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Wednesday, 21 January 2015

"Investor" in Unit Trusts, ILPs, Wholelife, and Endowment Policies?

Hands up anyone who "bought" Unit Trusts, Investment-linked. Wholelife, and Endowment policies as their first "investment"?

Now after having 5 to 10 years of building up your financial literacy knowledge - putting hand to heart - how many of you will admit they were sold to you, and they were some of your worst financial "mistakes"?

Know any fellow investor who voluntarily knocks on the doors of land banking or MLM companies to buy their products or memberships? I don't think so!

Anyone in sales would know what I'm going to say is true:

If a product or service sells by itself, there is no or very little commission in it. Company not stupid. Salespersons reluctantly offer these products as part of their "service". At best, these products are "loss leaders" to draw customers in so we can trade them up.

If a product or service is very profitable to the company, the commission or incentive will be super juicy for the salesperson who can push these products out to customers. Why? Ask yourself how much you knew about Unit Trusts, ILPs and Wholelife policies when you first "bought" them?

Today's post is not about being sold to per se.

It's more to share my observation of what I see when an "investor" with the above products hit their epiphany, mind-flip, ah-ha, or sudden enlightenment moments....


Let sleeping dogs lie

Of course there will be rabid vested interests who will argue till their faces are blue that these product and services I've mentioned are the most suitable to people who do not have the time nor inclination to get themselves financially educated.  

Wait a minute.

I am in total agreement with you!

Next! (下一位!)


In the financial blogosphere, we have read quite a few sharings when "investors" realised their past follies with the above products, and how they were willing to undo their mistakes, often at a loss to their capital.

Their reasoning - a short term pain is better than a drawn out journey of bleed and misery. 

Fork in the road

These "born again investors" will now have a new mantra - Buy Term; invest the rest.

How invest the rest? That's where the fork in the road will separate the active from the passive investors.

Do you see any Financial bloggers sharing their journey of financial freedom showcasing Unit Trusts, ILPs, Wholelife, and Endowment policies as their main vehicle of choice?

OK, a tiny few may show Unit Trusts, but these are usually "investors" just starting their journeys; we cut them some slack. They can be nice goldfish test cases to observe when their fish bowls will "crack" and they start sharing their mind-flip moments.

Passive investor but active in living!

This group of people have searched within their hearts and found they value living a good life is way more important than monitoring the markets and constantly tracking how many beans they have in their pockets.

Investing is just a part of their lives. 

Time should be better spent building relationships; developing their careers or businesses; and enjoyment of their hobbies, sports, and other leisure activities.

Frequently, these investors will end up with Dollar Cost Averaging with low cost Passive Index Fund Investing.

Please note: Singapore does not have Passive Index Funds (yet). So please don't say you are into passive indexing when they are no such funds in Singapore! 

Unless you are using Passive Index Funds from US or other countries outside of Singapore. (But then, I doubt you are that sophisticated. Most would take the active route after having spent so much time on self-research, and research is very active in nature!)

Low cost ETFs are not the same as low cost Index Funds. I'll leave you to research the differences on your own. What? You didn't expect me to spoon-feed you did you? If you always going to be like that, go buy an ILP lah!

And if you are constantly "re-balancing" your low cost ETFs every month, hey you! Yes you!

You have taken the wrong turn. Walk back till you came to the fork and take the other road called "active".

And stop lying to yourself.

Active investor but are you living in the here and now?

Here the journey can be more exciting!

Must be, if not you would have gone to the passive route. Duh?

1.  Traders R' Us

Some may realise they are more into trading and they switch. Ladies can attest to this - no man is more attractive than a confident man who knows who he really is.

Traders have the most interesting stories to tell: 

"Limpeh lost 100K on that stupid Liongold trade!"

"I made 1 million on that short EUR/CHF trade last week. Who's your daddy now?

We can also be the most crass and obnoxious people - its' always about the money and having a bigger "one" than the next trader. We can be super competitive. 

And cut the crap it's a trading "community". It's a zero sum game and we are constantly trying to move the money in your pocket to my pocket. 

It's what Wrestling fans would call a Royal Rumble! 

2.  DIY investors

Here, we are more into country club territory. No breaking of keyboards or cussing at the PC monitors.

A little bit more refined. We can carry a conversation in full sentences and have a robust debate without sending regards to each others' family members.

This group have come to the conclusion that we can't "outsource" our financial freedom journey - no one have our own best interests other than ourselves.

So its to individual DIY stock pickings and our very own DIY asset allocations. 

