Comments on Shyam's Column: Guaranteed Return Scheme…anyone?

Who knows where to download XRumer 5.0 Palladium? ...

2009-11-22T18:58:46.622+05:30

Who knows where to download XRumer 5.0 Palladium?
Help, please. All recommend this program to effectively advertise on the Internet, this is the best program!

Its not rocket science to find out ULIP is expensi...

2009-09-24T12:42:49.239+05:30

Its not rocket science to find out ULIP is expensive than MF + Term insurance. Investor should not opt for ULIP either for long term or short term ... Expenses are high and no flexibility at all. As

Thanks,but what i can do? alredy invest.

2009-03-08T11:54:58.909+05:30

Thanks,
but what i can do? alredy invest.

Hi Shyam, I found this term policy in BirlaSunLife...

2009-01-31T17:10:58.900+05:30

Hi Shyam,
I found this term policy in BirlaSunLife it might be good option for people who are thinking get some money back
https://www.birlasunlife.com/BirlaSunLife/Insurance/BSLI_MP/BSLI_InsPlans/Individual/Protection/bsl_premiumterm.aspx

One thing more, If you are a long term investor li...

2009-01-29T21:54:09.913+05:30

One thing more, If you are a long term investor like 5 years...preferably 10 years...you will find ULIP are better than ELSS or other mutual fund...If you are in for 3 years....ULIP is not for you.

I think it will make more sense if I talk with DAT...

2009-01-29T21:42:04.268+05:30

I think it will make more sense if I talk with DATA. Top Performing Mutual fund SBI contra, Reliance Growth, SBI Multiplier has given returns of 26%, 21%, 19% respectively anually during last 5 years.
Top Performing ULIP ICICI Pension Growth, ICICI Lifetime Growth, Kotak Growth has given returns of 27%, 26% and 20% respectively anually during last 5 years.
Data source moneycontrol.com, bajajcapital.com

Secondly, ULIP has attractive switch option. If someone has invested Rs. 10000 in ELSS 2 years ago, Say SBI, current value will be Rs. 8000, If one has invested 1 year ago, current value will be Rs. 4900. You have no control on ELSS. Its goes with market ..as there is lockin of 3 years...you cannot even withdraw.

However, If you are a investor..who knows about the market...you can switch from equity to Debt. When market is at LifeTime high..you can switch to debt so, what ever you had gained from Sensex 10K to 20 K, you can save this by simply switching online. when market is falling..you are safe....Its not always possible to time the market..but everyone was aware that market will fall from Feb 08-Dec08 and even now..but you are helpless in ELSS ..just watching your fund value going down...however if you smart investor..you need to make one switch to Debt fund and your gains are safe.

http://economictimes.indiatimes.com/LICs_Jeevan_Aa...

2009-01-29T21:14:54.789+05:30

http://economictimes.indiatimes.com/LICs_Jeevan_Aastha_may_collect_record_Rs_8000_cr/articleshow/4014081.cms

looks like this piece has initiated a vibrant deba...

2009-01-29T21:12:06.182+05:30

looks like this piece has initiated a vibrant debate already.

Manish:
Just checked your website - you seem to have done quite a bit of research yourself! nice to know that there's another 'Ghost Buster' out there!

Chandra:
I do not agree that ULIPs are safer in the long run! how could that be- afterall they invest your premiums in mutual funds! of course you could have a choice of picking the kind of funds that your ULIP will allocate your money into e.g. Pure Debt, Hybrid Debt & Equity, Pure Equity etc depending upon your risk appetite or "Life Stage" as they call it. If you have experienced lower returns from a mutual fund when compared to your ULIP, you must have picked a safe style for your ULIP's fund (e.g. 50% Debt, large cap only etc..) and a risky style for your mutual fund(e.g. Pure Equity, Mid cap only etc..). Obviously since the markets are in their doldrums, the latter would have lower cumulative returns 'as on date'. Then your finding would be the result of comparing apples to oranges.

This brings me to the second point. That is - no one seems to question how the hell the insurance companies are able to offer principal guarantee or minimum return guarantee!

Well, the guarantee exists for the first premium amount because they would invest your first premium (or entire premium in case of single premium plans) in high yielding debt (mostly AAA corporate bonds) . This means there is not going to be much of an upside (not comparable to equity) even though the ULIP products like RGF use 'the potential upside' as a carrot.

check this link for details on how LIC (and other Guaranteed return schemes) are able to launch these products:
http://economictimes.indiatimes.com/LICs_Jeevan_Aastha_may_collect_record_Rs_8000_cr/articleshow/4014081.cms

Vish:
i guess you are automatically asked to choose where your future premiums should be deployed at the time of applying for RGF (if you are enrolling fresh). So that's not a problem. but the issue I am trying to grapple with in the case of ULIPs is that they go against the basic principles of investment:

When you loose 20% of your premium in the first yr - that's a big hit that would take a long time to catch up with. Even in the later yrs you pay 'premium allocation' or 'policy administration' charges that would chop off 3%-6% p.a atleast for the 1st 5 yrs. This seems to be common phenomenon across annual premium ULIP products (irrespective of which company is offering them). These charges do not exempt you from the fund management fee (for the mutual fund into which your premiums will go). The question if you are anyway going to pay the fund management fee (which you would when you directly invest in these mutual funds), what are the other charges for? They only cripple you by reducing the money you are going to invest , upfront. The basic logic of time value of money says 'money lost today' is worth much more than 'money lost in future'. if you can earn 10% return p.a. by directly investing in a mutual fund, you would have to earn 15% p.a. or more in your ULIP because your investable amount gets reduced (by the charges) even before it can earn money for you! i.e. your money has to work so much harder !

