the ad objectionable because it was misleading.

Although I did not say so at that point in time, I was also wary of how interest rates were more likely to rise than not in future. This would have been abundantly clear in other blog posts I have published.

Today, a one year fixed deposit could get us as much as 1.6% per annum. A two year fixed deposit could get us 1.8% per annum.

With interest rates more likely to go up in future, a person who chose not "to earn 6.3% interest in 4 years" last year is probably going to do much better than someone who did.

Think and think again before buying products like this.

Remember, nobody cares more about our money than we do.

Related posts:
1. How to earn 6.30% interest in 4 years?
2. Nobody cares more about our money than we do.
3. Why fixed deposits and not structured deposits?

A conversation on the CPF and investing in stocks.

A conversation which I think might motivate a few others here:

Hi AK,

I have been going through your blog on max up minimum sum. I really like the idea to have govt help to build our retirement fund.

Can i seek your opinion that if my SA has not hit the minimum sum of 161k, is it better to do cash top-up (even more than 7k, no tax rebate beyond that though) to SA? Is when we hit the minimum sum, then we do VC to further build up our CPF account. Whats your view?

Thanks and regards,
G

Hi G,

If you want to give your SA a boost, I think doing the MS top-up is a good idea. You will hit the minimum sum faster and get income tax relief (up to the first $7K yearly) to boot. Of course, it really has to be money that you won't be needing for anything else. Remember that the process is irreversible.

However, if we do this yearly, we would be saving a lot in taxes and we are also very likely to receive a very meaningful lump sum payment at age 55 (with most of the money being from the government). :)

Best wishes,
AK

--

Hi AK,

So am i right to say we should only do VC after we have max up SA to MS and not before?

Thanks and regards,
G

--

Hi G,

If you want to benefit from the income tax relief, yes, that line of thought is logical. :)

However, remember that we can only do VC if our mandatory contributions do not hit the contribution cap set by the CPF Board. This cap is revised yearly. I believe it is $31,450 for 2015, for example.

Best wishes,
AK

Thanks AK for the confirmation. Your blog really change my view on CPF and how we can build our retirement fund.

In your view, do you think govt will keep increasing the minimum sum? I dont think there is issue with PMET but for those low or low-middle income earner might be tough as they might not meet the MS by the time they retire.

---

Hi G,

The minimum sum will increase yearly by about 3% to keep pace with inflation. This is a given.

The CPF is really to help the common people. You can tell this by how there is extra interest income for the first $60K in our account and how there is a limit to how much we can top up our CPF accounts. It is not meant to benefit the rich.

We need to educate those who need the CPF most for a financially more secure retirement. If lower income workers diligently top up their CPF-SA while staying financially prudent, the magic of compounding will help them have a meaningful retirement income for life. They need to start doing this as early as possible. :)

Best wishes,
AK

Hi AK,

Yes, i can appreciate after going through your blog. Thank you for the enlightenment.

I attended few of your sessions and like the way you analyse stocks. Can you share how you filter stocks, any key criteria before you put in your shortlist and start going through in details?

Thanks and regards,
G

--

Hi G,

Oh, you did? I am glad you enjoyed the sessions. :)

Well, I cannot give you a set of criteria. Like Charlie Munger would say:

"I can never make it easy by saying. ‘Here are three things’. You have to derive it yourself to ingrain it in your head for the rest of your life."

However, I would tell you my starting point. I invest mostly for income. So, whether a stock pays a dividend is an important consideration. Then, pick it up from there. If you were to invest for growth, you would have a different starting point. It is important to match our motivation and our methods. :)

I have a section in my blog's right sidebar titled "Food for Thought". You might want to read the books listed there. Good primers. :)

Best wishes,
AK

Related posts:
1. Achieving level one financial security.
2. Suddenly, financial freedom is less remote.
3. A simple way to a double digit yield.

Tea with Matthew Seah: Investment scams.

This is another contribution from one of ASSI's most prolific guest bloggers, Matthew Seah:

Recently I got to know of a likely fraudulent company selling US distressed properties in a declining city. 

Thought I could clear some air about how fraudulent investment operations work.





After doing some quick search, I found an easy to understand video from the Financial Industry Regulatory Authority, Inc.

How to Spot Investment Fraud?


.




Here are some other warnings signs which I think are also easily recognisable:

Promises of high, guaranteed investment returns with little or no risk.

“If it sounds too good to be true, it probably is.” Many fraudsters claim 12 – 24% or even higher returns. 

Unless their names are Warren Buffett, Peter Lynch, or George Soros, most investments can’t generate 12% returns consistently. 

Furthermore, all investments carry some degree of risk, so a 12% guaranteed return sounds amusing to me.

Unlicensed or “exempt” sellers or dealers.

If the investment company is unlicensed or “exempted” from registration, chances are they are not regulated by MAS. 

MAS has an Investor Alert List for anyone with internet access to do a quick check on the spot.





