by Dhammapiya
Investment Link Product behaves like a life insurance. It is a popular product in the past but now more people are getting skeptical about it.
As the name implies, it is a form of investment for ILP. A portion of the premium is invested with a fund managed by a fund manager. The fund can be purely equities, bonds or a combination of both.
However, we should realise the pitfalls of the expenses before jumping into it.
1. Typically, buying an ILP will involves a 5% sales charge.
2. Fund management fees will be around 1% to 1.5% depending on the type of funds.
3. Expense ratio can range from 1% to 3% depending on the type of funds.
Based on a conservative note, for the first year, it would have incurred at least 7% in charges before counting any positive returns.
On top of that, a portion of the units given will be deducted monthly or yearly for the insurance coverage based on the age. As we are getting older, the premiums for the insurance coverage will definitely rises. This will have an impact on the overall performance of the ILP especially if we rely the ILP for retirement purposes.
It is of little wonder why some insurance agents mentioned that the returns for the ILP is not guarantee but generally it should be fine over a period of 20 years. Only to realise after 20 years later, you had made a wrong decision, isn't that a bit too late?
My advise is to go for a purely life insurance and unit trust product. A purely life insurance offers greater coverage at a lower cost. For the unit trust, there are ample choices to choose from online fund distributors with a lower sales charges, as low as 1%. With all the research done by online fund distributors, selecting the proper unit trust based on your risk appetite would be a breeze.
From helium.com
