I have always been a compulsive reader. I read a lot on a variety of subjects. In fact, if I get interested in a topic, I will read anything I can find. One of the books that fit in with The Blue Roof is “The Art of The Deal” by Donald Trump. From Monday I am going to share with you the quotes that I have written down when I read the book a few years ago.
I want to end this week by sharing with you why I DO NOT LIKE ENDOWMENT, or SAVINGS POLICIES.
Before I do that, please read the following sentence very carefully: Any saving is better than no saving, even an endowment policy is better than nothing!
One of the big insurance companies advertises the following in magazines:
The illustrate monthly savings for 10, 15 and 20 years with a illustrative maturity value at under a low and high inflation rate, respectively. One assumption is that the monthly premium increases at 6% per year.
What I have done is to change the monthly premium to annual, I calculated the IRR, the present value of the illustrated maturity value, and the actual amount invested. This is what I got:
10 Years Low Inflation
|
Investment First Year |
Investment Final Year |
Total Investment |
Maturity Value |
Present Value @ 6% |
IRR |
|
150 |
254 |
23,725 |
25,900 |
14,462 |
1.74% |
|
175 |
296 |
27,680 |
30,200 |
16,864 |
1.73% |
|
200 |
338 |
31,634 |
34,500 |
19,265 |
1.72% |
|
300 |
507 |
47451 |
51,700 |
28,869 |
1.70% |
|
400 |
676 |
63,268 |
69,000 |
38,529 |
1.72% |
|
500 |
845 |
79,085 |
86,200 |
48,134 |
1.71% |
10 Years High Inflation
|
Investment First Year |
Investment Final Year |
Total Investment |
Maturity Value |
Present Value @ 6% |
IRR |
|
150 |
254 |
23,725 |
34,300 |
19,153 |
7.19% |
|
175 |
296 |
27,680 |
40,000 |
22,336 |
7.19% |
|
200 |
338 |
31,634 |
45,700 |
25,519 |
7.18% |
|
300 |
507 |
47451 |
68,600 |
38,306 |
7.19% |
|
400 |
676 |
63,268 |
91,400 |
51,037 |
7.18% |
|
500 |
845 |
79,085 |
114,000 |
63,657 |
7.14% |
15 Years Low Inflation
|
Investment First Year |
Investment Final Year |
Total Investment |
Maturity Value |
Present Value @ 6% |
IRR |
|
150 |
254 |
23,725 |
51,500 |
21,489 |
2.91% |
|
175 |
296 |
27,680 |
60,100 |
25,078 |
2.92% |
|
200 |
338 |
31,634 |
68,700 |
28,666 |
2,92% |
|
300 |
507 |
47451 |
103,000 |
42,978 |
2.91% |
|
400 |
676 |
63,268 |
137,000 |
57,165 |
2.88% |
|
500 |
845 |
79,085 |
172,000 |
71,770 |
2.94% |
15 Years High Inflation
|
Investment First Year |
Investment Final Year |
Total Investment |
Maturity Value |
Present Value @ 6% |
IRR |
|
150 |
254 |
41,897 |
78,300 |
32,672 |
8.49% |
|
175 |
296 |
48,880 |
91,400 |
38,138 |
8.50% |
|
200 |
338 |
55,862 |
104,400 |
43,562 |
8.49% |
|
300 |
507 |
83,793 |
157,000 |
65,511 |
8.52% |
|
400 |
676 |
111,725 |
209,000 |
87,208 |
8.50% |
|
500 |
845 |
139,656 |
261,000 |
108,906 |
8.49% |
20 Years Low Inflation
|
Investment First Year |
Investment Final Year |
Total Investment |
Maturity Value |
Present Value @ 6% |
IRR |
|
150 |
254 |
41,897 |
89,300 |
27,844 |
3.33% |
|
175 |
296 |
48,880 |
104,000 |
32,428 |
3.31% |
|
200 |
338 |
55,862 |
119,000 |
37,105 |
3.33% |
|
300 |
507 |
83,793 |
179,000 |
55,813 |
3.36% |
|
400 |
676 |
111,725 |
238,000 |
74,210 |
3.33% |
|
500 |
845 |
139,656 |
298,000 |
92,918 |
3.34% |
20 Years High Inflation
|
Investment First Year |
Investment Final Year |
Total Investment |
Maturity Value |
Present Value @ 6% |
IRR |
|
150 |
254 |
23,725 |
157,000 |
48,953 |
9.01% |
|
175 |
296 |
27,680 |
183,000 |
57,060 |
9.00% |
|
200 |
338 |
31,634 |
209,000 |
65,167 |
9.00% |
|
300 |
507 |
47451 |
314,000 |
97,907 |
9.01% |
|
400 |
676 |
63,268 |
419,000 |
130,646 |
9.02% |
|
500 |
845 |
79,085 |
524,000 |
163,386 |
9.03% |
If you have a question, please comment. I it is nice to hear from you. I appreciate your comments.