Should I forgo my savings plan from prudential to do this so i can start investing in ETFs? - Seedly
 

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Asked by Anonymous

Asked 2d ago

Should I forgo my savings plan from prudential to do this so i can start investing in ETFs?

I want to start investing in ETFs. Should I forgo my savings plan from prudential to do this? I have paid for about 4 years, and have around 21 more to go.

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Choon Yuan Chan
Choon Yuan Chan
Level 7. Grand Master
Answered 1d ago

I intrepret forgoing savings plan as cancelling it and not continuing.

It is not advisable because you will be relaising losses. For many insurance products, once you sign up, you are stuck with it; unless you are prepared to realise a hefty loss. So just continue the payment, but dont sign up for any more savings plan.

Use that amount to invest in ETFs instead

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Hi anon,

You would be realizing losses if you do so.

Your saving plan can still form a portion of your investment portfolio as the guaranteed component since there is a guaranteed floor on your returns.

Instead, focus on understanding what kind of ETFs (or shares or UTs) that you want to invest in. These investments are not guaranteed, you might lose monies on them too. So you will need to know what you are doing before you invest. At least you have a backup plan in the form of your savings plan. Presumbly you have increased your income from 4 years ago, so there should be some wriggle room in your budget to start investing, over and above what you are setting aside in the Prudential plan.

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Bjorn Ng
Bjorn Ng
Level 6. Master
Answered 1d ago

Hi bro, like what everyone has said, you will realized loss which I think will be quite significant as you are early in your policy. My recommendation is to just treat this as a long term saving plans, dont cancel it, and build up your warchest to begin investing.

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Adelyn K
Adelyn K
Level 5. Genius
Answered 1d ago

No, you shouldn't forego your savings plan. But if you would like to start investing in ETFs, maybe you can check with your agent if you can reduce your monthly expenditure so that it's comfortable for you to do both at the same time.

Since you've already started on the savings plan for 4 years, I would say maximise the value you can get from there. It's good to have some forced savings and that will help to generate some extra profits too. 21 years later, you will see the fruits of your forced savings plan. :)

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Junus Eu
Junus Eu
Top Contributor

Top Contributor (Nov)

Level 9. God of Wisdom
Answered 1d ago

No due to the fact that you will be realizing losses.

I would just start investing in ETFs but still keep the savings plan so as not to realize losses.

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As the others have mentioned here, you will be incurring a loss if you were to surrender your plan. How sure are you that your vestments in ETFs will yield a higher return as compared to your prudential plan? If you are not sure about it, just leave it there until you klnow what you are doing.

Personally, I've sold away my prudential endowment a couple of years ago. Then it was into its 13th year. Reinvested the proceeds into my options portfolio which I know will let me generate a return of 30%. Hence what I meant about knowing what you are doing.

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Alan Kor
Alan Kor
Level 6. Master
Answered 2d ago

Take into acct your cashflow and opporutunities costs

never mix insurance with investment

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Alan Kor
Alan Kor

2d ago

1) Money flowing to this "savings plan" over 25 years = lesser compounded cash used for investment aka opportunity costs
Brandon Ho
Brandon Ho

2d ago

Ahh I see, thank you for your input! :)

You'll be incurring quite a lost if you surrender now.

Instead, use the Prudential plan as an alternative to your fixed income or bond component in your portfolio. It is a conservative product giving you 3-4% compounded annual returns.

But you can still go ahead and do your own investing by buying equity funds and building your own portfolio.

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Alex Yeo
Alex Yeo
Level 4. Prodigy
Answered 2d ago

No. You will incur losses if you surrender policies prematurely.

Saving/Endownment plans are not all that bad. They are a form of forced savings, especially good for those that do not have a habit of saving. The returns though on the low side, but at least they are better than fixed deposit rates and there is still some form of protection in the event of death.

Would suggest you to slowly build up your warchest by saving more or increasing your income by doing sideline jobs.

The stock market is always here. There is no lack of opportunities. Once you have built up spare cash, cash that you would not need for the next 5 years, then you can start investing.

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Investing is about growing your wealth. By forgoing your savings plan of 4 years, you are creating extra loss for yourself than to make your situation better.

Therefore, before you make any rash decision, understand the basics of your finances and your savings plan. While the return may not be very attractive, it certainly provides some form of safety cushion during a market downturn. With this in mind, speak with a professional on the best way to plan your finances rather to start everything from scratch.

Here is how I will recommend you to understand your cashflow: https://www.blog.pzl.sg/understanding-your-personal-cash-flow/

In this online platform, anybody who is responsible will never tell you to cancel your savings plan and start investing in ETF. Instead, learn about your cashflow and create a budget that is suitable for investing. Here is how I do mine: https://www.blog.pzl.sg/how-to-create-a-monthly-budget/

Here is everything about me and what I do best.

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