Saturday, March 01, 2008

Alternative to fixed deposit

Dear Mr. Tan,

My wife and I are in our early 30s. We know very little about insurance and investment. We wish to thank you for giving us advice and information in your blog.

We bought life insurance about 10 years ago and pay a premium of about $150 each for 25 years. Presently both our saving in bank is about $X.

Can you kindly advise us on how to invest our saving as interest rate on fixed deposit is low. We do not wish to take risk and have never invested in stock.

A few days ago, I visited NTUC income @ AMK hub but can't really decide on Flexi-Link policy, Growth Plan, Revosave or Ideal plan. In fact, we are getting more confused.

I hope that this FAQ will help you to make a decision:

As you are investing for the next 30 years, it is better to invest in a low cost, diversified investment fund. You will be averaging out the good and bad years, and also diversifying your risk over a large number of shares. The risk is small, and you can get a good return.

I suggest investing in the STI exchange traded fund. You can buy through your stockbroker.


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Anonymous said...

Growth and revosave would not help you much. They are very poor and lazy workers. Yes they are RELATIVELY safe but not as safe you think.
Anyway I advise you to avoid them . They never get you any where near your goals.
To understand risk better and to help you understand why you need to invest in flexilink i suggest that you have your needs analysed first.Of course, first you need to get a good adviser who is qualified and honest to help you. Without understanding your needs you will have difficulty seeing the necessity to use flexilink or ideal plan. You will not realise how low risk is flexilink.Unqualified agents like to frighten you because they themselves are afraid and kiasu.
Only unqualified agents will recommend you revosave and growth becuase it is no brainer selling you the products and there is no advice or analysis needed. It is safe for them too and that is what they think and that is why they would prefer you to BUY these low return products.
Recommending you Flexilink or ideal
requires knowledge and skills and adviser also puts his reputation at risk.The adviser is accountable to you. It is becuase adviser wants to put your interest first before his.. On top of this, adviser gets LOWER commission for flexilink and ideal plans.
For revosave and growth, the commission is much higher.Now, you see the reason don't you?
You decide who to trust.Who is for you?


Anonymous said...

Though I agree with Zhumeng on most parts, I don't think there is a a real apple-to-apple comparison. For e.g. Flexi-link requires the individual to take the full risk while for Growth, the risk is shared between the insurer and individual. Therefore theoretically, Growth should be the right recommendation if the person does not want to take on any risk.

I think we are thinking too much from our own perspectives and measuring with our own yardsticks. Perhaps readers on this blog should reflect.

For myself, I will only buy low expense funds like STI ETF. And I am willing to take on 100% risk for the potentially higher returns.

Btw since Growth and Flexi-link are single premium products, shouldn't the commission be the same? Any FA like to share with us?


Anonymous said...

It is dangerous to let commission be the basis of recommendation. Then you find insurance agents finding ways to recommend this product to the detriment of customers.Insurance agents are motivated by commission and not by the interest of the client.
Both products carry the same commission. What makes Growth a more popular product with ntuc agents not because agents are concerned with meeting the goals of their clients but because it is a no brainer and 'safer'(for themselves) to sell this product. Agents are afraid of ILPs
because they are not properly trained and have no idea how they work for clients. As a result they behave like stock brokers giving tips freely ; when to buy and sell thinking that this is way to help clients WIN MONEY.

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