HDFC SL Crest Investment Plan? Should you invest or not ?

POSTED BY Zaib ON January 26, 2011 12:33 pm COMMENTS (28)

I want to ask a question regarding HDFC SL Crest Investment Plan? Please help . This is my situation !

I invested today in 3 mutual funds, namely HDFC Top 200, DSPBR Equity and Reliance Banking Retail-G. During the discussion with the financial planner, he introduced me to this HDFC SL Crest Investment Plan.

http://www.hdfclife.com/products/SavingsPlans/HDFCSLCrest.aspx

Now he told me HDFC SL Crest benefits and all (i.e. highest NAV guaranteed, etc.), but still I would like to get an expert opinion as to how this plan is. It looks quite good from the reviews from some of the websites. Here are those

http://economictimes.indiatimes.com/features/investors-guide/hdfc-sl-crest-tops-guaranteed-nav-plans/articleshow/6540546.cms

http://www.daytradingshares.com/income_and_taxes/2010/HDFC_SL_CREST_Tops_guaranteed_NAV_plans.html

Please advise me about HDFC SL Crest and let me know how I should move forward with my investments ? Is HDFC SL Crest a good product or not ?

Ahmad Zaib.

28 replies on this article “HDFC SL Crest Investment Plan? Should you invest or not ?”

  1. ghanshyam says:

    i took with this SL life crest plan in jan 2011 and paid annual premium of Rs . 1,00,000 …i paid yearly premium for 3 years…but since i did not paid after that , the policy was discontinued … now i want to know what is the expected return i get after 5 years i.e. in 2016…???

  2. Unfortunately moneysights is history! But the maxim of never mixing investments and insurance remains as strong as never mix drinking and driving. You will reach somewhere but no guarantee that its home!

  3. mittal_sam says:

    @MS

    This is an old thread, but would like your latest views on this policy.

    The google spreadsheet is pretty helpful to see the charges inside out. Only thing is that insurance cover needs to be valued.

  4. moneysights.com says:

    @VS,

    Since Mortality charges are charges towards providing the risk cover, they vary based on individual’s age & tenure of the policy.

    On your query about recommending an investment that pays better than FD, there are many options you can consider – right from large-cap only Equity MFs to Balanced & MIP funds. But the caveat is no one can guarantee the safety of a Bank FD…if you are too conservative, go for a MIP. But stay invested for long term as minor fluctuations may come.

    If you are open to investing monthly & can stay invested for 3-5 year horizon, a safe balanced fund would be the best option. Check out FT India Balanced Fund – http://goo.gl/6aLtK & UTI Childrens Career Advantage Fund – http://goo.gl/8Mnzf Both these funds are suitable to conservative investors & have also given decent returns consistently.

    Hope this helps.

    Team moneysights.com

  5. VS says:

    @MS

    Thank you for your supporting views.

    Another big disadvantage is that if the investor wishes to discontinue the policy at any stage, discontinuance charges ranging from Rs. 6000 to Rs. 2000 is levied, depending on when the investor chose to discontinue. The biggest disadvantage of discontinuance is that the amounts invested (premiums) will only be returned after 5 years from date of first premium paid and only 3.5% interest will be paid.

    Please guide me as to how Mortality Charges are calculated. Thanks.

    I also viewed the spreadsheet and the facts it revealed. Good job !!

    As mentioned in my previous post, I am a conservative investor. I would be most grateful if you can recommend an investment which will pay a little better than a bank FD. I am OK with half – yearly payments or even one annual payment. I am also concerned about safety of the invested capital.

    Thanks in advance.

    VS

  6. moneysights.com says:

    @VS,

    Very good points indeed.

    Apart from charges, there is 1 more reason where ULIPs score less – “Portability of fund value to another ULIP of a different insurance company”. Now, why this is an important parameter – What does 1 do when his/her investment in a Mutual Fund under-performs over 2-3 years consistently than the schemes/plans available in the market. One normally moves money from the dud scheme to a performing one. But this flexibility isn’t available in ULIPs. If you choose to move money after the lock-in period to another ULIP, you will have to bear the charges again. So till the time “portability” of ULIPs become reality (like it is in Motor Insurance & Health Insurance), you have 1 more reason to avoid them.

    On the charges front, here is a Google Spreadsheet that we had shared in the past to illustrate all charges. These charges are for a “real” ULIP scheme available from one of the leading Insurers in the country – https://spreadsheets.google.com/ccc?key=0Ap1lfmVtr0qqdEJoUFJQOWNPdms4bkdKdlZlTXQyOHc&hl=en#gid=0


    Team moneysights.com

  7. VS says:

    HDFC SL Crest:-

    Fund managers / Agents do not reveal all the charges involved. It’s only after you read the literature about the Fund do you see the “fine print”.

    What charges are revealed by them:-
    – Premium Allocation charge for 5 years – 4%, 4%, 3%, 2%, 2% of premium.

