How to evaluate a financial product?

[duckmite]

Hello

Somebody suggested I invest in this product and I'm trying to evaluate it. I only have a few details.

Pay $6000 a year for 5 years.
In the 10th year, I'll receive $37,672.

So, I read about this XIRR thing on this forum and after some googling, I think the XIRR is 3.29%.

So, my question is, is my XIRR correct and what else should I consider in evaluating a financial product?

Thanks!

P.S. Sorry about the noob questions.

 

[boredboiboi]

Hello

Somebody suggested I invest in this product and I'm trying to evaluate it. I only have a few details.

Pay $6000 a year for 5 years.
In the 10th year, I'll receive $37,672.

So, I read about this XIRR thing on this forum and after some googling, I think the XIRR is 3.29%.

So, my question is, is my XIRR correct and what else should I consider in evaluating a financial product?

Thanks!

P.S. Sorry about the noob questions.

Name of product?

 

[kingboonz]

Hello

Somebody suggested I invest in this product and I'm trying to evaluate it. I only have a few details.

Pay $6000 a year for 5 years.
In the 10th year, I'll receive $37,672.

So, I read about this XIRR thing on this forum and after some googling, I think the XIRR is 3.29%.

So, my question is, is my XIRR correct and what else should I consider in evaluating a financial product?

Thanks!

P.S. Sorry about the noob questions.

Is it guaranteed?

 

[dork32]

Hello

Somebody suggested I invest in this product and I'm trying to evaluate it. I only have a few details.

Pay $6000 a year for 5 years.
In the 10th year, I'll receive $37,672.

So, I read about this XIRR thing on this forum and after some googling, I think the XIRR is 3.29%.

So, my question is, is my XIRR correct and what else should I consider in evaluating a financial product?

Thanks!

P.S. Sorry about the noob questions.

your xirr is either 3.29% or 2.88% depending what you meant by 10 years.
if it is at the start of the 10th year, xirr= 3.29
if it is at the end of 10th year, xirr = 2.88

it is quite likely that it is going to be 2.88. that is the way insurance products are marketed.

i would consider things like
1. wat am i going to do with the 6k per year, if i do not put it in this scheme.
2. do i need the cash along the way, wat is the penalty if i need to withdraw prematurely.
3. is 10 years a good time line. wat am i going to do with the money 10 years later eg 2nd property, 2nd car, 2nd wife... if i do not have anything, i may want to lengthen the period so as to bargain for a better rate.
4. is this a safe company, will it still be around 10 years later.

2.88 is really nothing to shout about. i will not buy this product.

 

[duckmite]

Just got more information, looks like an awful policy.

Name of product?

It's Limited Pay Revosave from NTUC Income.

Is it guaranteed?

I thought the figure of $37,672 was guaranteed. It's not. The guaranteed amount, if I'm reading the document right, is $30,016! A guaranteed return of $16! After 10 years!

Naturally, the bit that has been helpfully bracketed by the agent is the non-guaranteed return, assuming a return of 4.75%.

 

[duckmite]

your xirr is either 3.29% or 2.88% depending what you meant by 10 years.
if it is at the start of the 10th year, xirr= 3.29
if it is at the end of 10th year, xirr = 2.88

it is quite likely that it is going to be 2.88. that is the way insurance products are marketed.

There's one bit that says "Based on the Illustrated Rate of Return of the Life Participating Fund: At 4.75% p.a., your total Illustrated Yield at maturity is 2.88%." So I guess you're right.

i would consider things like
1. wat am i going to do with the 6k per year, if i do not put it in this scheme.

The parent has another policy maturing that will be giving her $500 a month which she doesn't need. Apparently, she wants me to have it in my keeping so I can use it to defray household expenses and stuff should she pass on before the father. Any ideas what should be done with it? I suggested just dumping it in Medisave (4% interest, can use for medical expenses, can nominate a recipient). Maybe SG bonds?

2. do i need the cash along the way, wat is the penalty if i need to withdraw prematurely.
3. is 10 years a good time line. wat am i going to do with the money 10 years later eg 2nd property, 2nd car, 2nd wife... if i do not have anything, i may want to lengthen the period so as to bargain for a better rate.
4. is this a safe company, will it still be around 10 years later.

2.88 is really nothing to shout about. i will not buy this product.

I don't really have the answers to these questions but I'll keep them in mind.

Thanks for the advice.

 

[boredboiboi]

There's one bit that says "Based on the Illustrated Rate of Return of the Life Participating Fund: At 4.75% p.a., your total Illustrated Yield at maturity is 2.88%." So I guess you're right.

The parent has another policy maturing that will be giving her $500 a month which she doesn't need. Apparently, she wants me to have it in my keeping so I can use it to defray household expenses and stuff should she pass on before the father. Any ideas what should be done with it? I suggested just dumping it in Medisave (4% interest, can use for medical expenses, can nominate a recipient). Maybe SG bonds?

