Friday, April 04, 2008

Low cost funds

Dear Mr. Tan,
You referred to a low cost fund. What is the expense ratio that can be considered "low cost"? How do you find the expense ratio for a life insurance policy?

If you are investing for the future, you should look for a fund that have an expense ratio of less than 1%. If you earn 6% and deduct an expense ratio of 1%, you get a net yield of 5%.

For a life insurance policy, the front end and other charges will reduce your yield by about 2.5%. It is quite high.

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