Hi Mr. Tan,
Recently, I am looking to invest a small sum of money in a low risk product for my children's education. After discussing with my agents, I am thinking of investing the money in a 15 year NTUC's Growth plan policy which provides a projected return of about 4.16% with a guaranteed return of about 2%. I am not looking to invest in a mutual fund because I would like to keep the risk to an acceptable level.
1) What is your view of this product?
2) Do you think my decision is wise?
3) Is there any other product that I should be looking at?
REPLY
This product is fairly satisfactory. I have also invested my SRS funds in the Growth policy to get the same modest return in the past.
My preference today is to invest in a mutual fund to get a higher return over the future years. Read this FAQ:http://www.tankinlian.com/faq/savings.html
Perhaps you can invest in 5,000 shares of the STI ETF. I believe that it should give a better return over the next 15 years.
Single premium endowment like Growth is ok with people who are 'rich', who can afford to take low risk but not for majority who must take necessary risk to achieve the desired goal.For a time horizon like 15 years it is easy to get at least 6% to 8% in a diversified portfolio. As I have said, some are lucky that they NEED not take risk.Many who need to take risk , unfortunately have never been counseled properly resulting in taking too low risk and investing in product like Growth.Growth may not even give you 4.15% as projected.The long lock in is a risk, and premature withdrawal risk is another and of course the risk of not achieving the projected return.
ReplyDeleteMy forecast is that for 15 years the return is about 3.7% and not 4.15% . considering the low long term interest rate of 3.4%(20 year bond)
This product just preserves your money,(inflation is about 4% over long term). It doesn't grow your money in real term. If this is your need, it is an appropriate product.
For those who need to grow in real term Growth is NOT the right product. Growth is a product for the rich who need not take risk.
Zhumeng:o)
Did you know the inflationary rate of
ReplyDeleteof tertiary education is 6%? Although
it is much more , just time the 15 years with 6 and you get 90% to give you an idea how much your investment needs to grow in the Growth .Eg, if a 4 year course is 40K now you need to see the $40K grow to $76K (it should be double). Can Growth policy do that?
Dear Mr.Tan,
ReplyDeletekindly advise me if I wish to invest 5,000 Shares of STI ETF of my monies from my saving?
(1)How much is the cost ?
(2)Who is the agents?
(3)Est.of returns in 10 years'time?
Thank-you very much,
a hawker
Assuming a 4 year local uni course.
ReplyDeleteFee for each year is $8K in today's dollar
Fee inflationary rate is 6%
15 years from now the course will cost you $77K.
How much you need to invest now in Growth, assuming it will return you 4.15% over 15 years, is $42K.
If you invest in a well diversified portfolio assuming a realistic and easily achievable return of 6% the amount needed to be set aside is only is $32K. If the return is 8%, only $24K is needed.
Looking at the calculation above you can see for yourself that Growth Plan is for people with deep pocket. They don't need to grow their money. They want to preserve.
ReplyDeleteFor the man in the street it is critical that he has a sound and high performing vehicle to bring him to his destination safely and with little investment. To invest in Growth he is stuck in the rut and condemned and can't get any further in life.
Of course you need an expert to help and certainly not an insurance salesman.