Accident insurance provides a payout to your family upon total permanent disability and death caused by accidental causes only. There is usually a fixed duration for the coverage and the policy will expire at the end of the agreed term of upon claims. There are additional benefits that can be added on to provide extra coverage, such as reimbursing medical costs incurred due to an accident.
Active investing refers to a type of investment strategy where investors regularly buy and sell investments based on their analysis. These investors tend to conduct their own research by reading up on the companies’ business models, and taking the time to read their financial reports to determine if they are worth investing in.
An annualised rate of returns are returns over a period scaled down to a 12-month period. A 12% annualised return refers to 12% earned every year.
A 3-year 20% annualised return means that money invested 3 years ago in the fund has grown 20% every year. This doesn’t mean 20% overall but instead 60% in total over the whole period.
A form of insurance or investment providing the investor with a lifelong stream of money given annually or monthly.
Assets under management (AUM), sometimes called funds under management, is the total market value of all the investments/assets that a person or entity manages on behalf of clients. This definition and formula varies by company.
An asset is something that has monetary value. This could be something physical such as cash, land, houses, jewellery or non-physical such as copyrights, patents, or trademarks.
Backtesting is a method to assess how a trading strategy or model would play out using historical data. Backtesting assesses the viability of a trading strategy. The concept is that what strategy worked well in the past, is likely to work well in the future—and conversely one that performed poorly in the past, is likely to do similarly in the future.
A bear market is when a financial market witnesses stock prices falling by 20% or more from a recent high over an extended period of time. It also tends to accompany general economic downturns such as recessions.
A bond is a type of tradable asset which the issuer (debtor) owes the holder (creditor) a debt. The issuer is obliged to provide cash flow to the creditor, in the form of interest (also called coupon) over a predetermined period of time and repay the principal debt at the maturity date.
A blockchain refers to a distributed ledger or database that is shared through a peer-to-peer network. It serves as an electronic repository for storing information in a digital format. With blockchain technology, participants can authenticate transactions without relying on a centralised clearing authority, such as a bank. This technology has several applications, including facilitating fund transfers, settling trades, and creating digital assets like Bitcoin.
A bull market is the state of a financial market when stock prices are rising over an extended period.
Singapore’s Central Provident Fund (CPF) is a comprehensive social security system that enables working Singapore Citizens and Permanent Residents to set aside funds for retirement. It also addresses healthcare, home ownership, family protection and asset enhancement. The CPF is made up of three accounts, Ordinary account (CPF-OA), Special account (CPF-SA) and Medisave account.
Ordinary account (OA) can be used for housing-related expenses such as down payment and monthly mortgage payments. It can also be used to pay for selected insurance premiums and to invest in approved investment products.
Special account (SA) is focused on retirement savings and can be used to invest in approved financial products.
MediSave Account (MA) can be used to pay for hospitalisation expenses and approved insurance premiums.
Retirement Account (RA) is created when an individual turns 55 years old, and it consolidates the OA and SA accounts. The RA is used to provide a monthly payout to the individual during their retirement years.
Compounding interest is a specific type of interest on a loan or deposit, and is calculated based on both the initial principal value and the cumulative interest from subsequent compounding time periods. The rate at which the sum increases is directly proportional to the frequency of compounding and the compound interest rate.
Commodities, also known as primary products or goods, are items that are sold in their natural state for production or consumption. Examples of commodities include crude oil, coal, copper, iron ore, rough diamonds, and agricultural products like wheat, coffee beans, and cotton. These items are frequently traded on commodity exchanges.
A CFD is a marginable financial derivative that can be traded. When you trade a CFD, this contract will replicate the profit and loss of between the time at which the contract is opened and the time it is closed. You are speculating on a market’s price without taking ownership of the underlying asset, whereas when you trade shares you need to take ownership of the underlying stocks. Asset classes with CFDs include shares, indices, commodities and even cryptocurrencies.
Co-insurance is the percentage of the total cost your insurer will not reimburse you for on each claim. The percentage dictates the breakdown of costs you and your insurer pay for each approved claim. Co-insurance isn’t a set dollar amount, it’s a percentage of the bill. It is not to be mistaken for co-pay, which is a fixed amount that you would pay for each bill.
Cost-push inflation occurs when overall prices increase due to an increase in the cost of wages and raw materials. Higher costs of production can decrease the amount of total production in the economy. Since the demand for goods hasn’t changed, the price increases from production are passed onto consumers.
Cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it almost impossible to duplicate or counterfeit. Most cryptocurrencies operate on decentralised networks based on blockchain technology, which is a digital ledger of transactions distributed across an entire network of computers. This decentralised nature allows them to exist outside the control of governments and central authorities.
