My insurance products make me sleep at night.

One of the sub portfolios that I have is an insurance portfolio: in Belgium known as Branch 21. It is actually more a savings product than an investment product and the returns are not super sensational. They come with a 2 pct entry tax fee, and very often the same entry fee for the broker. But, they are capital guaranteed. So, why would you take them?

  1. Having a safety cushion that I can put under my investment portfolio is something that I wanted so I can sleep at night. The fact that it is capital guaranteed appealed to me.I guess I have a lower risk tolerance than I believe. At least, I have that base now covered.
  2. The returns are not sensational, but it is ok to expect the product to have a net return above the inflation and above the better savings account.
  3. If you look around you can get a decent broker fee, to limit the costs.
  4. They come with an inheritance clause: You can nominate the person that should get the money if something happens to you. I use this to make sure the person that I want, get what I want them to get.

Why some people don’t buy them

  1. You need to keep them 8 year, or you are taxed and loose the advantages. They are thus not liquid.
  2. they have no negative correlation with stocks, as bonds are supposed to have (however, recently, this is less sure)
  3. Entry tax and fee

I can fully understand that some people do not want these products. But for me, they are the perfect cushion of my investment portfolio. I just have to pay attention that they do not become a too big part of my portfolio.

For now I have invested an amount bigger than I want, but some 12 pct of this portfolio is now past the 8 years period and can be whitdrawn penalty free. It thus as a top notch savings account. I will enjoy this while it lasts (till the end of the year). I will between now and then use this liquidity to further invest in my tracker portfolio. Either when the markets take a correction, if not, it will be part of my monthly tracker investment purchase plan.

Do you have the need for an extra safety cushion?

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6 thoughts on “My insurance products make me sleep at night.

  1. AT,

    Until recently I owned an old First insurance account at Ethias. With a fixed interest rate of at least 3.15% it was one of the best investments ever. If and when interest rates peak again, I’ll certainly put some money into TAK-21 products again.

    Great read,
    NMW

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    1. I do use something similar. I Invest in “iSave invest” with Ergo, that’s a combination of TAK-21 en TAK-23 which gives me capital guarante and a possible higher return. But I never thought of using this as a replacement of bonds in my portafolio which is actually a great Idea. Thanks

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      1. In the specific case you mention, you should look at the ratio of tak21 vs tak23 that you have. a part of the tak 21 is probably offsetting the tak23 already.
        Next to that, it depends on your risk tolerance and the negative correlation you aim for with the bonds (something the tak21 has less)

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