Making the best out of ULIPs

If you have invested in ULIPs, here are a few suggestions to make the best out of it

Use “Switch” Option to the fullest. (4 are free)
The intent must be to increase the number of units accumulated and in the right bucket.


What are Units and how are they allocated?

Let me explain with the example of ICICI Prudential Life Time Pension Plan. The premium amount is invested in various funds as per your instructions.

For ICICI Prudential Life Time Pension Plan, following are the Funds

Pension Balancer (Balanced)
Pension Flexi Balanced
Pension Flexi Growth
Pension Maximiser (Growth) Plan
Pension Preserver (Short Term) Fund
Pension Protector (Income) Plan


You can choose the percentage distribution on the above funds for your ICICI Prudential Life Time Pension Plan.



Say for instance, I chose the following distribution:

Pension Balancer (Balanced) – 85%

Pension Maximiser (Growth) Plan -15%



Based on the premium paid and the NAV of the chosen funds in the market on that day, the invested money( premium amount) is used to buy as many units of the Fund.

For eg,

* if you paid the premium of 10,000, after some allocation charges are deducted, say 9000 is left.

* 9000 will be divided into 2 buckets—

1. 15% of 9000 = 1350;

2. 85% of 9000= 7650;

* Assume the NAV of Pension Balancer (Balanced) is 25.00 Rs and Pension Maximiser (Growth) is 50.00 Rs

* You would have the following number of units in each bucket

1. Pension Balancer (Balanced) – 306 Units (7650/25)

2. Pension Maximiser (Growth) – 27 Units (1350/50)



What is Switch?

Switch is an option for you to change your fund allocation.

For instance, switch allows you to move from the earlier allocation of Balancer(85)- Maximizer(15) to Balancer(10)- Maximizer(90)



Why Should I switch?

Some funds show better growth than the others.

For instance on the day you wish to redeem your Policy, the NAV of Balancer is 30 and Maximizer is 70,

With the Initial allocation of Balancer(85)- Maximizer(15), you would get =306*30 + 27*70 = 11070

But if your allocation was Balancer(10)- Maximizer(90), you would get =(10% of 9000/25)*30 + (90% of 9000/50)*70 = 12420



Implying, there was a better allocation you could have chosen for maximizing your returns (more than 10% difference w.r.t the initial plan)



Switch helps us by giving options to change fund allocations and hence maximize your returns



How does Switch Work?

Lets build on the above example. To refresh, you had taken the policy with Balancer(85)- Maximizer(15) and you have 306 and 27 units respectively.



The current NAV of Balancer is 30 and Maximizer is 70; You wish to make a switch

You have 3 options: Switch based on percent, units or amount.



Here, I will explain the switch through switch by percent. You can move x% from Fund1 to Fund2.

I wish to move 50% from Balancer to Maximizer.



In current market at the NAV of 30, 50% of 306 units of Balancer would amount to 306*30*50/100 = 4590.00;

Also 4590 is worth 4590/30= 153 units Balancer



With 4590.00, I can buy 4590/ 70(Current NAV of Maximizer) = 65.6 units of Maximizer

Hence my new units allocation would be, Balancer (306- 153= 153) and Maximiser (27+65.6= 92.6)



Your Fund value as per the new allocation (after switch): 153*30 + 92.6* 70 = 11070



If in future, the NAV Balancer is 35 and Maximizer is 90

Per old allocation fund value would be = 306*35+ 27*90 = 13140

Per new allocation fund value would be = 153*35+ 92.6*90 = 13686



Any guidelines for Switch:

When the market is on a low, switch to Balancer
When the market is on a high, switch to Maximizer
This will help you accumulate more units in each bucket

Before you decide to redeem, (one would usually do it when the market is on a up so that you get the max benefit), moving to maximizer should be profitable.

Wake up and take charge!

Do you sufficintly respect the money you earn? Do you understand your pay slip? Do you know how much tax you pay? Do you know what yu have been doing for tax exemptions?

If these questions were thrown to a group of ladies( in my circle), I can tell without so much as a blink that the majority would NOT answer in affirmative.

The sad but seemingly true fact with the majority is that, its "her" dad who handles her planning. The dad figure is replaced by the husband figure later.. And may be the sons when the lady is much older..

And I have been no exception until recently.

Without getting into the "whys" or reasoning the behavioral pattern, herez what I did to get into the bracket of the seemingly elite who unedrstand their monitory planning.