Cryptography is a method of protecting information and communications through the use of an algorithm, so that only those for whom the information is intended can read and process it. An original human readable message is changed into something that to an uninformed observer would look like gibberish; this gibberish is called ciphertext.The intended recipient will be given a key
to transform the ciphertext back into plaintext.
Debt consolidation refers to an act of refinancing debts from multiple lenders to one lender, and usually at a lower interest rate.
A deductible forms one part of your responsibility in the cost of your insurance claim. This amount is decided when purchasing your policy. The deductible amount could be for each claim or each year. This is a term usually found in medical insurance policies.
A dividend is a portion of a company’s profit that is paid out to shareholders, usually once or twice per year. Dividends are calculated and paid on a per share basis.
An effective annual interest rate is the real return rate on a savings account or any interest-paying investment after taking into account the effects of compounding over time.
Emergency fund is your financial safety net, money kept liquid for unforeseen expenses and situations. Money kept liquid means it should be easily accessible such as via the ATM, fixed deposits or in investments with little to no penalties for early withdrawal. The fund should have enough money to cover your family’s expenses for a minimum of 6 months or more.
Endowment insurance is a financial product that combines life insurance with an investment element. The purpose of this type of insurance is to help the policy owner grow their money. Such policies are usually capital guaranteed by the insurer and returns consists of a combination of guaranteed and non-guaranteed components. Premiums can be contributed regularly over a fixed period, or once at the start of the policy. Insurance coverage is usually very minimal.
An equity fund tries to outperform the market, with an investment manager choosing and changing the list of assets to try to outperform the index or a market.
ESG (Environmental, Social, and Governance) investing is a type of investment approach that takes environmental, social and governance factors into account, on top of traditional financial metrics. It is based on the belief that companies operating in a responsible and sustainable manner will ultimately outperform those that do not, and that investing in such companies can lead to long-term financial success while also promoting positive social and environmental outcomes.
An exchange-traded fund (ETF) is a basket of assets such as stocks, commodities, or bonds that trade on an exchange such as Singapore Exchange, Hong Kong Exchange, just like a stock. It often tracks an underlying Index or industry etc. ETFs can be a cost-effective way to invest your money passively. They share characteristics similar to mutual funds and stocks.
This refers to events or medical conditions that are not covered by the insurance policy. An example of an exclusion would be pregnancy related costs, or self-inflicted injuries.
An expense ratio is represented by a percentage of the fund’s average net assets. It indicates the fee that an investment company charges investors to manage an investment portfolio, a mutual fund, or an exchange-traded fund (ETF). The ratio represents all the fees of the fund, including management fees and and operating fees such as administration, marketing, and distribution
The free look period is the time period where the policyowner can terminate a new life insurance policy without any penalties, such as surrender charges. A free look period often lasts 14 or more days depending on the insurer and type of policy.
Financial planning refers to developing a strategy to achieve your long-term quantifiable financial goals, after comprehensively analysing your current financial situation.
Fixed deposits provide a secure and predictable returns on your money. Your funds are kept with the bank over a fixed duration of time. Your money is held by the bank for a predetermined period, and upon maturity, the bank guarantees the repayment of your initial investment along with the accumulated interest.
A fixed income fund is a fund that invests primarily in bonds or other debt securities. Some examples are government and corporate bonds. Such funds generally pay a return on a fixed schedule to investors, typically in the form of fixed interest or dividends. The amount of the payments can vary.
Hedge funds are actively managed investment pools, usually deploying non-traditional and risky investment strategies and asset classes with the aim of beating average investment returns for their clients. They require high minimum deposits and charge much higher fees than retail investment funds.
Housing Protection Scheme (HPS) Insurance policies protect Central Provident Fund (CPF) members and their families from losing their HDB flat in the event of death, terminal illness or total permanent disability.
Income tax refers to a percentage of your salary that is paid to the government, annually or monthly.
An index fund is intended to replicate the index returns as closely as possible. It is only when the index weights change or when stocks are added or deleted from the index that the index fund manager makes modifications to the index fund portfolio.
Inflation refers to the increase in prices for things and fall in the purchasing value of money in general. In other words, whether you’re buying your favourite Calbee Hot and Spicy chips or the latest Macbook, the prices have gone up. The $1.50 that you hold in your hand has lost its value in the sense that it can no longer buy the same bag of potato chips that it once could.
Refers to medical bills incurred during a hospital stay or day surgery. These could include room & board charges, surgical fees, doctor’s charges, diagnostic scans, and so on.
