Highest NAV Guaranteed Products

Highest NAV Guaranteed Products

Is it for you??

Highest Net Asset Value (NAV) in a unit-linked insurance plan (ULIP) give us an idea of getting the best side of both worlds ie highest possible return with zero risk. Is it possible? Lets see what it is all about..

As we all know that nothing comes for free, our study of all the products that are guaranteeing NAVs gives us the following understanding. The quick conclusion: your returns will be between 3% to 15% in the long term looking into the product selected, term of payment and time of paying the premium.

Concept

Essentially, these are capital guarantee products that ensure that the amount you invest does not lose value and you get some upside of equity. It is erroneous to think that you get Sensex-linked return, with zero risk. These funds can’t guarantee the pure return of an equity fund.

Let’s understand how these funds work. Most of them use an investing strategy called dynamic hedging or constant proportion portfolio insurance (CPPI). Under this, the fund manager will constantly reallocate money between debt and equity classes to assure the previous highest NAV.

There are some product who invest in debt instruments only.

The result of these strategy will see different result in different market conditions like it will only give better result in up going market and in dip or volatile market it performance is not seen healthy. Many articles have been reflected in media on these whose link are below for reference

We fear, looking into the future market condition that over a period of time, the portfolio in equity may become smaller and smaller and would move towards a pure debt fund.

Mis Concept

Highest NAV Guaranteed does not mean Highest Return

What Fund Managers has to say

Says Shashi Krishnan, chief investment officer, Bajaj Allianz Life Insurance Co. Ltd: “Depending on how much the markets fall, and at what point during the tenure, we reserve the right to exit the stock market and keep all the money in debt.” Given the “go-anywhere” mandate—or 0-100% allocation in equity, debt and money market instruments—that the policy document allows, these funds can technically move fully into debt and stay there, making your Sensex-linked dream just that. A dream.

Says Manish Kumar, head (investments), ICICI Prudential Life Insurance Co. Ltd: “Since these have exposure to both equity and debt asset classes, under normal circumstances, the returns can be somewhere between what a debt fund and an equity fund would give.” In the long term, that’s between 6% and 15%.

Should you buy?

If insurance is what you want and on it you don’t want to risk the principal amount & some small returns.

Due to lack of transparency on asset allocation and the insurer doesn’t guarantee that he would stay invested entirely in the stock market during the term. So, its hard to know what high is guaranteed.

If you are looking for a Sensex-linked return kicker with zero risk, please get real. Such products do not exist.

Article in Media

DNA INDIA

LIVE MINT

LIC Jeevan Saral

LIC’s Jeevan Saral

Features
Product Summary:This is an Endowment Assurance plan where the proposer has simply to choose the amount and mode of premium payment. The plan provides financial protection against death throughout the term of the plan. The death benefit is directly related to the premiums paid. The Maturity Sum Assured depends on the age at entry of the life to be assured and is payable on survival to the end of the policy term. It also offers the flexibility of term and a lot of liquidity.
Premiums:Premiums are payable yearly, half-yearly, quarterly, or monthly through salary deductions as opted by you throughout the term of the policy or till earlier death.
Loyalty Additions:This is a with-profits plan and participates in the profits of the Corporation’s life insurance business. It gets a share of the profits in the form of loyalty additions which are terminal bonuses payable along with death benefit or maturity benefit. Loyalty Additions may be payable from the 10th year onwards depending upon the experience of the Corporation.

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Benefits
Death Benefit:250 times the monthly premium together with loyalty additions, if any, and return of premiums excluding first year premiums and extra/rider premium, if any, is payable in lump sum on death of the life assured during the term of the policy.
Maturity Benefit:The Maturity Sum Assured plus Loyalty additions, if any, is payable in a lump sum.
Supplementary/Extra Benefits:These are the optional benefits that can be added to your basic plan for extra protection/option. An additional premium is required to be paid for these benefits.
Surrender Value:Buying a life insurance contract is a long-term commitment. However, surrender values are available on earlier termination of the contract. The surrender value will be the greater of the guaranteed surrender value and special surrender. The plan also allows for partial surrenders.
Guaranteed Surrender Value:The policy can be surrendered after it has been in force for at least 3 full years. The Guaranteed Surrender value will be equal to 30% of the total amount of premiums paid excluding the premiums for the first year and all the extra premiums and premiums for accident benefit / term rider.Special Surrender Value:80% of Maturity Sum Assured if 3 or more years’ but less than 4 years’ premiums have been paid; 90% of the Maturity Sum Assured, if 4 or more years’ but less than 5 years’ premiums have been paid and 100% of the Maturity Sum Assured, if 5 or more years’ premiums have been paid. The Maturity Sum Assured for this para will be the Maturity Sum Assured corresponding to the term for which premiums have been paid under the policy.Corporation’s policy on surrenders:In practice, the Corporation will pay a Special Surrender Value – which is usually higher than the Guaranteed Surrender Value. This value will depend on the duration for which premiums have been paid and the policy duration at the date of surrender. In some circumstances, in case of early termination of the policy, the surrender value payable may be less than the total premium paid.The Corporation reviews the surrender value payable under its plans from time to time depending on the economic environment, experience and other factors.Note: The above is the product summary giving the key features of the plan. This is for illustrative purpose only. This does not represent a contract and for details please refer to your policy document.
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Beneficial Illustration
Statutory warning:“Some benefits are guaranteed and some benefits are variable with returns based on the future performance of your life insurance company. If your policy offers guaranteed returns then these will be clearly marked “guaranteed” in the illustration table on this page. If your policy offers variable returns then the illustrations on this page will show two different rates of assumed investment returns. These assumed rates of return are not guaranteed and they are not upper or lower limits of what you might get back as the value of your policy is dependant on a number of factors including future investment performance.”

