Is endowment plan necessary? Especially one that requires payment for 30 years or would investing be the better option?

No it's not necessary.. Definitely not when the funds are locked up for so long period a time.. There are safer and more liquid ways to park your funds. Like Singapore savings bonds, or a bond Etf. These will give you about the same sort of returns as an endowment, plus minus a bit. There are also high interest rate accounts like citibank's maxi gain giving you about 2% or more at the end of one year (based on current rates where the base interest is 80% of one month sibor). If you have a larger risk appetite, a basket of s-reits yield a better return than an endowment. Hope this helps.

Endowment plans are definitely not necessities but they could be a good addition to your portfolio.

Many investors diversify their investments by investing in instruments of different risk levels. Endowment plans could be an option for these investors as a low-risk instrument which requires minimal monitoring while providing them with a potential of 2-4% (approx) yield per annum. Furthermore, there are endowment plans which provide minimal guaranteed maturity values with at least 1% (approx) yield per annum. Thus, if the participating fund of the endowment plan performs terribly consecutively for the term of the policy, the investor could still achieve a yield similar to a fixed deposit. However, this scenario is unlikely as endowment plans typically run for long periods which makes it rare for the policy to be issued zero bonus across the years. Furthermore, once the bonuses are declared, they become part of the policy. Endowment plans thus helps these investors to free up their time and allow them to focus their attention towards investments with higher risks (which translates to higher potential returns).

Endowment plans are also suitable for parents who are looking to put aside money for their children's education. Parents want to make sure that regardless of what happens to them, be it death or disability, their children get a chance to pursue the education they deserve. With an endowment plan, should death or total disability happen to the policy owner, the endowment plan would pay out a lump sum of money which can then be used for the children's education. Endowment plans also provide the discipline (which some parents may lack) by locking away the funds until the maturity date. This ensures that the children's education funds remain untouched until it is needed.

In conclusion, endowment plans are definitely not necessities but it can serve as a good instrument to certain groups of people. Thus, be clear of the reason you are purchasing an endowment plan before committing to it.

Should you have any queries, feel free to contact me at https://m.facebook.com/vinson14 or drop me a text at 94318747.

If there’s a chance, I would tell the teens me not to buy endowment coz after 23 years near maturity, I just managed to break even. It is not even 1/2 of projected value as last checked, estimated matured value is now $13K+ vs originally projected $20k+. it was my very first policy bought when I'm totally ignorant of the pros and cons.

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However, endowment may works for those without saving discipline. Best to buy without the riders. Having said that, there are other investment instruments that provide greater flexibility.

Firstly, you need to determine what kind of risk profile do you have.

Are you a conservative investor, moderate investor , or aggressive investor?

Determine how much risk you are able to stomach before determining the investment vehicle, what is the time horizon you are looking at to set aside this amount of money, and how much losses you are able to take.

Next, realise that endowment policies are partially guaranteed and partially non-guaranteed. Where as for investment options** such as unit trusts, exchange traded funds, mutual funds, they are 100% non-guaranteed**.

Then, compare between instruments that provide guaranteed returns. They are namely Fixed Deposits and Singapore Savings Bonds. In comparison to the returns that Singapore Savings Bonds can return over a 30 years period, endowment policies can only potentially provide higher returns than Singapore Savings Bonds.

You can read more about the calculations that I've done here:

https://bit.ly/2F0zkgc