Insurance is a contract that you go into to exchange the risks in your life, family or belongings with a cost that you pay. By doing so, you outsource the risk to the other party in the the contract.
Insurance nomination is the process where the policyholder appoints a person or persons to receive the insurance policy benefits in the case of their death. When such an event occurs, the life insurance company pays the policy proceeds to the appointed person(s) – termed as Nominee(s).
An investment portfolio is a collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds and exchange traded funds (ETFs). Although stocks, bonds, and cash typically comprise the core of an investment portfolio, you may grow a portfolio with many different types of assets including real estate, gold, paintings, and other art collectibles.
Investment portfolio management involves assembling and adjusting an investment portfolio to meet the long-term financial objectives and risk tolerance of the investor within a time horizon. It aims to maximise the expected return of the investments within an appropriate level of risk exposure.
An insurance rider is an insurance policy add-on that boosts a basic insurance policy with an increased layer of benefits. It is typically used to increase coverage according to the needs of the insurance policyholder.
An irrevocable trust refers to a kind of trust in which terms cannot be modified, amended, or cancelled without permission from the trustor’s beneficiary or beneficiaries. The trustor loses rights to the assets and the trust, after ownership of assets into the trust is officially transferred.
The term lapse is often used in insurance policies. This refers to the auto-cancellation of an insurance policy as a result of not paying the premium. When premium payment is not received within the grace period, the insurance policy will lapse. That means you will no longer enjoy the benefits or coverage of the insurance. For insurance policies with accumulated cash values, the cash values can be used to pay the premiums. These policies will also lapse when the cash value diminishes.
A liability is something a person or company owes. Liabilities include loans, accounts payable, mortgages, deferred revenues, bonds, warranties, and accrued expenses.
The London Interbank Offered Rate (LIBOR) refers to the interest rate that major global banks use as a benchmark when lending to one another in the international interbank market. LIBOR will be replaced by the Secured Overnight Financing Rate (SOFR) on June 30, 2023.
Life assured or insured is the person(s) who is covered in the insurance contract. In some cases, the policy holder and the life assured can be two separate persons. Example: Mother as the policy holder and the life assured her child.
Life Insurance is a contract that you go into to exchange the risks in your life or your family’s with a cost that you pay. By doing so, you outsourced the risk to the other party in the the contract. Some types of Life Insurances are whole life participating insurance, term life insurance, and investment-linked insurance.
The loan-to-value (LTV) limit determines the maximum amount an individual can borrow from a financial institution (FI) for a housing loan. It is usually represented as a percentage of the property’s value.
This refers to the time frame in which insurance policies cannot be amended or terminated without a penalty fee. The period for each insurance plan varies across different insurers and policies.
Market value is the price at which an asset would be fetched in the marketplace, or may also refer to the value that the investment community would give to a specific equity or business.
Also known as pregnancy insurance or prenatal insurance. It is an insurance policy that provides financial protection for both the mum and baby during the course of pregnancy, delivery and sometimes post-delivery complications.
A type of insurance purchased to cover the cost of medical treatments
Monetary inflation is a result of central banks using expansionary monetary policy. They do that by printing more cash to flood the economy with more money. This aims to increase spending by individuals and businesses, which in turn helps to boost the economy. The increase in spending increases aggregate demand. This translates to increase in the demand for labour and a rise in salaries. The more inelastic the aggregate supply in the economy, the greater the impact on inflation.
A money market fund is an open-ended mutual fund that invests in short-term, less than one year and low risk debt securities such as treasury bills. The investment objective is to preserve capital while providing higher yield, hence its considered a low risk place to park your cash.
A mortgage is a loan used to purchase or maintain a home, land, property or other types of real estate. The borrower agrees to pay the lender over time, usually in a series of regular payments that include the money borrowed plus interest.
It refers to the portion of a borrower’s gross monthly income that goes towards repaying all existing and property loans applied for.
In Singapore, MSR is capped at 30% and applies only to housing loans for the purchase of an HDB flat, or an executive condominium where the minimum occupation period of the executive condominium has not expired.
To calculate a borrower’s MSR:
(Monthly repayment instalments for all property loans / Gross monthly Income) x 100% = MSR
A mutual fund is an investment scheme that pools money from different investors packaged under a mutual fund company to meet a specific financial objective. The managers then use that money collectively to purchase securities, such as stocks or bonds. Unit trust funds are in the same investment family as mutual funds—however, a mutual fund is an investment company that issues redeemable shares, while a unit trust fund only issue units (as it is not a company). In Asia, a unit trust is essentially the same as a mutual fund.
