Regular investing and rebalancing inside an ILP: regular premiums, dollar-cost averaging, fund switching and rebalancing

Regular investing inside an ILP means paying a fixed premium monthly, quarterly or yearly into a regular-premium ILP, with each premium, after the premium charge, buying units in the chosen sub-funds at the prevailing unit price. The mathematics is the same as a Regular Savings Plan (RSP) with a broker or bank; the difference is that the investing happens inside a policy, so it carries policy-level and cover-level charges and comes with life cover and policy features. Rebalancing means periodically bringing each sub-fund back to its target weight, and in an ILP this is done through fund switching.

Why a regular-premium ILP amounts to "regular investing inside a policy"

The LIA guide divides ILPs into single-premium and regular-premium policies, the latter paid monthly, quarterly, half-yearly or yearly. When each premium is received, the premium charge applicable for that year is deducted and the balance buys units at the next computed net asset value (forward pricing; see How an ILP works). Because the amount is fixed and the price changes each period, more units are bought when prices are low and fewer when prices are high: this is the core mechanism of regular investing.

The approach is widespread. In 2025, investment-linked products made up 44% of Singapore's weighted new life business premiums, and the LIA attributes the attention to regular-premium ILPs to dollar-cost averaging helping to mitigate market-timing risk and volatility (LIA, 11 February 2026). Weighted new business premiums measure the scale of new business and are not the same as total premiums actually collected.

Another thing regular-premium ILPs share with RSPs is discipline: automatic deductions mean investing does not depend on a decision each time. The difference is that the commitment in an ILP is "harder": stopping premiums or surrendering early means bearing high front-end charges or surrender charges, which is both a constraint and a cost.

Dollar-cost averaging: what it can and cannot do

Dollar-cost averaging means investing a fixed amount at fixed intervals whether markets rise or fall; MoneySense considers that over a longer investment horizon this can help lower the average purchase cost (not guaranteed). The hypothetical figures below illustrate the mechanism (for illustration only; they represent no product or market and are not a forecast):

With the full amount invested, the average cost per unit is S$2,000 ÷ 2,025 ≈ S$0.988, below the arithmetic average of the four prices, S$1.0125; when the price returns to S$1.00 in period 4, the holding is worth S$2,025, slightly more than the amount invested. This is a mathematical property of fixed-amount investing. The right-hand column, however, assumes all four periods fall in the first policy year with a premium charge of 85% (the front-end loading example in the LIA guide): along the same price path, only 303.75 units are bought, worth about S$304.

This shows the limits of dollar-cost averaging:

1. It reduces the effect of timing, not the possibility of loss. In a persistently falling market, regular investing still loses money.
2. It does not guarantee a purchase price below the average. The advantage in the table depends on prices fluctuating and eventually recovering.
3. In an ILP, its effect must be judged after charges. Early premium charges and monthly insurance charges both mean fewer "units bought each period" than regular investing of the full amount.

Investing inside a policy versus outside it

Investing outside a policy means regular investing in unit trusts or exchange-traded funds (ETFs) directly through a broker, bank or fund platform, with protection handled separately through products such as term insurance. The two routes differ as follows:

Neither route is better in absolute terms. The value of an ILP lies in "one contract handling both protection and investment, with continued investing enforced"; the price is more layers of charges and less flexibility. Product details for bank and broker RSPs are on the sister site savings.sg; the full comparison of term insurance plus investing separately is in Like-for-like comparison.

Choosing sub-funds: risk categories and minimum suggested holding periods

The investing horizon should match the sub-fund's risk profile. The LIA guide sets out risk categories and minimum suggested holding periods for common types of sub-fund (March 2026 edition):

The LIA cautions that this is only a rough guide and that the actual risk depends on how each fund invests; a fund that specialises in bonds below investment grade, for example, is high risk. The closer you get to needing the policy value, the more it usually makes sense to reduce risk.

Rebalancing: manual switching, automatic rebalancing and cost

Rebalancing means periodically bringing each asset back to its target weight (MoneySense recommends monitoring and rebalancing regularly). Suppose the target is 60% equity and 40% bonds, and a rise in equities shifts the weights to 68% and 32%; rebalancing means switching about 8 percentage points of value back into the bond sub-fund.

There are three common ways to rebalance in an ILP:

1. Fund switching: selling units in one sub-fund and buying units in another; most insurers allow a limited number of free switches each year and charge beyond that.
2. Changing the allocation of future premiums: some products let you change only the sub-funds that future premiums go into, without touching existing units; this adjusts more slowly but usually does not use up switches, subject to the product terms.
3. Automatic rebalancing: some products can bring weights back to target automatically at a set interval, and some offer risk-graded portfolios managed by external asset managers. Whether there is a charge and how often it runs are set out in the Product Summary.

A common approach is to rebalance at a fixed interval (such as once a year) or when weights drift beyond a preset band; frequent switching uses up free switches, and each switch is dealt at the price at the next valuation point.

When the rhythm is interrupted: premium holidays, top-ups and partial withdrawals

Regular investing depends on continued contributions, and the following actions change the rhythm:

Bonus units are often conditional on continued premiums and no withdrawals; see ILP charges. If your income changes, first compare the consequences of a premium holiday, a lower sum assured and a lower premium; see If you already hold an ILP.

Each year, when the policy statement arrives, check five things in order: the units bought and sold during the year; total charges; how far each sub-fund's actual weight has drifted from its target; whether your investment horizon and risk tolerance have changed; and whether the premiums remain affordable for the next few years. If you would like this interpreted against your own circumstances, you can register your request through the contact details on this site.