facebookThoughts on ‘buy term, invest the rest’ for a beginner in investing? - Seedly

Anonymous

08 Jan 2020

Insurance

Thoughts on ‘buy term, invest the rest’ for a beginner in investing?

Is this a good mindset to have when you start investing? Should you get term life or whole life insurance first?

Discussion (5)

What are your thoughts?

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Nothing wrong with it, although some financial advisors out there would disagree with it, stating the need to take into context of each individual personal circumstances etc Then again, every advice / old saying / conventional wisdom that's been dispensed to the masses all had to be taken in context, there is no exception. Ultimately, its up to the onus of the individual to exercise their independent thinking. Just because a advice is simple, does not negate its importance. Its a merely a starting point for one to expand on.

In this case, "buy term, invest the rest" is a result of Singaporeans in the past whom are afraid of DIY investing. Instead, opting to buy investment-linked products (ILP) from insurance companies whom earned ridiculous fees for that. Since insurance companies are usually deemed in the eyes of policyholders as a "safe & reliable" partner. In the investing world there's no such thing as "guaranteed returns" in the truest sense, if ILPs are offering you guranteed returns, most likley they are guaranting a below-average return relative to the invested funds/products' expected returns (high safety of margin). But they can still sell ILPs to their clients, by touting that the below-average guaranteed returns is still much higher than the banks' savings interest rates (a result of quantitave easing by central banks around the world).

For the average Singaporeans who are at least educated to university / polytechnic level & given the vast assortment of investment education material, products & platforms out there, I simply see no reason why they cannot acquire the basic financial & investment literacy to gradually build up a solid portfolio. To simply state that investments have non-guarantee returns, risk is such as dangerous element, hence you should not touch not it unless you are an expert are just preying on the fact that Singaporeans tend to be a bunch of risk-adverse lot.​​​

Tan Li Xing

07 Jan 2020

Financial Consultant at Prudential Assurance Company (Singapore)

Haha, this is one very common statement we tend to hear. I think why people say that it's because term policies are usually relatively cheaper as compared to whole life policies.

Also in regards to that, I think we cannot just look at $ value in terms of insurance, but whether the $ value and the coverages & benefits make sense to you as the insured. So it's best to have both policies presented to you, and see which one makes the best sense for you to meet your needs and goals.

In regards to investment, I believe we should be doing some form of investment once we have a stable income, because the only way to plan for our retirement is to have our money work harder for us. We have CPF, yes, but even at the enhanced retirement sum, based on information found online, we will have about $1,960 to $2,110 in monthly payouts, and this is before our certain obligations and responsibilities that will still go on after we retire, so just somethings to think about​​​

1) Buy term for adequate insurance coverage with minimal cost.

2) Learn how to invest with the rest...

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