Getting an ILP PLAN from AIA

[parchiao]

I understand your intention now, that you wish to help people explore everything possible(still don't get why you don't condemn ILP though) but please also understand we wanna get them started right, as for anything deeper, sure, if they are interested.

Imagine if it's a average guy who has no interest in investing but just want some returns, and you open up a hundred path before him, it will only overwhelm him.

We are generally only pointing him in the right direction and start on the generally easy right path, as for how he wish to reach his destination with faster route, greater returns, higher risk etc... it's up to him to explore and question further.

Then it is a problem isn't it? Asking someone to invest without getting that person to first understanding what investment is all about. I could draw numerous analogies to illustrate why pushing index funds to a layman without an understanding of investments is wrong.

And I don't have to condemn ILPs, I am agnostic about the investment vehicle.

 

[parchiao]

Wow! It's misleading to say that the way to maximise return is to minimise costs?

I suppose that sums up the problem with ILPs. People who sell ILPs don't like to talk about the costs, and how the costs are so high that even after 10 years, the ILP cannot break even.

Instead, they say that you should not look at "short run" like retirement (to most people retirement is the long run) but the returns you get when you die.

Anyway, check out http://blogs.wsj.com/totalreturn/2015/04/03/would-benjamin-graham-have-hated-index-funds/

Yes. maybe you can explain why a disadvantage of ILP can suddenly become a reason to buy index funds. Why not other types of investments?

No point harping on the disadvantages of ILP, I never said ILPs are good, I just did not say they are bad as someone has already pointed out.

 

[Perisher]

Then it is a problem isn't it? Asking someone to invest without getting that person to first understanding what investment is all about. I could draw numerous analogies to illustrate why pushing index funds to a layman without an understanding of investments is wrong.

And I don't have to condemn ILPs, I am agnostic about the investment vehicle.

You didn't read my whole reply?

The person isn't interested to understand investment deeper based on the fact he bought a ILP, and we can't do much about it. But if he is interested in investing, then ILP would not even be on the table.
Seriously I don't think pushing an index fund is wrong, but you may go ahead and show examples and facts and figures that proves otherwise?
For your infor the index I am talking about here is S&P 500 and STI ETF.
I don't see how it's wrong to recommend index fund and how right it is not to condemn ILP.

And also, people recommend DCA ETF because it's a similar simple and easy to implement plan as ILP and cost way less to earn more. We are not talking about picking the right fund because we ain't encouraging the not interested party to do deep analyse on which fund can huat, we are taking it as general ILP vs Index fund. And generally unless you are lucky, most ILP underperform the market. That's it. You keep refusing to see this point.

And I don't see someone who is not interested in investing and not wanting to spend a lot of time understanding it as something wrong or a problem as you put it. They are investing their time to do other things they like, it's their life. Investing isn't for everyone, not everyone wanna spend a lot of time understanding how to optimize their returns, please understand this. And for these group of people, they are better off investing in index ETF like STI or S&P 500, add in a bit of bond and that's it.

No picking of funds, no timing, no other stuff.

 

[limster]

Yes. maybe you can explain why a disadvantage of ILP can suddenly become a reason to buy index funds. Why not other types of investments?

Benjamin Graham already explained in that quote you reproduced.

Maximise returns by minimising cost.

You can definitely buy other investments that are low cost. For example, a good quality bond is not an index fund, and partial allocation to such bonds may be suitable for some investors, especially when you know you have fixed expenditure occuring in the future.

I also do not think that index funds are suitable for everyone. If one is ignorant, gullible or lazy when it comes to finances, then index funds are not suitable.

 

[Perisher]

Benjamin Graham already explained in that quote you reproduced.

Maximise returns by minimising cost.

You can definitely buy other investments that are low cost. For example, a good quality bond is not an index fund, and partial allocation to such bonds may be suitable for some investors, especially when you know you have fixed expenditure occuring in the future.

I also do not think that index funds are suitable for everyone. If one is ignorant, gullible or lazy when it comes to finances, then index funds are not suitable.

Haha, on the contrary, I think index funds is precisely for the ignorant, gullible or lazy crowd or should I say for the uninitiated.

I agree we should add in a bond part to BTIR, makes it more stable.

 

[kletian]

Yes. maybe you can explain why a disadvantage of ILP can suddenly become a reason to buy index funds. Why not other types of investments?

