AIG, MERILL LYNCH: Should I bail out?

I have had at least 13 calls asking me a simple question: “Should i sell my units in Dsp Merill Lynch?” and “Should I surrender my TATA AIG policy”.

Surprisingly the answers to both the questions are a little different. A mutual fund has 2 distinct parts. One is a Trust – which has all the assets, one distribution arm which is the face visible to you as an investor / advisor, and does the fund management. In case of the Merill take over internationally, the trustee company has nothing to worry about, NEITHER DO YOU. Your NAV remains intact, your assets remain intact and you will get your money back.

However, this is a good time to review the risk in the FMPs/ Structured Products that you hold and exit some weak ones, inspite of an exit load. That is because the CDOs, PTCs, etc. in which the scheme has invested maybe a little weak. So review and be awake.

In case of AIG though, the money management skills have not been too great. The premium  money has been invested in CDOs! This is a worry.

In case of General Insurance clients may decide not to deal with AIG. Similar things can happen in life insurance. The general public maybe  a little hassled. All the shouting of “biggest, safest, etc.” will be called to question.

Selling of AIG INSURANCE products will become not just difficult, almost impossible!

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