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Investment Linked Policy (ILPs) for Today’s Investors

Investment Linked Policy (ILPs) for Today’s Investors pic 1


Investment Linked Policy (ILPs) for Today’s Investors!
COVID-19 has been an unforeseen global situation that has shifted the stereotypical mindset of wealth accumulation around the world. Savvy savers have started to explore investment opportunities, while current investors are turning to alternative investments in search of better returns. On the flipside, pre-Covid investment strategies (Fixed Deposits, Retail Unit Trusts and even REITS) have been falling behind as the preferred investment choice.

What are the current popular investments instruments in 2021?

  1. Cryptocurrency – Approx. 100,000 millionaires have emerged as of Feb 2021 from Crypto1
  2. Stock market – Primed for trading as stock prices went wild in every direction

At the same time, there were people who lost a significant part of their savings because of ‘FOMO’ (fear of missing out) and entering investments at the wrong time (eg. GameStop). “Investments” as one would describe, are a matter of the “heart”. When your investments are all showing red in your investments apps, should you:

1. Buy more to bring down your cost price?
2. Cross your fingers for it to just break even, and sell?
3. Sell it off right now to cut losses?

If your answer was either option 1 or 2, a different approach towards investments is still available for you.

Where investments are concerned, here are a few things to note:

One solid strategy is “dollar cost averaging”. This refers to investing the same amount periodically instead of timing the market’s ups and downs. This is especially critical to the success of our investments in the long term.

Investment-Linked Plans (ILPs), once a taboo to many, should be considered as a great alternative now with its many new changes. Unlike the ILPs of the past, the newer age ILPs are worth considering because of a few factors:

1. Traditional ILPs have insurance costs that ‘eat’ into your investment returns: Modern ILPs (101 ILPs) do not actually have any insurance charges that ‘eat’ into your investment returns.
2. Traditional ILPs never invest all our monies but take some to pay for insurance. The new age ILPs invests a 100% of your premiums paid for.
3. The returns on old ILPs are not good and fees are high: The new age ILPs provide attractive bonuses that reward discipline and ultimately lower the breakeven yield significantly (the returns needed to turn a profit). The wider selection and the availability of high-quality funds nowadays are the most crucial aspect that’ll make your investments work.

What are the advantages of ILPs compared to investments in RoboAdvisors, and other self-managed investment platforms?

*What are Accredited Investor Funds (AI Funds)? – Accredited Investor Funds are funds that are not available to retail investors, as there are specific criteria in Income and Net worth investors need to meetbefore they are allowed to invest. According to Investopedia2, the “pros of being an accredited investor include access to unique and restricted investments, high returns, and increased diversification”.

In weighing the pros and cons of investing in an ILP, the pros definitely outweigh the cons in the long run. However, with many ILPs in the market, having access to the right funds that give a higher return as compared to alternative investments is crucial.

There are tons of different things to consider when deciding whether to start investing through an ILP: Bonuses, charges, fees, and also the timeframe of your investment. Not every ILP works the same. To find out which one works best for you and your investment goals, contact me.

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Written by Leon Lee (Financial Services Consultant from TN Advisory Group)

At TN Advisory Group, our services and expertise can be used to assist interested parties in relation to the various fields of financial planning. Should you decide to not seek advice, do consider if the product in question is suitable for you.

If you wish to know more, hit me up!