Mommy Makeover for the STI

By TAN Kee Wee

(MediaCorp 938LIVE’s Money Talks, Thursday, 11 October 2007, 7.45 am and 7.20 pm)

If you think fat balding men and ugly women are only found in the driving seats of expensive sports cars, you are wrong.

There is a relationship between financial success and looking good. A recent study by two economists from Elon University in North Carolina shows the relationship between higher salaries and the time spent grooming.

Based on a survey of 13,000 men and women, they found that, for men, every extra 10 minutes spent grooming increase their salaries by 6 percent. For women however, if they want to increase their salaries by 6 percent, they must increase their grooming time by a factor of four.

We know that, for women, it is not just looking well-groomed. There is the added pressure to look young and sexy. Women struggle with the impact of aging and pregnancy on their bodies.

This has led to the growing popularity of a new service from plastic surgeons. It’s targeted at mothers and is called the “mommy makeover”. It involves three steps. They are: a breast lift, a tummy tuck and a liposuction.

The aim is to pull up slackened skin, reduce stretch marks and pregnancy fat. In the US, over 325,000 “mommy makeovers” were performed last year. This is an 11 percent increase over the previous year.

The desire to remain fresh has not been lost on the administrators of major stock indices like the Dow Jones Industrial or the Hang Seng Index. Ever so often, these indices also go through “mommy makeovers”. Tired stocks are discarded in an effort to keep the stock index looking sexy.

Last Friday, it was announced that the STI was going through its own “mommy makeover”. The number of stocks in the STI will be reduced from 48 to 30.

The new STI stocks were carefully selected according to standard criteria such as availability, liquidity, growth potential, and their representation of the evolving Singapore economy.

By including such rapidly-growing companies’ stocks in the new STI, one of the benefits will be to bias the STI upwards in the long term. And a rising STI will always give a good impression of the economy it is based on.

Small investors, who wish to benefit from a rising stock index, like the STI, can do so by buying the relatively new class of products called exchange-traded funds, or ETFs. Typically, an ETF tries to duplicate the main stock market index, or a sub-section of the stock market, whether it be in energy, technology, or commodities.

An ETF is created by putting together a basket of stocks that mirror an existing stock index. This basket is then divided into ETF stocks, and then traded freely just like any other stock.

By buying into an ETF, you automatically spread your risks as you are buying a bit of everything in the existing stock index. And without you doing anything, your portfolio will be given regular makeovers.

Currently, there are about ten ETFs traded in Singapore. But there’s only one for the STI. More ETFs for the STI might be created later.

If you take a bullish view of the Singapore economy, and want to invest in stocks, but don’t really know how to, you should consider an ETF. With regular “mommy makeovers”, the value of your investment should be able to defy gravity over the decades ahead.

Unfortunately, this gravity-defying trick does not apply to us. When we grow old, certain parts of our bodies will just not be able to defy gravity anymore.