This is a perfect section for you if you are interested in enhancing your knowledge about Financial Matters. A few tips and tricks about Investing, Shares, Mutual Funds and Money Saving Schemes.
Why you should be “Pissed off” At these Insurance Companies

* Do you Know that, The Securities & Exchange Board of India (SEBI), the stock market and mutual fund regulator, does not allow mutual funds to guarantee returns. Therefore Mutual funds can not provide guaranteed products which are related to stock markets, but IRDA can approve things like these and all these insurance companies come under the ambit of Insurance Regulatory and Development Authority of India (IRDA). So any Insurance Company can come up with a new Plan, link it with market and start providing “Guaranteed products”. You have to understand that “equity markets” and “guarantees” are a very risky idea together, so please stay away.

* Do you observe when do all these “Innovative” products come up in Market ? The answer is around end of the year, which is a premier Tax Investment time (Jan, Feb, Mar). Is innovation in Finance space limited to End of the year ? Why dont these products come through out the year? Why ? The answer is simple, if it comes after anytime other than last 4-5 months of the Financial Year (ie Dec, Jan, Feb, Mar), no body will bother to invest in these, because no body is bothered to “invest” at all. Companies very well understand investors psychology and their helpless ness at the end of the year because they have to provide investment proofs for Tax exemption as soon as possible. This is not just limited to these products, its true for NFO’s, IPO’s in booming markets, More Sales calls at the end of the year, and other new products .

* The so-called “Guarantee” is a marketing gimmick and is implicitly a result of the way the investment is structured. what it means is that the strategy they use itself is such that it will provide you the highest NAV, even we can create our own Plan and do what they are doing. But they make sure that Investors feel like they have done years of research and came up with these amazing plans .

* Why The Tenure is 7 yrs ? I am not very sure on this, but here are my thoughts on comments area

* You have to understand that there is nothing “Innovative” in this product, the fact that 7 companies have come up with the same product proves that its not “innovation” because Innovation is unique. Aegon Religare has gone ahead in this stupidity and introduced their Guaranteed Plan which guaranteed 80% of the Highest NAV, Looks like they think that it makes them look different from others .
Who should Invest in These Products?

If you are looking for modest returns, like 8-10%, you can invest in these policies. The return of these policies may be high in the beginning, if market does well; but when market starts performing badly, the returns can take a hit and then be in a tight range. Your NAV will be protected for sure, but the returns wont be, since over time the CAGR return will go down. Remember, if your NAV is 10 today and you highest NAV is 20, for a 2 year period, the return is a good enough 41%, but by the 4th year it’s just 18.9% and by the end of 7th year it’s a measly 10.4%. So what you really need, is protection of returns, not the NAV which is just a fixed number.
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