    The “fine print” charges:-
    – Fund Management Charge – 1.35% p.a. of fund’s value charged daily
    – Policy Administration Charge – 0.31% per month of annual premium !!
    – Mortality Charge – Not specified but depends on age & level of cover but is charged monthly !!
    – Misc. Charges – If opting for Highest NAV Guarantee then an Investment Guarantee Charge of 0.5% p.a. will be charged daily !!!

    Use MS Excel to make a simple calculation based on your annual premium for 5 years. Apply all these charges. For 1 lakh x 5 years (5 lakhs) you will be shelling out almost Rs. 39000/- as charges. Now compare with investing in a normal FD at 7% p.a.(after TDS) – assuming you invest 1 lakh on 1st January every year for the next 5 years – you will get a total interest of Rs. 105000 on 31st Dec of the 5th year. For the Fund to give you the same the NAV has to attain a value of Rs. 19.70. If it stands at Rs.15 (Guaranteed NAV) you will earn lesser than an FD.

    Please note that these are the views of a conservative investor ! I am not taking into account the benefits of the insurance part. An unfortunate incident will certainly give anything between Rs. 10 lakhs and Rs. 20 lakhs to the nominee. My main aim was to show readers the “unrevealed charges”.

    Please feel free to offer your views / corrections to my statements. I am always willing to learn from the inputs of others.

    Thanks & regards
    VS

    1. pingmani says:

      @VS: IS HDFC CREST (NFO) & HDFC SL CREST one and the same? Please clarify. Also i have a doubt in your calculation the FD interest for 5 years which sums up to 105000,for principle amount of 5lakhs, even if its compounded it doesnt reach that figure.

    2. agarwallp says:

      Hi VS,

      Can you please explain how did you come out with the value of 19.70 (the price of NAV to get an amount equal to FD). Using your example, if around 40000 is the charges for 5 years, you are investing around 4 lac 50 thousand. Assuming a NAV price of Rs. 10, I should have 45000 units. Now to achieve an Amount of 6,05,000 at the end of 5 years (6,05,000 is what you get in ur FD), the NAV should be around Rs. 13.5. and NAV of 15 should give you more than FD.

      I am no expert, so if I am doing any calculation wrong please feel free to correct me.

      Pradeep

      1. Dear Agrawallp, you are missing the point that the investments are done 1L * 5Y = 5L & not 5L Rs. in a single shot. That’s why your calculations are showing such results.

        Thanks

        Ashal

  8. Just try to understand the concept of “guaranteed highest NAV”. The fund manager keeps on booking some profit and investing that money in debt instruments. He has to protect the fund from great falls. But in long term, such money in debt can not give you compound benefit of equity market. So, overall, in long term, these funds can not give you more returns.

    Secondly, stick to good mutual funds with full 100% equity exposure. These highest NAV plans are for defensive people, who are happy to get less returns, even in long term.

    Hope it will help you.
    InvestmentKit.com

  9. Ahmad Zaib says:

    Thanks Manish & Santosh for your inputs! 🙂

  10. Ahmad Zaib says:

    Yes indeed!
    Even I thought that Term Plans were crap and endowment policies were the real deal. But now I’m highly of the opinion that I’ll not go for high endowment premiums and instead channelize that money into MFs 🙂

    How is that??

    Thanks.

    1. moneysights.com says:

      the best thing when it comes to investments 🙂

  11. Ahmad Zaib says:

    Thanks Team MoneySights,

    I went through many articles on this blog regarding ULIPs and guaranteed NAVs, and have fianlly come to the conclusion to stick with mutual funds only 🙂

    In your reply, by ‘term plan’ what do you mean? Are you referring to Life Insurance??

    Thanks!

    PS: I’ve signed on for an invite on your site. Do send me one soon… 🙂

    1. moneysights.com says:

      @Ahmad,

      Glad that you made the right call 🙂 Yes, by that we meant Life Insurance (the pure one i.e. Term Plans). The context for Term Plan + MFs is that many a times we plan investments for some future goal that needs to be insured if something happen to us – specifically Children’s Education & Home buying.

      In these cases, if one needs to protect the goal, one needs to insure the goal for achievement even if we are not there.

      Thanks for signing up…you should definitely get an invite towards early February.

      1. Suresh K Perumalla says:

        Hi ,
        After reading some articles in your website, I got addicted to this site and signed up today. Thanks for educating us financially.
        Could you please recommend a term plan which includes Accidental Death coverage + Sickness coverage apart from natural death during the policy period. I would prefer to have LIC first if any..

        Thanks in advance..

        1. Dear Suresh, Please do not mix plain life insurance with accidental or critical illness insurance. The riders provided with Term covers are not the good ones to invest in. My take for your situation –

          1. Purchase a plain term cover from the insurer of your choice. If you are happy with LIC’s Amulya Jeevan (although it’s prem. is very costly), so be it.

          2. Purchase a standalone Personal Accident Plan from a general Insurer like Bajaj or Apollo or United India (names are random not the order of choice).

