Insurance for you

Fund switching advice for ULIPs on Diwali 2011

2011-10-28T08:12:00.004+05:30

Dear Policyholders,

I am addressing you after a long gap. In fact the economic scenario has remained fluid and no rational assessment was possible due to concerns having roots overseas. Only the basic strength of Indian economy and more particularly the bigger Indian corporates gives me courage to tell you once more that equity investment is a better option and hence you should be more inclined to keep your funds in equities in accordance with your age and risk profile. This means that the younger of you may remain in equity pocket as younger people have longer period for letting the investment fructify.

It may seem to you that right when the interest rate is going up I have been telling you what I told above. I need to explain to you the situation and the main points guiding me have been the following :

A) the RBI has been busy raising the Repo and Rverse Repo rate due mainly to address the inflationary situation. They have done it lastly today itself by 25 bps and the Repo and Reverse Repo stand at 8.5pc and 7.5pc while the CRR has been kept unchanged at 6 pc. In my vew the rate increases in medium term do not adversely affect the corporates. The possibility of readjustment right after the moderation of inflation leaves scope of good appreciation in equity prices. You may well appreciate that while rates have been going up the collective performance of corporates has still shown positive growth over the past quarters since the rate hikes have been taking place.

B) the market is flat since Oct 2007 ie it stays at the same level now as was the level in Oct 2007. But, the important point is that the sales have nearly doubled , the profits have also nearly doubled while the Price to Book Value ratio has come down under 2.9 from above 4 in Oct 2007. Typically the net-worth of companies acts as support for Indian corporates as the this counters inflation in a beautiful way. This should be understood against the back-drop of Indian economy's still nascent state which has an enormous room for growth given the demographic advantage and the ever increasing proportion of population actively participating in recountable economic activity. This ensures robust GDP growth for some more time to come besides making capital as more precious asset than bullion etc.

C) it has been observed that the Indian equities go up in geometric progression after a long period of lull (extending beyond four-five years). This is partly due to lack of depth and partly due to design by some market participants. In view of this those who miss the bus don't have any safe chance of boarding it later. So safety lies in remaining invested in equities at the moment and being prepared to see some temporary dilution of values which may happen due to some developments in world markets or some precipitate govt action. Being ready to forego the interest earning is another aspect but it gets neutralized due to the nominal returns on equities being the same as the bank interest (it means that since the PE ratio at present is under twelve the nominal return on investment remains at over eight percent).

D) there is little chance of your being in absolutely wrong sort of equities as the fund managers of HDFC Life have shown capacity to choose only the right scrips.

Every thing said above has to be understood fully by you and I would be ready to explain the points that you may have to further discuss. The responsibility of your decision lies with you only and my advice may be taken as just a broad guidance.

I wish you all a very happy Diwali, and wish that collectively we will be able to take India in to an era that is corruption free.

Krishnakumar Khandelwal

Positive Growth by HDFC Life

2011-05-08T08:12:00.000+05:30

Dear Policyholders,

HDFC Life is the only company which has had positive growth during last year. Even LIC hasn't been able to show positive growth last year.

The year was bad for all as many changes were brought about by IRDA in line with policy of keeping interest of policyholders supreme and compelling companies to reduce costs and charges. Since HDFC Life has always been alive to this, it could negotiate a period of turmoil for the industry at large in absolute comfort.

You should now be satisfied and proud to be with HDFC Life. As for returns on various funds for ULIP Holders , the lead is maintained by HDFC Life. You may check fund performance by visiting www.hdfclife.com .

The total fund under management of HDFC Life have crossed the mile-stone of Rs 25000 crs.

Please contact me with your specific requirement of insurance coverage, funds investment and tax planning , I promise to give you entire satisfaction on all scores, HDFC Life provides me plateform to do it.

Thanking you,

Krishna Kumar Khandelwal

Fund Switching Advice as on 3 May 2011

2011-05-03T20:37:00.000+05:30

Dear Policyholders,

I last addressed you on 7th April 2011 when the Nifty was at 5891 and advised to be defensive. Today, after the announcement by RBI that repo and reverse repo rates would be raised by 50bps, the market took a beating and the Nifty closed at 5562. This translates into about 6pc falls since my last advice.

