Letās say you bought a Lehman-Like minibond investment $500k, promising high return for 3 yrs. Say you drew from your $1m commerical bank. Your bank left $500k balance.
3 yrs later you lost all your $500k because Lehman got bankrupt.
Your bank interest earned in 3 years: $750.
Hence your total loss: $499K
Base interest rate is at 0.05% at majority bank.
Now, Letās try the loan facility by insurer. Your own bank has $1m balance in terms of policy value. You loan from insurer $500k.
Loan interest incurred: $96K
This is shag. You borrow money to invest and all money gone! Imagine you borrow from bank and now you owe bank $596k!
Loss from Lehman: $500k
Total loss: $596K
But your $1m cash in insurance is still growing in that 3 years remember?
Interest earned there: $141k.
As I mentioned before, insurance policy is front loading, so the 4.5% is pretty conservative. Some policies can be as high as 5-6% though
Loss from Lehman + Loan interest: $596k
Hence Total loss: $455K
Vs $499k loss if you use the ātraditionalā method.
PS: Above scenario is assuming the person has no cashflow coming in in the next 3 years at all. In real situation, it does, from working income & dividends & rental. And such cashflow should flow into paying back partially the policy loan, and hence the interest incurred is even lower.
Hi there! My name is Sam from Singapore, I have 3 young kids, namely Z, Q, & E. As of writing today, I have reached financial freedom, and Iām writing this blog to share my thoughts on financial matters, and anything related to money. Primarily, this blog is meant for ZQE as they grow up. While I hope I can grow together with them and pass down my values and tips to them, life can be unpredictable. Hence I hope this blog may come in handy for them in future, and since Iām writing it, I might as well share my thoughts to the world.
I came from a middle class family, and Iām fortunate that I have met great mentors in my life who selflessly shared their secret to me. Here Iām now, to share these secrets to you.
I have no get rich quick scheme for you though, and whatever I plan to share is basically fundamentals of financial planning. Amazon founder Jeff Bezos once asked Warren Buffett, “Your investment thesis is so simple. Why don’t more people copy you?” Buffet replied, “Because nobody wants to get rich slow.ā
Thatās the reason why I decide to name my site financial turtle!
You donāt have to be fast to be rich, nor you want to be slow as well. It isnāt about speed, itās about consistency, and fully comprehending the 8th Wonder of the World; Compounding interest.
Hence I hope you find great ideas for you to implement on my site, otherwise thank you for viewing as the site was primarily built for my kids.
Disclaimer: whatever I share is purely based on my opinions, and if you have other thoughts, I welcome constructive feedback so that we can learn together.
Cheers!
Getting rich slow 