And that's the nightmare of financial planners!!!  If the majority can DIY, what's the point of their roles again?

Thankfully, going by the millions that were lost to scams like landbanking, Brazilian properties, Gold trading, Fine Wine, questionable MLMs and what not, chill. There's still a big market out there!

Another interesting thing about DIY investors is that they like to form different Guilds.

One Guild for Value Investing, another for Income Investing, and another for Growth... The list is endless.

But looking at the Singapore financial blogosphere, I see 2 titans each with their own fan base.

One is the 10 bagger I tell you so; the other is the 6 digit annual dividend bleeding heart.

I guess this makes sense.

Aren't we forever debating whether capital gain comes first or should we prioritise yield?

Is net-worth more important or cash flow?

And naughty me is having fun watching one of them trying to bait the other into a fight. 

Give it up lah! Come sit down, have a sip of tea, and have a cha shao bao!

3.  You got a life?

Most of these DIY investor or traders have school to attend, a career or business to take care in the day.

I wonder where they find the time to invest and trade? 

Something has to give right?

All we need is 10 minutes a day what!?

Eh? If you want to be so passive, might as well be honest to yourself and join those passive indexing investors and focus on having a life! 



  1. Wow Smol.

    Long post there but really good one. Looks like somebody is inside the mood now.

    Can I admit I was tricked into buying unit trusts because I was impressed by the historical return rate it presents? Ok tricked is a little harsh maybe I should have asked about the risk. But again no salesmen will highlight the risk, not unless someone asks him forcefully. Hmm, now where is my commission for telling something that everyone already knows? Probably doesn't worth a single cent.

    1. B,

      Just reminding readers I can do long posts too :)

      Good for you! Now married must say tricked by salesMAN. You learn fast!

      Leave the admission to being seduced by heels, tight skirts, and translucent blouses to the single guys ;)

    2. Lol!!! I had to read a few times to get what you mean.

      It was indeed a saleswoman but no heels and tight skirts. I was seduced by the potential returns instead. Come to think of it now, I rather get cheated by a pretty lady, not now but back then. Lol!!!

    3. B,


      Don't we all wish!

      Boys will be boys :)

  2. Replies
    1. CW,

      Eh? So that's how we can post a direct link at the comments!!!

      I never knew it's possible. I'll try it with my next Youtube song rebuttal with temperament and coconut!

      We're like Bollywood actors - we express ourselves through songs :)

      Readers, see?

      Is CW gentleman or what? (Don't worry, we will still banter till the end of days)

      Now you know how to tell apart hobbyist financial bloggers from business owner wannebes masquerading as financial bloggers ;)

    2. CW,

      I failed. Tried copy paste a link I created in Blogger and Word to the comments section but did not work.

      Can teach me how you are able to create a link in the comments section?


    3. Check out the text formating link here too:
      HTML cheat sheet

      You can always use the text formating to italise, bold, etc etc :)

      Have fun!

    4. LP,

      Like playing RPG, I think I'll max out 1 skill first ;)

      So that's how I can format the comments I made here.


  3. Hi SMOL,
    You reminded me:-
    When CPFIS was just started, there were so many new CPF approved Unit Trusts in the markets with quite high management fees. CPF approved huh! Must be safe and good lah. i also kena a few (very little) that after 5 years show nett, nett 1% t0 2% gain. i disposed them as quick as possible.
    From that day onwards, i only look at "DIY TRUSTS"
    i supposed many of us were a little naive then, thinking CPF approved sure safe and make money one. Until today there are many counters still languishing around since CPF approved from those days when CPFIS started.
    No wonder those days many people lost money in CPFIS. i believe now, people who use CPFIS with much more sophitiscation. Better educated not so easily influenced by the label of CPF APPROVED or Mad -In-Singapore must be good.

    1. temperament,

      The development of the wealth management industry is more "state-driven" in Singapore compared to Switzerland for example.

      Wealth management was first identified in Singapore Government's national development plans as a potential growth industry in the late 1980s.

      Guess when CPF funds were approved for "investing"?

      If we want to attract fund managers to Singapore, got to give them some "carrots" to chew on....

      Who's the patsy?

  4. I think its great you highlight that there is a difference between passive index funds and passive etf. i really have no idea what is the difference really. but seems ETF is making more sense as time passes. they do have their tax advantages. the problem with those recommending a holistic portfolio like me is that u need adegree of competence to buy overseas and knowing what you are in for.

    i don't think unit trust and endowments are wrong. they are higher cost but they can be rather decent. i do have folks that build their wealth that way. for most they can be easily misunderstood since you cannot buy a country easily versus a unit trust.

