How much return should one expect from ulip?

POSTED BY Sreerup ON March 18, 2013 11:57 am COMMENTS (11)

Hi,

I was evaluating the ICICI Life welth stage 2. My age is 32 years. I am planning to invest 50 K per annum. Now considering the charges like mortality 1.46 per month for 10,000,00 sum assured, Fund management charges (FMC) 1.35% per annum for the fund value and policy admin charges (PAC) of 0.47% of annual premium, it looks like total charges will be = Rs.4955 per year ( Mortality= 1.46x 1000000=1460, FMC= 1.35% of 50000 = 675,PAC = 0.47%x50000x12= 2820) 

After service tax @ 12% charges per annum = 5550, which is aroundd 11% of 50000, this is exculding first time allocation charge of 2%.

So, 11% of my investment will be deducted as charges for sure. now, if I want ROI of at least 10 % then my fund  has to effectively give a return of 21%= 11%+10%. 

Now my question is does this funds really perform so well, please suggest me should I invest in this plan or not. Otherwise please suggest me some good plan, my primary objective is investment and tax savings, not insurance as I have taken term policy.

11 replies on this article “How much return should one expect from ulip?”

  1. Sreerup says:

    Hi Ashal, Thanks for explaining me.
    yes it is technical to me to some extent…but got the high level idea.

  2. Dear Sreerup, please check the performance of the funds against the benachmark of the scheme i.e. QLTEF or QTS for past 3Y. Remember it’s the absolute DATA for calender year 2010, 2011 & 2012. it’s not trailing 3Y. Also the important point to be noted here is that the benchmark for both these schemes is Sensex TRI i.e. Totoal Return Index. or in other words, dividend declared by the cos. (the stocks which are the part of Sensex) is considered reinvested, so at any given point of time TRI value ‘ll always be higher than the nominal Sensex (normally reported Sensex value).

    If the above info looks too much tecjhnical to you, in simple words, the fund has outperformed it’s benachmark quite handsomely.

    Thanks

    Ashal

  3. Sreerup says:

    Hi Ashal, Can you please help me on how to understand if a fund is performing well or not, I mean what are the parameters I should look at for deciding performance of the the fund. When I see the fact sheet there are so many things, I am getting confused.

    It would be really helpful if you go to below link of Quantum fact sheet for February and let me know which page and table should I look for say QLTEF performance.

    http://www.quantumamc.com/Downloads/PDFs/2013/Combined_factsheet_February13.pdf

    Regards
    Sreerup

  4. Dear Sreerup, please check for the consistency in performance of Quantum Tax saver fund.

    For long Term, yes QLTEF is a good option.

    Disclosure – I’m investing my personal money in QLTEF. So my view may be baised.

    Thanks

    Ashal

  5. Sreerup says:

    Hi Ashal,

    You are suggesting Quantum Tax Saver fund growth option, can you please tell me more about this fund, like why should I prefer this fund compared to other tax saver funds.

    For long term investment how is Quantum long term Equity fund?

  6. Sreerup says:

    Thanks Ashal, Ramesh and TheZionView for your suggestions…now I am very clear on my financial planning.

  7. TheZionView says:

    Sreerup No fund can ever promise or perform 25% per annum continuously(warren buffet did it but thats different case)

    The agent is just trying to pull tricks with you so he can take home his commissions/target .

    You will be better off with investing that amount in PPF instead. If you can take up some more risk go for ELSS mutual fund

  8. Ramesh says:

    Correction. 1.46 per month should be translated to yearly by multiplying by 12. 😉

  9. Dear Sreerup, When you are asking for ELSS, I told you the same. The only difference I used the words Tax Saver funds. 🙂

    Please invest in Quantum Tax Saver fund growth option.

    Please do not believe for your agent for all the things, when his earning depends on how fat a cheque you can write. 🙂

    thanks

    Ashal

  10. Sreerup says:

    Thanks Ashal,

    The agent told me I have to take insurance else I can not get tax deduction, so I got confused. Which tax saver fund would you suggest, that will give a higher return than PPF. Do you think ELSS would be a good option?

    Regards
    Sreerup

  11. Dear Sreerup, if your insurance needs are already over by a term plan, where this policy fits in your scheme. Please invest in Tax saver funds for full 50K. As simple as that.

    Thanks

    Ashal

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