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Victor Lye

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Victor Lye

Founder & CEO at SquirrelSave

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Founder & CEO at SquirrelSave

Victor Lye

Founder & CEO at SquirrelSave

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Investments

Victor Lye
Victor Lye, Founder & CEO at SquirrelSave
Level 5. Genius
Answered on 21 Sep 2019
You said yourself. Your intent is to invest. So an ILP is not suitable. ILP is a bundled product comprising (i) protection (insurance) and (ii) investment components. In traditional insurance which also contain the protection and investment components, the insurance company will basically break the premium you pay into the two components. The protection component usually is small compared to the investment component. This is because insurance companies tend to ramp up the investment component. Why? One possible reason is the commission sales structure, salespeople will generally prefer higher premium products to sell - simply because of the higher commissions they will earn. In the case of traditional insurance, the insurer will have to invest the investment (or savings) component - to generate returns for the policyholder. But often the insurer can only invest mostly in conservative investments such as bonds because of the long term nature of insurance policies and capital-based regulations. This is not ideal typically for a young person who has a long-time runway. In the case of the ILP, the insurer essentially "outsources" the investment burden to a third party manager(s). The sum assured will also depend on the performance of the investments. The key question is whether the traditional insurance product or the ILP is suitable for a person. The clue is that most ILP holders treat it like an investment. But an ILP is an insurance product. So there is an element of mis-selling here if the client treats it as an investment. The key factor is that unlike normal investments, you cannot simply liquidate or exit the investments in an ILP - because you will also lapse the insurance component. Statistically, you are less insurable with time. This poses the dilemma of re-insurability. It is far better and more flexible to BUY TERM & INVEST THE REST. No need to bundle. You can enjoy your protection at lower charges and cost while having full flexibility to invest. ILPs came about more due to tax benefits where such premiums can be tax-deductible. In Singapore, there is no such benefit. In short, ILPs are not ideal.

Investments

Money FM 89.3 Show

Victor Lye
Victor Lye, Founder & CEO at SquirrelSave
Level 5. Genius
Answered on 21 Sep 2019
Assuming you are young, and with no dependents with an active life, do consider to buy personal accident insurance and top up your Medishield Life plan to an Integrated Health Shield plan (if you like private hospital treatment). Frankly, I believe that Singapore's public health system is really good and a Medishield Life plan is good enough, subject to personal ward preferences. Apart from personal accident, you should consider critical illness or term life - if you think you will start a family. This is to future proof your ability to provide for dependents - because starting term life insurance (not whole life) and critical illness at a young age is cheaper. Apart from protecting your future, set aside emergency funds of 3-6 months income - depending on your lifestyle. With technology affecting job roles, you should be prepared for future changes. After that, you can consider investing. But there is no need to build a "war chest" as there is no end to the human perceived size anyway. Just start with what is available and keep investing to smooth out the ups and downs of markets. Stay focused and pick your risk appetite carefully. Fix a time horizon of at least one to three years. Any shorter, and you will be no different from a trader, speculator or gambler! Singapore is fortunate to have digital investment services offering low fees and low investment entry. So check them out. All the best!

Investments

Stocks Discussion

Regular Shares Savings Plans (RSS)

OCBC

Savings

Blue Chips

Victor Lye
Victor Lye, Founder & CEO at SquirrelSave
Level 5. Genius
Answered on 21 Sep 2019
Do browse the online digital investment services now available. These are the alternatives to traditional investment services which charge higher fees and require higher minimum sums. You should also assess your own investment style. After years of investing experience, I advocate steady investing and global diversification. Problem is that we sleep and we can't monitor markets all the time. Hence, using AI-driven investment services is an alternative.

Investments

Stocks Discussion

Victor Lye
Victor Lye, Founder & CEO at SquirrelSave
Level 5. Genius
Answered on 21 Sep 2019
It depends on your risk appetite and time horizon. It also depends on your liquidity needs. If you really want passive income, bank savings and bond funds are available. But the returns are relatively low. Frankly, you will be better off in a globally diversified portfolio if you can afford to invest without the need for liquidity for the next 1 - 3 years.