No point harping on the disadvantages of ILP, I never said ILPs are good, I just did not say they are bad as someone has already pointed out.

I agree with you that objectives of the individual is important when selecting an investment vehicle.

However, when I try to come up with an investment objective that will validate the buying of ILPs, I can't. For any investment objective you can think of, you can do better with a similar external fund/product that's as easy to get, or simply index fund dca.

If it's a non investment objective, e.g. I want to get around 5% returns p.a. WHILE helping my insurance friend, then sure, ILP meets this objective. There are many other non investment objectives and reasons that helps sell ILPs (such as having a stubborn friend/relative who refuses to buy stocks/funds/whatever investments but he is OK with ILPs - this probably beats FDs).

However, ILPs just do not make investment sense at all.

Next, you mentioned that many on the forums are pushing passive index investing as the gold standard and you are more towards the active approach. I'm with you that investing should be based on objectives and sometimes pushing the index etf dca is overdone. Still, we cannot deny the fact that for most of the average singaporeans, they are looking for investments with low risk decent returns and passive index investing does just that.

Maybe you should have used a better vehicle to push your point across than use ILPs as examples. (Or is it an extreme example that even 5hitty products such as ilps can meet one's objectives while index investing cannot, depending on the objective?)

 

[parchiao]

I agree with you that objectives of the individual is important when selecting an investment vehicle.

However, when I try to come up with an investment objective that will validate the buying of ILPs, I can't. For any investment objective you can think of, you can do better with a similar external fund/product that's as easy to get, or simply index fund dca.

If it's a non investment objective, e.g. I want to get around 5% returns p.a. WHILE helping my insurance friend, then sure, ILP meets this objective. There are many other non investment objectives and reasons that helps sell ILPs (such as having a stubborn friend/relative who refuses to buy stocks/funds/whatever investments but he is OK with ILPs - this probably beats FDs).

However, ILPs just do not make investment sense at all.

Next, you mentioned that many on the forums are pushing passive index investing as the gold standard and you are more towards the active approach. I'm with you that investing should be based on objectives and sometimes pushing the index etf dca is overdone. Still, we cannot deny the fact that for most of the average singaporeans, they are looking for investments with low risk decent returns and passive index investing does just that.

Maybe you should have used a better vehicle to push your point across than use ILPs as examples. (Or is it an extreme example that even 5hitty products such as ilps can meet one's objectives while index investing cannot, depending on the objective?)

The only reason I can think of for someone to buy an ILP is the possibility of beating the returns of a traditional life policy, and this is possible only because the underlying fund of a traditional life policy is invested in different class of assets eg real estate, bonds and money market securities. An insurance product vs another insurance product is a fairer comparison than say term insurance plus own investment because term insurance is not renewable after a certain age. If someone buys an ILP purely for investment purposes or knows little about investing but yet is sold on the idea that he can beat the returns on a traditional life policy, the fault would not be with the product but the agent pushing the ILP.


Something for all to chip in, lets see your thoughts on this.

http://www.fool.sg/2014/03/25/strai...ed-8-4-annualised-returns-over-past-10-years/

The above link is a random article I picked from the internet that expresses how well a STI fund has performed.

https://sg.finance.yahoo.com/q/bc?s=^STI&t=my&l=on&z=l&q=l&c=

The second link shows the STI levels over the years.

If your best friend read the article and asked you for advice as he saw the 8.4% annualised returns on the fund, how would you approach such a question and how would your response to him be like?

 

[Perisher]

The only reason I can think of for someone to buy an ILP is the possibility of beating the returns of a traditional life policy, and this is possible only because the underlying fund of a traditional life policy is invested in different class of assets eg real estate, bonds and money market securities.

Really? A better return than Life policy is the only reason?

You can't imagine someone who has not much knowledge about investment wanting to have some kind of investment? Life policy ain't really about investment, you do know that right?

An insurance product vs another insurance product is a fairer comparison than say term insurance plus own investment because term insurance is not renewable after a certain age.

This is not correct. ILP is more about investment than savings/insurance. That's why we compare it to BTIR which is more about investment than savings/insurance. It's quite simply a very valid comparison.
You likely won't see people comparing life policy to BTIR here. Life policy has a vastly different purpose to ILP.

If someone buys an ILP purely for investment purposes or knows little about investing but yet is sold on the idea that he can beat the returns on a traditional life policy, the fault would not be with the product but the agent pushing the ILP.

