Hi Mr Tan,
I have an investment link policy. My advisor has advised me to invest on a yearly basis to enjoy better allocation rates (i.e. at the moment, I am doing regularly investment on a yearly basis).
My question is for dollar cost averaging to work best (i.e. for long term investment), it is advisable to invest on yearly or monthly basis? You advice is appreciated.
REPLY
Both methods should produce neutral results. The effect of dollar averaging depends on the level of the market at the time of each investment
It is more important for you to buy an ILP that invest 100% of your annual or monthly premium. Do not buy an ILP that takes away two years of your savings.
Read this FAQ:
http://www.tankinlian.com/faq/ilp.html
I have posted two cases in my blog of policyholders who were shocked to discover that after investing over $2000 for 2 years, they cash value is less than $400 today. You should not fall into the same trap.
It depends on the timing of each cash flow.The frequency isn't important.If you do yearly, imagine a small lumpsum is invested and when it is invested in a market trough it gets more units as compared to a monthly ones. Basically it is luck.
ReplyDeleteDollar cost averaging is simple but it has been overly hyped as a means of managing risk. There are other variations of this which are superior but more difficult to use.
Anyway just keep to this method and don't worry about the timing.
More importantly, be disciplined.The success of this technigue depends on it.
Zhumeng:o)
I don't know which company you have taken up this ILP. There are a lot of bogus regular ILPS in the market especailly from insurance companies, except for NTUC. The insurance agents will tell you that they are saving vehicles. Yes, but they are like traditional saving vehicles which take a lot of your premium to pay the wheeling and dealing agents . How about 2 years of your premium to pay the greedy unethical agents? Is it a lot? No wonder you are left with little after 3 years.
ReplyDeleteIf it is NTUC's , don't touch the ID2. Allthough a better than all the others but still it is not good enough. Buy the ID7. It has very LOW CHARGE.Low charge means there isn't no charge. It means you pay minimally. Remember ID7 is the best.
Can you clarify what is product ID2 and ID7 because I'm in the stage to buy some products from NTUC Income? Thanks
ReplyDeleteOffice worker
Both are known as IDEAL plan but the more ideal one is ID2. It hasn't got the advisory charge of 45% whereas ID2 has.Go to the business centre but beware of the consultants there too. They may play punk on you and sidetrack you to buy ID2 because some of them are part time commission agent too. Ask them whether they are paid a commission and how much. It is your right to ask.It is called disclosure. If they refuse you this info report them to the company or authority.
ReplyDeleteCorrection:: the ideal one is ID7 and not ID2.
ReplyDelete