There is an article in the Today paper on what to look for in an investment linked policy. It is written by the training manager of an international insurance company.
The article advised consumers to consider the financial objectives, to look for the suitable funds and consider the charges. There are motherhood statements, but avoid the essential facts.
Over 100,000 consumers (my guess) buy an investment linked policy each year and do not realize that they are making a bad investment. Many of these regular premium policies give a reduction of yield of up to 4%. If the underlying funds earn an average yield of 6%, the consumer gets a net yield of only 2% per annum. This is hardly enough to cover inflation.
If the consumer buys a term insurance policy and invest the rest of the savings in a low cost fund, the reduction in yield is likely to be only 1%.This will allow the consumer to enjoy a net yield of 5% p.a. The difference in yield between 2% and 5%, over a period of 35 years is a lot of money. It can amount to several hundred thousand dollars!
This is explained in my book, Practical Guide on Financial Planning. You can also attend the educational talk organised by FISCA (http://easyapps.sg/assn/Org/Event.aspx?id=5)
The article advised consumers to consider the financial objectives, to look for the suitable funds and consider the charges. There are motherhood statements, but avoid the essential facts.
Over 100,000 consumers (my guess) buy an investment linked policy each year and do not realize that they are making a bad investment. Many of these regular premium policies give a reduction of yield of up to 4%. If the underlying funds earn an average yield of 6%, the consumer gets a net yield of only 2% per annum. This is hardly enough to cover inflation.
If the consumer buys a term insurance policy and invest the rest of the savings in a low cost fund, the reduction in yield is likely to be only 1%.This will allow the consumer to enjoy a net yield of 5% p.a. The difference in yield between 2% and 5%, over a period of 35 years is a lot of money. It can amount to several hundred thousand dollars!
This is explained in my book, Practical Guide on Financial Planning. You can also attend the educational talk organised by FISCA (http://easyapps.sg/assn/Org/Event.aspx?id=5)
1 comment:
Sources like TV programmes, newspaper and magazine articles are good for general information but not to base buying or investing decisions on.
They have certain levels of indirect or even implicit conflict of interests against their audience as they rely on commercial advertisers (financial institutions) for large parts of their revenues. They couldn't possibly be too harshly or even honestly critical about products and companies that they're seeking advertising revenues from.
Though not honestly critical, I wouldn't say that they're dishonest as they usually stick to facts as facts, figures as figures and opinions as opinions.
The problem with them is that they'll phrase everything as diplomatically and even flatteringly as legally and semantically possible.
So, read them with your eyes and minds open. It's good to read such articles, even the paid advertisements. Get a broader view of what's available out there. But when it comes to sigining the dotted line, use those info with a clear mind in your own interest. Nothing wrong with that, it's your own money. Better to save the milk than to cry over spilt milk.
Of course, an arsenal of financial knowledge takes years to accumulate. And unless you started your career in the financial sector, you might have to pay dearly for your "tuition."
The easier and cheaper way for newcomers on the field is to read TKL books and websites. Then apply those practical guidelines on the barrage of commercial websites, advertisements, brochures, sales talks etc. that you're faced with.
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