How safe private insurance companies are?

Many people have this concern about taking policies from Private Insurance companies. Let us try to understand about the factors which takes care of financial stability and ability to repay back customers there money.

In reality the only things differentiates one insurance company from other is the service the provide, there settlement track record.

Want to know why Insurance is Important ? Read this

Private insurance companies

Solvency Margin

It indicates how solvent a company is, or how prepared it is to meet unforeseen exigencies. It is the extra capital that an insurance company is required to hold to meet all the claims which arise.

In other words, Solvency margin refers to the excess amount of asset the insurance company has to maintain over its liabilities. Basically, it is the amount the insurer has to stash away in order to pay the claims during emergency.

IRDA requires the insurance companies to maintain a particular level of solvency margin for their smooth functioning.

Why is Solvency Margin there?

Companies have Assets and Liabilities. In some adverse situation, Assets are used to payoff all the Liabilities. Suppose there is company which has assets of 100, and liabilities of 100. In ideal case it would be able to payback the liabilities. But what if some adverse situation occurs and liability increases unexpectedly.

In that case company will be declared Insolvent (Bankrupt). This will be a bad situation which every customer does not want to experience.

Thats the reason, Solvency margin comes into picture, The excess margin maintained by the company provides that extra cover which may be required in case some thing totally unexpected happens.

by the way, i am now on twitter, so you can follow me and get updates on twitter.

What is the current Solvency Margin?

Current Solvency Margin is at 150% for Life Insurance Companies. It means for every Rs 100 insured the Insurer should have 150 with them.

Does it mean customers are totally safe?

You must have understood Solvency margin till now, but what if some bad event of High Magnitude happens and then Liabilities of company (the claims they have to settle) crosses there total assets + extra margin, in that case they will not be able to pay back, but the chances of this happening is very very small, and generally Solvency margin takes care of it.

Some bad unexpected event like Earthquake or some terrorist attack which kills say 1000’s of people can dramatically increase Insurer’s Liability, but in most of the cases its always taken care by choosing adequate Solvency margin. But there are always that small percentage chances of the Failure which you have to live with and we cant do anything.

So what does it mean for us common Investors while choosing Insurance Products?

Solvency Margin has to be maintained by all the Insurance Companies in India whether its Private or Public sector. All the companies are at same level, Some of them are old, some are new, some are big and some are small, but its same for all and everything is under IRDA norms and scrutiny.

So decisions based on How safe or unsafe a company is not relevant now . Risk is with every company and that is equal for all.

So for people who are going to take Term Insurance, the best thing is to go with the cheapest price and good record of claim settlement. There are many new players in this market who are so new that we don’t have any long track record . like for Religare Aegon (which is my favorite).

So for term Insurance, just break your cover into 2 parts and take insurance from 2 companies to diversify the risk further.

Read tips while taking Term Insurance


This is what many people never knew and they take there decisions based on just trust and how long company has been in existence. Huh, people trusted Satyam and Lehman Brothers also, so what !!

All you want to know about “Jeevan Varsha Analysis”

Update : As pointed by Ranjan, there was a mistake in the analysis about the paying term of the policy, I have corrected it now. Please re-read the analysis.

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Today we will talk about the market product “Jeevan Varsha”, If you are a regular reader of this blog, by now you must have gained enough knowledge on how to evaluate a product like this, if not then go ahead and see.

Jeevan Varsha


You can see the features in detail here . Mainly there are 2 things .

Survival Benefits

  • 10% of the Sum Assured is payable at the end of 3 years.
  • 20% of the Sum Assured is payable at the end of 6 years.
  • 30% of the Sum Assured is payable at the end of 9 years
  • 40% of the Sum Assured is payable together with Guaranteed Additions, and Loyalty Addition, if any, at the end of 12 years.

Guaranteed Addition

The policy provides for Guaranteed Addition at the following rates

  • Rs. 65 per thousand Sum Assured per year for a policy of 9 years term.
  • Rs. 70 per thousand Sum Assured per year for a policy of 12 years term

We will analyse the policy for 12 yrs here . We will talk about two things using an example.

