Tuesday, October 23, 2007

Guarantee of 4% per annum?

Dear Mr Tan,

Does the insurance company guarantee at least 4% long term? It may not be realised even after waiting for the long term, right? Or do you based the 4% on past performance and think future will be the same?

REPLY:

The fund or insurance company does not provide this guarantee of 4% return.

If you are investing over a period of 10 years or longer in equities, you are likely to get an average of more than 4% per year, based on past records.

For some periods, the average return can be higher, e.g. close to 8% per year. For other periods, it may be lower, i.e. closer to 4% per year.

Take the investment risk and get a better return. Invest for 10 years or more, so that you can average out the good and bad years.

Invest in a large, well diversified, low cost fund, so that most of the return are given to you (and not taken away as expenses and charges).

I am quite confident that the return in the future will be higher than other types of investments. I am making most of my personal investment in this type of fund.
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1 comment:

Khiat Han Hwee Adrian said...

This is a time many investors are driven by greed.
Many are tempted to invest all you monies into emerging economies like China and India.

There are many so called "Financial Advisers" recommending such funds only highlighting the potential returns and not talking about risk.

Be careful with your investments. Diversify them and allocate a smaller portion like 10-15% for speculation purposes.

October 23, 2007 10:28 AM

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