Do you think investment plans from insurers are better than investing directly in the market? - Seedly
 

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Asked by Anonymous

Asked on 13 Aug 2018

Do you think investment plans from insurers are better than investing directly in the market?

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Luke Ho
Luke Ho, Money Maverick at Money Maverick
Level 6. Master
Answered on 10 Nov 2018

Better is pretty subjective, unfortunately.

If you're of the perception that lower fees is always better, than the answer would be no.

If you want a wider range of benefits - such as convenience, free switching, monitoring, regular updates, a guaranteed capital plus more upon your untimely death and the smooth transfer of those assets upon said death - and many more, than an investment plan from an insurer may be right for you.

Keep in mind there are many types of investments from an insurance company and you don't want to invest in a time bomb (https://www.moneymaverickofficial.com/posts/ugly-ilp-time-bomb, https://www.ifa.sg/ilp-considered-inferior-time-bomb/), do an investment with a higher focus on returns.

You can always nudge me if you're unsure.

https://www.facebook.com/luke.ho.54

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Tan Siak Lim
Tan Siak Lim
Level 3. Wonderkid
Answered on 14 Aug 2018

Investing directly in the market will always give you potentially higher return.

Please note that insurance is primary for protection, not return. Term policy has not cash value.

If you buy a whole life policy, the cash values will accumulate to a point where the policy is self funding. The underlying asset allocation is about 65% bond, 35% equity, this is regulated, so it will not perform like a pure equity portoflio.

If you buy an endowment policy, it is a saving plan, not insurance as there is no protection. Again, the underlying allocation is only about 35% equity, so the expected long term rate of return is about 4.5%, due to this controlled asset allocation. The benefit is the insurer gives some guarantee so that you will not lose money, unlike direct investment where there is no guaranteed.

If you are talking about ILP, then there are many layers of fee:

  • fund management fee of the underlying funds

  • product wrapper fee

  • advisory fee

These fee is justifiable if you can achieve a favourable return, and if you don't know how to do it yourself.

Surgeons and lawyers also charge a high fee, but if you need it, you need it. If you think you can do it yourself, do it yourself.

Ultimately, it depends on your risk appetite, your investment skils, available time and most importantly, temperament.

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