Again, ILP serves no purpose either in investment or insurance. Yes, blame the agent, blame the company for selling it. The product itself is pointless.

Something for all to chip in, lets see your thoughts on this.

http://www.fool.sg/2014/03/25/strai...ed-8-4-annualised-returns-over-past-10-years/

The above link is a random article I picked from the internet that expresses how well a STI fund has performed.

https://sg.finance.yahoo.com/q/bc?s=^STI&t=my&l=on&z=l&q=l&c=

The second link shows the STI levels over the years.

If your best friend read the article and asked you for advice as he saw the 8.4% annualised returns on the fund, how would you approach such a question and how would your response to him be like?

It is as it is, an averaged returns over decades of 8-10% p.a.

Let me ask you instead, if your friend wants a better alternative than ILP, what's your suggestion?

 

[limster]

Really? A better return than Life policy is the only reason?

It is so bizarre I wonder if he is trolling.

It's almost as bizarre as the guy that says that when investing in ILP, you don't invest for retirement because that is "short-term investment", as long-term investment is the return you get when you die.

 

[parchiao]

Really? A better return than Life policy is the only reason?

You can't imagine someone who has not much knowledge about investment wanting to have some kind of investment? Life policy ain't really about investment, you do know that right?


This is not correct. ILP is more about investment than savings/insurance. That's why we compare it to BTIR which is more about investment than savings/insurance. It's quite simply a very valid comparison.
You likely won't see people comparing life policy to BTIR here. Life policy has a vastly different purpose to ILP.

Again, ILP serves no purpose either in investment or insurance. Yes, blame the agent, blame the company for selling it. The product itself is pointless.




It is as it is, an averaged returns over decades of 8-10% p.a.

Let me ask you instead, if your friend wants a better alternative than ILP, what's your suggestion?

Your replies simply confirms that index fund poison exists on this forum.

Underlying any life insurance policy is an investment of some sort.

And your simple explanation might likely lead to some level of dissapointment if your friend invests in index funds now. If you cannot state the obvious, please don't go around talking up index funds. I don't think you have a decent level of understanding about investments to give good advice.

 

[parchiao]

It is so bizarre I wonder if he is trolling.

It's almost as bizarre as the guy that says that when investing in ILP, you don't invest for retirement because that is "short-term investment", as long-term investment is the return you get when you die.

Becasue words get twisted again. There is a big differece between 'the only reason i can think of' and 'the only reason'.

 

[Perisher]

Your replies simply confirms that index fund poison exists on this forum.

Underlying any life insurance policy is an investment of some sort.

And your simple explanation might likely lead to some level of dissapointment if your friend invests in index funds now. If you cannot state the obvious, please don't go around talking up index funds. I don't think you have a decent level of understanding about investments to give good advice.

Take it I'm ignorant, what is the obvious? Because so far, nobody here understands you.

What kind of disappointment are you talking about?

Why is it a poison?

Why is my understanding of investment not decent?

I'm open to your suggestion but please state clearly.
Btw, I have the same thought as you, i.e. you don't seem to have a decent level of understanding about investments to give good advice.

 

[Perisher]

Becasue words get twisted again. There is a big differece between 'the only reason i can think of' and 'the only reason'.

Read the whole thing.

'Really? A better return than Life policy is the only reason?

You can't imagine someone who has not much knowledge about investment wanting to have some kind of investment? Life policy ain't really about investment, you do know that right? '

I'm talking about what you can think/imagine of. Next up, you are gonna say the difference between think of and imagine of?

 

[parchiao]

Read the whole thing damn it.

'Really? A better return than Life policy is the only reason?

You can't imagine someone who has not much knowledge about investment wanting to have some kind of investment? Life policy ain't really about investment, you do know that right? '

I'm talking about what you can think/imagine of. Next up, you are gonna say the difference between think of and imagine of?

The problem with your statement here is that life policies are about investments. It is the investment that the insurer undertakes to produce the cash value. If someone is good with investments, that person could use a ILP to produce higher returns on the cash value. We already more or less agree that there are better investment alternatives, but that discusion is pointless if the product does not provide for the insurance element in the same way as a life policy or ILP.

 

[parchiao]

Take it I'm ignorant, what is the obvious? Because so far, nobody here understands you.

What kind of disappointment are you talking about?

Why is it a poison?

Why is my understanding of investment not decent?

I'm open to your suggestion but please state clearly.
Btw, I have the same thought as you, i.e. you don't seem to have a decent level of understanding about investments to give good advice.

