Avoid lock-in investment products

Some financial firms offer a financial product that locks the consumer in for 5, 10, 20 or 30 years. These products include life insurance and structured products.

Often, the terms of these products are not clear to the consumer. This allows the financial firm to make a large margin of profit on the products for many years. The consumer does not know if he is getting a fair deal.

The consumer does not have much choice. If he terminates the product, he will suffer a large loss.

My advice? Do not be locked into a long term investment product. If you need life insurance protection, buy a term insurance policy. Better still, buy a decreasing term insurance policy.

Invest your savings in a unit trust or investment fund that offer low charges. Do not pay a high front end sales charge. Do not pay more than 1.5% in annual charge. Better still, choose an index fund and pay only 0.5%. Maintain flexibility in moving your investments to another fund.

If you have to buy a lock-in product, such as whole life or endowment policy, choose a company that is operated in the interest of policyholders. Do not choose a company that aims to make profit for shareholders, as these profits ar taken from the policyholder's fund.

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