ILP

[FunkyPeach]

Hi all,

Just hope to get some thoughts on this :-

Some ten years or so ago, I signed up for an ILP plan. As I was much younger then, the premium was low for the coverage given. Like every ILP plan, some premium goes to paying for the insurance and the rest goes into a fund. And that time it was a Global Equity Fund.

Now, I just received a letter from the insurance company saying that they are going to do away with the original fund and wants to place the funds into a similar fund but managed to some other fund managers. (They have assured that the new expense ratio is lower than the original one.... at least as of now...) They asked if we still wanted to be in this new Global Equity Fund or to switch to other funds (normally regional based/industry based) or to diversify part of it in different funds.

I ususally don't give much thoughts to this, but now I thought I should think a little harder. I am thinking of a couple of things I should do, I just wonder if I am right in going along this :-
a) Find out how much I have profit/loss at current prices from the current fund.
b) Find out how much is the new fund

But my problem is should I still use the same fund or switch to another fund. Suppose by market cycle, the market will do worse some two/three years later, would picking another fund make a difference ? It would be the same isn't it ?

Does someone else have others thoughts on this ? Or encounter similar problems before ?

Thanks.

[hahabear]

Probably you have to call them up and find out more information from them. At least as a consumer, know what's the difference between current and new global fund.

They place different investment % levels in different countries and going down deeper, they would invest more % into a industry sector compared to other sectors of the same country. For example, if the new global fund proposes to invest a larger investment % into PIGS (Portugal, Ireland, Greece, Spain), would you still want to switch to the new fund?

If the fund consultant on the other line is unable to give you a good reply, then maybe they just want to switch to a new global fund to beautify their past losses. My previous painful experience of buying funds when I was younger also taught me to not look at "past 5 years of consistent growth rate", because the past don't represent the future. Enron was a up and rising great company before the dotcom bubble burst and it went bust.

Hence, think you should call them up and find out more about where your $ will be invested in the new global fund portfolio.

[lootster]

Let me guess... the company name starts with P?

Importance lies with the fund you selected.... many agents will tell you "fund is not important as it is a long term investment, afterall you are buying a long term insurance plan!" Which is full of craps as many don't even know the funds well.

The cash value you have at the end of the day really voice down to the fund you have selected.

I have seen ILP like this that breakeven in less than 10 years but of cos that's before the crisis..... choose your fund wisely and monitor closely as your FA will not watch over it for you

[kelly wee]

Hi Funky Peach,

For ILP insurance you must take note something which many people do not know. The insurance charges increases when ones gets older and will most likely be more than your premium you pay every month. Then it will eats into the returns (through yr fund/investment).

So you need to select the types of fund wisely and indeed yr FA/agent will not look after yr fund the most they will they you to switch fund or hold on it.

[Dennis Ng]

Hi Funky Peach,

For ILP insurance you must take note something which many people do not know. The insurance charges increases when ones gets older and will most likely be more than your premium you pay every month. Then it will eats into the returns (through yr fund/investment).

So you need to select the types of fund wisely and indeed yr FA/agent will not look after yr fund the most they will they you to switch fund or hold on it.

yes indeed.

Find out from the insurance company the insurance charges table for the ILP. You might be shocked of the increase in charges as the age increase.

[FunkyPeach]

Thanks all for your comments.

I had done a check. The new global fund has a higher percentage in US equities compared with the previous. But what they say as it is global fund, they have to put some money in Europe. I did speak with the adviser on my concerns on Europe equities, he advised to diversify and put some percentage into Asia equities.

I'm really concern as it is a fund, and something which I have to contribute monthly as it is an ILP. So, if market turns for the worse, which will happen when mkt crash) seems like ... my money is destined to diminish Of course, if market does well many many years later, my money might grow. (Of course, these money is used to pay for the premium.)

Yes, a little earlier before I joined Dennis' million dollar seminar, I did realise that as person aged, the premium will increase by a lot. But ... I really don't know what I to do... one reason being, this policy was taken before the govt make all insurance companies have the same claim guidelines.

[Dennis Ng]

Hi all,

Just hope to get some thoughts on this :-

Some ten years or so ago, I signed up for an ILP plan. As I was much younger then, the premium was low for the coverage given. Like every ILP plan, some premium goes to paying for the insurance and the rest goes into a fund. And that time it was a Global Equity Fund.

Now, I just received a letter from the insurance company saying that they are going to do away with the original fund and wants to place the funds into a similar fund but managed to some other fund managers. (They have assured that the new expense ratio is lower than the original one.... at least as of now...) They asked if we still wanted to be in this new Global Equity Fund or to switch to other funds (normally regional based/industry based) or to diversify part of it in different funds.

