Advice Needed: ILP or Regular Saving Plan

[makav31i]

Sorry n00b question.

Let's say if I have $50k to invest is it advisable to spend $35k on Nikko STI ETF and the other $15k on the ABF SG Bond ETF in one go?

Or should I invest it elsewhere? Many thanks.

If you want to put 35k in STI, might as well buy the SPDR STI ETF as compared to Nikko AM STI ETF...on how and where you put the money, it really depends on what type of portfolio you want to create...

 

[Shiny Things]

Sorry n00b question.

Let's say if I have $50k to invest is it advisable to spend $35k on Nikko STI ETF and the other $15k on the ABF SG Bond ETF in one go?

Or should I invest it elsewhere? Many thanks.

Don't worry, we were all n00bs once.

The Nikko STI ETF is best for smaller clips - if you can afford $3k in a clip or more (and you definitely can), the SPDR STI ETF (stock code ES3) is very slightly better. Other than that, this is an excellent idea - it's a great starting portfolio.

 

[cheeyen]

It may sound stupid, but the risk I see is having insufficient discipline to buy the shares every month with SCB, or to postpone the purchase thinking the markets will go down. And also to be scared into selling during market downturns.

Of course, these risks are all self-induced. If you can get over them, it's a great plan!

Hello, may I know if I am buying using SCB, can anytime buy right? New in investing, cause from what I read POSB invest is every 12 of the month deduct, is there any timeframe that I need to buy for SCB case?

 

[SpinFire]

Hello, may I know if I am buying using SCB, can anytime buy right? New in investing, cause from what I read POSB invest is every 12 of the month deduct, is there any timeframe that I need to buy for SCB case?

Yes, you can buy/sell at anytime using SCB. It's just like a regular stock trading account.

 

[cheeyen]

Yes, you can buy/sell at anytime using SCB. It's just like a regular stock trading account.

Got it, thanks!

 

[VII]

If you want to put 35k in STI, might as well buy the SPDR STI ETF as compared to Nikko AM STI ETF...on how and where you put the money, it really depends on what type of portfolio you want to create...

Thanks very much for the advice, much appreciated. At this point I have no idea what type of portfolio there are so don't really know how to answer this. I guess priority is to earn dividends followed by capital gain.

I was looking at REIT seeing some posters here like dividendwarrior doing very well with them but I guess I'm too late for that.

Don't worry, we were all n00bs once.

The Nikko STI ETF is best for smaller clips - if you can afford $3k in a clip or more (and you definitely can), the SPDR STI ETF (stock code ES3) is very slightly better. Other than that, this is an excellent idea - it's a great starting portfolio.

Thanks very much for your advice, I'm really grateful. My plan now is to use around 2/3 of the money to buy the SPDR STI ETF and the remaining 1/3 or so to buy the ABF SG Bond ETF.

I'm in this for the long haul. Should I just buy whenever or should I time it? I've no idea how this works. Are there more "advantageous" time to jump in? For example if the dividend payout is on the 1st of march can I buy in on 22nd february and get paid the next week or do I have to wait for one year before I'm qualified to receive dividends? Many thanks.

 

[AngeLeo]

thank you for the detailed write up. I will follow your plan and sign up for an account.

But may i know if there are any other charges for SCB besides 0.2% fee for buying/selling for Nikko AM ETF?

and for POSB invest savers only allowed to sell all lots at one go? Cant sell partial?

why in the first place you asked about savings plan or ILP then?

you must know insurance is insurance, ILP just gives you an option to have coverage and some returns. Will ETF pay you lump sum death, TPD or CI happens?

don't mix up your priorities.

if the money you're gonna invest in is for the future and to make it more worthwhile, follow shiny's recommendation.

if your basic coverage is not met, an ILP is a good starting off platform.

My goal is to save for the age of 40/45yrs old which i feel is a milestone (where the children are growing up) and that is when i need some extra cash. Based on this , would it be advisable for me to take up ILP or stick to a regular savings plan (15/20yrs)?

Currently, I have a 300k TPD + 100k CI term, upgraded my hospitalization plan and some foundation policy from ntuc that my parents took up since i was young which is set to mature at about age 50.

Stick to your goal and don't stray. Don't let the agent psycho you into buying something that does not fit your needs. RSP is also not much insurance also.

Looking at your term plan already feels funny. Getting CI is costlier than getting TPD due to the fact that recovery and treatment costs are expensive.