1. Returns from this Policy at the End

2. Can we do better than this policy with same amount of premium [ you know we can 😉 ]

Example : Lets take an example of a person 30 yrs, who takes this policy for Rs 5 Lacs and wants to make yearly payment.

Tenure of Policy : 12 yrs
Tenure of Payments : 9 yrs
Sum Assured (SA) : Rs 5 Lacs
Premium : Rs 78500 (calculated adjusting Mode rebate and High Sum assured Rebate)

Method of calculation of Premium

Total Annual premium for 30 yrs old for 12 yrs policy = 165.30
Mode Rebate of 2%
High Sum Assured rebate of Rs.5 .

So Total premium = (500000/1000)*(165.3 – 5) * .98 = 78547.0 (So i took it approx 78500 .

In Case of Survival , he will get

In 3rd Year : Rs.50,000 (10% of SA)
In 6th Year : Rs 1,00,000 (20%)
In 9th Year : Rs 1,50,000 (30%)
In 12 Year : Rs 6,20,000 [2,00,000 (40%) + 4,20,000 (70 for per 1000 for 12 yrs , 70 * 12 * 5,00,000/1000 ]
Returns from this Policy at the End

Now how do we calculate the returns from this policy for this person. There are two way (Models) of doing this . One way is that we can just add the amount of money he receives from the policy and see how much total money he gets at the end of 12th year.

The other way is to assume that he is investing his money (which he gets at 3rd , 6th and 9th) year somewhere , so that he can get it at the end of 12th year (this way is a better way of calculating) .

First Model : Amount is just added

Total Sum received = 50,000 + 1,00,000 + 1,50,000 + 6,20,000
= 9,20,000

Second Model :

Amount received is invested @8% such that he recives it at 12th yr . (for 9 yrs , 6yrs and 3 yrs)

50,000 after 9 yrs : 99950 [ 50,000 * (1.08)^ 9 ]
1,00,000 after 6 yrs : 158687 [ 1,00,000 * (1.08)^ 6 ]
1,50,000 after 9 yrs : 188,957 [ 1,50,000 * (1.08)^ 3 ]
6,20,000 : 6,20,000

Total = 99950 + 158687 + 188,957 + 620000
= 10,67,594

We have not consider Loyalty additions and lets us see what are the reasons?

Bonus’s and Loyalty additions are not guaranteed and thats the reason you cant claim it as entitlements. These components are not backed by the sovereign guarantee that extends to the sum assured and guaranteed additions components.

In the (unlikely) event of Company going insolvent, you’ll only be entitled to the sum assured, at the time of death or on maturity, and the guaranteed additions thereon.

This applies to any Insurance company with products giving Loyalty Bonus as one of the components.

Now lets calculate the CAGR return from this policy, We have to use annuity formula for it for 9 yrs and then simple compound interest formula for 3 yrs. The formula would be
A = [ annuity part for 9 yrs] * [compound interest part 3 yrs ]

A = [ P * [{(1+i)^9 – 1 }/i] * (1+i) ] * (1+i)^3, where

A = Total money he accumulated till now .
P = yearly Premium (78,500)
i = CAGR return which we want to find out .

What have we done here?

The person we have calculated annuity returns for first 9 yrs (because he is making the payments for 9 yrs), then he does not pay anything for 3 yrs, so we have calculated compound interest for next 3 yrs. It may be a bit complicated to understand i know.


For First Model

The value of i which satisfies this equation is 3.3%, Yes you read correct. But this is not a good way of seeing things, so lets look at Second Model.

>>> (78500 * (1+.033) * ((1+.033)**9 – 1)/.033)*(1+.033)**3

For Second Model

The value of i which satisfies this equation is 5.1% . This is the true representative of returns .

>>> (78500 * (1+.051) * ((1+.051)**9 – 1)/.051)*(1+.051)**3

thanks to “Raja” for correcting my calculation

Which model is more better?

So lets take the Second model as the standard model for evaluation, So we conclude that returns from this policy would be around 5.1% considering

Consumer is smart enough to invest the proceeds again into some debt product using which he can get 8% returns .

Note that this return is considering there is no Loyalty Additions because they were not assured.