Investments

Unit Trust

Equities

Victor Lye
Victor Lye, Founder & CEO at SquirrelSave
Level 5. Genius
Answered on 21 Sep 2019
You should be aware of the expense ratios for unit trusts which are known to be among the highest in the world. The fees eat into your returns. You are better off using the digital investment choices now available in Singapore with low minimum entry and low fees. www.squirrelSave.com.sg is one of them, Do browse the choices and all the best! https://www.businesstimes.com.sg/banking-finance/singapore-mutual-funds-charge-higher-fees-than-global-average-morningstar

Investments

Retirement

Victor Lye
Victor Lye, Founder & CEO at SquirrelSave
Level 5. Genius
Answered on 21 Sep 2019
Investing requires you setting your risk appetite and your time horizon. Once you set these, just invest. There is no good or bad time. The best is to start as early as possible in your life so that you maximise the ability to ride the ups and downs of markets. Get emotions out of investing.

Investment Linked Policies (ILP)

Insurance

Investments

Victor Lye
Victor Lye
Level 5. Genius
Answered on 21 Sep 2019
ILP is a bundled product comprising (i) protection (insurance) and (ii) investment components. In traditional insurance which also contain the protection and investment components, the insurance company will basically break the premium you pay into the two components. The protection component usually is small compared to the investment component. This is because insurance companies tend to ramp up the investment component. Why? One possible reason is the commission sales structure, sales people will generally prefer higher premium products to sell - simply because of the higher commissions they will earn. In the case of traditional insurance, the insurer will have to invest the investment (or savings) component - to generate returns for the policyholder. But often the insurer can only invest mostly in conservative investments such as bonds because of the long term nature of insurance policies and capital-based regulations. This is not ideal typically for a young person who has a long-time runway. In the case of the ILP, the insurer essentially "outsources" the investment burden to a third party manager(s). The sum assured will also depend on the performance of the investments. The key question is whether the traditional insurance product or the ILP is suitable for a person. The clue is that most ILP holders treat it like an investment. But an ILP is an insurance product. So there is an element of mis-selling here if the client treats it as an investment. The key factor is that unlike normal investments, you cannot simply liquidate or exit the investments in an ILP - because you will also lapse the insurance component. Statistically, you are less insurable with time. This poses the dilemma of re-insurability. It is far better and more flexible to BUY TERM & INVEST THE REST. No need to bundle. You can enjoy your protection at lower charges and cost while having full flexibility to invest. ILPs came about more due to tax benefits where such premiums can be tax-deductible. In Singapore, there is no such benefit. In short, ILPs are not ideal.

