ULIP or Equity MF- Which one better?

ULIP or Equity MF – Which one better?

I have often seen very confused investor for which one is good for investment either ULIP or Equity MF. Both are long term investment product. Investors often lure with the ULIP for very catching word insurance. Whereas equity mutual fund do not offer any insurance but great return as the efficient wealth creator in long term.

Although, Unit-linked insurance plans (ULIP) offers many types of funds from equity to debt segment. If you compare its return over the five year period, it has performed very bad when we compare it with equity fund return.

Recently a very informative financial magazine has done a study about the return of ULIP and equity mutual fund schemes. The Top 10 ULIP funds has given an average anuualised return of 16.61% while mutual fund schemes has delivered an average return of 22.20%. If we compare top 25 ULIP funds and top 25 equity mutual funds, ULIP delivered an average return of 15.28% and MF schemes return has been 20.71% in the same period.

ULIPs published their NAV before adjusting fund management cost and other cost while equity mutual funds published NAV after adjusting all cost. It is the reason investors are not getting right comparison between ULIP and equity MF funds. Returns from ULIP would be more worst after deducting charges like premium allocation charge, mortality charge and other charges. These charges are different for ULIPs managed by various financial entities. Only fund management charge is adjusted in unit price of ULIPs funds. MF schemes unit prices are calculated after deducting all expenses. This makes equity mutual fund return more superior than ULIP funds.

The fund management charge, of around 1.35% may attract investor towards ULIP as it appears lower than expense ratio of equity mutual funds. But when we consider other costs of ULIP- in most cases- it goes up to above 3% in the initial years of investing in ULIP. In an analysis of 237 ULIP funds, more than 50% of ULIP funds underperformed the Sensex over a period of 5 year ended in Feb 2015.

IRDA has put some cap on various charges after 2010. But still the costs of ULIP are much higher than equity MF. If you are looking for good long term investment option with low cost, equity mutual funds are still good choice.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Gold Trading in MCX

Gold Trading in MCX

Trading in gold and silver are getting higher in day by day. We Indian are much obsessed for gold. In India, MCX facilitates for gold trading. Short term trader do trade with very low margin and get the gain from momentum in the respective prices.

In the open gold market, gold trading happens in per 10 gram rate. It means if gold rate says Rs 25,000 then it means 10 gram gold’s price Rs 25,000. In MCX the gold trading rule of trading is different. First you have to open account with MCX through any registered broker. After opening the account, you have to kept some margin with exchange for trade in gold. Commodity exchange fixes the margin amount on the basis of the momentum of the commodity rate.

In India, commodity exchange MCX provides 3 types of gold lot – 1 Kg (Gold Bada), 100 gm (Gold Mini) and 8 gm (Gold Gunia). For example if gold is trading at Rs 25,000 per 10 gm then the total value of 1 kg gold would be Rs 25 lakh. If you want to buy 1 Kg gold in commodity exchange then you will have need only Rs 1.25 lakh and if you buy it physical market then you will have to pay Rs 25 lakh full payment.

So you can purchase 1 kg gold worth Rs 25 lakh only paying Rs 1.25 lakh margin amount approx at present. The margin amount may be change it subject to MCX guideline. If you purchase Gold Bada (1 kg lot) then for Rs1 movement in gold price incurred you Rs 100 profit or loss. If the rate increase by Rs 1 then you will get Rs 100 and if it the rate goes down then you will have to loss Rs 100.

For gold mini (100 gm lot) the margin requirement is Rs 12,500 and for Gold Gunia (8 gm lot) the margin requirement is only Rs 1,000. By Rs 1 movement in gold prices, the mini gold gives you Rs 10 profit or loss and gold gunia gives you Rs 1 profit or loss.

Many traders are very active in gold trading through the MCX. However, it would be good if you have some extra margin kept with your broker in case of price goes against your trade. As I always say that trading have more risk than investment. You can also take delivery of physical gold. For this you will have to inform exchange before 5 days of gold contract expiry date.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

SIP return beating other instrument..?

SIP return beating other instrument ?

Yes, as I always say that SIP (Systematic Investment Plan) is always good option for investment and create the wealth. You can read today’s Time of India, Mumbai edition on page no. 11 for your belief. Even worst of SIPs would have given you more than your PPF (Public Provident Funds) returns.

Regular investments in mutual fund equity schemes have been rewarding for investors in the last 15 years. Investments in equity schemes done through SIPs have outperformed traditional products such as Tax-saving fixed deposit and PPF.

Tax saving fixed deposits and PPF have returned a little over 9% every year in the last 20 years. Meanwhile, average returns in equity schemes through SIPs- an equivalent of recurring fixed deposits of banks over a 15 years period have been 21.54% every year with the worst performer giving 13.71%.