    1. Kyith,

      Just google passive index fund vs ETF and walah!

      We can buy index funds without opening a brokerage account. Not so with ETFs.

      For those who love SCB low charges, imagine ZERO commission if we can buy no-load passive index funds like we do now for most money market and bond funds through on-line unit trust distributors ;)

      I never say unit trusts or endowment polices were wrong. Especially if we have done our due diligence and comparison shopping.

      If I can identify the next Peter Lynch, I would gladly turn over most of money to this money manager!

      Same goes for 10 year endowment plans if I can't find alternative corporate or sovereign bonds that can match the same in returns and safety. Now we can even throw in preference shares and REITs to the comparison mix!

      Outsourcing thinking is never cheap.

      I roll-eyes when I see a qualified financial planner openly selling his unit trust "trading" strategy to clients in blogosphere!?

      Imagine the churning involved!

      ETFs would have been infinitely more efficient and cost effective!

      In US, you can get an ETF for any country, sector, or asset class theme.
      But like you say, the clients have to first get themselves educated and competent.

      Unit trust is the few financial vehicle when we buy or sell, we don't know the EXACT price until a day or a few days later. Trading anyone?

      Look ma! I buy/sell without looking at the price tag!


  5. Hi SMOL,

    Good highlight on etf and index funds. I read it when I was a newbie before, but forgotten about it till you mentioned it again. I think ETF is exchange traded fund, so it's just traded on sgx like a normal stock counter, whereas index funds are more like unit trust. You can buy it from different platforms. The charges would follow that of the unit trust for index funds (management fees, front loaded fees etc) while etf are more like that of stocks.

    There's all types of etfs too, like leveraged and derivatives etfs lol

    I've tried both investing and trading. And I think I'm not so suitable for trading. It brings out the gambling nature in me. Still searching for the right way haha :)

    1. LP,

      Remember when ETFs were introduced in Singapore, there were some "synthetics" in the mix?

      Glad that's sorted out by the market. We "ho pian" is it?

      I wonder how those who preach passive indexing by John Bogle will respond to:

      "Generally speaking, Bogle says most broad index ETFs are just fine, but he warns investors that individual sector and country funds are probably “too narrow for most.” As for leveraged and inverse ETFs, Bogle says this is where the “fruitcakes, nut cases and lunatic fringe” can be found. “There’s just no possibility or any realistic way that you’re going to win that bet,” he says about leveraged ETFs.

      And finally, when you factor in the reality that about 75% of ETF assets are held and whipped around by institutions, and therefore subject to high turnover, Bogle says it’s not the place for the weak of heart."

      Hmm.. I wonder will the SPDR STI be considered by John Bolgle as "too narrow for most" as a country specific ETF?

      Like you say, its best we discover who we are first, then find the right vehicle for us.

      Singapore has no passive index funds, no broad based index ETFs, so some may settle... Like PSLE where they give us a choice of secondary schools to choose from. No fish prawn also good?

      Some who say they "practice" passive indexing in Singapore, it's basically a self-invented "bastard" version of passive indexing ;)

      A little knowledge can be more dangerous than no knowledge.

    2. How many are learning or reading the real or practical thing on long term investing?

      Too much theory!

      Really too much from the "Gurus".

      Show Me Your Money online and near real time then even hardcore ones will believe.


    3. CW,

      Talking about hardcore, I love watching women wear heels, especially stilettos. But I can't wear them!

      I prefer wearing sandals.

      How do we know which kind of shoes fit us?

      Hello? Just put our feet in and stand in front of a mirror :)

  6. I started out in NS naively buying life policies and ILPs. Later, I added on unit trusts. Burnt a big hole in my CPF savings when I had to redeem my unit trust at a loss to purchase my flat. Since then, I have never touch a managed product again. Term policies, critical illness protection, hospitalization plan and DIY investing henceforth.

    1. S-Reit System Investor,

      Isn''t it interesting that most Financial bloggers that commented have their share of "stumbles" and were not afraid to air them?

      Perhaps this was the "catalyst" to start our journey of self-discovery?

      I mean if we are happy with unit trusts and endowment policies, why bother with individual stock pickings and research on different asset classes?

      And without this self-discovery, would we be blogging :)

      Looking on the bright side, it's good you started young.

