Tuesday, 26 January 2016

A fortune with Manufortune from Manulife?

Manufortune from Manulife My partner's mother was given a brochure  on the endowment plan called Manufortune, by Manulife when she went to the bank to withdraw money to put some money into another bank's fixed deposit. She was interested to find out whether this endowment plan from Manulife is worth investing in. More details on ManuFortune can be found here.

Disclaimer: I am not a financially savvy person, so what I'm going to write is based on what I deduce from my limited research and reading. This may not be an accurate account of the real scenario, and you are to exercise your own judgement on whether you agree with what I have written. I won't be held liable for any inaccuracies or omissions (see also my disclaimer at the end of the blog). This article also only expresses my opinion, and I am not encouraging or discouraging the buying of any product in this blog.

ManuFortune Brochure

About ManuFortune from Manulife

According to the brochure, you will be given 2% per year for the first three years. On the fourth year, you will get back all that you have put in, together with potentially, a maturity bonus. 

Comparing ManuFortune from Manulife vs Maxsave/ Maxsave Enhanced from Great Eastern

For a risk adverse person, like me, my thoughts are that ManuFortune is definitely better than the Maxsave or Maxgrowth which I have bought because:
  • principle is guaranteed as long as you hold to maturity (unlike Maxsave and Maxgrowth where I could potentially lose about $5000 from each policy upon buying them!)
  • bonus is guaranteed for the first three years (unlike the Maxsave and Maxgrowth which have NO guaranteed bonus, although the potential bonus is more than 2% per annum, but without guarantee, you can have NO bonus at all, worst still, lose your capital - see the point above)
As such, I would prefer ManuFortune as compared to Maxsave or Maxgrowth from Great Eastern, as you are definitely going to get your principle amount and 2% bonus no matter what. 

Worst Case Scenario

Assuming that the person who is buying ManuFortune, with a single premium of $20,000 is going to hold it to maturity. And let's just look at only the guaranteed portion (i.e. without the maturity bonus), 

The IRR is 1.5%.

Better Case Scenario

The brochure of ManuFortune indicated that there could potentially (means not guaranteed) be a bonus of 2.5% on the fourth year. With that, the IRR is 2.1%:

Compare Singapore Savings Bonds

Let's compare ManuFortune with risk free rate. I take risk free rate to be that of Singapore Savings Bonds February 2016 issue. I consider SSB bond risk free since it is backed by a stable economey i.e. Singapore. What's more it is almost liquid (since you can withdraw each moth), an advantage over ManuFortune. 

The following is the cashflow for the Singapore Savings Bonds February 2016 issue, assuming that one invest $20,000 in it for 4 years:

SSB Feb 2016 Issue Cashflow if one invests $20,000 in it for four years

In other words, ManuFortune could potentially increase one's fortune by $1200 to $1700 if one were to invest $20,000 into it. On the other hand, the SSB Feb 2016 issue will increase one's fortune by $1306 if held for four years. 

As ManuFortune is an endowment plan, there is also some insurance to it, which SSB does not have. But I did not take that into account during the comparison, as I find the benefit relatively small, and we all hope all is well, ya?  

Based on these, would you invest in SSB or ManuFortune?

My Thoughts

I did not encourage my partner's mother to buy ManuFortune. Neither did I discourage her to. It really depends on her. My thoughts are, if she has $20,000 that she does not need for the next four years, and she is not putting it into something that increases her fortune by at least $1200 in four years, then putting money into ManuFortune may not be a bad idea. But, of course there are always other products out there that may have better potential yield, depending on one's risk appetite. Ya?

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