I don't really have the answers to these questions but I'll keep them in mind.

Thanks for the advice.

First is your time frame only 10 years? There are a few type in the market. There is a type where the plan will last till 120 years base okay life insured, can leave it to grow or take it out as and when you like. The plan will only end on 120 years or totally withdraw. The plan comes in good return at the back of the plans, roughly 15 years and above.

 

[unhinged_loon]

Just got more information, looks like an awful policy.



It's Limited Pay Revosave from NTUC Income.

I thought the figure of $37,672 was guaranteed. It's not. The guaranteed amount, if I'm reading the document right, is $30,016! A guaranteed return of $16! After 10 years!

Naturally, the bit that has been helpfully bracketed by the agent is the non-guaranteed return, assuming a return of 4.75%.

Even putting your money in SSB with the current low interest rates makes more sense. The SG government is very very very very very unlikely to default on SGD denominated debt (it can just print money). The current SSB rates are lower than the non-guaranteed 2.8% but the returns are fixed.

 

[kingboonz]

Financial products very easy to evaluate one...

Risk = returns.

Any fees taken by agents will eat your returns without reducing your risks. (IE: you can get better returns if you invested in a product of similar risk category, directly)

It all depends if you want to pay the agent for convenience. Remember it is not hard to learn investing yourself, like what we have said billions of times. There is a reason why we say investing isn't hard to learn.

Whether you need a product or not depends on your risk appetite. Also remember that there is no such thing as low risk high returns. Everything has tradeoffs in a fair and equitable market. Property investing included. So decide your risk level first then let us know again.

 

[duckmite]

It's not my money but apparently, I am in charge of investing it now.

I'm thinking of putting $500 a month into G3B via POSB Invest-Saver. I have $30k in SSBs currently anyway so that can provide a "capital guarantee" (coz parent). Dividends provide the "interest element" and I'll assume the capital loss (hope not!). Gains, not sure if the parent will want it.

Sounds OK?

 

[tangent314]

POSB-IB into G3B is pretty good if you can handle equity risks.
You mentioned MA earlier, it's not a bad idea if either your or your parents MA is not capped. If you are willing to consider MA, you may want to consider SA (or possibly RA for your parent if CPF Life has not yet started payouts)

 

[duckmite]

Both MAs have been maxed out. RA has been rejected as an option. CPF Life payouts have started too.

So, the money has been transferred to my account and I've set up the RSP to buy G3B. After which, the parent did the same thing? I've no idea what's going on anymore. Scant interest was shown when I tried to explain, as best I could, the equity risks.

 

[BBCWatcher]

RA has been rejected as an option.

By whom? Why?

Another possible CPF-related choice is an "all three" top up. Up to $37,740 per year can be pushed into CPF that way. If MA has reached the Basic Healthcare Sum then that portion will spill over into SA or OA, depending on whether the Full Retirement Sum was reached or not. Funds deposited into CPF that way will earn a blended interest rate >2.5%. (OA earns 2.5%, but some portion will end up in SA and earn 4%. Exactly how much ends up in SA depends on the recipient's age and any MA spillovers, if applicable.)

 

[duckmite]

By whom?

The account owner.

Why?

I think RA contributions will be trickled out monthly and she just wants to park it somewhere.

Another possible CPF-related choice is an "all three" top up. Up to $37,740 per year can be pushed into CPF that way. If MA has reached the Basic Healthcare Sum then that portion will spill over into SA or OA, depending on whether the Full Retirement Sum was reached or not. Funds deposited into CPF that way will earn a blended interest rate >2.5%. (OA earns 2.5%, but some portion will end up in SA and earn 4%. Exactly how much ends up in SA depends on the recipient's age and any MA spillovers, if applicable.)

70 this year and receiving CPF Life payouts already. Think I'll collate the information and pass it on but it's her decision in the end.

 

[Samaritan101]

Hello

Somebody suggested I invest in this product and I'm trying to evaluate it. I only have a few details.

Pay $6000 a year for 5 years.
In the 10th year, I'll receive $37,672.

So, I read about this XIRR thing on this forum and after some googling, I think the XIRR is 3.29%.

So, my question is, is my XIRR correct and what else should I consider in evaluating a financial product?

Thanks!

P.S. Sorry about the noob questions.

To analyse a financial product. Understand few facts first.

1) What is it for? Is this product for regular savings/retirement/education planning, etc...

2) How long will I stay committed to this fund/when I need this fund?

3) How much budget I am willing to set aside?

4) What are the extra perks of this plan (if any)?

5) How much of my invested money will be guaranteed $ non-guaranteed?

6) Analyse the insurer company returns (usually it can be found in the benefit illustration or at the company website returns for participating funds)

Anyone wants to learn financial products, do PM me to allow me to explain more about the different types financial products offered in the market. It's only be generic and if you prefer detailed version, no problem. No introduction/selling of any financial products. Customise consultant as each of individual of you has their own financial goals and plans