Total payment in 12 yrs was 12 * 79,000 = 9.48 lacs and at the end of 12 yrs he gets

9.2 Lacs (First model , 50k , 1 lacs , 1.5 lacs and 6.2 lacs, not reinvestment)


11.78 Lacs (If proceeds are reinvested)

Some policy lovers would argue i am not considering Insurance and tax benefit part.

Regarding Tax benefit : We will compare this product with PPF, Mutual funds and Term Insurance and they also have 80C benefit with them, so tax benefit is something common with all, so there is nothing special with this policy regarding Tax benefits. For Insurance I will cover it in next part which we will discuss.

Can we do better than this policy with same amount of premium

Let us first understand the Insurance part.

The sum Assured is 5 lacs, so if a person dies before 3 yrs, he gets 5 lacs, if he dies after 3rd yr, he will also get the Guaranteed additions. So the maximum a person can get by dying is in 12 yr, in that case he will get 9,20,000 (50k, 1 lacs, 1.5 lacs, 2 lacs + 4.2 lacs GA, No loyalty additions in this case).

So lets be graceful and say that this person will get 9.2 lacs in case he dies.

The first thing to note here is Insurance cover, I don’t know what will happen to the family of this person if they get 9.2 lacs as Insurance money. If a person has the ability to pay 78,500 per Annam as premium, a wild guess for his Insurance cover is around 30-35 lacs at least. So the Insurance cover is not enough

Now lets see, what I recommend for this person who pays 78,500 per year to take care of his Insurance of 9.2 lacs.

So a person who pays 78,500 per year, can divide his 78,500 yearly payment into two parts, For insurance and Investment separately. You know what i would suggest, its simple Term Insurance and Investment in PPF or MF’s

Read Importance of Insurance (Term Insurance)
Read about Mutual funds and how to choose them

Let us first take care of his Insurance part, though he is covered of max 9.2 lacs just for 12 yrs, we are not that uncaring in nature to under-insure him, we understand importance of Insurance and his Family needs and the tenure of cover should be 25-30 yrs, not just 12 yrs, His Insurance requirement is around 30-40 lacs and we will provide it anyhow, even if the investments are to be compromised .

So we will try to provide him 35 lacs cover for 30 yrs.

For Defensive Investor


Term Insurance of 35 lacs for 30 yrs : Rs 9,600 (Aegon Religare)


So he is left with 68,900 (78,500 – 9,600), for his investments. If he invests this in PPF (though there is limit of 70,000, lets assume he can do it). he will get around 14.12 lacs (annuity formula) at the end of 12th year.

He can then take out 1.73 lacs out of this to fund for his Insurance premium for next 18 yrs left, still the amount left would be better than the Jeevan Varsha. The other alternative is to keep the money in some Fixed Deposit and keep using the interest amount to fund Insurance premium for next 18 yrs.

There can be other ways of doing it, but the main point is that we have done better than Jeevan Varsha in all respects.

This investor can also use balanced funds for investments.

For Aggressive Investor


Term Insurance of 35 lacs for 30 yrs : Rs 9,600 (Aegon Religare)


He can invest 68,900 yearly (5741 per month) left in Equity Diversified Mutual funds using SIP every money month in max 3-4 mutual funds.

He should expect to get around 12% compounded returns over 12 yrs , and your money should grow to 18.5 lacs (12% is again not guaranteed , its not based on Historical returns )

Summary and Notes

We have seen the policy from a broad level and see its main components, we have not seen small details, because they are not significant enough to change the views anyways. We have seen how its too complicated and provides returns which are less than what you can easily get in PPF.


Term Insurance + (MF or PPF) is a great combination, its easy to understand .The main this is to first Insurance your self Sufficiently and then think about investments.

That’s what i had to say for the day, don’t forget to recommend this blog to others so that they can also benefit. Also be sure to follow me on twitter here in case you are on twitter.

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Disclaimer : The views on this article are my personal. All the things discussed on this article are for learning purpose only. This blog will not be responsible for your investment decisions. There may be some mistakes while calculations, so please do your own calculations for taking any decisions. thanks

Investor alert – Beware of Mis-selling of financial products

From many years there has been a lot of mis-selling happening in some products and investors are getting trapped in it. In this article I’m going to tell you about mis-selling of financial products so that you avoid getting into this trap.

beware of Mis-selling

What is Mis-selling ?

