ULIPs are good for the long period of investment

Friends,

We calculate the nominal return on equity on post tax basis while we talk of yield on debt funds on pre-tax basis, clearly equal nominal returns would be preferable. The equity-advantage does not end here. Consider the folloing which reflects return on Sensex in each decade since 1980 till now:

1980-90 … +25pc p.a.

1990-00 … +30pc p.a.

1998-08 … +25pc p.a.

The yield on long-term G-Sec has ranged between 6 to 10 pc per-annum.

The difference is clearly visible. Even if you have not timed your investment decision the return in equities has never been lower than 10 pc after nursing stocks for a full 10 year period and the peak returns have been as much as +40 pc p.a.(between 1982 to 1992).

Even the gold has never been able to exceed in gains in long term (over the equity investment).

Another observation is that the longer you stay in equity investment, the more stable returns are expected. Also, if you invest after big crashes your returns are more handsome over the long period.

In this light the ULIPs are good for the period of investment is usually long for the young and middle aged people.

HariOm,
Krishna Kumar Khandelwal