Our Scope
Investment Areas & Focus
Cash and CPF Investment Linked Plans (ILPs)
DWP's Scope
DWP Advisors are ONLY focusing on:
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Cash investments - Regular premium
CPF investments -
Single premium Ordinary Account
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Note :
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For CPF Investments, both CPF OA and CPF SA plans, do not give any commission to the Advisor.
Since from 1st Oct 2020, there will be no more Sales Charge anymore...
CPF Investment Plans
For CPF Ordinary Account (OA) money
We choose to sell CPF OA (zero-commission product) for several reasons:
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Client's needs: Investing using CPF OA funds, we can potentially earn higher returns over time, which can help the clients to grow their wealth and retirement funds.
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Relationship building: Selling zero-commission products, we hope it can be a way for agents to build trust and long-term relationships with clients. In addition, we hope that the clients will think of us first when there is any future potential business.
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Align with our team principle: Mission over commission.
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Asset Allocation Considerations: It is part of our strategy to utilize the money in the CPF OA for investment.
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Only invest your CPF Ordinary Account (OA). Do not invest your CPF Special Account (SA) money !
Investing your CPF Special Account (SA) money is a personal decision that depends on various factors, but here are some reasons why we choose not to invest their CPF SA funds to our clients:
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Regulatory restrictions: The CPF system restricts the type of investment funds that can be invested using CPF SA money. The funds that are allowed to invest using CPF SA are normally very safe funds, which offer similar rate of returns as the existing prevailing CPF SA interest. Hence, there is no additional incentives to invest using CPF SA money.
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Asset Allocation Considerations: Clear diversification is an essential aspect of our investment strategy. It is part of our strategy for CPF SA to serve as a stable, low-risk component and having other investments to provide growth opportunities. Hence, not investing the CPF SA is part of our investment plan.
It is important to note that CPF SA funds are a valuable part of retirement planning, and the decision to invest or not should align with your financial goals, risk tolerance, and overall investment strategy.
However, if you are advised, by other Advisors, to invest your CPF SA, it is very unlikely for you to make investment profits higher than the interest rate guaranteed by CPF SA over a long-term period.
The Effects of Compounding
Compound interest is a powerful financial concept that can have a significant impact on the growth of investments over time. Here's how it works and its effects:
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Definition of Compound Interest: Compound interest is the interest earned not only on the initial investment (principal) but also on the accumulated interest from previous periods. In other words, you earn interest on both your principal and the interest that has already been added to your account.
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Exponential Growth: The effects of compounding is often described as "earning interest on interest," leading to exponential growth in the value of an investment over time. As each period's interest is added to the principal, the next period's interest is calculated on the larger sum, accelerating the growth rate.
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Increasing Returns: Over longer periods, compounding can significantly increase the total returns earned on an investment. This is because the compounding effect becomes more pronounced as time goes on, especially when the investment is allowed to grow without withdrawals or interruptions.
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Time Horizon: The longer the time horizon, the more pronounced the effect of compounding. This is why starting to invest early and staying invested for the long term can result in substantial growth of wealth.
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Illustration: For example, if you invest $1,000 at an annual interest rate of 5%, compounded annually, after one year, you will have $1,050. In the second year, you will earn interest not just on the initial $1,000 but also on the $50 interest earned in the first year, resulting in a total of $1,102.50 at the end of the second year.
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In summary, the effects of compounding is a fundamental principle in finance that highlights the benefits of starting early, staying invested, and allowing earnings to reinvest over time to achieve significant growth in investments.
01 In the Past... Older ILPs
Are Regular Cash Investment-linked Plans (ILPs) good or bad?
Whether an investment-linked plan (ILP) is good or bad depends on your financial goals, risk tolerance and understanding of the product. However, in the past, all the ILPs were considered bad as the plans were clearly not beneficial to the clients because:
The premium allocation rate to buy units (to invest) was low
Old ILPS -
For the first year premium, only 15% of the premium paid was used to invest (to buy units). The rest of the money, 85% of the premium, was deducted as charges.
- High allocation charges
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The insurance charges (cost of insurance) increased exponentially with age
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Resulting in Low Profits
Old ILPS -
Though the premium paid remained the same throughout, the insurance charges would increase exponentially with age. The annual insurance charges would increase from only $300, at age 30 years old, to $12,000, at age 75 years old. (Refer to article below)
- High insurance charges
With the low premium allocation rate to buy units and the high cost of insurance charges, these made buying ILPs very disadvantageous. Since it was very difficult for the ILPs to make profits even after paying for the premium for many years.
Thankfully, Nowadays
There are certain ILPs that the premium allocation rate to buy units (to invest) is 100%, therefore, from Day 1, all of the premiums were invested (used to buy units).
Moreover, there are no insurance charges at all. These made those ILPs suitable for investment.
Hence, it is very important that for the ILPs you wish to get, they must :
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Have 100% of the premiums invested from Day 1.
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Not to have any insurance charges or cost of insurance.
Once you have narrowed down the ILPs to get, you will need to find
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