A recent post on LinkedIn by Kirtan A. Shah, founder and CEO of Credence Wells, has ignited discussions about common mistakes people make when investing.
Shah shared his own experience from 15 years ago when he invested in a popular insurance contract. However, upon its maturity, the returns felt disappointingly low, almost like a “fraud” to him.
The unfortunate reality of low returns
Shah noted that he had paid annual premiums totaling £3,187 over those 15 years, expecting a robust return. Yet by the end of that period, his total investment had grown to just £47,805.
After 10 and a half years, he received a maturity amount of £69,530, which, when calculated quickly, showed a dismal return of 4.55% on his investment.
This unsatisfactory return highlights a widespread misunderstanding about insurance contracts, which are frequently marketed as investment vehicles.
A smarter alternative given by Shah
In his post, Shah proposed looking at investment strategies differently. Rather than merging insurance with investment, he recommends keeping them separate.
He explained that, for someone with a term insurance policy, investing the remaining funds in the Public Reserve Fund (PPF) would be more economical and yield better results.
This approach, according to Shah, could provide a 7% return, which is noticeably higher than the 4.55% he experienced, while still maintaining the same insurance, tax benefits, and risk-free investment features.
Who really benefits from investing in insurance?
Shah also discussed where the actual benefits of insurance investments seemingly disappear. He remarked, “If you hope to get returns from investing in insurance, you might be mistaken.”
His rationale is that insurance agents may take up to 40% in fees during the first year, and then continue to collect 8-10% throughout the life of the policy.
He pointed out that while agents make substantial profits, policyholders often find themselves stuck with minimal returns of 4.55%.
How did netizens react to the post?
The feedback from users has largely supported Shah’s perspective. Many chimed in with their own experiences and scenarios regarding investments.
One commenter noted, “Insurance and investments are entirely different. Many make the error of buying traditional products that usually return around 5-6%.”
Another user suggested alternative investment strategies, stating, “Absolutely! Fund plans are among the worst options. A semester plan combined with PPF or MFS would be a better choice.”