Insurance

Endowment Policies

Victor Lye
Victor Lye, Founder & CEO at SquirrelSave
Level 5. Genius
Updated on 01 Sep 2019
Having run investment, insurance and healthcare businesses, your finding is no surprise. Let's start with a brief breakdown and basic principles to help you understand. First, my opinion is that many people are sold insurance which they don't fully understand. Try asking someone to repeat the features and benefits of an insurance product they bought. Chances are that even a CEO level person is clueless and embarrassed. This has to do with the sales methods and the way insurance has been marketed. It has improved a lot over the years and there are many well-meaning salespeople, but there is an arguable mismatch between the sales and buy side of the insurance market in terms of sophistication, motivation and needs. Second, most sales-driven insurance methods end up selling you the highest premium product. Due to the inevitable mismatch between the sales and buy sides of the situation, the buyer is often less motivated to know the exact details, often ending up with the proposition as "what is your budget?" and the sales side tries to cobble a product that sucks up what you say you can afford. This is an unfortunate reality. Third, insurance is mostly a bundled product comprising an actuarial component - let's call it "A", and a savings component - let's call it "B". A is constrained by actuarial calculations and is rather fixed. B can be as high as possible to suit your budget. There is a tendency to sell a higher premium insurance product because the commission is percentage-based. So the only way to motivate sales is to structure a bundled A+B product - which means there tend to be sales of what we call - whole life or endowment insurance products - which contain a lot of B. Fourth, when the insurance company gets your B, it adds up all the Bs from all insured members and pools it into an insurance fund. But the way the insurance fund is invested is constrained by the actuarial considerations and regulatory requirements - which tend to limit the ways your B is invested. Mostly, into long term bonds. Hence, the returns are constrained because the risks must be set relatively low. Fifth, you will note that you may likely have been sold an insurance product which contains a high proportion of B which is then managed in a pool which has no regard for you as a person. For example, if you are 20 years old and the others in the pool are of different ages (and risk profiles), your B together with all their Bs are managed according to the insurance company’s profile – not yours. There is no personalization. Lastly, the above explains why your returns are low – without going into greater details. I would add that in the case of “non-participating” policies, the insurance company merely gives you the returns indicated in the insurance benefit illustrations and can keep the extra returns it earns – if at all. Not bad for the insurance company. In response to the market, insurance companies offered to share these potential returns through commonly called “participating policies” where you not only get the illustrated returns in the benefits documents, you also get to share in the gains made by the insurance company through bonus declarations. I hope these basic points give you a better understanding, though there are more details. What I would do is to clearly define my protection needs. Then consider buying term insurance which purely A component which will be cheaper than a bundled A+B product. Use your resulting premium savings (by avoiding the bundled A+B product) and invest that sum regularly. Today, using digital life insurance platforms and Robo-investments, you can construct your own A + B product without the bundled constraints and high commission expenses. Bear in mind, insurance commissions for bundled A+B products can be as much as over 100% of your annual premium! Seek advice from a financial adviser and make sure it is not an insurance sales push. All the best!

Investments

Savings

Insurance

Loans

CPF

Victor Lye
Victor Lye, Founder & CEO at SquirrelSave
Level 5. Genius
Answered on 01 Sep 2019
First, do your budget for at least the next 5 years. Make sure you do not overspend and can generate a surplus each year. Second, use the surplus and decide the proportion to pay down debt, invest and build an emergency fund. I recommend building an emergency fund of 3X to 6X your monthly salary. Once you achieve that, consider your investment risk profile. If your potential return based on your risk profile is significantly greater than the loan rate, you can invest, especially if you are young. If not, pay down the debt. All the best!

Investments

Robo-Advisors

Victor Lye
Victor Lye, Founder & CEO at SquirrelSave
Level 5. Genius
Answered on 01 Sep 2019
Understand your anxiety. One lesson I have learnt the hard way, and which was already shared by many before me, is that we should not time the market. If you want to speculate, bet or gamble, by all means, timing the market is one technique. But true investing starts by knowing your own risk profile and making sure that your mix of underlying assets results in a risk that matches your own profile. In all my years of investing as a professional wealth manager, I realise that I am also subject to the same problem - just as my clients are. If you look at most crashes and corrections in the markets, it would be a stroke of luck, not skill, to consistently navigate every drop in the market. Same for the bull runs. Data suggests that most corrections and crashes were done within a span of 2-3 years. The upturns in the markets tend to be longer. Truth is, we can't time these turning points well as humans due to our emotions. So if you want to invest, take at least a 1-3 year time horizon, know your risk appetite and start early. There is never a right time to start but start early. In fact, I believe even children should start investing, simply because they have a long runway and do not need the money until they grow up. Since you can invest a small amount monthly, you can start now and ride the ups and downs. Robos that allow you to start with small amounts are welcome investment methods which were not available in the past. Traditional investments required minimum investments and were not as efficiently diversified. So choose a Robo that is global and manages downside risk. For these reasons. I created SquirrelSave. Of course, every Robo has its pros and cons. So take your pick according to your comfort. All the best!
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