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What are your thoughts on having traded endowment policy as a low-risk asset in a diversified portfolio?
Thoughts on having traded endowment policy as a low-risk asset in a diversified portfolio?
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Elijah Lee
16 Apr 2020
Senior Financial Services Manager at Phillip Securities (Jurong East)
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Pang Zhe Liang
16 Apr 2020
Lead of Research & Solutions at Havend Pte Ltd
It depends on your needs and whether the term to maturity and effective rate of return is reasonable. If yes, then it is a possible solution.
The only thing to note is the insurer's ability to pay the higher non-guaranteed rate of return over time.
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I think it can be a useful and might yield better in a shorter period than buying an endowment from ...
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As a capital guaranteed instrument, it is really quite a safe asset class that is not tightly correlated to equity markets. You will have to work through the maths, paying attention to the reversionary and terminal bonuses, to get a sense of your i.r.r. in the worst case and best case scenario (just in case the endowment matures in a weak economy and terminal bonuses are not awarded).