Things to think about

Now that you've decided to save, and found out where you can put your money more effectively, here are a few things you need to remember when you're trying to accumulate your wealth.

• If you're buying an endowment policy for both its insurance and saving capacity, it is important to note that the insurance element is less and not necessarily adequate.

• If you're intending to capitalise off high projected returns, it is important to note that they may not materialise and to assess whether you can bear the brunt of possible losses.

• If you're going to limit the loss on your principal, then make sure the plan is capital guaranteed. Regular premium endowment plans may not always be capital guaranteed.

• If you're going to need more cash and ensure more liquidity, then picking a plan that provides regular cash payouts is a better choice. If it's retirement that you're considering, then a longer tenure and a lump-sum payout type of plan are what you should be considering.

• If you're unsure about where to start, it is imperative to seek professional advice from a financial adviser. It is important to pick a good financial adviser and one who is able to be objective. It is equally important for you to be forthcoming with relevant information for the adviser to work with.

• If you're going to start buying policies, it is a good idea to buy them from different insurance companies instead of just one, in case the insurer is exposed to problems.

INVESTMENT DISPOSITION

• Risk appetite: The ability to stomach price volatility. Staying out of riskier investments is advisable if you have a low tolerance for temporary losses in your capital.

• Risk capacity: Separate from your appetite, the reality of your financial condition should shape your decisions. If you have outstanding debt, doubts over your job security or high levels of expenditure, then your risk capacity is limited.

• Time horizon: The more time you are prepared to remain invested, the lower your risk of realising a loss.

This article was first published in The Straits Times.