I’ve invested in a long term investment-insurance plan at $2.4k/year. Based on the performance chart, the 3 months, 6 months, 1 year, 5 years are all negative. Only the 10 years is positive at 4.5%. Is the investment doing well? - Seedly
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Anonymous

Asked 1w ago

I’ve invested in a long term investment-insurance plan at $2.4k/year. Based on the performance chart, the 3 months, 6 months, 1 year, 5 years are all negative. Only the 10 years is positive at 4.5%. Is the investment doing well?

I’ve checked Bloomberg — the 3 YR & 5 YR Return are both negative%.... Wondering if the investment is doing well or really badly? I’m worried.

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Sharon
Sharon
Level 6. Master
Answered 1w ago

1) Since there's fresh funds injected into the plan every year, you can compute the XIRR, to determine the annualised return.

It is the rate at which your investments compound year after year.

You can read up on how to calculate XIRR here:

http://singularitytruth.blogspot.com/2019/02/why-i-use-xirr-and-how-i-calculate-it.html

According to the Greatlink Global Real Estate Securities Fund factsheet, there are dividends paid out from 2006-2019.

I'm assuming you've been investing it for a while.

If you still have the statements on how much dividends you get, you can include these dividend amounts + yearly premium when computing the XIRR, so that you'll know the real annualised return on this.

Usually for this type of fund to do well, you need to hold at least 10 years because the high costs eat away at the returns. In your case, according to Bloomberg, there's a front load fee of 5% (sales commission) and expense ratio 1.66%.

In GE's AR 2019, Greatlink Global Real Estate Securities Fund indicates a 7.39% (2019 figure) for 10 years, or 4.11% since inception.

If you take 7.39% minus expense ratio (and 4.11% gain minus expense ratio), your gain would be reduced to 5.73% (10 years) and 2.45% (since inception) respectively.

If it's your 4.5%, your gain will be reduced to 2.84%.

Based on my understanding (someone correct me if I'm wrong), the expense ratio is not the total expense ratio. But since that's the only figure I can find, we'll just take that.

Because I had an AIA ILP, which invested in one of the funds called Emerging Market Balanced Fund (10 years - 3.12%, Since 2006 Inception - 2.65%).

It's TER (Total Expense Ratio) mentioned in their memo in 2011 is 1.75%. However, AIA AR 2019 states expense ratio as 1.55% (2019 figure).

And as per the insurer's note:

"Expense ratio does not include (where applicable) charges for insurance coverage, brokerage and other transaction costs, performance fee, foreign exchange gains/losses, front or back end loads arising from the purchase or sale of collective investment schemes and tax deducted at source or arising out of income received."

So I'd think the actual expense ratio (which we should consider is TER) is actually much higher than the one stated in their AR or on Bloomberg.

2) You may also want to seek a client adviser to review this and other finances.

MoneyOwl previously offered a free comprehensive financial planning service, but I think it's no longer free now.

https://investmentmoats.com/wealth-building-2/review-comprehensive-financial-plan/

https://www.moneyowl.com.sg/comprehensive/

I'm not from MoneyOwl and I don't use their service. I just like their business model of "Non commission-based Advisers", which would be more objective and probably be more aligned with their clients' interests than conventional advisors from insurance companies.

Hope the above gives more clarity.

I'm also learning more about the various investment vehicles as I go along. If something's not right, please feel free to point out. Thanks!

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Sharon
Sharon

2d ago

5 dividends? I think he meant the frequency of disbursement. In my case, I have bonds funds that reinvest the dividends every month i.e., 12 times a year. You can find the annualised return in GE factsheet. https://investorhub.financialexpress.net/documents/greateastern/en-GB/CBZ9/FS "Performance figures longer than 1 year are annualised."
Question Poster

2d ago

Sorry I meant, my agent said my funds got dividends every year. So the interest is 4.65% + 4% (dividends) = 8.65%p.a

Above all, past performance is not an indicator for future performance. Despite that, it will be important to understand the fundamentals of the fund that you are invested in. In detail, we need to evaluate whether the underlying assets are capable of long-term goals.

In addition, you may wish to do a comparison with another fund that is invested into similar asset class. This gives you a brief idea on whether the basis for the negative returns.

Overall, I will suggest for you to speak with your agent to do a comprehensive financial portfolio review. During an unprecedented time like this, it is crucial to be invested into the right assets.

I share quality content on estate planning and financial planning here.

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Question Poster

1w ago

My Insurance Agent tell me, at around 10years then my investment will break even.
Pang Zhe Liang
Pang Zhe Liang

1w ago

I will suggest for you to find out the exact policy that you have, and whether the plan is focused on investment or protection. For the latter, the investment allocation may not be 100% in the early years. Consequently, it may take a longer period of time to breakeven. Having mentioned that, investment only yields non-guaranteed return. Therefore, we need to know the ability for the invested fund(s) to grow in the long term. With this in mind, I will suggest for you to do a proper portfolio review with your agent - he should be in the best position to advise you on these key details.