Now, considering all factors which I have enumerated below , I would like to ask all to be at least 75pc in equities and some more aggressively inclined may get 100 pc into equities. This means that you may get into 75pc in 'growth fund' and rest in 'stable managed fund' .

As for the reasons behind my above advice, the first is that the PE for Nifty as also for the market at large is now about or under 15. This means that the nominal returns on equities will average more than 6pc per annum. This kind of return in equities should be welcome particularly when the economic growth will not be below 8pc even after downward revision.

The world's other markets have not lost, rather have gained over the month of April '11 .

The sector-wise situation is like this that metals, cement, telecom, IT , infrastructure, power, FMCG, pharma and petroleum sectors will not suffer on account of high interest rate regime and would see some improvement in terms of top line and bottom line in the next twelve months.

The sectors that may see some pressure on margins and drop in sales are auto, consumer durables, realty and cap-goods. The banking sector may have some adverse impact but since they have improved profitability by a wide margin over last two years and are at low PE levels there is only a limited down side in their case.

Since the investment by HDFC Life's (the name has changed now) team is in carefully selected companies, your risk is that much lower.

Also, since the inflation is otherwise eating into money's worth every passing day, an investor can not afford to miss the bus when the equities go up. This necessitates the greater equity investment for long term investors which is the profile of most of the young policy-holders.

I have explained to you matters in greater detail so that you may take an informed decision but please keep in mind that ultimately it's your own decision and risks in equity investing should be understood before hand.

Wishing you all happy times ahead,

Krishnakumar Khandelwal

Fund Switching Advice as on 7 Apr 2011

2011-04-07T08:24:00.000+05:30

Dear Policyholders,

The matters have turned out as explained all through since Jan '11 . The markets have shown the resilience but there are a few late development that may take shine away from the markets .

I have always told you that funds under ULIPs should be subjected to risks only very carefully as there is a provision to fine tune the same in accordance. I advise you to come into balanced fund without delay and let some time pass before we review the situation.

The conservative may get into 'defensive fund' .

The result season is commencing shortly and the future course of market will be analysed afterwards.

For reference Nifty closed today at 5891 .

Wishing all best,

Krishna Kumar Khandelwal

Scope of good returns in 2011-12

2011-03-24T09:58:00.001+05:30

Dear Policyholders,

I think almost all my policyholders having ULIPs are pleased due to the rate of return on their investments together with other benefits ie tax savings, risk-cover, benefits under sectin 80 C, facility of nomination, ease of investing, keeping debt/equity ratio at the desired level in accordance with the prevailing situation through free switching option and liquidity. This has demonstrated that the ULIPs are the best investment and insurance products.

Since after my advice to you on 29 Jan 2011 (which you may go through and refresh memory), much happened. The budget, the RBI action, the Japanese disaster, the West Asian turmoil and the local political events happened during the intervening period. The markets have not dented much although. This is because of the little room on the down-side and I in fact conveyed the same idea in previous posts.

I think there is now enough scope of getting good returns in financial year 2011-12. For reference Nifty closed at 5480 after having seen the sub-5300 level since Jan 11. It means that those who have moved to equities in greater proportion as per advice have entered at right time and patience would reward them.

I take this occasion to remind you that the ULIP holders since before 2010, have a provision under policy to top-up at minimal cost of 1 pc . All of you must top-up funds on your policies if the funds are available because these funds will not be tied-up due to absence of lock-in already (or small period left) and may participate in the debt/equity investment as per choice.

Please write to me for any specific query.

With best wishes to you and your family members,

Krishnakumar Khandelwal

What we can do in respect of our funds under our ULIPs?

2011-01-29T17:16:00.001+05:30

Dear Policyholders,

The Nifty is under attack and what should we make out of it. Let us see what we can do in respect of our funds under our ULIPs . I am doing the loud thinking to have a firmer opinion and list it below, pointwise :

1. Should one take some risk to avoid missing the bus when bullish moves come back, I think one should take some risk and get into equities because if the bench mark yield is 8.20 pc for 10 year paper and inversely it is 12.2 PE for it. We know that the PE for Nifty would be about 17 at the current level. There is however one difference between the two ie the PE for bonds would be static but for Nifty the growth in profits of whatever magnitude will bring the PE down every coming year. The trouble may come only when there is negative growth in profits of companies but that is unthinkable for the time being as the GDP growth remains above 8pc and expected to be so in near future.

