Dear friends, Before 1 week I posted 1 question regarding the difference between ULIPs and SIPs. And I waited till date for someone reply on it. But no one did any comment on it. So I’d like to explain it for you… As we all know, “ULIPS” (unit linked insurance plans) are served by all the Insurance Companies across India and they are regulated by “IRDA” (Insurance Regulatory and Development Authority of India). It was one of the greatest inventions in the Insurance Industry, which allows its customers to get the benefit of stock market. Unit linked insurance plans (ULIPs) are a category of goal-based financial solutions that combine the safety of life insurance protection along with long term wealth creation opportunities. In ULIPs, a part of the premium goes towards providing you life cover &the remaining portion is invested in fund(s) which in turn is invested in stocks or bonds. The value of investments alters with the performance of the underlying fund opted by you. But today, lots of people are the victims of Miss-selling by insurance people. All Ulip plans have 3 or 5yr lock-in period. Several people don’t tell this and someone told that only 3yr you have to pay. The real factor is all this plans have minimum 5 to 10 yr premium payment term except for single premium plans. And another thing is, “Charges”. Some people didn’t even discuss about the charges to their customer’s and cheated them by giving heavy charging plans. In Ulip there is several kinds of charges, and which are usually levied in the first 5yrs. They are Premium allocation charges, policy administration charges, fund management charges, mortality charges, miscellaneous charges and switching charges (if needed). Seeing there is lots of malpractice is going, IRDA implemented some useful changes in Ulip plans and given strong regulations to all LI companies. Now all plans are serviced in a good manner and added more features and benefits to the customers. Now have a look at SIP (Systematic Investment Plans) in MFs (mutual funds), regulated by “SEBI” (Securities & Exchange Board of India).Under this Plan, investors invest a specific amount for a continuous period, at regular intervals. By doing this, the investor has the advantage of rupee cost averaging and it also helps him save, a fixed amount each month, compulsorily. When you opt for SIP, you automatically participate in the market swings. Your amount of investment remaining the same, you buy more number of units in a declining market and less number of units in a rising market, so that you do not panic in turbulent market conditions. As said earlier, SIP results in rupee cost averaging, which means that, when you invest consistently the same amount at regular intervals, your average cost per unit will always remain lower than the market price, irrespective of how the market is - rising, falling or fluctuating. Whereas, it will not be true for one time investment. A SIP investor gets phenomenal rate of return compared to a one - time investor. In mutual fund plan’s there is no entry load and no exit load (for withdrawals after 1 yr). Any person above 18 yrs & have bank account can join this plan. Can start by Investing minimum Rs.1000/ month. No medicals & simple joining formalities.. plans getting in short term & long term. High liquidity and transparency. All investments & earnings have income tax benefits. There is around 45MF companies and above 800 plans. Selecting our suitable plan is the only problem.
Posted on: Fri, 07 Jun 2013 11:48:40 +0000