Should I buy education insurance policy for my children?

I believe most of the parents with newborn baby will wonder whether they should purchase an education insurance policy for their beloved baby. Current education insurance products from various life insurance companies in Malaysia consist of a mixture of endowment and investment-linked insurance policies. I will not delved into the details of each category of such product, but for a brief introduction to children education insurance policies, please go here.

Why do you need children education insurance policy? For some parents, they claimed that it is a must for their children while for others, they mentioned that there are other financial products in the market that can fulfill the education savings purpose much better. Therefore, I intend to list out the pros and cons of having a children education insurance policy.

Advantages:

• Tax relief: If you buy a children education insurance policy with limited term (i.e. 18 - 20 years) and with payor benefit rider, you are entitled to up to RM3,000 tax relief for medical/education insurance. For details on tax relief, refer here.
• Savings: For those who don't have the habits of savings, the insurance policy is a good way of forced savings since at the end of the insurance term, there will be some cash values for the children.
• All-in-one insurance package: You might want to add other insurance coverage, like medical card, to your children education insurance. This is especially possible for investment-linked policies.
• Piece of mind: Should there be any incident happened to the parents, there is at least some sort of guarantee that there will be a sum payable to the surviving children, if the children are the beneficiaries of the insurance policy.
  

Disadvantages:

• Low returns: Children education insurance is basically an insurance product with relatively low return rate. For those with experience in investments, they might do much better with unit trusts/stocks/property investments.

Comments: I think children education policy is a good option for those who don't have the knowledge and time to make their own investments/savings. For me, I prefer to buy term insurance to partially cover for the estimated future cost of education (of course, it is better to fully cover the cost of education if the cost of term insurance is not too prohibitive) and purchase a separate medical card for my children for the medical emergencies.

HwangDBS declares income distribution for structure income funds

HwangDBS Investment Management Bhd declared its first quarterly net income distribution of 1.50 sen per unit for the HwangDBS Structured Income Fund I and of 0.4842 sen per Unit for the HwangDBS Structured Income Fund II.

It said on March 24 the distribution translated to a 1.52% growth for the Structured Income Fund I and 0.49% growth for the Structured Income Fund II.

Unit holders registered as at Feb 23 for the first fund and March 20 for the second fund were eligible to the income allotment.

They were the first two funds in the HwangDBS IM series of two-year closed-ended income funds targeted at qualified investors, mainly corporate investors.

Its objective is to provide regular income distributions over two years by investing up to a minimum 0.20% of the fund’s net asset value (NAV) in cash and money market instruments.

The difference between both funds is in the maximum 99.8% asset allocation of the fund’s NAV. Structured Income Fund I invests up to a maximum of 99.8% in a structured note linked to the credits of a basket of high quality Malaysian companies.

Structured Income Fund II invests up to a maximum of 99.8% of its NAV in a structured product linked to a basket of high quality corporate bonds (local and/or offshore corporate bonds).

HwangDBS IM chief executive officer and executive director Teng Chee Wai said all of the three underlying referenced credits -- IOI Corp Bhd (IOI Corp), Tenaga Nasional Bhd (TNB) and Khazanah Nasional Bhd (Khazanah) -- of the Structured Income Fund I’s structured note continued to meet their financial obligations as at end of January.

Of the three referenced entities, IOI Corp. was the focus due to the planned privatisation of its subsidiary, IOI Properties Bhd.

As for the Structured Income Fund II, all of the four underlying reference entities, IOI Corp., Hongkong Land Co. Ltd, CapitaLand Ltd and Hutchison Whampoa Ltd continued to meet their financial obligations as at March 17.

Of the four referenced entities of the StrlF II's structured product, IOI Corp. and CapitaLand were the focus over February and March due to the IOI Corp’s planned privatisation of its subsidiary, IOI Properties and CapitaLand’s rights issue.

Teng also noted that the other two underlying corporations Hongkong Land and Hutchison Whampoa continue to weather the current economic conditions and are widely expected to be amongst the few major corporations within its respective sectors to record a decent net profit for the year ending 2009.

Moving into the next quarter of 2009, Teng said HwangDBS IM would continue to monitor the economic environment and credit markets in respect of their effect on the referenced underlying credits of the funds’ structured product investment.