2. There is fear that FIIs will sell further and dent Nifty. Here we seem to presume that FIIs are irrational entities and would not look at the value-price ratio while selling. In fact the sell off in 2008 was an exercise in irrationality caused by the collapse of financial system in US. There is no possibility of a similar event happening now or in near future, so down the line buying need will emerge with fall in prices beyond a level.

3. The domestic savings find way into equities to some extent and would add to demand for equities and not supply because Indian masses sell only at some profit and not at loss (short-term traders apart).

4. The follow-on public offering by companies over the last three years at premium have arrested the slide in such companies.

5. There is a lot of capacity creation by companies by ploughing back profits in to capex. This makes the base for greater profitability in good times and let's companies have assets that grow in value due to inflation but which show lower book-value due to depreciation adjustment. The writing-off cycle for most assets is far lower than the real life and residue for these assets.

6. Sector-wise :

Cement : this sector has been discounted in line with performance and should have good times ahead.

Banking : this forms a large part of Nifty and has been under price pressure though has delivered better numbers for latest quarter and no fear of further slide is seen.

Auto : this sector has seen great run-up and is on its way down which will have reached the safety point in a few more weeks. The high interest rate regime has cast some shadow on its growth prospect but the intensity of demand seen in past may not just die down so easily.

Telecom : the share prices of companies in this sector are at very low ebb already , if any thing , it may see rising fortune.

Infrastructure (including cap-goods manufacturers ) : this sector would grow in size always , the profitability may fluctuate , however, it has been robust. For example BHEL's quarter ended 12/10 delivered profit of Rs 1403 crs against Rs 790 crs of quarter ended 12/08 ( two year - double profit) .

Oil, Gas and Petroleum : this is represented by heavy -weights like ONGC and Reliance. Other are in marketing and have limited scope of going up or down. Both biggies gave out good results which are more than double of what it was in quarter ended 1208.

Pharma : this has many names with good track records, the Nifty has no worries on account of them..

Housing : this sector has little representation in Nifty and is one of the unstable ones. DLF is already down enough to worry for future.

IT : this has regained its importance and improved performance due to US economy on recovery path. They would progress and are on firmer ground. The profits have improved but prices are in normal range

Metals : there has been good capacity creation in this sector and profitability is OK, so, here also worries should remain at bay.

FMCG : this sector has best of the corporate level practices, HUL and ITC are very strong companies which would grow only in positive direction in future and keep Nifty in balance.

Power : the likes of NTPC have no parallel , the price also is on the lower side. With distribution and bill collection problems under check, power sector should remain OK and growing. Profitability of this sector is ensured.

(I have talked of sectors with particular reference to Nifty because HDFC Life's equity funds have bulk from the Nifty universe. The rest are very meticulously researched and collected and give the opportunity of beating the indices year after year. )

The Price to Book ratio is at historically low point and would put-up resistance against price fall.

The big fall in 2008 had occurred when the PE for Nifty was high at 27-28. The case is quite different this time. If there is over-selling , then the bears will take care of Nifty from going further down . You should have resurgent mood rather than sombre mood at present. This is my message. You are aware that any thing may happen , designed or otherwise , so you have to arrive at your own judgement before you convert idea into action.

The food and commodity prices have bearing on industrial economy and not so much on the rest like Pharma, IT, FMCG and services. High commodity prices give commodity producers to improve margins. High interest rates affect in a similar way. Since the industrial have far lower representation than they used to, the situation should not be taken to be very alarming.

With best wishes ,

Krishnakumar Khandelwal

Fund switching advice as on 28 Jan 2011

2011-01-28T10:07:00.000+05:30

Dear Policyholders,

The market was down by a considerable margin when Nifty closed at 5604 . This is the same level beyond which the Nifty had scaled up to 6200 since the Sept month of 2010. This was the point where I had not allowed you to remain in equity pocket due to my concern for safety. Since almost 6 months have passed and the latest round of results shows growth in sales and profits intact.

In light of above, now you may raise the bar for investing in 'growth fund' even entirely and in accordance with you risk profile. The FY is to close in two months and the dividends will come to investors in next three months. This will improve your position by roughly 2.5pc. So, by discounting the Nifty by cost of money, your entry will be equal to entering market at almost 4800 level in Feb 10, which by the way the lowest point for the calender year 2010.