Secretive or complex strategies.

Oftentimes, fraudulent investments comes with complex and secretive strategies. 

Ask them how the investment generates its returns and to provide supporting documentation. 

Sometimes, my friends who are already in such schemes would answer 

“I cannot tell you because it is a trade secret/proprietary/non-disclosure” 

or 

“Others might copy our business model if I tell you.” 





With no transparency, it is highly doubtful that the investment would be legitimate, don’t you think?

Scams come in many shapes and sizes. 

If you do not know if it is a scam, but are in doubt, best to stay away. =D




Related posts:
1. Advice from a fraudster.
2. Thought process of a scam victim.
3. (See the 3rd point I made at a conference).
4. Invest in real estate for high returns.

Frasers Centrepoint's 7 year 3.65% bonds: Who should buy?

Some readers alerted me to a bond that is being issued by Frasers Centrepoint and asked me what I thought of it. After all, investing for income, bonds are relevant instruments.

The bonds in question are 7 year bonds and have a fixed interest rate of 3.65% per annum. So, unlike the perpetual bonds issued earlier in the year by the same entity, there is a maturity date for these bonds.

Bond holders will get back their capital (as long as the entity doesn't default) at the end of the 7 year period. So, they are safer than the perpetuals which, like bond funds, I keep saying, we should avoid.

Of course, I also said that we should avoid long term bonds because as interest rates rise, bond prices will fall as Mr. Market expects higher returns for lending money. Yes, when we buy bonds, we are more lenders than investors.

There is no reason for Mr. Market to buy older bonds at their issue prices when the coupons or yields are higher for newer issues. So, prices of affected bonds will have to decline to give a comparable or more attractive yield.

Then, is a 7 year bond a long term bond? Well, conventionally, long term bonds are 20 year or 30 year bonds. However, I feel that a period of 10 years is also considerably long. What about a period of 7 years? I think it is pretty long.

In the next 7 years, is it likely for interest rates offered by the banks for money in fixed deposits to go to 3% or more per annum? When we consider how they have gone from about 1% per annum to as high as 1.6% per annum in the last one year, it is possible that they could go much higher in the next 7 years. So, we have to be prepared that the price of these bonds could decline in the next 7 years.

So, who should buy these bonds?

Those who are not only happy with a 3.65% coupon but are buying with money they are sure they do not need in the next 7 years and are prepared to hold for the full 7 years.

Read more about the bond in question: here.

Related post:
Frasers Centrepoint's Perpetual Bonds.

Singapore Savings Bond (Part 4): Good or not?

More details have been released with regards to the Singapore Savings Bond. Here is a quick and very simple summary:


1. Person must be at least 18 years old, have a bank account (DBS, POSB, OCBC or UOB) and a CDP account.

2. Application for the bond will be through the ATMs (DBS, POSB, OCBC or UOB) or internet banking (DBS and POSB only). Fees will be charged by the banks for application and redemption requests.

3. New Savings Bond to be issued every month. Application and requests for redemption must be done before the window closes 4 working days before end of the month. Must be in multiples of $500.

4. Application amounts of $500 to $50,000 are allowed but each person can only hold a maximum of $100,000 of Savings Bond at any one time.

Source:
http://www.channelnewsasia.com/news/singapore/mas-on-how-to-apply-for/1839400.html

Quite obviously, the Savings Bond (just like the CPF) is not created with HNW individuals in mind. 

It is meant to help the average Singaporean who is more of a saver and who wants a safe place to park his savings which will reward him with a higher interest rate compared to a paltry 0.1% paid by some banks for money in savings accounts now.

I must first state the obvious and that is the Savings Bond is a better place to park our savings than a regular savings account if we have more liquidity than we need on a monthly basis. The most obvious reason for saying this is the much higher interest rate.

Although the Savings Bond is not as liquid as a regular savings account, it really is not too bad. The minimum lock up period is basically one month.





We could apply for a savings bond this month, receive it next month and if we decide that we need the money back, we could request for a redemption and get the money back in the following month. We would be paid a pro rated interest income based on the coupon for a holding period of 1 year (which is 0.9% per annum based on an example given by the MAS). We will not suffer any loss of capital in the process either.

If the holders of these Savings Bonds would like to get higher interest rates, they must hold the bonds for longer periods of time. How does this work?

If someone should hold it for the full one year before redemption, he could enjoy a coupon of 0.9%. If he should hold the bond for another year, in the second year, he could receive a coupon of 1.5% (using the example given by the MAS earlier). So, on average, it would be 1.2% per annum which is the coupon for a 2 year bond.

The coupon for each following year steps up until the 10th year and the average coupon for each of the 10 years could be 2.4% (which is the coupon for a 10 year bond around now).

In my earlier blog post on the Singapore Savings Bond, I said that it does not seem very attractive for me, the operative word being "me". When I said I have reservations about it and that I don't really like it, I was thinking about me. OK, why did I say what I said?