I ususally don't give much thoughts to this, but now I thought I should think a little harder. I am thinking of a couple of things I should do, I just wonder if I am right in going along this :-
a) Find out how much I have profit/loss at current prices from the current fund.
b) Find out how much is the new fund

But my problem is should I still use the same fund or switch to another fund. Suppose by market cycle, the market will do worse some two/three years later, would picking another fund make a difference ? It would be the same isn't it ?

Does someone else have others thoughts on this ? Or encounter similar problems before ?

Thanks.

when you invest into an ILP, putting money aside on a regular basis, you benefit from dollar cost averaging. So when market is low, you end up investing more units, while when market is high, you will invest fewer units due to the higher price, so you would becos of this "system" buy more when prices are low and buy fewer units when prices are high.

[wemakebread]

Hi Funky Peach,

Actually I have the same problem.
One of the ILP which I had held for 5 years is in the red.
I guess 10-15 years to break-even is probably a more reasonable expectation.

In fact, one of the options I am contemplating now is to liquidate it and buy some of the promising stocks listed in this forum.


The ILP was an investment that I consciously made in my earlier days, before I had equipped myself with financial education. I knew ILP was not the "best" investment around but I decided to start somewhere, instead of storing cash in the bank. On hindsight, I am a little regretful but still taking it in my stride. I just take it as part of the learning journey.

My greater regret remains that I have not met Dennis & attended his course before the Financial Crisis. But I am thankful and grateful that there will be more opportunities in the days ahead. Just need to exercise diligence, patience & caution.

[Albert]

Hi,

I am also holding to an ILP. Since its inception in 2006, it is in the red. Therefore in 2009, I decided to actively manage it. Initially, my monthly contribution is invested in a global fund. However, in Apr 2009, I have consistently transferred to Singapore Equities. As a result, I have successfully turn profitable.

Even so, the rate of return after 4 years is 14% = 3% p.a. (As I have contributed 45% of my annual premium for the sales commission for the first 3 years).

Lesson learnt: Even if you are in the red due to the sales commission, it is possible to turn profitable if you actively managed it. There are definitely pros and cons in any investment instrument. Take the first step to correct it since you are in it anyway.

[Albert]

My intention is to keep contributing to the fund and exit it when the market turns.

As I have incurred my initial sales commission, it is beneficial for me to carry on with the ILP till mortability charges are high which I guess should be 45 years old.

Thats' my 5 cents worth

[HappyHealthyWealthy]

Hi,

I am also holding to an ILP. Since its inception in 2006, it is in the red. Therefore in 2009, I decided to actively manage it. Initially, my monthly contribution is invested in a global fund. However, in Apr 2009, I have consistently transferred to Singapore Equities. As a result, I have successfully turn profitable.

Even so, the rate of return after 4 years is 14% = 3% p.a. (As I have contributed 45% of my annual premium for the sales commission for the first 3 years).

Lesson learnt: Even if you are in the red due to the sales commission, it is possible to turn profitable if you actively managed it. There are definitely pros and cons in any investment instrument. Take the first step to correct it since you are in it anyway.

Hi Albert

I have an ILP taken up in 1997. Like you, I decided to manage my own portfolio a few years ago. I switched my monthly contributions to China India Fund (70%) and Technology Fund (30%) when the prices were still relatively low. And I'm glad I made the right decision as both funds have performed quite well despite the recent economic downturn, especially the China India Fund.

Although my policy is in the black, I wouldn't say the return is fantastic. Recently, I re-evaluated the policy and contemplated withdrawing the profits to invest elsewhere since I have learnt how to "fish" from Dennis.

I think it would be wiser to manage my own money than leave it with the insurance company. I also do not want my profits to be eroded when the next economic downturn comes.

I have come across some senior folks who took roller coaster rides with their investments in funds/unit trusts because either they were too busy working hard to make more money or they lack the financial know-how to do it. Most of these people only knew when to buy but they did not know WHEN TO SELL. I find this very sad because they not only lost money but they also lost precious time, which money can't buy.

I hope my sharing here will inspire some readers to take an active interest in learning how to better manage their own finances/investments.

[cellobear]

Hi,

As a financial planner myself, I would actually prefer to help clients increase their financial knowledge (preferably through Dennis) so that they are able to manage their funds independently themselves.

With ILP, insurers are actually transferring the responsibilities of investment to the fund managers and the investors. So it really make great sense for investors to personally take care of it by monitoring it from time to time (similar to equities). Actually, even traditional policies also one big fund, just that insurer take more active care to ensure consistent and sustainable returns over the longer term.

Have an exit timeframe for ILP as mentioned by a previous response, due to the increasing mortality charge.

But I am glad to see that more and more people are actively managing their own money through proper financial education, something that I myself did not benefit from when I was younger.

ch.