i) This illustration is applicable to a non-smoker male/female standard (from medical, life style and occupation point of view) life.ii) The non-guaranteed benefits in above illustration are calculated so that they are consistent with the Projected Investment Rate of Return assumption of 10% p.a. In other words, in preparing this benefit illustration, it is assumed that the Projected Investment Rate of Return that LIC will be able to earn throughout the term of the policy will be 10% p.a., as the case may be. The Projected Investment Rate of Return is not guaranteed.iii) The main objective of the illustration is that the client is able to appreciate the features of the product and the flow of benefits in different circumstances with some level of quantification.iv) Loyalty additions will depend on future profits and as such is not guaranteed.v) The Maturity Benefit is the amount shown at the end of the policy term.
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If this is of your interest then ask for detail or Proposal Forms.

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With Warm Regards

Zoher Doctor / Smart Money Inc.
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Regards, Zoher Doctor / Smart Money Inc.Director 402, Bholesai Apt., Parsi Street, Fatehgunj, Vadodara Gujarat India Tel.: (M) +91-9824063400 Alternate Email ID: zoherdoctor@gmail.com, zoher.doctor@ indiatimes. com,
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For any other clarification, please free to contact us on Zoher-9824063400, Monica-9725099113, Bindi-9725099114
email: zoherdoctor@gmail.com or kinduzo@gmail.com

Regards,

Zoher Doctor / Kinduzo Financial & Insurance Solutions Pvt. Ltd.

Director

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Infrastructure Boom to drive GDP growth

Construction boom to drive GDP growth

India's 8-9% GDP growth over the last few years has made its infrastructure deficit even more visible. Growth in infrastructure such as airports, ports, roads, power, and highways has not kept pace with the economy and the growth in demand. Expected high GDP growth rate of 9-10% in the 11th Plan period (2007-2012) will not materialize if infrastructure spending is not pumped up, and rapidly.

In FY07, infrastructure spending stood at 5% of GDP. The Planning Commission estimates that this figure has to increase to 9% of GDP by 2011 to sustain the target GDP growth rate during the 11th Plan period. The Planning Commission targets infrastructure spending of USD 500 billion during 2007-2012, of which 30% or USD 150 billion will come from the private sector.

Also, real estate investments and capacity expansion by industries to the tune of USD 12 billion and USD 174 billion respectively in the 11th Plan period will add to the construction boom. The construction industry is hence expected to grow at a CAGR of 25% over the next 5 years.
Source: CRISIL

Performance of Infrastructure Funds

Peer Comparison of stocks
We have compared a few leading infrastructure companies - Gammon India, Larsen and Toubro (L&T), Nagarjuna Construction and IVRCL.


EBITDA margins and ROCE are expected to dip marginally in FY08 while PAT margins will remain more or less stable.
Gammon India
· Its subsidiary Gammon Infrastructure Projects Limited (GIPL) will add to the order book of Gammon India
· Has stake in ATSL that is in the lucrative power transmission business
L&T
· Strong order flow in existing business
· Forayed into new businesses - Defense, thermal power equipments, nuclear power, railways and shipbuilding
· Its subsidiaries - L&T IDPL (infrastructure) and L&T Infotech (IT) are expected to bring considerable upside
Nagarjuna
· Robust and diversified order book
· Awarded hydro-power contracts
· Strong presence in housing
IVRCL
· Strong order book - could be affected by delays in development of land bank
· Raised funds through IVR Prime
· Hindustan Dorr Olivier, an EPC company, is its subsidiary
· Diversified into oil & gas exploration - exposed to risk in this capital intensive business, upside could also be high in case of finds
We believe the above companies will ride the wave of construction and growth will definitely be strong over the next decade. This will bring satisfactory returns to patient long-term investors. However, valuations do look stretched and are contingent on actual performance - and much of this depends on government action. Given that this is a pre-election year, risk of delays and cost escalations cannot be ruled out. Medium term uncertainties remain - as valuations across the market look stretched.

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Return are as per 14th Dec 2007.

Source ValueResearch

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Happy Investing!

Zoher Doctor / Smart Money Inc.
F i n a n c i a l P l a n n e r
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