Net Worth is calculated as:
Total Assets – Total Liabilities = Net Worth
Your net worth is the figure you get when you sum up everything you own, such as the value of your home to the cash in your bank account and then subtract the value of all of your debts, such as mortgage, loans or even credit card balances.
When policyholders do not make any claims during their policy period, insurance companies offer a discount known as a no-claim bonus or no-claim discount (NCD).
By accumulating an NCD, policyholders can reduce their insurance premium at the time of policy renewal. The discount generally increases with each year that goes by without making a claim and can lead to considerable savings on premiums. However, if a policyholder makes a claim, they may lose some or all of their NCD, which could result in an increase in their premium at the time of renewal. NCDs are commonly offered in motor insurance policies, but they may also be provided in other types of insurance policies like home insurance.
Non-fungible tokens (NFTs) are cryptographic assets stored on a blockchain that cannot be replicated, with unique identification codes and metadata that distinguish them from each other. Unlike cryptocurrencies which are fungible tokens (meaning that each token has the same value), NFTs are valued individually, and cannot be traded or exchanged at equivalency.
Passive investing refers to the type of investment strategy where an investor believes that a diversified basket of common stocks, held at the lowest possible cost, with minimal trading, will tend to produce a market average return in the mid to long term.
Covers medical expenses and personal liabilities due to accidents while riding a bicycle or a personal mobility device.
A policy holder or policy owner refers to the person who owns the insurance policy. This person may or may not be the person who is covered by the policy. Any claims or payment paid out from the policy will be made to the policy holder.
A Ponzi scheme is a fraudulent investing scam that acquires new investors by promising high rates of return with little risk, generating returns for earlier investors with money taken from newer investors and not from actual revenue-generating investment schemes.
Pre-existing health conditions refer to any known illnesses, injuries, or health conditions that existed before someone gets covered for health or life insurance. Insurance companies can increase the cost of premiums or directly refuse to give individuals coverage based on any known pre-existing health conditions, especially those that are considered long-term and/or chronic ailments.
The price/earnings to growth ratio (PEG ratio) refers to a stock’s price-to-earnings (P/E) ratio divided by the growth rate of its earnings over a specific time period. The PEG ratio is used to determine a stock’s value when considering the company’s expected earnings growth, and it is known to give a more holistic view compared to the standard P/E ratio.
The price-to-earnings ratio (P/E ratio) is the ratio that determines how investors and analysts gauge the value of a company and its shares, and is calculated by measuring the current share price while taking into account its earnings per share (EPS). It is typically estimated on a backward-looking (trailing) or forward-looking (projected) basis.
A recession is part of a business cycle where there is a general decline in economic activity. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. The National Bureau of Economic Research (NBER) defines a recession as a significant decline in economic activity spread across the economy, lasting more than a few months. This is normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
A real estate investment trust (REIT) invests in most real estate property types, including apartment buildings, cell towers, data centers, hotels. Investing in a REIT allows individual investors to earn dividends from real estate investments—without having to buy, manage, or finance any properties themselves.
Return on Investment (ROI) is a popular performance metric used to evaluate the efficiency or profitability of an investment. It directly measures the amount of gain or loss on a particular investment, relative to that investment’s principal.
The reversionary bonus is declared once a year, forming part of the guaranteed value of your policy. It is dependent on factors such as investment performance and level of expenses incurred by the participating fund. Reversionary bonus is paid when the policy matures or when there is a claim paid.
A revocable trust refers to a type of trust in which provisions can be changed or terminated, allowing the living trustor flexibility to alter instructions, remove assets, or cancel the trust. During the lifetime of the trust, income earned is given to the trustor, and property transfer to the beneficiaries of the trust only occurs after the trustor’s death.
Robo-advisors are computer systems which provide automated financial planning services with little to no human support. The robo-advisor collects information from clients about their financial situation and future goals through an online questionnaire. The system then crunches the data client provided, to come up with an asset allocation approach for users to invest. They often provide easy account setup, robust goal planning, account services, portfolio management, and security features, often at much lower fees compared to traditional human advisors.
Automated investment options that allow you to invest your money via their automated strategies with little to no human support. The team that manages these funds are called robo-advisors.
This is also known as endowment policy which is used to grow your wealth. There are participating and non-participating endowment policies. Both types will pay a combination of guaranteed and non-guaranteed returns.
A secured loan is a type of loan that requires a particular form of collateral as a condition to borrow, and such physical assets can include property and vehicles, or liquid assets like cash. A bank or lender can request collateral for large loans where the money is used to purchase a particular asset, or when credit scores are not good enough to obtain an unsecured loan.