          3. Purchase the Critical Illness plan either from the same insurer (PAP) or from any other of your choice.

          Please read previous articles to know why Term plan + Rider is a bad combo.

          Thanks

          Ashal

          1. Suresh K Perumalla says:

            Thanks Ashal for your prompt advise.
            Yes the riders are not that much beneficial with respect to their cost.
            I will check your recommendations. Meanwhile, will explore this site for the article you said about bad combo.

            -PSK

          2. Suresh K Perumalla says:

            Hi Ashal,
            I got few more quesions. Please clarify..
            1. Will there be any issues if a policy is taken (especially term plan) multiple times for the same person with Nominee being different in each time?
            2.While applying for LIC-term plan for elder people (>55), do we need to submit any extra documents related to their health?
            3. Actually what is your recommendation amount of money to be term plan insured for a coverage period of 35 years and 10 years respectively taking inflation and future raise in cost of living? Sorry.. I am this to save this money into investments if not required. Hope you got my point..
            -PSK

          3. Dear Suresh, here are the answers for your queries.

            1. Will there be any issues if a policy is taken (especially term plan) multiple times for the same person with Nominee being different in each time?
            No, there is no issue, You can have different nomination as per your choice in your different policies.

            2.While applying for LIC-term plan for elder people (>55), do we need to submit any extra documents related to their health?
            Term Plan for age more than 55? can you provide the details or the reason or need for this term plan for that elderly person?

            3. Actually what is your recommendation amount of money to be term plan insured for a coverage period of 35 years and 10 years respectively taking inflation and future raise in cost of living?
            As per your own choice, whatever break up you are comfortable at.

            Thanks

            Ashal

          4. Suresh K Perumalla says:

            Hi Ashal,
            Thanks for the clarification..::)
            Please see below in quotes and advise..
            —————————————————————————————————————
            Question: While applying for LIC-term plan for elder people (>55), do we need to submit any extra documents related to their health?
            Term Plan for age more than 55? can you provide the details or the reason or need for this term plan for that elderly person?

            —> “Recently my father told me he don’t have any term plan covering for the life time. He had 5 Lakh plan which got matured and received already. So thinking proactively, would like to take term plan on his name for at least 10 years coverage with nominee being my Mother. Will there be any issues? “.

          5. Dear Suresh, @ age 55, if & only if your father has some open financial liabilities then only a term plan should be purchased. Else if he do has sufficient wealth already, no need to go for that term cover. Also not many Term covers are available for his age & the prem. is very high for some available plans. In my opinion, he should focus more on increasing his wealth now than opting a term cover.

            Thanks

            Ashal

  12. moneysights.com says:

    @Azmad,

    Every agent who also sells insurance & MFs would prefer to sell you a ULIP. And the scheme you are talking about happens to be a ULIP only. Whatever the agent tells you, don’t fall in the trap.

    Go for a term plan + SIP in MFs. This is the best & would beat any option. Manish has written enough already about ULIPs & guaranteed NAV products…read them & take the right decision.

    Team moneysights.com

    1. Moneysights

      Well I cant be very sure if Term + MF will always and always beat ULIP ! . Its genreally true for majority of investors who have no idea on how ULIPs work , and how they can use Top-ups + Swtiching facility to extract real juice out of ULIP’s . I know people who have make far enough by ULIP;s than HDFC Top 200 just because they had clear understanding of how equity works , concepts of portfolio rebalancing etc .

      ULIP are wonderful tools to make sure you rebalance your portfolio and move from equity to debt and vice versa and not pay any short term capital gains , if you can manage to do it well even 3 times out of 4 times successfully, your ULIP’s will beat the mutual funds .

      So in general yes Term + MF should be preferred choice for average investor given the complexity of the product and the unwilligness (not inability) , to understand and find out how to make best use of the product .

      Manish

      1. moneysights.com says:

        @Manish,

        Agreed completely.

        But what you are saying is – “3 out of 4 times” is like going right 75% of the times. Now even if we becomes slightly realistic, we can’t go right twice out of 4 times (even twice is higher given the volatility these days).

        Would any of us had believed to actually that markets would correct by almost 8-10% in matter of just 1 month (we are talking about the recent correction). So timing the peak of equity markets & shifting money in & out of debt & equity is a task which only professional or extremely savvy investors can do.

        Although, with portfolio re-balancing one can taking this “timing aspect” out but how many common/retail investors can boast of doing this?? When we talk about automated investments via SIPs, they are best suited for common man. If one was so educated or savvy, s/he is going to get best when managing investments w/o taking the route of either ULIPs or SIPs in MFs i.e. on her/his own through direct participation in equity & bond markets…

        Hope you appreciate where we are coming from.

        Team moneysights.com

        1. @moneysights

          I agree with you that 3 out of 4 times is not realistic for common man , I was actually having experts in mind who are very much in equity and have good experience .. even for them , I should have put 2 out of 4 times . accepted that 3 out of 4 looks little odd. May be I didnt think much before putting that number 🙂

          Manish

          1. moneysights.com says:

            we are on same boat then 🙂

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