Objective | To understand the pros & cons of the Ewpple ETF portfolio vs endowment insurance plan.
In our previous post, we learn how to build additional streams of income.
In this post, we will explain why you should use the Ewpple ETF strategy to invest instead of buying endowment insurance.
Some years ago, I brought an endowment policy from an insurance company. After comparing it with the Ewpple ETF portfolio plan, I regretted buying it.
Firstly, what is the Ewpple ETF portfolio plan?
Ewpple ETF portfolio plan is a DIY investment strategy whereby investors save monthly to build a fund. This fund grows by investing in quality ETFs with good capital & dividend gain. It is used to provide a passive income stream for investors to last till the end.
Please see below for more details about the Ewpple ETF portfolio.
Make Your Money Work Harder
https://mqs2000.blogspot.com/2020/03/make-your-money-work-harder.html
Use 3 ETFs To Achieve Monthly Income For Life
https://mqs2000.blogspot.com/2020/04/use-3-etfs-to-achieve-monthly-income.html
What is an endowment insurance policy?
An endowment policy is a saving plan life insurance contract designed to pay a lump sum upon maturity or on death. Typical maturities are ten, fifteen, or twenty years up to a certain age limit. Some policies also payout in the case of critical illness.
Both investor & buyer of Ewpple ETF strategy and endowment insurance have a similar investment objective.
Ewpple portfolio & endowment policy needs investor /buyer to invest /deposit a fixed affordable amount regularly (eg. On a monthly or yearly basis).
Upon certain predetermined target date /maturity, you can withdraw a sum inclusive of original capital & additional investment return as a lump sum or over some period.
Besides the above, these 2 financial plan have also some differences.
Differences
Ewpple ETF portfolio strategy can only invest in equity, bonds & Reits based broad index ETFs. This portfolio is self-manage by investors.
Whereas endowment insurance invests mainly in company shares & ETFs or any other financial product. The investment is managed by fund manager appointed by the insurance company.
I regretted buying endowment insurance & below are the reasons.
Features Ewpple ETF Portfolio Endowment Insurance
1 Initial Value
Since day 1, the portfolio value will be the current market value of all its investment assets.
Zero cash value for the initial period. (Typically 1st 3 years)
2 Breakeven Period
Depends on current market value, possibly to be profitable on day 1.
The cash value will always be less than the premium paid for the entire duration of the policy until the maturity date.
3 Deposit Flexibility
Monthly saving discipline strongly encourage. But has the flexibility to change, stop, or resume monthly investment anytime without any penalty.
No flexibility, if monthly premium payment stop, the policy will be terminated. Can't change the premium amount also.
4 Investment Return
The average return is 7 - 9% per year.
Typically clocks 3 - 4% final yield to investors, the balance return goes to the insurance co & fund manager.
5 Portfolio Management
Investors manage their own portfolio, have full control to decide when & what ETF to buy.
The fund manager manages the entire investment process. Investors don't know the full investment holdings & have no involvement at all. No full transparency.
6 Termination Value
In a time of need, the portfolio can be liquidated anytime at full current market value.
Terminal value is zero for the initial years, losses until maturity & only profit after maturity.
Conclusion
Replacing endowment insurance plan with Ewpple ETF strategy can produce higher investment yield, better cashflow flexibility & more management control. Ewpple ETF plan do not have insurance coverage. But this shortfall can be easily & cheaply overcome by buying the required term insurance.
Invest wisely!
You will NOT make any money by merely reading this post. You need to take action.
Assignment
Question | Do you have any issue with your existing endowment insurance policy?
If yes, please feel free to contact me at ewppleblog@outlook.com.
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