We must have come across friends and family who say that their retirement or children’s tertiary education are covered because they have purchased an endowment policy from a reputable insurance company.

At age 55, I will have at Least $500,000 when my policy matures.

Many of my colleagues

This is something really common for those of us out there who are risk adverse, strapped for time and are uninterested in investing your own money. For the rest of us, let us list out some of the main benefits of investing your own capital in the stock market instead of paying premiums to your endowment policies.

1. It cost much less to invest on your own

All insurance policies have a “break even” date and a “maturity” date. Let me break that down for clarity sake.

Break Even Date

• Guaranteed losses in your invested capital before that day
• Capital are losing value to annual inflations

Maturity Date

• Returns determined by the financial firm and market conditions after break even date
• Withdrawn amount much less than actual projections but slightly above sum assured

2. Shares Portfolio provides Flexibility and Modifications

Investing in shares presents risk for your capital but there are so many ways you can manage your own portfolio

Dollar Cost Averaging

• Price of shares owned = Total cost of shares / Number of shares
  • This means that no matter what you can always cut paper losses by buying more at a lower price if you purchased at a less ideal price.
• You can decide on number of shares according to your investment allowance at the time of purchase

Take profits or cut losses at any time

• Markets are ever changing especially for mature companies who are providing crucial services such as (Transportation, Telecommunications, Banking, Food and Beverages).
• This means you can always look at industries which you are most familiar with to invest in and buy or sell to withdraw profits, accumulate shares anytime when the market is open.

3. Dividends entitlements (for most matured shares counters)

• Depending on share counters, you will be entitled to dividends (On a Annually, Bi-Annually, Quarterly Basis)
• Dividends can be “predicted” based on historical records (Click here to view)
• Get a refund for the stocks you hold (Dividends in cash)
  • Risk of holding stocks decreases with time
• Passive annual income
  • Some people treat dividends as passive income
• Regardless of market conditions, dividends will be paid (amount might vary)

Reviewing the pros and cons of both investing in shares or buying insurance policies, we can see why some people chooses stocks over endowment policies to grow their wealth over time.

Hopefully people will make more informed choices the next time they are considering to invest their Monies for their kids or retirement.

Click here to find out more on how to invest yourself in Singapore without paying hefty commissions.