Stocks Commentary
Update on Triple Happiness Fund
I got an email from this person and his questions will answer almost all other questions relating to the fund.
As of 14th October 2008 he writes
Hi. I found your blog regarding of the "DBS Triple Happiness Fund ! Trouble again? ".My mum also have to invest in the fund, And i now didn't stay with her and currently studying at kuala lumpur area..And she called me to ask me check on this. But i really no much idea on it..And i found your blog, and felt anything you state there are very correct and you know many about this. So can i ask you about this?? Because even i called to DBS, what they told me are nonsense.
1) Does this fund will let us lose any money??because last time my mum went there, the manager was told her, she can get back the origin money she invest, but after see your blog, i think that are different.
2) How come they say capital guaranteed fund, can become like that?
3) Are the fund safety now?? because now we already didn't heard any latest news of the AIG. Is it the government also save it ? I really worry about this, and my mum seem also worry cause her feel nervous everyday.So please let me know some information about it..please..and thanks. Sorry For Troublesome.
Your Regard, Shi pei
My reply
Hey there pei. I understand how you feel about the fund and I’m worried as well. But as for now, you should not worry.
I have already called the relevant people regarding the fund and got satisfactory answers from them. So with that assurance, lets look at the questions you asked me
Does this fund will let us lose any money??because last time my mum went there, the manager was told her, she can get back the origin money she invest, but after see your blog, i think that are different.
Answers: The only way for the fund to lose our money is when they terminate the entire policy at current market value, means selling all the bonds at current market price at 0.91. For that to happen, both AIG Banque and the bond issuers must default. Lately, AIG has already been bought by the US government and there are no defaults by the issuers of bonds as well. So the chances of termination are very low (having double layered protection).
Another way of the fund losing money is that if AIG Banque collapse in the future, our fund manager(DBS asset management) will have to find another guarantor, may it be Aviva or other big insurance company. In doing so incurring, more cost to us.
But don’t worry, they told me if that were to happen, it will only be a small fraction of the cost from the fund.
Next question
How come they say capital guaranteed fund, can become like that?
Answer: The meaning of a capital guaranteed fund, is to ensure that no matter what happens to the fund, you will receive 100% back after the policy have ended or early termination has occurred. This is a point, that most relationship manager will emphasize to you , to get you to invest, making you think that there is virtually no risk involved. However nothing in the investment world is risk free, all financial books states that , if you want a return! There has be a risk! Both Return and Risk have to compensate and complement each other just like Ying and Yang. The recent crisis have already proven that!
Even capital guaranteed funds have risks involved, and investors will lose their money should the guarantor goes into liquidation etc: AIG's near collapsed.
What more can be said for capital protected funds.
(Definition:The idea behind this type of fund is that you will be exposed to market returns because the fund is able to invest in the stock market, but you will have the safety of the guaranteed principal protected by an entity , be it insurance or a collateral)
Next question
Is the fund safe?
Answer: Yes, as of now the fund is safe, because there are two layers of protection, the bond issuers credibility and AIG Banque's solvency with regards to AIG as a parent status. And yes AIG has already been taken over by the US government.My suggestion to you and your mum is to keep the fund and not to sell deal to fear and panic. Come to the worse, just opt for them to change the guarantor if AIG Banque were to default.
Lastly, this current crisis has taught many people including me, to READ the investment product carefully, especially what the policies involving credit event or guaranteed defaults and UNDERSTAND clearly what you are investing.
Generally, a capital guaranteed fund is the safest investment product provided by the bank as compared to capital protected and mutual funds.
Because this is a once in a lifetime crisis, we should expect this once in a lifetime incident to happen. So , if you're still hesitant in investing in all these structured products issued by the bank whether now or in the future, i suggest you go for and stick with government bonds the safest among safest investments.
As of 14th October 2008 he writes
Hi. I found your blog regarding of the "DBS Triple Happiness Fund ! Trouble again? ".My mum also have to invest in the fund, And i now didn't stay with her and currently studying at kuala lumpur area..And she called me to ask me check on this. But i really no much idea on it..And i found your blog, and felt anything you state there are very correct and you know many about this. So can i ask you about this?? Because even i called to DBS, what they told me are nonsense.
1) Does this fund will let us lose any money??because last time my mum went there, the manager was told her, she can get back the origin money she invest, but after see your blog, i think that are different.
2) How come they say capital guaranteed fund, can become like that?
3) Are the fund safety now?? because now we already didn't heard any latest news of the AIG. Is it the government also save it ? I really worry about this, and my mum seem also worry cause her feel nervous everyday.So please let me know some information about it..please..and thanks. Sorry For Troublesome.
Your Regard, Shi pei
My reply
Hey there pei. I understand how you feel about the fund and I’m worried as well. But as for now, you should not worry.
I have already called the relevant people regarding the fund and got satisfactory answers from them. So with that assurance, lets look at the questions you asked me
Does this fund will let us lose any money??because last time my mum went there, the manager was told her, she can get back the origin money she invest, but after see your blog, i think that are different.
Answers: The only way for the fund to lose our money is when they terminate the entire policy at current market value, means selling all the bonds at current market price at 0.91. For that to happen, both AIG Banque and the bond issuers must default. Lately, AIG has already been bought by the US government and there are no defaults by the issuers of bonds as well. So the chances of termination are very low (having double layered protection).
Another way of the fund losing money is that if AIG Banque collapse in the future, our fund manager(DBS asset management) will have to find another guarantor, may it be Aviva or other big insurance company. In doing so incurring, more cost to us.
But don’t worry, they told me if that were to happen, it will only be a small fraction of the cost from the fund.
Next question
How come they say capital guaranteed fund, can become like that?
Answer: The meaning of a capital guaranteed fund, is to ensure that no matter what happens to the fund, you will receive 100% back after the policy have ended or early termination has occurred. This is a point, that most relationship manager will emphasize to you , to get you to invest, making you think that there is virtually no risk involved. However nothing in the investment world is risk free, all financial books states that , if you want a return! There has be a risk! Both Return and Risk have to compensate and complement each other just like Ying and Yang. The recent crisis have already proven that!
Even capital guaranteed funds have risks involved, and investors will lose their money should the guarantor goes into liquidation etc: AIG's near collapsed.
What more can be said for capital protected funds.
(Definition:The idea behind this type of fund is that you will be exposed to market returns because the fund is able to invest in the stock market, but you will have the safety of the guaranteed principal protected by an entity , be it insurance or a collateral)
Next question
Is the fund safe?
Answer: Yes, as of now the fund is safe, because there are two layers of protection, the bond issuers credibility and AIG Banque's solvency with regards to AIG as a parent status. And yes AIG has already been taken over by the US government.My suggestion to you and your mum is to keep the fund and not to sell deal to fear and panic. Come to the worse, just opt for them to change the guarantor if AIG Banque were to default.
Lastly, this current crisis has taught many people including me, to READ the investment product carefully, especially what the policies involving credit event or guaranteed defaults and UNDERSTAND clearly what you are investing.
Generally, a capital guaranteed fund is the safest investment product provided by the bank as compared to capital protected and mutual funds.
Because this is a once in a lifetime crisis, we should expect this once in a lifetime incident to happen. So , if you're still hesitant in investing in all these structured products issued by the bank whether now or in the future, i suggest you go for and stick with government bonds the safest among safest investments.
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