Best use of Surrender Values….Please Suggest!!

POSTED BY Nitin ON December 20, 2012 4:14 pm COMMENTS (25)

I am going to surrender my few LIC Jeevan Anand polices, thanks to JagoInvesters forum for opening my eyes.
Here are the details:

Total Paid amount: 4.3 lacs (9 Polices, paying from last 6 years)
Surrender Value: 2.6 lacs

Now the QUESTION is where to invest this lumpsum amount (2.6 lacs) for long term period to get maximum return.
Apart from this, I am planning to start:

(1) Term Insurance (HDFC C2P or Aviva iLife)

(2) PPF in SBI (Rs.5000)

(3) SIP in below funds using FundsIndia:
– Franklin India blue chip (Rs.3000)
– HDFC Equity (Rs.4000)
– IDFC Premier Equity (Rs.2000)

Requesting all senior members to please suggest best option to invest above surrender amount.

25 replies on this article “Best use of Surrender Values….Please Suggest!!”

  1. Nitin says:

    Thank you for your valuable suggestion.

  2. Dear Nitin, please continue with your existing allocation for the time being.

    Thanks

    Ashal

  3. Nitin says:

    Dear All,

    I am having one question regarding amount allocation in different MF schemes:
    Currently having SIP in below funds via FundsIndia:
    – Franklin India blue chip (Rs.2700)
    – HDFC Equity (Rs.3600)
    – SBI Emerging Business (Rs.2700)

    My question is:
    Is the allocation of amount in above schemes is correct in terms of long term investment prospective?

    I am asking this question because I have read in some other threads that:
    “Investment of 60-70% in large cap funds and rest in small- and mid-cap funds” will give high return in furture.

    Considering above statement, should I change amount allocation of above schemes like:
    – Franklin India blue chip (Rs.4200) instead of Rs. 2700
    – HDFC Equity (Rs.3600)
    – SBI Emerging Business (Rs.1200) instead of Rs. 2700
    Or
    Should I wait for 1 year with current allocation and change later after the performance analysis?

    Please guide!!

    1. Ramesh says:

      The total amount is much more important than all this supposedly fine-tuning.

  4. Nitin says:

    Thanks Ashal for your time and reply.

  5. Dear Nitin, you hacve invested in HDFC Eq. & Fr. Bluechip only so from diversification point of view I asked to invest in your existing funds & if you want to diversify a bit more, added Quantum LTEF also.

    So ultimately it’s for diversification purpose.

    Thanks

    Ashal

  6. Nitin says:

    @Ashal: What is the advantage of spliting surr. amount into 2-3 funds instead of a single fund only….it is because of diversification or something else?

    Just a correction in above, I haven’t invested in ‘Quantum Long Term Eq’ yet.

  7. Dear Nitin, please continue in your existing funds. Any debt fund ‘ll do. Just check the exit load of the debt fund. Please split the surrender amount into 3 part to invest in HDFC Eq. & Fr. Blue Chip & into Quantum Long Term Eq.

    Thanks

    Ashal

  8. Nitin says:

    Dear Ashal,

    As always, thanks for your reply.

    Just a question, since I already have SIP in 3 funds (mentioned above), so
    (1) Is it good to continue STP in existing funds like:
    – HDFC Cash Management Savings plan retail => HDFC Equiry
    OR
    – HDFC liquid fund => HDFC Equity
    OR
    – HDFC Short Term Opportunities fund => HDFC Equiry
    OR
    – Templeton Floating Rate Retail => Frankiln India Bluechip

    (2) Or should I go for another fund house for STP like:
    – Quantum Liquid fund => Quantum Long Ter, Eq. fund (As you suggested).

    (3) If your answer is continue with same fund house (HDFC/Franklin), then which is good complination out of options mentioned on Sr#(1).

  9. Dear Nitin, I’m giving below an example.

    You invest 100000 Rs. into Quantum Liquid fund. Now you start a wly STP of 5000 Rs. into Quantum Long Ter, Eq. fund. Now on wly basis, system ‘ll transfer 5000 Rs. from Liquid to LTEF.

    Thanks

    Ashal

  10. Nitin says:

    @Ramesh: Thank you for your suggestion.

    @Free Financial Calculators: Yes, I know I am taking long time its only because I already bearing loss while surrendering policy so this time don’t want to take action without proper understanding.

    Thank you for your valuable input and suggestion.

    Keep doing the good work.

  11. Nitin says:

    Let me rephrase my question:

    Which is the best dept fund & equity fund for STP purpose?

