Last night, we were having coffee at Starbucks and I brought along my notebook. I decided to follow up with a 2nd half review. I was putting on the wealth coach hat and she is my customer. I reverse engineer the process to understand the present need.
I understand that there is a total annual insurance expense of HKD 44k and annual donation to charities at HKD 18k. Hence for her HKD expense will be HKD 62k. Her requirement is whether her HKD 586k can be put to better use. It has reduced from HKD 591k to HKD 586k.
After the session, we derived two key actions to take away from the session:
1) Her critical illness policy guarantees USD 300k at the end of 25 years tenure. However, the premium is very expensive. The first action is to check whether our SG term policy for critical illness covers her needs. If yes, then we will either terminate the HK critical illness policy or downgrade to save on premium.
2) If this happens, the extra premium saved will be used to invest so that we will have a larger pool of money for medical expenses.
We also agreed that HKD 486k will be deployed for investment. I suggest that 50% into HK Tracker Fund and 50% into CSOP A50 ETF. Both are ETF and the purpose is to reinvest all dividend into the funds. HKD 100k will be reserved as emergency funds.
This morning after looking briefly at the specification of the funds (I used to invest in both funds), I suggest to Invest HKD 400k in 2822.HK. The rationale for investing in CSOP A50 ETF is because of the PE ratio of China which is still low at about 7.4 whereas HK PE ratio is at 18. China’s “One Belt One Road” should bring the country towards a greater height in the long run. Therefore we invest in this not for the short term but cater for 30 years later. This 2822.HK will go in immediately. It may retract but we are focusing on the long term.
This morning I read up on both the HK policy and the existing term policy, the critical illness portion is identical. We are looking at terminating the critical illness policy. This will help us achieve financial freedom earlier without compromising our downside. It is a matter of “over-protection” in insurance which has became an unnecessary expense.