Mis-selling means selling a product by giving a wrong picture of a product , it may include .

  • Giving Wrong Information
  • Giving Unrealistic Information (some times based on previous performance)
  • Not giving full information about the product.
  • Selling the product with proper information, even if it does not fit customers requirement.

Why is mis-selling happens?

Mis-selling happens because of following reasons

Low Awareness : Financial awareness is very low in our country and that’s the reason we do not understand products and how they can fit our requirement, Agents put a picture of a product in such a way that it looks the best product for us.

Competitive environment and Sales Targets : There is lot of pressure on agents and manager to show performance and sell products to meet there targets because of which mis-selling happens.

Last minute “Tax Rush” : People in India do not plan there Investments in Advance and hence at last moment they buy product just to save tax and which does not fit there requirement, and sellers take advantage of this.

Examples of Mis-sellings


ULIPS are the classic example for mis-selling in this country, ULIPS are often projected as high growth, less risky products with “Insurance” in build. Ofter agents promise that ULIPS are risk free and it wont drop more than x% and return at least 10-15-20% in long run, which is nothing but marketing gimmick.

I have seen at least 100 people who have bought ULIPS and they don’t need it after 3rd year. They do not know why they bought it other than tax saving and when talked about how much Insurance cover they have, no one had more than 5 lacs.

One of my friend has ULIP for 50 yrs !!! not sure what he will do !! One of my friend has insurance of 1.25 lacs !! Insurance of 1.25 lacs !! Really, what does that mean … His/her life cover is just 1.25 lacs, he earns 5 lacs yearly !!

Read : who needs ULIPS ?

Mutual Funds

Even mutual funds are mis-sold, that happens when a agent recommends you a mutual fund which does not fit your requirement. Often agents recommend mutual funds which are too risky for customers without understanding there risk-appetite.

Read how to choose mutual fund ?


One of the worst thing which has happened in India is that Agents never tell customers about Term-insurance, which is ultimate requirement for Indians, This happens because of penny like commission agents get on Term policies, that’s the reason they often lure customers with products like ULIPS and Endowment or Money back policies, which do not insure people to the extent they need it.

Agents don’t explain the importance of Insurance and only make them feel that they loose money in Term Insurance and we get lured by it, because we love “not loosing money” more than “little chances of dying and our families suffering”, this happens because people do not have enough foresight to look into future and question themselves about what will happen if they die without giving enough cover to there families.

Watch this video to know a horrific story of an insurance mis-selling:

Read why Life Insurance is so important

So like this Mis-selling happens in many products.

What can we do and should do?

“Prevention is better than cure”, this saying also applies in Investing, I know of people who took wrong products and then have to live with it for 10-20- years like Endowment plans. (Read why Endowment plans are not good)

So the only thing we can do is to educate our self to the level where no one can take advantage of our ignorance. Once you come to a level, where you understand importance of things in investing and managing you money, then no one can mis-sell you the products.

One of the recent product which i will categorise in Misold category is “Jeevan astha”, The reason I will say it was mis-sold is because it tried to put its picture in a very fuzzy way and tried to put things which were confusing to general public.


Don’t Take any product just because it look good or is recommended by someone (not even me). Do your research and do some study, it does not take more than 1 hr to search the net and read about it, or ask some knowledgeable person whom you trust about the product.

1 or 2 hrs to study can save you pain of years, So don’t be lazy, when it comes to money no one is yours, its only you who can save you from mis-selling.

So wake up .. Jago Investor 🙂 Jago !!

Insurance Presentation

I have created a small and simple presentation for newbies regarding Life and Health Insurance . It will help new people to understand the importance of Insurance .

Search within You ..

I was watching a seminar video on my laptop today which was a trading seminar conducted in US, the speaker was an American.

In the middle of the seminar he presented a small story which was from Hindu Mythology which made me feel good, I am putting it here word by word after finding it from net (so that I don’t have to type all myself).

search within you

There was once a time when all human beings were gods, but they so abused their divinity that Brahma, the chief god, decided to take it away from them and hide it where it could never be found.
Where to hide their divinity was the question.

