Sebi has dropped TER. Obviously now the guys getting Rs. 25L a month and working as RM can no longer afford to sell mutual funds. So you will be told the following…

  1. Ulip is tax free. (permanently for the next 100 years I hope)
  2. Moving from equity to debt or vice-versa is tax free and easy (all clients know market timing of course)
  3. Charges are lower than 2% of mutual funds (bull shit Hdfc sensex etf is .05%)
  4. Irda definition of “large cap” are stricter (hey indexing solves that believe me)
  5. It has an auto mode of investing – based on age (aww bull shit a guy who knows switching needs this??)
  6. It has a waiver of premium advantage (hey Joker Term plan is supposed to handle this, right?)
  7. Online Ulips are comparable because charges are similar (nonsense the term insurance charges are still different)
  8. On an average Ulip category performance is better (how many times have we heard this!!)
  9. Ulip attracts better talent (oops show me please.

What they will not tell you (and you should ask):

  1. why is the term insurance cost higher in the early part?
  2. why is it LUCRATIVE for the online sales guys – what am I missing there?
  3. why is the premium so high in the later years (oops rising premium with age is it?)

My view:

you can throw a term insurance away when you don’t need it

you cannot port a fund – you are stuck to a bad fund manager

Broadly – there is nothing that stops you from investing for the long term in an index fund. Stick to a term insurance.

A new type of Ulip is being hawked nowadays – it is obviously very profitable for the issuer. It ties you up for a very long time with a poor product that you don’t need.

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  1. Every single relationship manager who comes to me , I tell him to make an excel sheet and prove this is better than a term + active managed median fund – they never come back….

  2. ULIPs are not efficient, agreed. But they are way better than LIC endowment plans which hundreds of thousands of LIC agents sell to young earners yesterday, today, tomorrow and for many years to come. LIC has a 70% market share in insurance business which shows ULIP business of private insurers is probably 10-20%.
    SEBI is doing a great job to those who invest thoughtfully. Its not SEBI’s duty to make RMs sell MFs. Its the buyers prerogative to understand what he buys. The LIC and ULIP buyers have to plot their own journey. And dont forget IRDA is doing nothing to prevent misselling.

  3. Sir, index funds woeked in U.S.A, but japan index has not moved since 80-90 … will it work in india? and why

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