    I mean if I start STP for lump sum investment, which is the recommended Dept fund & Equity fund for long term investment?

    1. You can use HDFC liquid fund for STP into say HDFC Equity

      However there are tax implications.

      Read this carefully

      http://www.moneycontrol.com/news/mf-experts/systematic-transfer-plan-smart-way-to-investequities_698569.html

      Nitin, one suggestion if you dont mind. Dont wait too long for the best answer. Act now. Everybody makes mistakes and learns on the way

  12. Nitin says:

    Dear Ashal,

    Once again, thanks for your reply.

    Actually I am new in mutual funds , so I need to learn/read about STP & dept fund in details.
    It will be great if you give me a example like if you have to invest this amount then what will be your plan? (Something like Invest in XYZ debt fund and do STP after 1 month in abc funds). I want to invest it for long term 5-10 years.

    Just a disclose: Last month I already started a SIP in below funds via FundsIndia:
    – Franklin India blue chip (Rs.2700)
    – HDFC Equity (Rs.3600)
    – SBI Emerging Business (Rs.2700)

    I shall be grateful for your early & prompt response.

  13. Dear Nitin, in my personal opinion, please invest the amount into Debt funds & use STP to invest in Eq. MFs over the next 6-9 months period for full 2.5L Rs. alternatively as the amount is meant for long term (i assume 15-20Y), you may invest in single shot also.

    Thanks

    Ashal

  14. Nitin says:

    What is the best way to invest a lumpsum amount?

    Suggestion please!!

    1. Ramesh says:

      My way will be to:
      1. Analyse your total portfolio assets.
      2. Decide on a proper comfortable asset allocation percentages for the different asset classes.
      3. On basis of that, put the surrender value money directly into the relevant asset classes, without resorting to various types of transfers etc. If the equity asset class is very less than your comfortable allocation, then put the entire value in one go (= 1 lumpsum).

  15. Nitin says:

    Dear Friends,

    Awaiting for more suggestions to invest this amount (2.5 lakhs) as a lumpsum investment, please share your views.

    Thanks.

  16. Nitin says:

    @Vikas: Out of 4.3 lacs I will get only 2.6 lacs. So surrender value is 2.6 lacs.

    @Manish: Yes, you are right at the end of day its a money (no matter from where its comes).
    But points is that Since I already invested it somewhere and realized that will not get good return so better to invest it somewhere else after booking some loss.

    Hence mentioning it as a surrender value will give different treatment as comparied to simply ‘X’ amount (because of the loss factor)…..just my POV.

    Please guide how to invest it smartly to recover loss and get good return too.

  17. Nitin

    I can see some element of behavioural finance here , how does it matter from where the money has come , it might have come from surrender , some bonus or just you might have found it on road ..

    Now your question is this … “I have amount X , and how should I invest it for so and so purpose” .

    Right ? Do you agree with me ?

    Manish

  18. Vikas Ratnawat says:

    Hi Nitin,

    Please let me know what is “Surrender Value”.

    Is this extra amount ( 2.6 lacs ) you get???
    OR
    Out of 4.3 lacs you get only 2.6 lacs???

    Total Paid amount: 4.3 lacs (9 Polices, paying from last 6 years)
    Surrender Value: 2.6 lacs

  19. Nitin says:

    Dear Biswa Singh,

    Now I understand your points, though I need to learn bit more about STP.
    Thanks for your time.

    Dear All,

    Kindly share your views also if their is any other better alternative to invest that money.
    Looking forward for your kind sugesstions.

  20. Biswa Singh says:

    1. As you are planning to invest your money into different mutual funds via SIP what you can do is to open a debt fund and invest all your surrendered money to it. Now you will get interest on your money like any fixed deposit. You can then apply for STP (systematic transfer plan) from your debt fund to the other mutual funds the same SIP amount you have mentioned in your query.

    2. If you want to get secured return then you can open a tax saving fixed deposit of all your surrendered money. This lock in period for tax saving FD is 5 years so you can withdraw money before that.

  21. Nitin says:

    Dear Biswa Singh,

    Thanks for your sugesstion.

    Due to my limited knowledge, I am not able to fully understand your both sugesstions, it will be great if you elobrate it bit more like which debt fund, with 5 yr tax saving deposit etc etc

    Thanks.

  22. Biswa Singh says:

    There are many ways but the two that i can think are below:

    1. Open a debt fund, put all your money there and STP it to the other mutual funds that you want to open.

    2. You can also opt for 5 years tax saving deposit to to recover some amount that you lost.

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