The ans was very simple and simply in Understanding the market and the various products available. Based on the way I chose and found effective, here are some tips---
Bottom Line: Just Do it! First take the leap (small one)-- then think!

a. Shares:
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1. Start investing small time ( start from as small as Rs 500.00 per month) in equity market ( icicidirect.com is quiet handy)
2. Once you have your money in it, you would start following the news/happenings that impacts your money
3. And once you get into the groove, there is no stopping you.
4. No amount of reading without getting your hands in the mud helps.

Remember: Dont treat the first couple of Rs 500 as too dear. Imagine it to be the money you spent on auto-rickshaws that month!

b. Mutual Funds:
-----------------
The chance that you still havent got into the MF Ship, is very rare.. atleast in the current situation...if you have been trying to do something to lessen your tax-payable.
If you havent yet got into the ship, SIP is a good option-- Rs 1000/month into MFs meant for tax exumption under 80C to start with is again a pretty neat thing. If you want to know which ones to invest in, visit moneycontrol.com or any icici branch and have a chat with a MF advisor. He would give you a list of MFs and some sites that you can study to understand the suggested MFs history.


Remember: Again, once you have your money in the market, you would start using sites/portfolio managers like moneycontrol and that triggers the process of you watching your money. Once you start watching your money, you start following the trend and then, unconsciously, you start getting up-to-date and start understanding some investment options and then start venturing into a few.
Overall, you become more conscious of your money and the market situation at the expense of Rs 1000 each month. And this money also helps you do you tax planning.Pretty neat deal ha?

c. FMP: A less adverstised ,low-risk option
--------------------------------------------
FMPs are open only for a small window( 4-5 days); This works similar to an FD. More info below..

A few questions you might have...

Q1. Due to lack of info or want to take risks, have you invested in FDs?
A1: If yes, there is a better option: Fixed Maturity Plan(FMP). FMPs are especially attractive because they have better post tax benefits that FDs.
I will not elaborate more on what the post tax benefits are here and spoon feed you... go, and read it yourself...:)
Things you want to understand before going for FMP:
1. Are you chosing Growth/ Dividend option? Dividend is better for short term investments.
2. If Growth( i.e. fro long term investment), are you going for with/ without indexation?

Q2: Have you invested in NSC? Do you know it is an option that earns you the least interest?
A2: FMP is a much much better option.

Q3: Have you invested in ULIP? Do you have a lapsed ICICI policy? Wondering if it is worth renewing? Are you getting different solution options that are contradicting/ confusing?

A3: ULIP is one of the good options available in the 80C products basket.
Here was my situation:
1. I had purchased an ICICI Prudential Life Time Pension Policy in 2004; I paid the first premium; The product had a 3 years lock-in and mandatory payment of first 3 premiums.I travelled onsite; I hadnt chose ECS and hence defaulted on teh mandatory premium payments.
I got different/ contradictory/ peace meal solution options from ICICI contacts. I was totally pissed off. I was suggested I forget the firs premium and ditch the policy.

After months of research, Herez what i gathered. And the good news is I am renewing the policy without any ICICI nit-wit officer giving me incorrect pointers.
1. Register yor policy on iciciprulife.com
2. You can make payments, switches etc online-- all on your own.
3. You can chat with an Advisor can get clarifications in writing.

Solution to my case:
1. Pay the due premiums ( between 8.00am and 3.00pm online- this constrainst is policies that are lapsed fro more than 6 months)
2. I can close my policy anytime after it is in-force. ( Ofcourse i will take this decision based on the fund value)

Overall, Collect info from as many sources..But, ultimately let it be you who should be taking the decision and responsible for it.

(Would like to express my opinion on why Women should plan their finances more rigorously... some other time.. tired of typing for now..)

Thanks Blogspot

yesterday, had a interesting conv with one of my colleagues-- seems he'd stumbled on one of my posts in the past-- a post that was oozing feministic views... guess it was written on one of those days when i ran into unpleasing samples of the opposite gender....:)
Lately have been so occupied in keeping up with the pace and running the race of the new life, that therez hardly been the inclination or time to observe any entity thats not family.
So getting back to the conv, when V asked if i still held my feministic views, I was at loss...because honestly, i couldnt recall the old references.. and that made me visit my blog again.. read a few of my old posts... relived some of those moments, raked the pages of past that had so much zest for life...

Thanks V.

I also sketched ysterday! Felt wonderful...But, for the first time noticed something different about me..

In the past whenever i've skecthed,i've known the thought behind it.. the abstractions and the strokes have been deliberate. But yesterday, for the first tiem, i did not understand my sketch. There was no specific idea or intent... something just unfolded...
Umm... not sure if this is positive development.. I am in the habit of knowing what my mind thinks...