I have now raised a point about timing the market for entry points. You said it was unnecessary in an earlier reply. But I disagree because for any investment, if you buy at a high, the returns cannot get to the same levels of 8.4% annualised as per the article. The STI chart will more or less illustrate that. This is what I would tell my friends. This is what someone will learn when they at least put in some effort to study about investments. This principle is true regardless of what ever financial instrument that require you to go long.

 

[limster]

I have now raised a point about timing the market for entry points. You said it was unnecessary in an earlier reply. But I disagree because for any investment, if you buy at a high, the returns cannot get to the same levels of 8.4% annualised as per the article. The STI chart will more or less illustrate that. This is what I would tell my friends. This is what someone will learn when they at least put in some effort to study about investments. This principle is true regardless of what ever financial instrument that require you to go long.

The more you post, the more I think you don't actually have investment experience or investment knowledge.

Humour me. Do you have any experience trading shares? From what you have posted so far, I think you have zero experience. Correct me if I'm wrong.

 

[Perisher]

I have now raised a point about timing the market for entry points. You said it was unnecessary in an earlier reply. But I disagree because for any investment, if you buy at a high, the returns cannot get to the same levels of 8.4% annualised as per the article. The STI chart will more or less illustrate that. This is what I would tell my friends. This is what someone will learn when they at least put in some effort to study about investments. This principle is true regardless of what ever financial instrument that require you to go long.

Let me tell you why this is pointless. You are essentially ignoring DCA here. Did you note I say DCA STI ETF?

Another point, I linked an article in one of the older threads in the shares forum, the article was about a famous investor who pointed out that over the long run(decades), where someone keep buying at the high vs someone who kept buying at the low of the market will give a result that is of small difference. The effort to try to capture the low and high are therefore pointless for the average investor.

Anyway, we are giving a range of about 8-10%, nobody is expecting it to be exactly some %. I don't know what's your fuss about?

Besides that, how do you know when is high and when is low? You expect someone who is an average investor to time it?

And anyway, why are you expecting people to put an effort into investing?
Does someone who buy an ILP seems like someone who wanna put an effort into understanding investing?

And are you trying to teach people to time the market? Timing the market is beyond any casual average investor...

 

[parchiao]

The more you post, the more I think you don't actually have investment experience or investment knowledge.

Humour me. Do you have any experience trading shares? From what you have posted so far, I think you have zero experience. Correct me if I'm wrong.

My pleasure. I am going for a holiday tomorrow using my annual 5 digit dividend income. Its not comparable to some others who have posted on this forum, but I am happy to have it. The bigger pleasure for some of you will be that I will not have time to humour you for a while from tomorrow.

And you should also humour me by telling me why my additional posts makes you think I don't know anything?

 

[Perisher]

My pleasure. I am going for a holiday tomorrow using my annual 5 digit dividend income. Its not comparable to some others who have posted on this forum, but I am happy to have it. The bigger pleasure for some of you will be that I will not have time to humour you for a while from tomorrow.

And you should also humour me by telling me why my additional posts makes you think I don't know anything?

No need to show off. People ask if you have trading experience, you bring out your 5 digit dividends... That's beside the point but noted.

I never at any stage thought this is about humoring each other but rather sharing our knowledege. If you think this is a show, so be it.

I'm more concerned about helping people and sharing here in this thread.

 

[limster]

And you should also humour me by telling me why my additional posts makes you think I don't know anything?

Because they don't make any sense and show a lack of understanding.
I might not agree with Perisher's views, but at least I understand what he is saying.

These are some of your posts:

The only reason I can think of for someone to buy an ILP is the possibility of beating the returns of a traditional life policy,

If it was for investment, I am not inclined to think that index investing will outperform an ILP, for reasons such as choosing the right investments.

But I disagree because for any investment, if you buy at a high, the returns cannot get to the same levels of 8.4% annualised as per the article.

If you don't understand why you are not making sense, Perisher tried to explain it to you but you probably think you are correct. In which case, why is no one supporting your reasoning?

For example, your explanation that if you buy when the stock market is high, your profits will not be high, is basically a variation of Wahkao saying you should buy after a crash.

Even FP_IFA, trying to give some balance to the ILP vs other stuff debate, is avoiding adopting any of your reasoning.

Maybe because they have no idea what you are saying too. See other posts in this thread by kletian and anfielder.