Get your fundamentals covered before you advance. Chinese say learn to crawl before you learn to fly.

I'd say drop the term plan, get a limited-pay whole life plan with returns that covers your basic and cost less than what you're gonna set aside. Use the rest to play with ETF.

 

[chopra]

get your priority right.

want insurance, buy term
want investment, do it urself, as recmended by shiny.

do not buy life, endowment, ilp, saving plan etc...unless you feel rich and want to give chiobu agent commission

 

[Shiny Things]

I'd say drop the term plan, get a limited-pay whole life plan with returns that covers your basic and cost less than what you're gonna set aside. Use the rest to play with ETF.

This is TERRIBLE advice.

Insurance salesmen like Angeleo love to point to ILPs or whole-life plans and say "oh look, the cost of the insurance is so much lower than the cost of term". This is probably true! (In fact I'm not actually convinced it is, because the actuarial risk is the same, but anyway.)

But the fees they rip off the top of the whole-life or the ILP are SO MUCH HIGHER that it outweighs any benefit of the allegedly cheaper insurance. If you take out a whole-life policy or an ILP, the entire first year's premiums go straight to the insurance company and the agent as fees!

You will end up with far, FAR more money when you retire if you keep your term plan - set it to mature when you turn 65 - and investing in ETFs with the money you save by not pumping it into a whole-life plan.

Once you turn 65, you don't need insurance any more! You'll have the better part of a million dollars sitting in stocks and bonds - by that age, it should be 50% in stocks and 50% in bonds - which'll be more than enough for you and your missus (or mister, I ain't gonna judge) to retire in comfort for 25 years and still hand some off to your ungrateful sprog.

 

[AngeLeo]

This is TERRIBLE advice.
But the fees they rip off the top of the whole-life or the ILP are SO MUCH HIGHER that it outweighs any benefit of the allegedly cheaper insurance. If you take out a whole-life policy or an ILP, the entire first year's premiums go straight to the insurance company and the agent as fees!

Insurance salespeople would probably be happier if someone took out a term plan or ILP rather than a whole life plan. More commission, less pain too.

You will end up with far, FAR more money when you retire if you keep your term plan - set it to mature when you turn 65 - and investing in ETFs with the money you save by not pumping it into a whole-life plan.

Wonder what's wrong with limiting what you spend for a whole life coverage vs limiting your coverage and getting back nothing? Interesting concept by Shiny.

Term:
$1,300+ a year for $300k
Total $45k+ paid til age 65
Get back $0, lose coverage

Limited-Pay whole life:
$5,200+ a year for same coverage
Total $52k+ paid for 10 years
Get back $18k+ to $45k+ depending on performance at age 65
Coverage remains till age 99

Do the simple math...

Once you turn 65, you don't need insurance any more! You'll have the better part of a million dollars sitting in stocks and bonds - by that age, it should be 50% in stocks and 50% in bonds - which'll be more than enough for you and your missus (or mister, I ain't gonna judge) to retire in comfort for 25 years and still hand some off to your ungrateful sprog.

Truely hope you won't need insurance at age 65 or beyond. Simple stats will show you the risk of "what if" is higher when you're older...

Those who follow Shiny's words should be prepared if your 50% stocks and 50% bonds can tide you through when 1997 / 2007 and who knows 2017 comes?

I think it's sound advise to not put all your eggs in one basket be it ETF, Unit trust or even ILP.

 

[Dividends Warrior]

Just wondering.

What kind of insurance plans does Warren Buffett have?

 

[chopra]

Just wondering.

What kind of insurance plans does Warren Buffett have?

angmoh got pension ma. right?
he probably only got car insurance from berkshire

 

[Dividends Warrior]

angmoh got pension ma. right?
he probably only got car insurance from berkshire

Oh ya hor.....he owns an insurance company!

Silly me.

Anyway, he can afford to employ top doctors and nurses to look after him. He can even buy an entire hospital. No need insurance.

 

[SpinFire]

Insurance salespeople would probably be happier if someone took out a term plan or ILP rather than a whole life plan. More commission, less pain

Just curious, why is it less pain for the sales agent when someone takes a whole life plan vs ILP/term?

 

[AngeLeo]

Just curious, why is it less pain for the sales agent when someone takes a whole life plan vs ILP/term?

Less pain for life and term, more pain for ILP because of CKA, RAM and going through all the funds and letting client choose the funds... background on the funds, how the funds work, what the funds are investing in etc.... can probably spend 2 hrs just on explaining...

