Hi, Mr. Tan,
Is it better to buy a single premium ideal plan or regular premium one? It seems for regular premium ideal plan, I need to pay $4/mth policy fee for whole life. But for single premium, they only charge one time $50 for opening account.
But the advisor stated that regular premium, though charge more, can be less risky.
REPLY:
If you have a lump sum, it is better to invest in a single premium, as the charge is lower.
If you do not wish to take the risk of investing a large sum at one time, you can break into three tranches and invest them over a few months (as recurring single premium).
The regular premium plan is intended for you to save a monthly sum over 10, 20 or more years.
If you have a lumpsum and the insurance agent advises you to split into regular, eg. ideal. Yes it is less risky but lower return and breakeven over a longer time.It is not an appropriate approach.
ReplyDeleteBEWARE: The ideal plan gives the agent a lot of commission.He
might have advised this because of the high commission he would get.
The appropriate approach would be to split into 2-3 investments if the market is uncertain, like Mr. Tan suggested.
Research has shown that a single lumpsum delivers greater return than dollar cost averaging(DCA). DCA strategy is controversial especially in a situation like yours,it is abused by the insurance salesman for his self interest in this case.
DCA is ideal when you are saving and investing on a regular basis.You are building and accumulating up your assets.
this is false dichotomy as you also have the option to BTAID (buy term and invest the difference).
ReplyDeleteanybody who is already well covered doesn't need the protection offered by single premium ILPs. it is better to invest in separate fund because of lower load fees.