Historically speaking, the Sensex was formed in 1978-79 and was given par value of 100. Since then it has doubled itself eight times (taking in to account the dividends recd. also ) ie doubling in every three years on an average. It has not doubled in the last three years, on the contrary it is lower by some 10 pc from the level prevailing in Jan '08. I agree that much has changed in the times since then but in a way it has changed for the better in terms of equity values in nominal terms ie in terms of value in rupee terms as the currencies have diluted all over the world. Since the value of counter has diminished ie of rupee, why should you not discount the hard assets the companies had then and added since then. This itself suggests that what you buy today is far more cheap than we think. If Onions and Potatoes can be costly why rest of the things would not, if milk and cheese will be costly why rest would not, if petrol and power will be costly why rest would not, if gold and silver will be costly why rest would not and most of all if the incomes will be more why the companies would not make more money through their operations. So, my dear friend, be absolutely comfortable in betting in market which only can keep your money's worth intact which is losing value where ever you keep it deposited, even in the bank's vaults or banks coffers.

Please, however, don't blame me for any short term hiccups that you may encounter but I have told you all above in the hope that you do not miss the bigger run that may come any time without warning and the potential for which is created in times of bad mood prevailing for reasons beyond economic sense due to political and other environmental considerations.

With best wishes,

Krishnakumar Khandelwal

Fund Switching Advice as on 25 Nov 2010

2010-11-25T09:36:00.002+05:30

Dear Policy Holders,

The time has come when I have to advise you as under in respect of 'fund switching':

The aggressive amongst you should come in to 'growth fund' to the extent of 75pc and rest in 'secured fund'.

The moderates should be keeping funds in 'growth fund' and 'secured fund' in ratio of 50:50.

The defensive should maintain funds in 'defensive fund' entirely.

This advice has been occasioned by my observation that market has kept head above water even in the wake of 'koreas' in a token war and the scams in housing loans by banks and the telecom sector. This has tested the ground for the equities in general and makes me believe that there would be big jump ahead after the consolidation phase. The market has even otherwise lost some 5pc value from the recent top and the present level of Nifty at 5850 is quite OK.

Now I tell you by way of good news that our insurance company has come out with a wonderful product which is a single premium unit linked product without any limitations and also provides you with life risk cover of 1.25 times or 5 times (of the premium) as per your choice and stage of life. It has provision for switching in the same fashion as you enjoy with your present ULIPs. The other good point is that it has curtailed the commission to adviser to a minimal level and has transferred the benefit to policy holders ie now your premium will be invested directly in to fund of your choice to the extent of 97.5pc. Since it is single premium product your worries about future capacity of paying premium need not be there any more. You will still have option to top-up to the extent you want it upon availability of investible funds in your hands. The benefits do not stop here but extends in the form of your right to withdraw money from your policy at will , in full or parts, once the policy has completed full five years. The eligibility of entry is right from age 18 to 65. The term is fixed as ten years. There would be no medical examination for those who opt for 1.25 times risk cover. There are numerous more benefits which I would like to tell individually to the ones who have decided to go for it in principle. Please be serious about getting in this policy purchase without wasting time as the good products which are too cheap cost-wise are prone to withdrawal by companies after a successful run and raise charges. I have told enough and it is up to your level of understanding of financial products in a 'common sense' way and after shedding negative tendencies. Needless to say that HDFC group now carries the best reputation not only in India but globally. HDFC SLIC has become number-one private insurer in October '10 in term of business done. Please do not hesitate to contact me for any further detail. The site www.hdfclife.com also enable you to view the brochures and fund performance etc.

Krishna Kumar Khandelwal

Fund Switching Advice as on 4 Nov 2010

2010-11-04T09:05:00.000+05:30

Dear Policyholder,

The time has come when you do the following :

Aggressive : May get in to 'balance fund'.

Moderate and Conservative : May get in to 'defensive fund' .

This comes after the Q II results confirming the good times for the industry in general and the RBI 's policy measures not being too hurtful in its latest review on Tuesday, the 2nd of November 2010. Also the US Fed is readying to pump in a lot more liquidity in coming times which indicates that capital flows are going to remain positive.

No gainsaying that the funds saved through insurance / pension polices are long term funds and playful treatment is a big No in nursing these funds.

