Either I am being very touchy about ULIPs or Endowment plans in general or too many pro-ulip articles are appearing in the print media also. The big worry about using numbers in an example is to know enough about statistics – mean, median, mode, standard deviation and NOISE. Noise is the distortion that is caused – or the insignificance of the change being attributed.
Let me give you an example. If suppose I ran the Standard Chartered Half Marathon this year in 2 hrs 50 minutes and ran the last marathon in 2 hrs 57 minutes. Suppose I had a rice diet on the previous day of the race last year and wheat on the previous day of the race this year…and come to a conclusion that WHEAT IS BETTER THAN RICE for runners…THAT WOULD BE NOISE – I mean the difference is just not enough to come to such a drastic conclusion. There has to be a lot of data, analysed over long periods of time, over different types of runners…to come to any such conclusion.
Now it ET does an article and says – over a 20 year period in a plan of Mutual fund + Term Plan (Rs. 22,47, 076), and Ulip (Rs. 23, 38,167) – THE DIFFERENCE IS JUST NOISE. The difference is so SMALL that it is IMPOSSIBLE to justify ULIP instead of MF +Term.
The problem of ULIPs do not go away whether it is being bought for 20 years, 30 years or 300 years. Let us look at some of them:
– fund manager consistency or luck (as you wish to call it)
– if a ULIP does badly, bad luck, you are stuck with it.
-suddenly if you do not require life insurance, you are still going to pay the risk premium
– charges are so vaguely structured (for the common man) that removing some part of the money can make the whole deal useless.
– no term insurance is ever taken to its end. Surely somewhere in between you loose the need for risk cover – you can throw away a term insurance, but with a ULIP you continue it
No I am not freaking out on a UL vs. MF debate. I personally have a lot of investments in direct equity, ULIPs, mutual funds and also carry term insurance. It is about knowing how to buy…however here is an article, read on:
if it is a plug, it is a plug. Sorry too bad if ET carried it. Even the title is misleading…but well it is there.
Post Footer automatically generated by Add Post Footer Plugin for wordpress.