For a while now, I could get higher interest rates from fixed deposits offered by the banks and I feel that interest rates will only go higher in future.  So, for example, one year or so ago, a 13 months fixed deposit in UOB was offered an interest rate of 1.08% p.a. Today, the offered interest rate is 1.45% p.a. This is a big increase in a year.






Of course, we must note the following points about the fixed deposits:

1. Minimum amount required is $20,000.

2. No interest will be paid in case of early redemption.

So, logically, for someone who has less than $20,000 to be deposited or who might need to make an early redemption in case of an emergency or opportunity (depending on whether the money is in his emergency fund or war chest), if $20,000 is all he has, this option is out.

However, if someone has quite a bit of spare cash, then, whatever liquidity is not required for the immediate future, fixed deposits with higher interest rates might make more sense than the Savings Bond in terms of returns. Just remember to have the fixed deposits in tranches of $20,000 (or whatever is the minimum sum required by the bank).

The Singapore Savings Bond is a good thing to have as it allows people to get higher interest rates for their savings with as little as $500. The very short minimum lock up period with no risk of capital loss are favourable points too.

Whether the Savings Bond is the best option for us, however, would depend on our circumstances, our motivations as well as the alternatives available to us.




-------------------
Added (3 Feb 2017):

Monetary Authority of Singapore has added 
three more application channels for Singapore 
Savings Bonds (SSBs) - OCBC's and UOB's 
banking portals and OCBC's OneWealth app.

MAS said in a news release (Feb 1) 
that since the start of the programme, 
a "significant number of investors" applied 
for the bonds through DBS/POSB's Internet 
banking portal and that there were requests for 
more online options. Those interested can also 
apply via ATMs of the three Singapore banks.

Source: http://www.channelnewsasia.com/news/singapore/more-application-channels-for-singapore-savings-bonds/3483842.html

Related post:
Singapore Savings Bond (Part 3).

Beyond needs and wants is the price of convenience.

Frequently, I would mention that there is a price to be paid for convenience. When something is more convenient for us, it usually means that it requires less or no work on our part. Usually, this can only be so because someone else has done much or all of the work for us.

Whether something is convenient or inconvenient for us is usually relative. If we have to do a lot of work in order to save some money, then, it might not be worth the trouble. Of course, I understand that what is considered inconvenient will differ from person to person. So, I am just sharing what any reasonable person might agree with.

For example, at last year's InvestX Congress, I shared on stage how I walked to a nearby supermarket to get a bottle of water instead of buying the same in a food court where I had dinner with some friends. It was probably a 50 meter walk. It wasn't too far away.

So, the inconvenience that I had to suffer to buy bottled water from a supermarket was negligible. For more convenience, I would have had to pay $1.50 for the same bottled water in the food court while it was just $0.60 in the supermarket.

Hmmm....

For people who are addicted to coffee, I have also mentioned in my blog before how we could save lots of money by not buying coffee from coffee shops and to simply bring a packet of 3 in 1 coffee mix to work daily. 

It isn't too inconvenient to put a packet of 3 in 1 coffee mix in our bag to bring to work, is it? Depending on where we usually get our daily coffee fixes, the savings could range from maybe a dollar to several dollars a day.

For an event last month, I used the example of herbal tea. Herbal tea? Yes, in a place like Singapore where it is summer the whole year round, shops selling herbal tea, including Chinese medicine halls, do a roaring trade.


(OMG! This is Panda Dung Tea and guess how much is it?)

How much does it cost to take away a 500ml plastic bottle of chrysanthemum and ginseng herbal tea? $1.50 or so, I would guess. (If you were to look carefully, in some shops, they have kept their prices unchanged but the bottles have become slimmer. Same height but slimmer.)

OK, the question is whether it is inconvenient to make our own herbal tea? Alamak, must buy chrysanthemum flower, ginseng roots and liquorice. Throw in boiling water, let it cool, bottle and then bring to work. So much work! Definitely too inconvenient!

What if I were to show you a herbal tea bag? Yes, a tea bag. Just bring a packet to work each day and just let the tea bag steep in warm water. Have freshly brewed herbal tea in seconds. Very inconvenient? I don't think so.

Cost? $1.05 for a pack of 3 tea bags from NTUC Fairprice. (2016 UPDATE: It is now $1.50.)

Each tea bag could easily produce up to 1.5 litres of herbal tea. This is my experience.

If you drink a lot of herbal tea like I do, you might want to consider this product which is made in Singapore.

I feel that very often people are worried about losing face. Alamak! I am sure people talk about me frequently about my habits but these people don't matter, I feel, my bank account does.

So, beyond thinking whether it is a need or a want, the next time you think of buying something, just pause for another moment and think whether you are paying too much for convenience, if any.

Related post:
How to recession proof your life?

Note: This is not an advertorial. AK derives no monetary benefits from sharing this find.