So I still advise to all of you start a some amount of SIP in equity mutual fund for your 15 -20 years goal like retirement, child education etc. It would be your most prudent investment decision. For more information you can touch with me also.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Maggi Controversy: Product Recall Insurance

Maggi row: Product Recall Insurance

After Maggi noodles controversy, insurance companies are getting higher number of inquiries for product call insurance. Product recall insurance comes with as an add on feature with product liability cover. Insurance companies recommend this cover to manufacturers because, besides covering the cost of recall, it is seen as feature that limits product liability.

In India, the most significant instance of product liability in the food industry happened in 2003 when chocolate maker Cadbury faced charges of infestation. This incident caused huge losses to Cadbury and compelled the company to redesign its packaging.

However, even after that incident, demand of product liability cover did not pick up significantly. It would be good if company have product recall insurance as presence of toxic substances is not the only reason for product recall.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Falling Gold Prices!!!

Look at Gold Prices

Dear investor look at gold prices, you can read in my old blogs. I have many times suggested that gold is not good investment avenue for wealth creation. Gold plunged 4 percent on Monday to its lowest level in more than 5 year.

It was sudden, massive drop for gold as they breached critical support levels as on growing expectation that the US Federal Reserve will hike interest rate this year. I am again saying here please do your asset allocation according to your need and investment period. Gold is very good for hedging but it is not very good investment option in long run.

In India, people are mad about gold purchase regardless price and return. So I advise to my Indian investor that they should keep gold as much they need for holy occasion and events and do not buy it for investment purpose.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Direct Equity v/s Equity Mutual Fund

Direct Equity v/s Equity Mutual Fund

I have seen many investors have often not sure whether they should invest in direct equity or invest in equity mutual fund. According to me, both are good instrument to create wealth in long term but both have different type of risk. We will discuss here about these instrument today.

Direct Equity:

Investing in direct equity is suited for those investors who have plenty of time and understanding of finances of companies. It is very good for those who have time to track the financial health of the company. Such investors invest in good companies at very beginning and earn multifold return in long term. You should have large sum to invest in such companies at the starting.

Equity Mutual Fund:

Investing in equity mutual fund is very good instrument for wealth creating in long term. It is very suited to those people who have no time to track the market and companies and also not understanding of finances. One can easily invest in equity mutual fund in lump sum or in step by step in the form of SIP (Systematic Investment Plan). There is no need to have large sum at initial stage of investing like in direct equity. It also give the multifold return in long run on your investment. One can start investing a very small amount like Rs 500 also and gradually increase this as per their income.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Atal Pension Yojana

Atal Pension Yojana : Relevant Points

Atal Pension Yojana (APY) is a scheme for all those people of the unorganized sector who wish to join the National Pension System and are not the member of any other social security scheme. It has been launched on 1st June 2015.

According to NSSO Survey of 2011-12, in India, 88% of the total labour force do not have any pension provision for their after retirement life. In 2015-16 budget, government has announced Atal Pension Yojana (APY) which will provide the defined pension, depending on contribution and investment period.

Under this scheme, a person can get a fixed pension of Rs 1000/2000/3000/4000/5000 per month after completing the age of 60. However, the pension amount depends on their own contribution which varies on the age of joining the scheme.

The people who are looking to join this scheme must be a citizen of India. The eligibility age for this scheme is 10 to 40 years of age and the person must have a valid bank account. The minimum period of contribution by any person would be 20 years or more.

The bank will deduct the amount on monthly basis of the account of APY subscriber. If subscriber fail to contribute the penalty would be levied as per structure.

·         Rs 1 per month for contribution upto Rs 100 per month.

·         Rs 2 per month for contribution upto Rs 101 to 500/- per month.

·         Rs 5 per month for contribution upto Rs 501 to 1000/- per month.

·         Rs 10 per month for contribution beyond Rs 1000 per month

If payment not received till 6 months then account will be frozen. After 12 months account would be deactivated. After 24 months account will be closed. Exit from the scheme before 60 is not allowed. It is only permitted in the event of death or terminal disease. After the age of 60 the subscriber have to request to their bank branch and the fixed amount would be credited each month to subscriber and his spouse. After the death of subscriber the nominee would get the corpus which is invested by subscriber.

The nominee will get Rs 1.7 lakh if monthly pension is Rs 1000, Rs 3.4 lakh if monthly pension is Rs 2000, Rs 5.1 lakh if monthly pension is Rs 3,000, Rs 6.8 lakh if monthly pension is Rs 4000 and Rs 8.5 lakh if monthly pension is Rs 5,000.

The govt. would also contribute 50% of the total contribution or Rs 1000 per annum, whichever is lower, to each subscriber account, for a 5 year. The eligibility for this benefit is the person should not member of any other statutory social security scheme and should not be tax payer. The person should also join the NPS between the period of 1’st June 2015 and 31st December 2015.

The toll free no. for Atal Pension Yojana (APY) are 1800-180-1111, 1800-110-001. There is also dedicated no. for each state. I am not mentioning all here. If anyone need particular state toll free no. please ask me.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com