      Imagine a 65 year old with lots of CPF or cash to throw around bought into the "passive index" thingy and throws everything into SPDR STI!!!??

      Then STI tanked 50% like in 97 or 2008.

      People will console him with statistics that show passive indexing works with a long enough time frame like 30 years.

      "But I don't have 30 years! I'm 65! And what do I eat in the meantime?"

      Want to start passive index investing? Start young! (Parents who bought child insurance, you listening? Oh! Silly me. Child insurance are sold to; never bought.)

    2. I started buying ILP before enlisting in the mid 90s. The agent (still my current one) go through blocks of HDB knocking doors to promote. He is lucky, he got me as his client. It was only less than $30 a month then. After I started working I added more.

      ILP is probably not the most ideal for people like us, but they are definitely not that bad for some. I admired the effort running through the stairs! Unfortunately for me, he wear pants!

    3. Rolf,

      Let's call a spade a spade.

      ILP is dumbshit. I think next to Life insurance for child, it has to be the 2nd dumbest insurance one can buy.

      Wholelife and Endowments at least have a savings element which is comparable to fixed deposit rates; and in this low interest rate environment, they are not too bad.

      Nobody buys ILP; they are all sold to. Ask your agent how much commission he got out from you ;)

      No financial blogger would blog that he/she has recently added to his portfolio of ILPs. Have you?

      Just like CDOs that let to the subprime, the insurance industry likes to "bundle" stuffs together so they can add the shitty parts (the part that's profitable to them) to the good portion (which is protection but no caviar for them).

      If we want protection, go for protection. If we want savings, go for savings. And if its an investment, invest in the right vehicle!

    4. Hi SMOL,

      For the Dumb ILP, I keep it because of relationship with my agent! You call me stupid and I admit. It has the life insurance components in it. Actually I also buy accident insurance from him. Being a "suay" guy, I had claimed much more of the accident insurance than the premium i paid. Do you know I cannot buy Medical insurance because I am a sick chicken. But in the mid 90s if agents are kind enough to promote medical insurance to me rather than ILP, at least I will be covered. Medical insurance pay so little commission! That's why.

      But my agent is very proactive in my accident claims many times. So I heart soft and continue to dump my money monthly....

    5. Rolf,

      I can tell you and your agent have a special bond.

      Which brings back to my point if we "bundle" feelings like loyalty, camaraderie, charity, pity, etc; with financial matters, then its not really about savings, investment, protection anymore.

      CNY is coming. I am sure there will be colleagues and friends who will "peddle" CNY goodies to us - nothing wrong in making a side income.

      Sometimes I don't even want or need the products, but I do "support" from time to time, provided the seller is not too pushy.

      When it comes to relationships, we can throw logic out of the window.

      Hey! Under the new MediShield Life, you are covered!

      It all works out in the end ;)

    6. I realized more office aunties selling CNY goodies now as more may have attended baking classes and understand the importance and opportunity of having extra income. More savvy. Ha Ha!

    7. CW,

      I think the risk/reward favours selling CNY goodies over trying their luck in the markets if they have no idea what they are doing ;)

      I also notice more young entrepreneurs "getting their feet wet" by renting a stall at Chinatown. Take no-pay or annual leave and experience what's it like to be your own boss for a month!

      I wish I were like that when I was young. Don't think too much; just do!

  7. Hi SMOL,

    I must be the lone tree in this wilderness. I bought no ILP or unit trusts, but do have couple of endowments and one life plan.

    Yes, I cowbei cowbo the meagre returns, but at the same time, I think such forced savings at a young age is a blessing in disguise.

    3 more years, I will break even for 1 plan, 5 more, all plans will break even, thereafter, I can get meagre gains.

    Imagine when I get burn in CAO, I have all my money as investible cash?? Also, although not breaking even yet, I could still liquid and terminate my policy as a "stop loss" even if am in a emergency or think that enough is enough. But if I am caught in CAO, and at one time, have my fair share of China fibretech, fuxing etc, I am not really sure if I am better off now.

    As for child insurance, I think you mean whole life insurance. I think H&S for child is important, you never know when u Kena diabetic or whatever, which might be due to my or my wife wonderful DNA. In fact, my son H&S is free for the next 7-8 years because I made a hospital claim( touch woods!! I pay pay, I never want to make a claim !!) but u get me point. He is hospitalized when he is 2. Too young to buy? Think again.

    I also got uni-endow for him. I am aware it is a marketing gimmick for another endowment, but I know I am settjng money aside for him forcefully, which I otherwise might be tempted to shift into investible fund.

