I bought an endowment plan?!

Aiyo, bluryoungadult, don’t so blur can or not? Buy endowment plan where got good? You never read so many people say endowment plan not good meh? You still buy for what?

Well… It felt like the right decision then and tbh I’m not regretting it one bit! I did my homework, I weighed my options, I really thought long and hard, and I am prepared to handle the not-so-good outcomes.

I bought this endowment plan when I started work as a first baby step to investing and a means to diversify my then non-existent portfolio. So yes, it’s truly meant for savings, not for insurance. (Because come on, that’s not what endowment plans are for)

I started the long process by searching for all accessible endowment plans in the market on comparefirst website. I liked using comparefirst for this because it gave me the figures right away. No need to leave my contact details with a specific insurance company to later be bombarded by phone calls and pushy sales (no offence).

After collating the results, I then narrowed down the options with the following selection criteria:

  1. Guaranteed payout > total premium paid (I don’t care how good the non-guaranteed payout is because its NON-guaranteed!)
  2. Pay for a few years and let the money grow (5 years was the most common one)
  3. Long term outlook – more than 10 years since I’m still young

After reading forums and thinking long and hard, I settled. I settled for Tokio Marine TM Nest Egg (GIO).

Below is a summary of the benefit illustration:

  • Annual premium: $5,076
  • Total premium paid after 5 years: $25,380
  • Guaranteed payout after 15 years: $30,000
  • Total projected @ 3.25%: $35,273
  • Total projected @ 4.75%: $41,251

Probably peanuts to the seasoned investor. But for a newbie like me, why not?

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3 thoughts on “I bought an endowment plan?!

  1. Investingwolf says:

    Hi BYA,

    Wow… That’s a nice start. When I started working, I wanted to save money using endowment plan as well. However, after 2 years and more experience studying the financial instrument, I realised that it was a terrible idea. Locking up 5K a year for 5 years in a endowment plan is a waste of capital and opportunity compared to what it can make.

    If it is locking money for savings, giving the Singapore Savings Bond with an average return of 2.12% after 10 years is a better idea. It meets all your criteria 🙂 Hope it helps.

    Investingwolf

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    • bluryoungadult says:

      Hi investingwolf! Thanks for commenting! I agree with you! But I felt that the returns on this endowment plan is ok, so decided to go with it. I’m not financially savvy so I don’t know things like what’s the XIRR etc. Just judged it based on the absolute number. Extremely crude and beginner move. I bought SSB too, the 2.38% issue. 🙂

      Like

  2. investingwolf says:

    TBH, I also do not know how to calculate XIRR or what it really means. To me, absolute terms also means a lot so I like to see it in terms of %. Using free calculators such as moneychimp.com, calculating a initial investment of $25k and eventual return of $30k after 10 years would only yield 1.84% compounded annually. Compared to the 2.38% you get for the SSB, after 10 years, the amount can add up to quite a bit. Not to mention that if you become more financially savvy and decide to take the money out within that period to invest, you can receive the entire capital from the SSB but not from the endowment.

    Like

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