 

[wooty100]

Just conflicting schools of thought. No need to put off anyone in a healthy discussion.

My take is to think about your priorities and plan within your budget.

ILPs, wholelifes ,Endowments are just plain vanilla product names coined together to give the mass market a common understanding of what they do in general. Proper advices , product varieties , company branding, marketing and general public confidence in the companies all play a part to gel the whole experience.

I think the general public has been educated well enough to know the common products and have a good understanding in how they works. It is about how the plan carries out the process and reach the end goal of a client. Give yourself a good time frame to look into the varieties and engage in some discussions with agents from different profiles.

 

[MaoZeDuo]

Insurance salespeople would probably be happier if someone took out a term plan or ILP rather than a whole life plan. More commission, less pain too.



Wonder what's wrong with limiting what you spend for a whole life coverage vs limiting your coverage and getting back nothing? Interesting concept by Shiny.

Term:
$1,300+ a year for $300k
Total $45k+ paid til age 65
Get back $0, lose coverage

Limited-Pay whole life:
$5,200+ a year for same coverage
Total $52k+ paid for 10 years
Get back $18k+ to $45k+ depending on performance at age 65
Coverage remains till age 99

Do the simple math...



Truely hope you won't need insurance at age 65 or beyond. Simple stats will show you the risk of "what if" is higher when you're older...

Those who follow Shiny's words should be prepared if your 50% stocks and 50% bonds can tide you through when 1997 / 2007 and who knows 2017 comes?

I think it's sound advise to not put all your eggs in one basket be it ETF, Unit trust or even ILP.

I think you are missing out on a few things here.

Getting back is very vague word. A life policy allows you to take cash out but on a loan basis which means its a liability you have to pay the company back to keep your policy going. This also means there is a lack of liquidity here, unless you are telling your clients they should lapse the plan for cash... at age 65? So coverage still cease ma. Furthermore, loan rates are usually not very friendly

Math on an insurance policy, especially whole life and ilps, was never simple. Do you explain Effects of Deductions to your clients? Or would you know how to explain if your clients asked you?

Just some additional awareness for the peeps here

 

[peacefulday]

get your priority right.

want insurance, buy term
want investment, do it urself, as recmended by shiny.

do not buy life, endowment, ilp, saving plan etc...unless you feel rich and want to give chiobu agent commission

yes well said!

buy term for insurance and investing yourself ~

 

[kenneth27]

I had to disagree in tying down everyone with the quote "Buy term invest yourself". While I'm personally doing that, but I did it to suit my needs.

Buying life/term insurance or investing in IPL or stocks/bonds must caters to your own needs.

The purpose of insurance is to protect. But of course, it would become very plain if insurance company sell it that way. So they tie in with different products to cater for different needs.

A perspective of an outsider.

 

[mopiko_boy]

So here's what I'd do if I were in your shoes.

I'd open a brokerage account at Standard Chartered (for the cheaper brokerage - $18 or $28 a trade would destroy you). Each month, I'd transfer $300-$350 across and buy 100 shares of the Nikko STI ETF (G3B).

Once a year, just to mix things up a bit, I'd buy one lot of the ABF SG Bond ETF (A35). This'll set you back about $1100, so make it a Christmas special thing, but it'll give you some extra diversification and some income as well.

In 20 years time, you'll have $20,000 in bonds (which will pay you $500-$1000 a year interest) and stocks which originally cost you $60,000 but will probably be worth more like $150,000 (assuming about 7% a year growth).

a few noob questions from a investing newbie:

1) You mentioned transferring $300-$350 across monthly to buy the ETF. So does that mean I need to have an existing savings/current acct with stanchart first in order to perform online trading? (I currently only have a online banking acct with them because of my manhattan credit card, no savings acct)

2) Can we apply to open a stanchart trading account via online or need to go physically to stanchart branch?

3) Do we need a CDP account too? Is the stanchart trading account equivalent to a CDP account?

4) I understand that ETF investors have to pass a CAR test. Is this tested at the point of open a trading account? Or prior to that? If fail the test, gotta wait how long to take a retest?

5) You mentioned 7% a year growth. That's good stuff. Is that the norm for Nikko STI ETFs?

6) What is the possibility of a ETF getting delisted from SGX? What happens then? Do we lose all the capital we have put in?

Sorry for the long list of questions.. and thanks in advance.