regarding savings & shares

Ravi 1
Viewed 1889

Hi,

I have few questions. Before asking those, I would like to share about my investments so far.

  1. From July 2006 onwards I am paying 1250/- pm to Max Newyork Life -Life maker unit linked plan. So far I have paid 70,000/- but still the market is 63,000/-.
  2. I am paying 1000/- pm to Sundaram Select Focus - Appreciation from 0ct 2008, so far paid amount is 29,000/- and current value is 33,000/-.
  3. As I am in taxable income this year, I have invested 10,000/- in HDFC TaxSaver -growth.
  4. Another 10000/- in PPF.
  5. Another 20,000/- LIC

Here are my questions: 1. Shall I continue ULIP or not? 2. Shall I continue Sundaram Select Focus - Appreciation or not? or shall I switch to other MF?

Apart from tax savings, recently I have opened Dmat account through Reliance money. Please suggest me some shares to buy.

Thanks for your time.

~Ravi

ppf elss ulip mutual-fund life-insurance
1 Answers

ULIPs have high load charges in initial 3 years. In your policy, as per Max New York insurance website, first year allocation charges are as high as 55-65% (depending on policy term), 20% in second year and 5% thereafter. So out of 70,000 you have paid, only around 56000 has been invested, which has value of 63000 now.

ULIPs are bad product for short term, as to pay huge commission to agents they have upfront charges. Unfortunately the money has gone now in form of this load and now little can be done to take that money out.

  1. You can continue policy further till March 2012, until Direct tax code comes into play. As allocation charges are now 5%, its not that bad policy now, if compared to first 2 years. After direct tax code comes into play, there won't be any tax benefit of insurance policies on which annual premium is more than 5% of sum assured. So if your policy does not fit into tax exemption, there is no point putting money into it.
    If you don't want to keep it further, You can stop paying further premium and can get this 63000 amount back.
    As per policy terms: If all due premiums have been paid for at least three consecutive years and subsequent premiums are unpaid, an opportunity will be given to you to revive the policy within the revival period of 3 years. During the revival period, the insurance cover under the policy will continue and all applicable charges would be levied. At the end of the revival period, if the policy is not revived, the policy will terminate and the Fund Value will be paid. However, instead of terminating the Policy, company also offers to continue the policy with the insurance cover, if so opted by you, levying appropriate charges until the fund value does not fall below an amount equal to one annual premium.

  2. Sundaram Select focus has not performed well as compared to other similar funds. Consider switching to some better funds like Birla Sunlife Frontline equity fund, HDFC Top 200 Fund, DSP Backrock Top 100 fund or Reliance Regular Savings – Equity

  3. Investment in HDFC tax saver is good decision.

  4. PPF investment is also good.

  5. Which LIC policy you invested in for 20,000.

I would also advise to go through a previous answer on investment advise.

Regarding which stocks to buy, As the current market is on lows, you may choose good company stocks and invest in them. IT companies stocks are good buy as of now. But do your own research on companies before putting your money.

Pankaj Batra5212

Hello Pankaj,

THANKS A LOT for the reply.

Your analysis is great and suggestions are simply superb.

  1. Regarding ULIP: Yes, I will try to pay till mar 2012 as load charges are less now.

  2. Regarding MF: Ok, I will try to switch one of the funds you have suggested, may be Birla Sunlife Frontline equity fund.

  3. Thanks for the encouragement.

  4. Thanks for the encouragement.

  5. Regarding LIC's: As of now, I do not have the information. (My dad is investing from years, and those are having maturity period in the couple of years)

Pankaj,

Once again thanks a lot for your time.

~Ravi

Ravi•
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