To date, all the referenced underlying have not shown any adverse signs of credit deterioration and Teng said HwangDBS IM remains confident that the underlying referenced entities will continue to meet their financial obligations in a timely manner.

Source: TheEdge Malaysia

KWSP Statement 2009 is available now!

It seems like KWSP has updated their databases to credit the 2008 dividends into the members accounts over the weekend. You can now view your KWSP 2008 statement with the dividends credited as well as 2009 statement now!

Know your needs and risk profile

While fund houses and investment banks said the time is right to re-invest in a diversified portfolio after markets have corrected 30% to 60% this year, investors should know their investment objectives and focus on long-term investments.

Knowing their own needs and risk profile was important in looking for a suitable asset allocation strategy, financial advisers said.

For those with excess cash but were not invested, CIMB Wealth Advisors Bhd’s chief executive Tan Beng Wah said without jeopardising their lifestyle, they should take the opportunity to have a diversified portfolio of investments in equities, fixed income and properties.

He said this was because investment valuations were at historical lows.

“They can also buy real estate as an investment. However, if the funds are limited, one may want to consider real estate investment trusts (REITs) or property stocks of funds, depending on what is available,” he added in an email reply to The Edge Financial Daily.

Tan said it was better for individuals with immediate pressing concerns and no cash cushion to keep greater allocations in cash and fixed-income instruments to cover short-term needs rather than investing in equities or other higher-risk assets, and debts should be settled first.

He added that young individuals with a high earning power and disposable income in relation to their lifestyle could stomach higher risks and opt to invest more aggressively now to take advantage of the current market selldown.

“Value averaging is a better strategy under the current market environment. If the individual has an investment time horizon of two years and above, we would suggest to the individual to gradually invest in markets adopting a well diversified asset allocation approach.

“The risk/reward ratio from investing in the markets at this juncture is too attractive to ignore,” Tan said.

Expressing a similar view, HwangDBS Investment Management Bhd (HwangDBS IM) chief investment officer David Ng said while no one could predict when the market would bottom, cost averaging was the better approach compared to lump sum investments as it took much of the emotional aspect out of investing and lowered the investment cost, especially in the equity markets.

“It is oftentimes best to start investing when one feels most uncomfortable with the outlook of the economy. However, we are not advocating investors plough all their savings into the market, but rather, to gradually inch their way into the market whilst it continues to languish at levels that are deemed to be attractive,” Ng said.

He added that it would be wise to exercise prudence in the current environment.

VKA Wealth Planners Sdn Bhd managing director Javern Lim suggested a 30:70 model for its clients, whereby 30% of the investments would be put into aggressive asset classes and the remaining in conservative assets.

“Aggressive assets including stocks, equity mutual fund, such as exposure to Greater China and US financial market-related counters, property (taking advantage of current low BLR rate) that give you chance to benefit from the recovery of the economy in the next few years,” he said.

“Conservative asset classes would involve fixed deposits, bonds, Employee Provident Fund (EPF) scheme, insurance, annuity and money market instruments that would protect your capital.

“Most importantly, it is to provide peace of mind. After all, money is not everything in life. You deserve to enjoy your life,” he added.

Local investors are moving into money market funds (MMF) since the global financial crisis took hold in 2007. Nevertheless, financial planners said MMF, which has a high degree of liquidity, was a short-term parking facility in times of uncertainty while waiting for the next investment strategy and decision.

MMF includes treasury bills, bankers’ acceptances, certificates of deposit, commercial papers and repurchase agreements (Repo).

Lim said MMF was an ideal alternative cash management instrument for corporate investors due to reasons of tax exemption, capital preservation, same-day redemption, liquid underlying investment, no penalty for early redemption, monthly distribution of income as well as higher return compared to fixed deposits.

Financial planners said local investors could grow their wealth by accessing overseas markets through offshore funds launched by financial institutions and fund houses in the country.

Lim said not many local investors would invest directly in overseas equity markets as they lacked the knowledge and related research information.

Nevertheless, Tan said local investors were increasingly aware they could easily invest in overseas markets. While some investors go through private bankers, individuals who invested on their own had the capital capacity, knowledge and access to stockbrokers overseas or opt to invest online.

Source: TheEdge Financial Daily, March 19, 2009