Invest Or Protect? Which Should You Focus First As A Working Adult In Singapore

This article was written in collaboration with Manulife (Singapore) Pte. Ltd. All views expressed in this article are the independent opinion of DollarsAndSense.sg based on our research. DollarsAndSense.sg is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.

Investing and insurance coverage are key elements of personal finance. Investing aims to build our wealth, while insurance coverage protects it against unforeseen life circumstances like accidents or illness that could hinder our ability to work and earn. This presents a dilemma for young working adults: which of the two is more important?

On one hand, young adults, who have many income-generating years ahead, should prioritise earning, saving, and investing. By doing so, they can set aside an emergency fund and gradually develop an investment portfolio that yields passive income, thereby reducing their reliance on a regular job for financial security.

On the other hand, health stands as the most significant asset for young adults. It is the foundation that allows them to earn a living and provide for themselves and their loved ones. Yet, if their health were to deteriorate due to an unforeseen accident or illness, not only would their capacity to work and earn be at risk, but also their potential to build an investment portfolio for long-term financial stability.

Protect Yourself First

“Put on your oxygen mask first before helping others.”

This is the common advice that flight attendants give during the safety briefing at the start of every flight. The idea behind this is simple: Protecting yourself first puts you in a better position to care for others.

In the realm of personal finance, this means securing adequate insurance coverage before embarking on ambitious investment plans. Even the best investment strategies can be derailed if health issues prevent a person from earning a living, and in some cases, even deplete their savings.

For young working adults, obtaining suitable insurance coverage as soon as you start your career is essential. This includes health/hospitalisation insurance, life insurance, critical illness coverage, and other relevant policies.

As your responsibilities and the number of dependents relying on you increase, it’s advisable to review and potentially increase the coverage levels to ensure sufficient protection and financial stability.

Invest For Your Future

Investing early is a wise strategy for those looking to maximise their financial growth.

Starting early is advantageous for better investment outcomes due to two main reasons. Firstly, a longer investment horizon provides more time to compound returns. For example, S$10,000 invested over a 10-year period with an annual return of 6% per annum will grow to S$17,908, or about 1.8 times our initial investment. If we increase our investment horizon to 30 years at the same rate of return, our return will grow to S$57,434, or about 5.7 times our initial investment.

Secondly, it gives you the opportunity to navigate and withstand market volatility.

For young working adults, time is a valuable commodity that should not be squandered in the financial markets. Over the next few decades of investing, we may encounter both good and bad times. Adopting a disciplined approach like dollar-cost averaging, where a fixed amount is invested regularly, is beneficial. This strategy allows investors to purchase more units when prices are low and fewer when prices are high.

Over the long-term, this leads to purchasing investment units at a lower average cost while leveraging the power of compounding to effectively grow the investment portfolio.

Get Started On Both Investing & Protection

Instead of thinking you need to choose between investing and obtaining protection, it can be beneficial to pursue both simultaneously. Beginning early in both investing and protection has distinct advantages, particularly for young working adults.

Younger individuals generally face fewer health issues and have a less extensive medical history. As such, the insurance underwriting processes are usually more straightforward, as there are likely to be no pre-existing illnesses that will result in exclusions and more affordable premiums. This is subject to the insurance contract terms and conditions.

Starting to invest early also allows one to take full advantage of the power of compounding returns over a longer period. A young investor has the capacity to weather short-term market fluctuations and benefit from the potential growth of their investments over time.

By adopting a double-barrelled approach to investing and insurance, young working adults can build a solid financial foundation, ensuring both protection against unforeseen events and the growth of their wealth over the long-term.

Invest & Protect In Manulife InvestReady (III) with ReadyCare Riders

One product that can help young working adults get started on both investing and protection is Manulife InvestReady (III) with ReadyCare Riders. This is a whole-life regular premium investment-linked plan (ILP) that integrates protection with investment opportunities.

Customers can invest 100% of their basic premiums in a selection of professionally managed funds. This means that from the onset, the full amount of the premiums goes directly into chosen investment funds, allowing for potential growth from the beginning. There are also welcome bonus, annual premium bonus*, and loyalty bonus^#  that they can receive.

Additionally, this plan offers significant flexibility. Customers can access free unlimited fund switches throughout the policy term, top up the premium and withdraw the accumulated reinvested dividends (if any) at any time.

With ReadyCare riders, customers can decide the type of life event coverage they want. This ranges from Death, Terminal Illness, Critical Illness and Hospitalisation benefits. Customers can use the existing investment values to fund the protection coverages, thus reducing the need for additional out-of-pocket cash contributions to pay premiums

Manulife InvestReady (III) is designed to help young adults achieve their financial goals by allowing them to address their investment and insurance needs through a single plan. As the policyholder is able to invest in a diversified range of funds, the investment not only has the potential to grow but simultaneously also provides financial protection for customers and their families. This approach ensures that policyholders can build a resilient investment portfolio for the future while also safeguarding themselves against unforeseen events. Consequently, the policy offers a comprehensive financial strategy suitable for young professionals.

Read Also: Understanding Investment-Linked Policies: 11 Financial Terms You Should Know Before Investing

*A one-time Annual Premium Bonus will be given for selected Minimum Investment Period (MIP) options if the first basic premium is paid via annual premium payment mode. If there is any change in mode of premium payment from annual to non-annual during the premium shortfall charge period, the Annual Premium Bonus will be deducted from the account value.

#Loyalty Bonuses vary in accordance with the Minimum Investment Period (MIP) selected.

Important Notes

Manulife InvestReady (III) and its supplementary benefits are underwritten by Manulife (Singapore) Pte. Ltd. (Reg. No. 198002116D). This advertisement has not been reviewed by the Monetary Authority of Singapore. Buying a life insurance policy is a long-term commitment. There may be high costs involved if you terminate the policy early, and your policy’s surrender value (if any) may be zero or less than the total premiums paid. Your investments are subject to investment risks, and you may lose the principal amount invested. The performance of the InvestReady Fund(s) is not guaranteed. The unit prices and any income accruing to it may fall as well as rise. The Fund Managers shall have the absolute discretion to determine whether a distribution is to be made in respect of the InvestReady Fund(s) as well as the rate and frequency of distributions to be made. The intention of the Fund Managers to make the distribution and the distribution yield for the InvestReady Fund(s) is not guaranteed, and the Fund Managers may review the distribution policy depending on prevailing market conditions. Distributions may be made out of income, net capital gains and/or capital. Past distribution yields and payments are not necessarily indicative of future distribution yields and payments. Any payment of distributions by the InvestReady Fund(s) may result in an immediate decrease in the net asset value per unit. You should read the prospectus and the product highlights sheet and seek financial advice before deciding whether to purchase units in the InvestReady Fund(s). A copy of the prospectus and the product highlights sheet can be obtained from a Manulife Financial Consultant or our Appointed Distributors.

This article is for your information only and does not consider your specific investment objectives, financial situation or needs. It is not a contract of insurance and is not intended as an offer or recommendation to purchase the plan. You can find the full terms and conditions, details, and exclusions for the mentioned insurance product(s) in the policy contract.

This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the LIA or SDIC websites (www.lia.org.sg or www.sdic.org.sg)

We recommend that you seek advice from a Manulife Financial Consultant or our Appointed Distributors before making a commitment to purchase a policy.

Information is correct as at 12 April 2024.