Monday, June 25, 2012

UTI - ULIP (Unit Linked Insurance Plan) Review

I am from the school of thoughts who represents Term Insurance is good for Insurance requirements and Mutual Funds + PPF are good for Investment requirements. Like to keep both Investments and Insurance seperate and think that most of the ULIPs are a ' CHOR' and they are there to loot the investors because of the high upfront expensive and so many misscellenous charges like Mortality charges, Fund managements charges, Policy admin charges etc. but there is an exception to this general rule of ULIPs.

UTI's ULIP is called Unit Linked Insurance Plan but it is not your regular ULIPs (Its a good exception to ULIP) its more of a Balanced Fund with a 40:60 ratio.( Equity Maximum - 40% ; Debt Minimum - 60% )

1) UTI ULIP gives a maximum Insurance cover of  upto 15 lakhs maximum depending on the target amount selected.
2) Accident Cover : Personal Accident cover of Rs. 50,000/- at no additional cost.
3) Tax Benefit : Tax Rebate under sec 80C of IT Act 1961.
4) Premature withdrawal : Full premature withdrawal in case of any exigency with only 2% exit load.
5) Maturity Bonus: 5% in 10 year plan ; 7.5% in 15 year plan
6) UTI ULIP allots units at the prevailing NAV (No Entry Load) after deduction of premium paid to LIC for Life cover. (Life cover is governed by Master policy taken by Scheme from LIC and yes its mortality charges are cheaper then term cover taken from LIC itself)
7) Expenses: Currently between 1.5% to 2%. This Includes the Fund Management Charges and all other charges like Marketing expenses, R&T fees etc.
8) Liquidity : Corpus of More then 2,280 crores as on 31/03/2012
9) LONG HISTORY: since October 1971
10) Returns : 9.41% CAGR over 40 year period. as on 31/03/2012
11) Insurance cover will continue even if renewable premium is not paid till Rs5,000 is balanced in the fund kitty. (MOST IMPORTANT POINT)

1. Insurance premium deducted is variable and it depends on the age factor.
2. There are two different charts for calculating the premium for different plan one for FIXED TERM COVER PLAN and another for DECLINING TERM COVER PLAN.
3. You cannot take this plan without Insurance cover.
4. There is upper limit of 15 lakh investment you cannot invest more in it.
5. Non-Working womens upper limit is 5 lakh.
6. Entry into the scheme is till 48.5 years of age for 10 year plan Monthly SIP
7. Scheme tenure of 15 years is restrictive

1. First you have to select a Target Amount say Rs 15,00,000 and Tenure (10 years or 15 years ) then select FIXED COVER or DECLINING COVER.
2) Now if you have selected 15 lakhs and 15 years then your annual premium is 15,00,000 /15 = 1,00,000 per year. (If you have selected Target amount= 2,00,000 and Tenure= 10 year then Annual Premium= 20,000)
3) Out of 1 lakh premium for 35 years old around Rs 2,325 goes for Cover and rest 97,675 will get invested at prevailing NAV.
4) you can split the installment into Quaterly, Half Yearly and also do a SIP as well.

This is supposed to be a Must in your portfolio for long term goals. It can give you stable returns which outperforms FD, LIC,PPF for over 40 years that speaks volumes about the scheme. If you are young and dont need Insurance then also I recommend to take this scheme as a Balanced Fund in your portfolio.

This scheme is going to be DTC COMPLIANT Balanced Fund as and when DTC comes into effect your ELSS category will loose its Tax benefit status but this scheme which gives more then 10 times life cover of annual premium is included in proposed DTC for Tax benefit.

What are ETF's (Exchange Traded Funds) ?

Echange Traded Funds (ETFs) are funds which are listed and traded on exchanges like stocks. ETFs invest in constituents of the index in the same proportion as the index and hence it reflects index. ETFs Started in India in year 2001 by Benchmark AMC.

