Monday 15 May 2023

Finance Investment Movement 33

Recently, I went on a couple of business trips and met about 20 friends/associates. In meetings and mealtimes, there was a sense of pessimism even though we have not met since Covid. Conversations centered around the fragile business environment. Most of their forecasts predicted a slowdown attributed to unresolved global events and risky conditions such as high interest rate persistence. Are we heading towards a major disaster? To avert it, there was a surprise consensus on the solution. Everyone pointed their gaze at China. The country that's sizable enough, the mischief maker in the seas, the creditor of the Belt and Road initiative, the technology competitor, the relations and opinion divider in the various ongoing wars. However, there's a big concern. China had overstretched itself financially in its Covid fight and there were anecdotes shared that government payments were delayed. It will need time to repair its finances but time is what we lack now. Anyway, it's broadly agreed this year's results appear to be a lost cause.

Business aside, I spent time looking for new products that could provide decent yields. One of these was endowment plans with regular premium for a limited time. But as I read through various companies' brochures, a few thoughts bubbled. Vanilla endowments used to be just like a long dated time deposit with a little insurance cover. Now, its function has expanded to offer payout after a certain time, much like an annuity, even up to 120 years. If required, after a few years, the policy can be terminated and funds are returned with bonuses and capital intact. Otherwise, by holding till expiry, the policyholder stands to enjoy many multiples return. The catch is the guaranteed and non-guaranteed portions that's determined by the company. That got me thinking how is the reversionary bonus determined, are there formulas that the public can access and how closely is it audited. Basically, the concern lies with the reliability of the payouts as claimed (of course each and every company is smart to include all sorts of caveats).

Tip: LaDame De Montrose 2017, fresh and lighter fruit than previous years, needs more time

No comments:

Post a Comment