But if inflation happens badly in the 5 years, your 100k may drops its value to like 80k.

I don't know.. it wasn't my definition

wodenus,

You do not listen very well.

A) FD is saving instrument. You SPEND your saving instrument in case of financial emergency.

<<But you can go to sleep and do nothing for five years and you will be fine. And it will survive stock market crashes.>>

B) In 5 years, the FD value will be reduced by inflation. So, whether the stock market crashes or not, the FD REAL value will go down every year.

Dreamer

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Added on June 10, 2009, 5:18 pmc.o.o.l,

That is why FD is NOT investment. Whether inflation happens badly or not, the REAL value of FD will go down. FD rate is never high enough to cover inflation.

Dreamer

This post has been edited by dreamer101: Jun 10 2009, 05:18 PM

I'm trying to, you have to help me understand this.



I see. I currently have FDs at 5% p.a. What's the annual inflation rate?


This post has been edited by wodenus: Jun 10 2009, 05:43 PM

wodenus,

A) So, do you BELIEVE the actual inflation rate is 5% or less??

B) Now, if you keep track of your expenses every month like I do for the past 10+ years, do your expenses only increase 5% or less compare to last year?? That is your own inflation rate.

You know the number.

Dreamer

fd at 5%?! wow... even money market rate is below that.
it's not a plain vanilla fd we're talking here, right?
(i'm highly suspicious here.. hehe)

I don't know, which is why I'm asking you



Don't keep track of expenses much. Are you saying that if my personal inflation rate is less than 5%, then my FD becomes an investment?

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Added on June 11, 2009, 12:24 amIt is... it's a plain vanilla FD rate, 5 years at 5%. Two years ago it peaked at 5%, just before the world economy tanked

This post has been edited by wodenus: Jun 11 2009, 01:12 PM

wodenus,

<< Don't keep track of expenses much. Are you saying that if my personal inflation rate is less than 5%, then my FD becomes an investment?>>

1) That furfills one of the two conditions.

2) The second conditions is you do not intend to use it for the next 5 years. The second condition does not work if this FD is used as your emergency fund.

Dreamer

So if I don't intend to use it for the next 5 years, then it becomes an investment?

so, that's the catch.. 5 years! (i had the tendency of thinking as such.. e.g long tenure)

well.. if we factored in 'opportunity cost', the proposition may not be the same.. but if you look at it as though it's a cost effective way of mirroring a bond (with coupons) asset.

if i were you, i wouldn't read too much into the inflation rate.. for it's just an arbitrary figure.. why? well, it depends on the propensity of a person to spend. in an extreme environment, if a person have zero spending, inflation is just academic.
on the other extreme, if a person spends 100% of what he/she earns(and more).. this person will feel the effect.

when spending becomes an auxiliary to life.. then we are less affected by inflation. of course, besides delayed gratifications, other substitutions to spending requires creativity of our part..

so, if people tell you that chicken rice's price has inflated by 30%... you can say, i rare my chicken and serve my own rice and thus, i'm able to avoid that 30% hike.. there're myriads of ways, and this is just one silly example, that's all.

This post has been edited by lwb: Jun 11 2009, 11:56 AM

wodenus,

Yes.

Dreamer

Cool you're the first person I know who's ever considered FDs an investment. Thanks, I learned a lot

[quote=imtrobin,May 3 2009, 03:09 AM]
I will just reply in one thread

The bank is Hong Leong.

The agent has already long left the industry.

I'm not sure the exact plan my mum took, it's some kind of whole life policy, ALP, or something where the returns are reinvested into. I think she put in 24K total. No she never took out the money or do a claim before. When my mum bought it, I was but a mere boy.



I guess this is traditional ins plan called flexicash. Can opt to pay premium for 8 yrs only. but advised by HL ins continue pay as auto premium actually deducted fr. insurance (money receive at maturaty time).

This is policy like Endownment/Saving.

I see the TS's plan more likely a unit-linked policy by HLA.
Unit-linked policy is available even 20 years ago, consulted a HLA agent about that.

Someone replied this topic and it goes to the first page, or else I won't be able to see it and reply.

Investment-linked product not always a bad choice. It just like in unit trust. You should know when to move to equities, when to switch out to fixed income, how to lock-in profit, when to do your "dollar cost averaging", etc.

I doubt many agents actually do that for their clients but policy holder should be aware they can switch funds depend on the market.

Another way to have some sort of investment is to buy whole-life policy. Haha, Mtsen will not agree to this as he is PRO on, buy term invest the rest but try to take another look on it.

In whole life(participating polic), your premium (actually is additional prem you paid) will be so-called "invested" in the company operation and investment, and when the company's profit from it, you get some "dividend".

For me, performance of participating fund is far more secure that units in investment linked as performance of insurance company but it cannot generates return such as 20% a year.

Well, high risk, high return but make sure you know how to manage them.

..as an agent, try not to give general statement like this. I would have thought then this must be the 'expected' returns EVERY YEAR... and if I bought the ILP last year, i would have 'damm' the agent who told me ''...around 8 to 9%'... There is a better way to explain to the client on what should be expected out from the ILP plan.

investment link performance is not 8 ~ 9 %.
Investment link plan performance is depends on the fund you choose.
PRUlink equity fund pass 10 years performance is about 9.4%. PRUlink Bond fund is about 6.6%. And if you know how to do switching, the return should be higher.

How Much can i expect if im paying Rm200 / month in PAP ??

I am really confused. I was made to understand that I just have to pay every month for my ILP and because its gonna be like until I am 55 - 60 years old, I would have a substantial amount. But looking at the previous postings this might not be the case. Someone mentioned about fund switching. I am wondering how would we know when is the right time to switch funds?