Vardhan , Karthiik, Vish:
I am always hesitant to advice a good mutual fund because there is no fundamental data to base my recommendation on. I can look at their stock holdings in the portfolio but I dont know what that portfolio will look like a month from now. I can look at the fund manager track record but again he/she could quit anytime. same applies to 'track record of returns' or 'star ratings'. they are all so dynamic.

Manish has recommended Sundaram BNP tax saver - I too will vote for them based on my opinion that they are a conservative house. Anything they do they will atleast think about protecting your principal when they make their stock picks.

Hi Chandra,I am glad you expressed your views on t...

2009-01-29T18:52:25.866+05:30

Hi Chandra,

I am glad you expressed your views on the article. And then I did not know about "the 1 LAc in ELSS for 5 years" charges. But FYI, the 6% mentioned is for the RGF(not Lifelink) and if premium is 15,000 till 34,999 to be precise. Moreover, you have different premium bands.
What you are saying is for lakhs, for for a novice like me or most of them, this article definitely holds good who would go for 35k till 99,999 band.

ULIPS can be better but as of now ELSS would be a wise option in the long term for better returns as well as tax savings. Because once the market is up, ELSS would give you better returns and ULIPS would give the company better returns(witout over-ruling the idea of self-returns).

Please do some research and let us know which one you think to be better rather than just throwing comments and not giving a commendable solution.

Shyam, At the outset, I would like to thank you fo...

2009-01-29T18:28:58.721+05:30

Shyam,

At the outset, I would like to thank you for the article below. Of late, I was planning to get into the "RGF" scheme pushed and lured to me by some ICICI Pru Agent who never spoke of the 20% Premium Allocation Charges. But then he said there is no premium allocation charge for this. When I read the brochure it's written its not applicable for "regular premium" in this policy.
I wonder if this is comes under regular premium.But thanks to you now I am planning for an ELSS mutual fund investment.

But I would like to ask you something, i.e. as they are giving 4 free switches betweens various funds, so wouldn't it be good if after the first premium year with RGF, I switch to "Pension Maximiser" scheme that would allocate my units in the equity market(as said by them) as per the market scenario now???

Sir, I would be glad if you could give me your honest opinion/recos on which ELSS product(brand) would be good to take as per your experience.

one more point...please understand every investmen...

2009-01-29T18:21:04.780+05:30

one more point...please understand every investment, mutual fund and insurance company is in market to make profits...why scare people with the charges..we need to find a plan which has low charges but has the potential for higher returns..I think we don't mind paying 2 % if the returns are more than 12 % ..u still get 10%...
Every plan which is giving returns will have chagres..we have to find a plan which has low charge and provide good returns.

I have some comments about the article posted by P...

2009-01-29T18:13:59.965+05:30

I have some comments about the article posted by Posted by Shyam Pattabi regarding Jeevan Aastha and ICICI RGF.. Jeevan Aastha provides 8% assured returns for 10 year term...which are tax free. Give me one FD which provides net 8 % returns for 10 years.. FD provide 10 % returns only for 1-2 years and after 3 years they also provide 8% which are taxable ...so net return in hand is 6.5 - 7.5%.

Secondly, ICICI RGF is available with 10 products from ICICI not only two products mentioned here...even one product name is incorrect...If you invest in ICICI LifeLink product which is single premium...you have allocation charge of 2 % for amount between 1-5 lac and 0% for more than 5 LAc. secondly Policy adm charge is Rs. 840 per year not 6% in LifeLink...
Secondly, NAV of 15 is minimum assurance...If markets performs better, you get higher one...
Other point ELSS mutual fund also come with 2.25 - 2.5 % recucurring expense...have you ever read the offer document...which means if u invest 1 LAc in ELSS for 5 years..they will deduct 2500 per year every year...
Have you compared the returns of Mutual fund and ULIP in last 5 years..please do it...you will find ULIP are much safe in long run and provide better returns....

I need to invest around Rs 50000 for Tax saving pu...

2009-01-29T12:16:34.973+05:30

I need to invest around Rs 50000 for Tax saving purpose in mutual fund . Can you please suggest me a good return mutual fund with no hidden charges

Hi Shyam, This post is surely an eye opene...

2009-01-29T10:57:23.561+05:30

Hi Shyam,

This post is surely an eye opener for all those investors who blindly go by the pleasant sounding words.

I have made comparision between lot of pilicies that offer returns + Tax benefits but could not find one as their future benefits did not seem matching to the cost of living expected after 15 / 20 years.

Kindly advice us on a good ELSS. If you don't mind.

The explaination cant get better than this.India s...

2009-01-28T17:30:00.586+05:30

The explaination cant get better than this.

India still takes its decision on emotions and words like "guaranteed" and "assured" , they dont understand concept of purchasing power , compounding. They dont understand stock markets behaviour or cycles and this is what companies take benefit of .

I have cried all over my personal blog about why anyone in there senses must avoid LIC jeevan Astha or ICICI RGF , but do people listen , Jeevan astha is all set to create records for Great collections .

Links :

http://www.jagoinvestor.com/2008/12/jeevan-astha-another-idiotic-product.html

http://www.jagoinvestor.com/2009/01/icici-prudential-rgf-2-out-of-10.html

India is not becoming a "investing nation" , from "saving nation" , But still there is a long way to become a "smartly investing Nation"

Manish
http://www.jagoinvestor.com