So Brahma called a council of the gods to help him decide. “Let’s bury it deep in the earth,” said the gods. But Brahma answered, “No, that will not do because humans will dig into the earth and find it.”

Then the gods said, “Let’s sink it in the deepest ocean.” But Brahma said, “No, not there, for they will learn to dive into the ocean and will find it.” Then the gods said, “Let’s take it to the top of the highest mountain and hide it there.” But once again Brahma replied, “No, that will not do either, because they will eventually climb every mountain and once again take up their divinity.”

Then the gods gave up and said, “We do not know where to hide it, because it seems that there is no place on earth or in the sea that human beings will not eventually reach.”

Brahma thought for a long time and then said, “Here is what we will do. We will hide their divinity deep in the center of their own being, for humans will never think to look for it there.”

All the gods agreed that this was the perfect hiding place, and the deed was done. And since that time humans have been going up and down the earth, digging, diving, climbing, and exploring–searching for something already within themselves.

What does this teach us?

In life we have all the power to achieve something we want, we cant get help from some one, we can get tools, we can get support or for that matter any damn thing, but what is needed for success lies with us only, So don’t hunt for things outside, first know yourself.

“Its only you who can change things.”

How do I relate this to Investing and Money Management?

Whatever it takes to grow your money, do better investments or take informed decisions, Its within you, you just need to explore it, You can read stuff on this blog or anywhere else, but the real wisdom lies within you, you have to work hard on it.

I know nothing spacial or advanced things, I know things which any one can learn, The only difference can be my willingness to learn and make the difference and confidence. You can do it to. Just make sure you have the fire to learn and see within you and have confidence.

Just like a good cook doesn’t need great ingredients to make good food, he can make great things out of simple and basic stuff, the same way, we don’t need fancy products for our investments, Even if we have basic products we can utilize them well and create wonders, Only the knowledge and willing to do is required. Its within you, search for it ..

Please leave your comments on the blog, on your view and whether you liked the articles or not. That way I can know atleast that people like my articles or not.

Leave Travel Allowances and medial Reimbursements – The tax free allowances

As we are in mid Feb of the year and its tax time, I thought to talk a bit on LTA and Medical reimbursement benefits. Though many of you might already know about it, let me go over it in brief for readers who have less knowledge about it.

Leave travel allowance

What is LTA ?

As the name suggests, LTA i.e Leave Travel Allowance is an allowance that an employee receives form his employer for his traveling expenses while he/she is on leave. This allowance is given only for the domestic traveling, international traveling is not covered in this allowance.

There are normally two situations when employee gets this allowance :

#1. Employee receives this allowance while traveling alone or with family or dependents from his current employer.

#2. Employee receives this allowance while traveling alone or with family or dependents from his former employer after retirement or termination of job.

It is the benefit given to a salaried employee and you can claim travel expenses from any one journey in a year. Lets see some important features of this allowance:

Features of LTA

  • There is a block of 4 yrs decided by govt ( current block is 2006-2009). In a block you can claim LTA for any two years. For other 2 yrs you cant claim it, so total 50,000 will be taxable in those 2 yrs.
  • These blocks are not financial years (April 1 to March 31); they are calendar years (January 1 to December 31).
  • If your LTA is not utilized, it gets added to your salary and you will be taxed on it.
  • LTA covers travel for yourself and your family. Family, in this case, includes yourself, parents, siblings dependent on you, spouse (even if your spouse is working) and children.
  • The entire cost of the holiday is not covered. Only the travel costs are covered. So, whether you fly, hop on to a train or take public transport, you will have to show the ticket to claim your LTA. This means you will need to keep your air, rail or public transport ticket.
  • If an employee doesn’t claim once or twice in a block year, he/she can carry forward one claim to the next block year. But the condition is he/she has to claim for that allowance in the first year only of that particular block year.
  • If husband and wife both are receiving LTA then they can claim for the allowance in the same year but for different destinations.

Restrictions on claiming LTA

  • You can claim on only twice in a block year
  • Only actual cost of traveling is covered in this allowance
  • You cannot claim LTA 2 times in a year.
  • If the children are born after 1 October 1998 then you can claim for only 2 children’s traveling expenses. There are no restrictions for the children born before 1 October 1998.

