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POSTED BY ON September 28, 2010 7:18 pm COMMENTS (5)
One agent suggested to invest lumpsum into Reliance MIP (say abour 3 lacs) and choose the growth option. After one year, go for a SWP from the scheme ( of about 3000 rs) investing the same as SIP in an equity fund to get a balanced mix of debt/equity. Your comments on this is most welcome
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Tx Hemant
Why Agents are Mis-selling MIPs now a days
After the ban of entry load since August 2009, Suddenly MIPs have become one of the most recommended product by Mutual Fund Distributors. Is MIP one of the best product for investor? Frankly speaking, the intention of distributors is not to offer the best product to investors but the intentions is to make the most from the clients. MIPs now offer more commission to mutual fund distributor than Equity Funds STP (Systematic Transfer Plan) to Equity through MIP is again a very expensive thing for investor but very lucrative for Agent.
From the last 1 Year, the corpus of MIP schemes have seen a huge inflow all over India. Last year, the total industry AUM was close to Rs. 3700 crore and today it is well over 24500 crore. In this entire period, equity funds AUM have gone down. Now when the intentions itself are not good, needless to say that the outcome will be right. Many investors are not aware that there is an EXIT Load of 1% in almost all MIPs if you were to withdraw before one year & in some cases even 1.5 years.
Make no mistake in choosing MIPs. It is better to invest only if you need it. Don’t use it as parking investment as it could be costly mistake.
You will pay commissions twice – once while getting into the MIP (REL MIP btw, currently is giving 1-1.5% upfront commissions) and then again when getting into the equity fund (again, 0.5% to 1%). You don’t see it in your fund NAV but it is something that is being paid through the management charges.
Never transfer (STP) from MIP plans to Equity plans. Why? MIP already has about 20% equity. Better to STP from a Liquid fund or a floater fund into an equity plan.
Also note – why is he asking you to do this after 1 year? Reliance MIP has an exit load of 1% if you leave earlier. If you want to do something like this consider buying a Reliance Short Term plan (no exit load) and transferring slowly into an equity fund starting now (why wait a year)
That was comprehensive.. tx Deepak
Dear friends,
I am an investment consultant.After looking into your agents proposal i feel its a good plan if you are retired or abt to retire.
1.Invest in MIP:-Its a great concept.But you need to have a time frame of atleast 2 years,as there might be a phase of low return if the interest rate is going north.
2.SWP-systematic withdrawal plan- He might have said STP{systematic transfer plan}.There is no problem in doing STP for a certain amt if market is bad.As after one year no exit load is there.I hope ur agent might have studied ur requirements.
@deepak!
Its not abt how much an agent getting remuneration,its abt whether the need of the client is achieved.Short term plan gives 5% annually.Some fund might give 3% qly over a particular period.Hereby paying an exit load of 1% is lucrative for that investor.
Now i believe only the serious people who got the knowledge and experience is surviving this era.70 % quit this business.If investment community is good themselves ,then why there is no domestic money in the current market?
PLS DONT ALWAYS THINK NEGATIVE OF CONSULTANTS.THEY ARE ALSO DOING THIS AS THEIR CAREER.