Fd or ssb bond lor if more conservative
hi help needed
- Thread starter Beefslice
- Start date
Fd or ssb bond lor if more conservative
It is very sad to see that our local banks are out to “con” the old uncles and aunties, the less financially educated, with such products just to make money for themselves.
Who made those markings on the document, the circles and ticks? Likely to be the bank staff as they explained the product to your mum 10 years ago? So a tough case to fight?
What your mum had bought/invested is a regular premium ($100) investment-linked insurance policy (ILP). The investment is a bond unit trust, how much can such a bond unit trust earn u? Every time u buy/pay $100, u have to pay sales charge, normally banks charge 5% for unit trust, so how much must the unit trust make for u to recover the sales charge first before u can see a profit?
So after 10 years, the ILP gave her an effective annual compounded return of about 0.4%? At least she gets back her capital invested!
Let's take a look at some other types of insurance policies below:
1. Whole Life policy = Protection + Savings
2. Endowment = Less Protection + More Savings (as compared to 1)
3. Term = Protection
4. ILP = Term + Investment
5. Whole Life with multiplier = Whole Life + Term
Your mum “invested” into #4, returns are dependent on the performance of the underlying fund/investment, which did not perform as projected cos it is a bond fund. She paid $100, some goes into the investment/fund, some goes to pay the Term policy to give her coverage of $6k death benefit. If she pass on before 5 years, your family would have profited with $6k paid out. But she survived, so what she gets is the maturity value provided by the investment/fund. If she “actively” monitors the surrender value of the policy over the 10 years, she might have noticed the low return then decide to terminate/cut loss or switch funds if allowed under the policy.
If she had “invested” into #2 Endowment policies, she might have made more?
If she had bought into #3 Term Policy, she would have lost all her capital!
So do educate your mum, not to buy ILP ! Check what else she bought, and try to help her salvage the rest if possible/where necessary/appropriate!
Goodluck
Who made those markings on the document, the circles and ticks? Likely to be the bank staff as they explained the product to your mum 10 years ago? So a tough case to fight?
What your mum had bought/invested is a regular premium ($100) investment-linked insurance policy (ILP). The investment is a bond unit trust, how much can such a bond unit trust earn u? Every time u buy/pay $100, u have to pay sales charge, normally banks charge 5% for unit trust, so how much must the unit trust make for u to recover the sales charge first before u can see a profit?
So after 10 years, the ILP gave her an effective annual compounded return of about 0.4%? At least she gets back her capital invested!
Let's take a look at some other types of insurance policies below:
1. Whole Life policy = Protection + Savings
2. Endowment = Less Protection + More Savings (as compared to 1)
3. Term = Protection
4. ILP = Term + Investment
5. Whole Life with multiplier = Whole Life + Term
Your mum “invested” into #4, returns are dependent on the performance of the underlying fund/investment, which did not perform as projected cos it is a bond fund. She paid $100, some goes into the investment/fund, some goes to pay the Term policy to give her coverage of $6k death benefit. If she pass on before 5 years, your family would have profited with $6k paid out. But she survived, so what she gets is the maturity value provided by the investment/fund. If she “actively” monitors the surrender value of the policy over the 10 years, she might have noticed the low return then decide to terminate/cut loss or switch funds if allowed under the policy.
If she had “invested” into #2 Endowment policies, she might have made more?
If she had bought into #3 Term Policy, she would have lost all her capital!
So do educate your mum, not to buy ILP ! Check what else she bought, and try to help her salvage the rest if possible/where necessary/appropriate!
Goodluck
Important Forum Advisory Note
This forum is moderated by volunteer moderators who will react only to members' feedback on posts. Moderators are not employees or representatives of HWZ Forums. Forum members and moderators are responsible for their own posts.
Please refer to our Community Guidelines and Standards and Terms and Conditions for more information.
