In the past, the lay person does not know how to invest in shares or which shares to choose. A good choice is to invest in a life insurance policy and let the insurance company manage the investments.
The option of investing in a life insurance policy is no longer attractive for consumers, due to the high deduction may by the insurance company to cover its expenses and profit. Many life insurance companies take away 50% of the accumulated savings from the consumer, leaving a poor yield. For example, the insurance company can earn a yield of 5% but they give only 2% to the consumer. The difference of 3% is a lot of money.
Consumers now have the choice of investing in an indexed fund that takes away 0.3% per annum. If the indexed fund earns 5%, the net yield to the consumer is 4.7%. The consumer can buy the insurance protection through a 25 year term insurance policy and pay a small premium, which is less than 10% of the premium for a whole life or investment linked policy.
After factoring all the cost for the term insurance, the fee of the indexed fund and other expenses, the consumer is able to keep 85% of the accumulated savings, instead of 50% provided by a life insurance policy.
If the accumulated saving is $500,000, the consumer can keep $425,000 (after deducting 15%) instead of $250,000 (after deducting 50%). the difference is more than $150,000.
This concept is explained in several FAQs stored in my website, www.tankinlian.com/ask.aspx. Read this FAQs and learn how to invest in the indexed fund. You can also attend the educational talks organised by FISCA (see www.fisca.sg/events) or buy my book, Practical Guide on Financial Planning.
My message is very important for young people, especially the graduates who are starting work for the first time. Many insurance agents will be seeing you to tell you about investing in a life insurance policy. If you take their advice, you will likely be losing $150,000 or more, during your lifetime. Act now, before it is too late.
Tan Kin Lian
Friday, December 17, 2010
Role of social insurance
Most countries have a universal health insurance system that is provided by the state or through the private sector on conditions that are regulated by the state. It allows the population to have the basic level of health care at an affordable cost. Most developed countries, with the exception of America, have this kind of arrangement.
America has a private health care system. It produced high cost and leaves a significant portion of the population to be uninsured.
Singapore used to have a good and affordable health care system. In recent years, we are adopting some of the bad practices of America. There are now complaints that parents cannot buy insurance through Medisheld or the private alternatives for children with some congenital conditions.
Our problem is caused by the misconception that the private sector is more efficient in the use of resources. This is only partly true, but it has to be balanced with the negative aspects of the pursuit of profit at the expense of other consideration, and the high cost of marketing and administration.
Some services, such as health care and education, are better handled under a social insurance scheme, rather than by the private sector. See the explanation in this article.
Tan Kin Lian
America has a private health care system. It produced high cost and leaves a significant portion of the population to be uninsured.
Singapore used to have a good and affordable health care system. In recent years, we are adopting some of the bad practices of America. There are now complaints that parents cannot buy insurance through Medisheld or the private alternatives for children with some congenital conditions.
Our problem is caused by the misconception that the private sector is more efficient in the use of resources. This is only partly true, but it has to be balanced with the negative aspects of the pursuit of profit at the expense of other consideration, and the high cost of marketing and administration.
Some services, such as health care and education, are better handled under a social insurance scheme, rather than by the private sector. See the explanation in this article.
Tan Kin Lian
GPS Navigation System
I wish to look for a GPS navigation system in my car. I have a Packard Bell system, but it has been giving trouble lately. So, I am looking for a different system. Any recommendation of a good system that is easy to use and give good directions?
Tourist attractions
I have added some tourist attractions in Learning Tips. It can be viewed through the internet or on a Windows Phone. http://easyapps.sg/learn/
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