Watch this video of rules and exemptions of LTA:

How much amount can claim under this allowance to get tax benefit?

You have a limit up to which you can claim your spent amount on LTA and medical bills and save tax on that part. If you didn’t claim it, for that much amount you will be taxed .

Limit for LTA : 50,000 per year
Limit for Medical Bills : Rs 15,000 per year

So from your total salary, you can save tax on this 65000 if you want, if you don’t claim it, you will have to pay tax on this part .

Medical Reimbursement

You can also claim deductions on the medical bills for medicines and doctor visits. You just have to get the bills and submit a proofs .

The bills can be in the name of you or your dependents .

Final Note : Utilizing this benefit just requires you to keep the documents ready. many people do not claim this benefit because they are too lazy of keep the documents safe. Don’t be lazy …

What is mean by Risk Appetite? What determines Risk-appetite?

Have you heard the word “Risk Apetite”?

You might have heard this word from your mutual funds agent, your Ulip agent, your stock broker, from analysts giving tips or any other place, we hear the word and then we feel we understand it. may be you understand it, But how do you define it?

risk appetite

One of the reader asked me to include this in my article and it seemed a good idea to me. Before writing this article, I had a good understanding and explanation of “What is Risk-appetite”? but instead of using my words I thought it would be a good idea to surf the net and try to find some material on it to help it write article. As expected, each one was totally correct, but not easy to understand by common public.

So at last I thought I should write it the way I see it and feel it. One of a simple funda I apply in my life is “if its complicated, its not worth”, So let me start this small explanation.

What is Risk appetite?

Risk appetite is the amount of risk you can take on your investment. It is the point till which you feel that you should be in the game because still in the long run you will be rewarded finally. Till that point there will not be enough change in your mental state.

The moment it reaches a point from where you feel like getting out is the best thing you can do, That is the point where you accept that you were wrong at the time of investment. that’s your Risk appetite point. Now this is for a situation where you can not decide in advance about your risk.

Lets see a Psychological aspect of this, When you see your money increase or decrease it has direct relationship with your emotional state. If your money keeps increasing, you will feel euphoria and get excited, you will be on top, and when you see it decrease or going down day by day. Our emotions guide us in our life, and they are very helpful in your financial life (to determine risk).

Lets see an example :

Ajay and Manish invested 100 in Share A, After some days the value dropper to 90, at this point both were calm, and accepted that this happened because of market volatility and its totally normal. After some more days price went down to 70. At this point Ajay thinks starts feeling oohh.. and oucch.. in his stomach.

This is the point where his emotional pain increases to a point where he can no longer stay with this investment. That’s the risk Appetite for Ajay. whereas Manish is not affected that much, still he can take loss of 20 more, only where prices drop to 50, he will feel jitters.

What determines the Risk-appetite?

Risk Appetite is determined from many factors like Your Expectations, Your current Situations and your past experiences.

Your Expectations

You risk appetite has to be proportional to your expectation. If you want more you Will have to take more risk.

In the above example, Ajay will exit the investment and take Rs.30 loss, but what if Shares drop to 60 and then starts moving up and up and finally reaches 130. Who will make profit. The person who had more risk-appetite.

Your Current Situations

Your current situations determine your risk appetite, If you are sound financially and can afford to loose more, you can have high risk appetite and vice versa. A person with a family to support will have less risk appetite than some one who is is totally independent and has all his salary to spend on his own.

Your Past Experience

Obviously, what happened in past with you in different situations will determine your future decisions. People who lost lot of money by investing in Jan 2008 will now have less risk-appetite, because next when they invest there money somewhere, they will get panicked easily by a small drop and hence may get out fast.

Where as a person who made great money in 2003-2007 bull markets will have high risk appetite.

I personally like Equity a lot, the reason may be because I want to make lots of money fast (expectations), I can afford to loose some money currently because of less responsibilities (current situations), and because I have made some (very small number) of quick profits (past experience).

What is good? High or Low Risk Appetite?

