Financial advice for a young person

Hi Mr Tan,
Your website has certainly been extremely important in my understanding of today's financial products and situation.

I have just graduated and will be starting work soon. I carried out some research on how I should diversify my savings into investment and insurance. Through your guidance, I decided to do them separately.

A financial adviser tried to promote the following product:

Riders attached with this plan:
1) Disability Linked
2) Waiver of Contribution (TPD or Critical Illness)
3) Critical Illness link benefit

For all 3 riders: Sum assured is $150,000. Regular Contribution: $250 and about $22 being contributed to payment of insurance

Bid offer spread: 5%
Top up Minimum S$500, at no additional charge
Partial withdrawal allowed (minimum of S$250 per withdrawal)

Unit allocation (as percentage of premiums paid)
Year 1: 13%
Year 2: 40%
Year 3: 45%
Year 4 to 6: 100%
Year 7 to 9: 103%
Year 10 onwards: 105%

Is this investment-linked plan advantageous to me? I have my doubts over the low percentage of premium going into the investments.

Secondly, at my age, what kind of insurance should I actually consider? Is it all right to purchase term insurance.

Thirdly, I have considered embarking on a monthly investment plan on unit trusts with the intention of starting my investments early, not trying to time the market and at the same time accumulating my savings for future investments. I would like to seek your advice on whether this is feasible.

REPLY

Do not invest in this high cost product. 200% of your annual premium is taken away during the first three years.

Read this FAQ:
http://www.tankinlian.com/faq/ilp.html

This product appears to give you allocation of 105% from year 10. After discounting the spread of 5%, you are actually investing at the net asset value. A honest adviser will tell you the truth. A dishonest adviser will mislead you into thinking that you are getting 5% more.

Here is my suggestion for investing your monthly savings:
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/savings.html