This refers to the tax payable by the seller of a property to the government within a fixed period from the time of purchase.
The Singapore Interbank Offered Rate (SIBOR) refers to the interest rate that is used as a benchmark for lending between banks that operate in the Asian market. SIBOR is set daily by the Association of Banks in Singapore (ABS). Thomson Reuters acts as the calculation agent to collate the SIBOR rate from 20 member banks, daily, before 11 a.m. Singapore time. A minimum of 12 banks is required to report their rates each day and an average is calculated to derive SIBOR. If less than12 banks fail to report the rates on a given day, there will be no SIBOR for that day.
The Singapore Overnight Rate Average (SORA) is the volume-weighted average rate of borrowing transactions utilised in the unsecured overnight interbank SGD cash market in Singapore, which operates between 8am and 6.15pm Singapore time.
The standard deviation is a term in statistics that measures the dispersion of a dataset relative to its mean, and is calculated by applying a square root to the variance. The further away the data points are spread out from the mean value, the higher the standard deviation. A volatile stock means its standard deviation is high, while the deviation of a stable stock is usually low.
A statement of accounts is a document that reflects all transactions, including sales and refunds that took place between you and a customer in a given period of time.
This refers the amount of insurance coverage that is purchased. The Sum assured will be the amount that is paid by the insurance policy to the customer upon a claim.
This is a complementary scheme to the Central Provident Fund (CPF) in Singapore. Participation in SRS is voluntary and members can contribute a varying amount, subject to an annual limit. And the contribution can be used to purchase approved investment instruments.
Term insurance provides a payout to your family upon your demise. It may also cover total permanent disability and critical illness. There is a fixed duration for the coverage and the policy will expire at the end of the agreed duration or upon claims.
Third-party liability is a legal obligation of an individual or entity to compensate an external party for damages or injuries caused. It is mandatory for many policies, such as motor and commercial liability insurance, and helps to prevent financial loss due to legal liability for damages caused to third parties.
The concept of the time value of money explains that the same dollar amount of money will be different in the future. The same $1 has a higher “value” sooner than later as you can earn interest and profit from the money you receive earlier. This gives the $1 today a higher “value” than the $1 ten years later.
Total debt servicing ratio can be derived by taking the total monthly debt repayment sum divided by total income. A health debt ratio should be 60% or less.
A type of insurance coverage that typically comes together with a whole life insurance or term life insurance. A payout for TPD is triggered when an individual is found to be permanently disabled. The conditions differ amongst insurers. When this condition is met, a lump sum payout (usually equivalent to the death benefit payout) will be given.
Travel Insurance is a contract between you and the insurer, designed to cover the costs and losses associated with unexpected events incurred while travelling. Such events include travel delays and emergency medical expenses while abroad.
A Treasury Bill (T-Bill) is a short-term debt obligation backed by a government with a maturity of one year or less. Investors receive the full face value at maturity.
A trust is a fiduciary relationship where one party, termed as a trustor, gives another party, the trustee, the right to hold title to their property or assets. Trusts provide legal protection for the trustor’s assets, ensuring those assets are distributed following the wishes of the trustor. There are six types of trusts– revocable or irrevocable, funded or unfunded, living or testamentary.
Underwriting is how insurance companies assess the risk that they will assume when they sell policyholders a policy. With the information provided (such as age of the person, current and prior health conditions, and related statistics) a decision will be made on whether they wish to cover the risk, and at what price. The price set is the insurance premium.
Unit trust is a collective investment fund that is priced, bought, and sold in units that represent a mixture of the securities underlying the fund. The underlying value of the assets in a unit trust portfolio is directly stated by the number of units issued multiplied by the price per unit. The term “unit trust” is also used in the United Kingdom as “mutual fund,” which has different properties than mutual funds in the United States.
An unsecured loan is a type of loan which does not require any type of collateral. Instead of using a borrower’s assets as a form of security, lenders approve unsecured loans by taking into account a borrower’s credit scores. Unsecured loans can include personal loans, credit cards, and student loans.
Volatility is a statistical measurement of how much a security or market index’s returns vary. Typically, the higher the volatility, the riskier the security. Volatility is usually calculated using the standard deviation or variance between returns.
A waiting period is a term found in all life insurance policies. It refers to the amount of time your insurer requires you to wait until you are eligible for claims on conditions covered in your policy.
Whole life insurance provides a payout to your family upon your demise. It may also cover total permanent disability and critical illness. These policies provide coverage over your entire lifetime and would also provide annual cash bonuses paid into the policy.