Its a personal thing, There is nothing like good or bad. Its a subjective matter. At last everything boils down to “You get what you wanted”, It must give you emotional satisfaction and joy.

There are people who are fine with 9% return per Annam and there are people who are not even satisfied with 20% returns.

What is Risk Factor of a Product?

Many people do not understand what is there risk appetite, I have friends who invested in Dec 2007 in ELSS funds, and cried a lot after it went down by 50%. The reason was they never understood the risk factors. I also saw my investments drop to same levels, but my mental state was not affected because I knew that it was possible with mutual funds and before investing I had accepted that if it happens, Its fine.

Risk and returns are always proportional. If A gives more returns than B, than A has to be more risky than B.

Generally people choose a product which matches there return expectation and then compromise with the risk and then later when there is loss more then there risk appetite, they cry.

The better thing would be to choose some thing which matches your risk-appetite on risk side and then accept that you deserve the returns provided by the product.

I know people who want more than 12% returns and also don’t want to see there investments see any negative returns ever. they are totally foolish to expect this. This will not happen.

Also I know people who are ready to see there investments dip by 30-40% with happiness but they only invest in PPF or bank FD’s, these people are bigger fool than former one;s, by not utilizing the equity power.

I hope you got all of your answers. If you still have any query feel free to ask us. You can leave your doubt in the comment section.

How to manage ULIPS ? – Tips to become a smart investor

I am finally back from vacation, I feel bad for not writing anything for these 11 days .. I have written a post on GOLD Breakout here , People interested in investing in GOLD may be interested. Let me talk about IRR and ULIPS today.

When we see talk about ULIPS, people generally see its returns over some years , where as its not the true indicator for its actual returns , What we need to see is called IRR.
What are ULIPS ? , read here


What is IRR ?

Actually IRR is not only related to ULIPS, its a general concept. IRR is Internal rate of Return, It means returns after adjusting all the costs and expenses. IRR alone is not a single thing we should look at, Its calculated by assuming fixed rate of return like 6 or 10%. The other things to look are its actual performance too.

What are good ULIPS in markets currently ?

Some weeks back there are was a survey and study by outlook money on best Ulips, Birla Sun Life’s ClassicLife Premier and Kotak Life’s, Long Life Wealth Plus were some top funds compared on the basis of IRR. this article talks about the best ULIPS in detail, click on this to read more.

Full article related to ULIPS can be read here

Understand , Choosing a good ULIP is just 5-10% , the main part is how your manage it . how to take care of the advantages provided by ULIP, If you just want to buy a ULIP and sleep for 10 yrs , ULIPS is not for you then . you must buy Mutual funds Instead .

Manging a ULIP is the main part , If you manage a bad ULIP very well , you can earn good returns, but you can loose money by buying Best Ulip in markets and mismanaging it .

How to manage a ULIP ?

Managing a ULIP over a long term is very simple but not easy . You have to do some simple things . Always use switch facility when you anticipate the opportunity .

When you see markets are very high and there is lot of euphoria in market , Decrease your Equity allocation and shift it to Debt . And when you see dull ness in market and everybody is too afraid in markets its the time to shift your money in Equity .

Watch this video to learn how to manage ULIPS:

How to make sure that this is done easily ?

You should find out your Equity : Debt allocation ratio which suits you , which is comfortable for your risk appetite . Once you choose it . Make sure you maintain it once it goes out of sync . So suppose you decide that your Equity:Debt ratio will always be 75:25 . and suppose after an year , you see that it has changed to 65:35 . You should shift some of your Debt part to Equity and bring it back to 75:25 .

You can read how Equity Debt rebalancing helps in long term

This way you will make sure that if Equity has gone up (because if good market performance) , you are shifting some money back to Debt (because now chances to correction is high) and vice versa .

The main advantage of ULIPS is the you can shift between Equity and Debt without any tax liabilities , If you buy Mutual funds and do it , you will pay tax every time you buy and sell it in short time frame (1 yrs) . So until you utilize Switch facility well enough in ULIPS , you are not taking best advantage from your ULIPS .

So as a general rule :

– Increase your Debt allocation once markets are too high and every body is rushing to buy shares in stock markets .
– Increase your Equity allocation after markets are down a lot and there is lot of fear among investors (this is a good time to buy cheap stocks).
– Increase your Debt if you are too confused about what will happen .

