Endownment Plan VS Investments

Endowment are not necessary but they are a means of passive income.

I prefer to invest in stock or crypto rather than endownment plan which is my biggest regret

Hi Timothy! I was just in your situation last year. I bought an endowment plan as a student, thinking that it was a good investment at the time with 3.75% p.a. guaranteed over the course of 25 years. That plan cost me close to $3000 per year.

Shortly after I signed up for the endowment, the COVID circuit breaker hit, and that was when I had more time to read up on personal finance and investing. I realized that such products are actually severely inferior to investing in individual stocks or index ETFs for the long term in terms of a risk/return ratio. The risk that an individual would take on via index investing and individual stocks is outweighed by that of potential returns about 10% p.a. or better.

So I ended up terminating the plan before the second year, forfeiting my entire premium paid thus far in light of better opportunity costs for my money.

As for the insurance, that is defnitely important, so please go for it. Just make sure you find the right coverage for yourself.

Best of luck!

IMO stay clear of endowments, keep investments & insurance apart.

The idea of endowment seemed appealing (regular savings, capital "guaranteed", decent returns) to me when I started learning about investing. Even met up with a FA with the intention to get one. However decided against it as I realised there are better alternatives to it.

• Robo-Advisors

Great option for beginner investors who want to get started but lack significant capital/experience to DIY. Get some time in the market while learning more, with relatively less volatility. Management fees (<1%) are considerably lower than the commisions in endowments.If

• DIY into ETFs/Stocks

Yes more time, effort & energy is required to learn & carry out DIY. But it allows you full autonomy of your instruments & methods going about them. Plus, theres no fixed limit on your returns, albeit the possibility of capital loss (which endowments can't guarantee against either). Transactional fees should be lower unless you trade often.

In all, I would advise to avoid endowments as they are BIG commitment, especially if you are not yet working. Imagine cutting into your savings just to pay the monthy premium, without a salary. Also, the lack of liquidity of the funds you pump into it may come back to haunt you down the road. Eg. you see potential growth/value in a certain stock, but you lack the sufficient funds to capitalise on the opportunity, as they have been locked away in an endowment. If you're worried about making regular savings, focus on having discipline to save a fixed portion of your allowance/income. Bank savings accounts give pathetic rates now, so I'll suggest cash management accounts (eg. Syfe Cash+) that gives better rates (1.5%) with relatively stable capital.

Insurance is still important tho. If you didn't get the Aviva Group Term Life/Personal Accident in NS, I strongly suggest you get some form of pure coverage.

All the best!