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Is this a good investment?
08 Apr 2017 (121 views)

Are you willing to give your money to a financial institution who promises to invest their money carefully for 25 years, and ask you to give them 40% of the accumulated amount, so that you get only 60% as your return?

For example, if your investment amounted to $300,000, the financial institution will take away $120,000 and give you $180,000?

Your total savings for the 25 years could be $130,000, Your net gain is $50,000 for 25 years.

ANSWER
This is how 100,000 people are investing their money each year in Singapore. 

They invest in an ILP (investment linked policy). It is described under various names, e.g. Pru Link, Global Wealth and other fanciful names. But they are all ILPs.

The ILPs are like unit trust. The only difference is that you can add term insurance to the policy, and the premium is charged separately. But the charges of ILP are exorbitant.

If you look at the "Effect of Deduction", which is shown in the Benefit Illustration, you will find that it represents (say) 40% of the accumulated premium. The percentage can vary from one product to another. the 40% indicated is quite typical.

Most investors know that they can invest in a unit trust and pay lower charges. These charges will probably take away less than 20% of the accumulated sum over 25 years. If they invest in an index fund, such as the STI ETF, the charges will take away less than 10% of the accumulated sum.


 



Is this a good investment?
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Are you willing to give your money to a financial institution who promises to invest their money carefully for 25 years, and ask you to give them 40% of the accumulated amount, so that you get only 60% as your return?

For example, if your investment amounted to $300,000, the financial institution will take away $120,000 and give you $180,000?

Your total savings for the 25 years could be $130,000, Your net gain is $50,000 for 25 years.

ANSWER
This is how 100,000 people are investing their money each year in Singapore. 

They invest in an ILP (investment linked policy). It is described under various names, e.g. Pru Link, Global Wealth and other fanciful names. But they are all ILPs.

The ILPs are like unit trust. The only difference is that you can add term insurance to the policy, and the premium is charged separately. But the charges of ILP are exorbitant.

If you look at the "Effect of Deduction", which is shown in the Benefit Illustration, you will find that it represents (say) 40% of the accumulated premium. The percentage can vary from one product to another. the 40% indicated is quite typical.

Most investors know that they can invest in a unit trust and pay lower charges. These charges will probably take away less than 20% of the accumulated sum over 25 years. If they invest in an index fund, such as the STI ETF, the charges will take away less than 10% of the accumulated sum.