Final Note :

If you cant invest for more than 10 yrs and cant look after switch facility and cant monitor markets at broad level , You should stay away from ULIPS, the best thing for you would be to invest in PPF each year and invest in Equity Diversified Mutual funds through SIP every month and review it at least once a year .

Please dont buy ULIPS for just tax savings , dont get out of it in 3-5 yrs . there is 3 yrs locking , but even if you get out in 4th or 5th year , there are heavy penalties you have to pay to get out , which your agent never tells you , Only after 5th year there are free exits .

ULIPS are not bad products , they are only bad if you dont manage it well and buy them for wrong reasons .

The basics of Trading with example of Reliance – For beginners

What is Trading?

I see many people who want to try there hands in trading .

Trading means buying and selling something with a short tenure in mind. Short tenure can be day, week or months. You can trade Stocks, Derivatives like Futures or Options or you can try out Commodities or currencies too.

The sad part is that many people just enter this trading business without much preparation and knowledge and burn there hands like anything. they continue loosing money every day, week, month and cant figure out why they are loosing.


Understand some things :

Trading is a profession, and its highly rewarding in every ways. BUT !! Trading is one of the hardest thing one can ever attempt, trading is simple but not easy. It takes years for one to master it and become successful as a trader.

If you are trying to learn trading and want to do this in your life. I can suggest somethings:

  • Start Learning about markets and do it for at least 1 year (not 1 month)
  • Learn Technical Analysis and try to do some analysis on your own.
  • Read good books and make sure you have read it really well.

Once you have done this. Then you should paper trade for some time, may be 2 months. After you have paper traded and can see that you can trade well on paper, then start with small money (you must be ready to loose this money) … Do some real trading with this money and see how you perform.

Trading is a highly rewarding and satisfying profession. You can earn good money and you are your own boss. Trading can be fun and challenging. But Trading is the most challenging and highly risky profession one can attempt as I already said.

I have put up a simple Technical Analysis Example for Reliance, It discusses buying or selling Signal for Reliance in coming days. You can see it here

Why Technical Analysis?

Technical analysis helps in taking much better decisions for buying and selling. Its a must for short term traders, however it also helps people who have longer time horizon, With Technical Analysis you can make better entries, exits and manage your decisions well.

Some reading Material for people who want to learn technical Analysis is here



Your investment must be the way you want your life to be – Simple and Easy.

Keep it Simple Please

Lot of people thinks that if they choose complex investment products then they can generate a good return. But then key to successful investment is make it as simple and easy as you want your life to be.

There are many products available in markets , Some are extremely easy to understand and strongest. While others are complex and on an average not very easy to understand by common public.

Simple and Easy Investment

In Life, simple things works best. We all want our lives to be simple and easy, We don’t want lots of complications. In the same way we should use simple products while choosing our investments. Simple things works in the best manner.

There is a tendency of creating complex products because general public feels, that because they are complex and not easy to understand, they must be working very differently and in a smart way. This is far from truth.

Easy to understand products like Term Plans, PPF and Mutual funds works brilliantly. You don’t need ULIPS or product like Jeevan Astha and Endowment plans with lots of stupid clauses.

What happens when u choose simple products?

Your life is easy, you can understand them better, track them better and change it in a much better way.

Imagine a person A with ULIP or Endowment policy for Insurance needs and B with Term Insurance.

What are the benefits B enjoys?

– He understands every things about his products the reason being there is very less to understand. (If you die, your family gets money, if you don’t, you get nothing).

– He can choose to stop his stop his policy any time he wants (if he does not feel the requirement)

– He can change it to some other policy later in life if he wants.

There are many things like this, where as in ULIPS and Endowment policies , people are stuck with no mercy if they cant pay premiums some 2-3 yrs in a row. There are too many clauses and different types of sum assured, and things like those.

What is the Learning?

Take easy to understand and simple products which look Plain Vanilla, Complex products have nothing extra than complexity. Just make sure you understand easy products well and how to use them well. Your investing life would look much like your investments. Keep them Simple.