    As for whole life, ya, when my wife ask, I says no need. She persists, I said no need and explain why, but finally say if u really want it just to have a piece of mind, go ahead. It's meaningless but not harmful. Back off to move forward is always the best. She said never mind then

    1. Sillyinvestor,

      You have a funny sense of humour!

      I am lone tree, then with a straight face say you have endowments and wholelife!?

      Got potential for one-liners! LOL!

      I've explained my position on child insurance in this post:


      The premiums for the life insurance could have better gone to H&S like you did :)

      If we go in with eyes open, it's perfectly alright. If we view endowments and wholelife as "forced" savings - not investments - then we can do comparison shop with money market funds and fixed deposits, etc.
      More aggressive ones may even consider Asian Currency Unit (ACU) deposits if I am pretty sure I will send my child to Australia to study as an example.

      Friend, your math logic can be a bit warped ;)

      Your son's H&S is not "free". It's already paid by the claims you have chosen to forego... See the Jedi mind trick the insurance company has done to you?

      It's like my ex telling me she is "saving money" for me by buying during a sale? Feels a bit weird each time I reach for my wallet.


    2. SMOL,

      I siao meh, where got forego claims, of course I claim everything la. My claim amounts to 10 years prenium liao.

      Also, when I mean I am the lone tree here, I mean I have no negative feeling regarding the products or being "sold to"

      If you didn't sought after, its being "sold to" isn't it? What is the big deal? When you buy a shirt, and you found a more stylo one at another retailer, you blame the first retailer for not telling you about the shop down the street? come on..

      Or you blame the retailer for calculating rent, manpower cost in into the price of shirt? come on again...

      You blame the retailer for selling cotton for the price of silk. Ya.. Stupid retailer, but did you ask for the material at the first place?

      See... now its obvious once I go naked that I am the lone tree here, isn't it.

    3. Sillyinvestor,

      Sorli sorli!

      My bad.

      Please put your clothes back on. Punish me instead!

      "Teacher, I've been a bad boy. Can you spank me?

      Ooooh. Harder t'cher. Say that I've been a bad boy. Say it, say it!"


      I think I need psychological help!

  8. SMOL,

    ILP is like having a butler go to supermarket buy your groceries for you? Not nice meh?

    DIY means have to plan how to get to supermarket, find parking, pick the products we want at good value, checkout, etc. So troublesome!

    OK, I admit I am a control freak - I must read the label and expiry of my groceries then compare lol, so I think the butler will drive me nuts :p

    1. ckw-I99,

      No. Having a butler do groceries shopping for you is unit trusts.

      I am a big believer of leveraging on Other People's Time (OPT), which in this case is Talent. It's a lot of work to hunt down those 25% of money managers that can beat the index (and I have the time) ;)

      Make a wild guess why we have funds of funds?

      ILP is having a chauffeur drive your butler to do groceries shopping.

      If I got that kind of cash to burn, I would go for private banking. At least they'll usher me to a cosy room, give me "free" pistachio nuts, and pour me atas coffee with beans that pass through the ass of some animals...

      Wink, wink.

  9. Ha! Ha!
    Private banking is where the bank gives you so many
    "Freebies" and they will continue to do that only if you keep on giving back to the bank all their "Freebies" and then some - in terms of giving them your $$$ businesses. There is no free lunch but if they(bank) make you happy & important, why not? After all if you have too much cash, what's next?

    1. temperament,

      If I am a hairy sheep, giving up a bit of wool is OK what?

      But when I hear the sound of knives being sharpened in the next room, its time to bail!

      Lamp chops and wool are not the same!

      It's interesting to read about high net-worth accredited investors suing their private bankers for the millions they have lost...

      A variant question of why 80 plus people still want to buy Toto:

      Why do millionaires want to bet millions on a speculation?

      Because they want to move up Forbes' list to be as billionaires?

      Too much cash? Collect cars lor! Buy yachts! Even better private planes!

      And then walk with a swagger and give others the "Li wu bo?" face.

  10. My first investment was into unit trusts.. In 2007 just before financial crisis lol

    1. RetailTrader,

      Talk about baptism by fire and great timing!!!

      I'll bet you learnt more about yourself and the craft of investing during those early days than if you had started in 2009 ;)

    2. you are very right.. if I had started in 2009 i could still be invested in unit trusts now and thinking i'm an investment whiz.. it's encountering crap that forces you to adapt and hence improve.


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