"Promising Returns" Variable Unit Linked Insurance and the PSEi

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As we were browsing entries in Facebook, we came across this article entitled "Philamlife lures Pinoys with new insurance-investment schemes."  Here's an excerpt from the news article:

Philamlife Lures Pinoys with New Insurance-Investment Schemes
by Edgardo Tugade December 3, 2012.
source: GMANews

The Philippine American Life Insurance Co. (Philamlife) on Monday said it was mostly foreigners who took advantage of the growing Philippine economy by directly investing in industries, while Filipinos kept their money in low-yielding accounts.

Thus, the insurer is introducing new products to help Filipinos benefit from the economic growth of 7.1 percent as measured by the gross domestic product in the third quarter, the fastest growth in South East Asia.

The company is promising returns of at least 8 percent in an insurance and investment plan. 

Rex Mendoza, Philamlife president and chief executive officer, said most Filipinos placed their hard-earned money in savings or time deposits which earn 0.375 percent and 2.75 percent per year, and cannot even catch up with the benign inflation rate at 3.1 percent.

As you probably know already, the Philippines Stock Exchange Composite Index (PSEi) has reached a new all-time high of 6,171 this January 2013.  As a result, insurance and investment companies are banking on this positive development and are aggressively marketing their investment products. (Read more after the jump)

What disturbs us in the article above is the use of the word "promising."  It's as if they're guaranteeing returns of at least 8 percent for the year.  We all know that there are no guarantees when it comes to investing in the stock market.  While investing in instruments like time deposits and BSP special deposit accounts may guarantee a certain percentage they certainly won't reach 8 percent given the low interest rates right now.

We are hoping that this was just an error on the writer's side and not by the insurance firm.

While the outlook for the Philippine economy and PSEi is still positive and very bullish.  We'd like to encourage everyone to be more discerning and observant when making investments.  When investments companies, brokers, agents, and fund managers start PROMISING returns we need to be cautious in order to protect our hard earned money.

The insurance being described in the article is what is called a Variable Unit Linked (VUL) Insurance.  In essence it is part insurance and part investment.  A product invented by insurance firms to lure in people to buy more insurance from them.

Here at Money Magnets, we'd like to keep it simple.  If you already have Life insurance, you probably don't need this new type of insurance anymore.  It's the same thing.  Invest your money in Mutual Funds or UITFs instead.

If you still don't have any insurance, then it's something you can look into.  The investment portion of the VUL has the potential to increase the benefits your benefactors will receive if the investment does well.  The longer payment/investing period involved in insurances is also ideal for taking in more risky investments like the equity market.  


2013 PSEi Forecasts   

Given the bullishness of the Philippine stock exchange, analysts have readjusted their forecasts for the PSEi for 2013.

PJ Garcia of BPI Asset Management said that the PSEi might reach 7,100 this year.
 (January 21, 2013)
Source: read the complete news article here.

April Lee Tan of COL Financial, formerly Citiseconline, has a more conservative forecast of 6,500 for the PSEi. (January 16, 2013)
Source: read the complete news article here.


Happy 2013 Money Magnets!

In 2013, we'd like to hear more from you.  Email us at moneymagnet.phil [at] gmail.com if you have any questions and if you have any requests as to what type of articles or investments you'd like to hear more of.  We look forward to hearing from you.

Keep on attracting wealth!
Happy investing in 2013.


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