Should I keep my AIA ILP for the time being after investing $10k so far?

HI anon,

Front-loaded ILPs are always tricky because they make you pay all the admin charges and insurance early on, and then you feel a bit "ai wan" (hokkien for regret/wasteful) for throwing all the money and effort away later on.

I'm a fan of frameworks. Here's one which might be useful for you (and I also used when considering whether to keep or throw my own ILP, lol):

• How much have you put in so far? It's much easier to throw away $2k than $20k.

• Do you have other investment instruments? If you have other profitable investments that can help you recoup your $20k of lost capital, it will always make surrendering an ILP easier.

• What opportunity cost are you losing out on? If you don't want to throw away you $2k or $20k - that's one thing. But if you continue to put $300 a month into this ILP, are you confident that it can bring you the returns you need? If you cancel your ILP, are you confident your $300 monthly invested elsewhere can be profitable too?

• What are the fees on your ILP? Yes, everyone says ILP hefty fees and all. But how much exactly? Where do they come from? Are these fees avoidable in other asset management industries? Bear in mind that ILPs usually buy funds, and funds generally come with lots of fees already.

• Do you have protection if you throw away you ILP? For some, their ILP is the only form of insurance they have. In this case, you have a more pressing need before you throw away your ILP - that is to go and sort out proper insurance coverage!! Many insurance agents/financial advisors here on seedly who can help with that.

• Is it a front-loaded or back-loaded ILP? Most people know front-loaded ILPs (like your AIA one) where your premiums initially go mostly to admin and very little into investment. Back-loaded ILPs usually invest 100% of your premiums into sub-funds, the insurance coverage is usually just 101% of the account value, and the most hefty fees usually come at the later part in the form of early encashment charges, e.g., 30 year plan but you want to encash/surrender at 25 years - you will probably be paying a fee of 10% of the net account value. If your account value then is $1M, you will be losing $100k just like that.

Ultimately you brought up a very good point. Best to make whatever losses early on in your investment journey when your capital is still small. That's an important perspective. Yes we should never lose our capital as Warren Buffett's first rule of investing. But if I may add to that, if you must lose your capital, make those mistakes early and recover from them fast.

Sorry, although I'm posting an "answer" to your question, I have ended up asking you more questions than you asked in the first place. But I hope these questions will help you come to a decision that you can sleep with at night. It's not an easy decision, and I have no cookie-cutter answer for you, but I hope this helps.

Avoid ILPs at all cost. Super high fees and many layers of fees within. Everyone in the pipeline gets a cut from you, and you are the goat at the bottom getting slaughtered by fees. Fees are critical as it reduces your returns significantly.

Only good for your adviser because they earn about 50% of the premiums you pay as commission, rubbish product