Few example of ETFs in Indian Stock Markets are

1. 'GSNifty Bees'  -  It tracks Top 50 Nifty companies which comes under Nifty Index.
2. 'GS Junior Bees'  -  It tracks Midcap Funds (CNX Nifty Junior Index components)
3. 'GS Gold Bees'  -  It tracks domestic Gold Price
4. 'GS HangSeng Bees'  -  It tracks Hang Seng Index of Chinese Companies
5. 'GS Bank Bees'  -  It tracks CNX Bank Index.

They are mostly passive in nature and hence the fund management is least, as it only has to reflect underlying index or underlying assest.

Benefits of ETFs
1. Easy to invest and understand
2. Least cost as it is passive in nature
3. It will give near about index based return
4. Tax efficient as long term taxes are nil.
5. Transparent Portfolio

Is investment in ETFs good for investors?
Historical data globally suggest that most of the fund managers over long period of time has not been able to beat the benchmark indices constantly as global markets are efficient so for a global investor odds are in favour of person investing in ETFs which will give decent return with reduced volatility and less risk.

However coming to Indian context there have been many funds which have beaten the index by huge margin over long period of say 15 years or more and are still outperforming the indexes so if you can select few good funds you can beat the ETFs as Indian markets are not that efficient yet. so for Indian context I would still prefer to go with your HDFC Top 200 Fund,Reliance Growth Fund, UTI Dividend Yield Fund.

Friday, June 22, 2012

Dividend Yield Fund from UTI declares dividend

Last few years equity market has not performed well. Many people in this times go for defensive play where they select stocks which gives high dividend. This strategy is called Dividend yield strategy. There is once such fund which works on this idea its called UTI Dividend Yield Fund. For last few years it has performed excellently well compared to benchmarks.

UTI dividend Yield has given a return of 11.6% CAGR vs the Benchmark returns of 3.5% and category average is mere 3.3% for over 5 year period.

There is a dividend declaration in UTI Dividend Yield Fund.
The dividend will be 4% of face value or upto 90% of distributable surplus as on the record date, whichever is lower.
The record date for dividend is 26 June 2012.
Last Dividend declared was in November 2011.

UTI - ULIP declares Bonus for year 2012

UTI - ULIP has declared a bonus of 1: 10 that is 1 unit as bonus for every 10 units held.
Record date for the bonus is 20 June 2012.
UTI ULIP (Unit Linked Insurance Plan ) is one of the oldest schemes from UTI Mutual Fund It was launched in the year 1971. The scheme has many benefits including Insurance cover UPTO Rs 15,00,000 and an Accident cover upto Rs 50,000 only.

The scheme is hybrid fund with 60:40 and it can also be used in once portfolio as a balanced fund.

Friday, June 15, 2012

Top 25 companies from BSE 200 will be part of "Axis Focused 25 Fund"

Axis Mutual Fund promoted by Axis Bank is coming up with good and innovative products like Axis Triple Advantage fund which consist of Equity, Debt and Gold all in one Fund.

Now this time they are coming up with a new fund which has nothing innovative about it.
It intends to select Top performing 25 companies from the list of BSE 200 companies and will be more of a large cap oriented flavour. The idea is that large companies are less volatile at the same time they create more wealth. Hence it should be good long term fund with focus on concentrated folio of around 25 companies.

There are similar products from other AMC like Kotak 30 which selects 30 companies and has done well compared to other funds. there is other fund called JM core 11 which will invest only in 11 companies but it has failed miserable.

I would recommend that let the fund get launched and in due course say let it run for around 6 months or a year and see how it fares then we can take investment call on it, but definately we can keep 'Axis Focused 25 Fund' on the watchlist radar for sure.

Axis Focused 25 fund NFO will be open for subscriotion till 25th, June 2012.

Saturday, June 9, 2012

Historical prices of Gold in Indian Rupees

Historical prices of Gold in Indian Rupees source a facebook friend.