Wishing you very happy Diwali Times,
Krishna Kumar Khandelwal

2010-09-20T08:23:00.004+05:30

Dear Policyholders,
I am addressing again after about a month which has seen indices go up very fast and the Nifty has now reached a high level of above 5900. I have noticed pointers which indicate that a correction of about 5 to 10 % is on cards. Respecting this very observation I now advise you to transfer funds entirely in to 'secured fund' . This is for all three ie for the conservative, the moderates and also for the aggressive.
The RBI has raised the policy rates by a small margin but the bond prices are down and if you enter the secured fund now you also have a chance of appreciation in the bond values when the interest rates are revised downward and I expect it to happen after about six months from now. It is not that stocks have a bleak future but the risk-reward equation is at such point that the prudent investors keep funds in safe pocket and this applies more for the insurance and pension plan funds as they are for long term goals. My resolve is to advise you in way which takes care of safety as well as of decent growth. I am happy that this has been practically achieved since the time I began to advise you in these columns.
The new plans have been introduced by companies as per the IRDA guidelines but what I find is that the charges like policy fee and fund management have been raised and the fund allocation charges in the first two years have been brought down. The fund-switching also will cost in future policies as against free switching for 24 times in a year in respect of plans sold to you so far. This makes the old plans worth more than gold, therefore please ensure that you keep paying the premium without fail and also keep topping up with every rupee that you save only on the ULIPs you already hold. You are aware that there is no withdrawal restriction or charge on your presently held policies (in a few cases the withdrawal is possible after three years, so check your policy issue date). Its only you who will have the cake and eat it too.
So, rejoice and enjoy your most valuable investment asset to the hilt. If you neglect to take full advantage, you are only going to damage the cause of fund growth and tax saving and hassle free management of funds.
Wishing you all the best,
Krishnakumar Khandelwal

Fund Switching Advice as on 23 Aug 2010

2010-08-23T07:54:00.002+05:30

Dear Policy Holders,
Its time to take stock of situation in Indian equity markets and readjust out funds in different pockets. The Nifty as also other indices have seen good run up during the month of August '10. Although at this time in the year we should be getting readied to fully invest in equities as the period beginning after Ganesh Chaturthi or Dussera moves the markets up due to release of money in the hands of businesses along with profits, part of which finds way back in to govt coffers by the end of Financial Year. The floating surplus pushes up the demand for investible securities including equities. The insurance companies sell more policies in the six month of Oct-Mar. The ULIPs remain the most preferred option. All this augurs well for the markets but I am going to advice in a reverse way, due mainly to the disturbing factor of down moves in foreign markets on one hand and due to Indian markets being at three year high at this wrong point during the year which sees some downward pressure usually. Since some thing has not happened in an ordinary way, we have also to be slightly more cautious. I therefore advise you to do the following :
a) the aggressive should park entire fund value in Balance Managed Fund.
b) the moderates should get there funds into Defensive Fund.
c) the conservative should be opting for Stable Managed Fund only.
As per the IRDA guidelines, newer products will be announced by HDFC SLIC as also other companies wef from 1 Sep 2010. After studying them, I will give you my assessment and tell you merits of the same.
Thanking you,

Krishna Kumar Khandelwal

ULIPs under regulation solely by IRDA

2010-06-23T07:25:00.000+05:30

Dear Policyholders,
  The ULIP related controversy has ended with Govt of India issuing a notification regarding ULIPs that this product will remain under regulation solely by IRDA.You may recall that when the SEBI had tried to be spoilsport for the most successful product with Insurance Companies, I had given you the word of assurance that SEBI would not be successful in its attempt. In fact SEBI's move was in bad taste and it seemed to me that it was acting at the behest of some lobby but how can one surely say so. So, now when the ULIPs are not under cloud anymore, you should be making use of this wonderful product for your investment needs.
  I am happy to report the Growth Fund (Life) Unit's NAV has crossed 80 point mark on 21st June '10 . This is exactly 4 times the par value Rs 20 in Jan 04 when Nifty was at 2000 level. To have quadrupled the value in just 6 1/2 years is a remarkable feat. It translates in to return of almost 23% per year on compounded basis. Where else in the world such an achievement may have been made. This is superior to returns in any other asset class over the same period including Realty and Bullion.
  To further enhance your returns, I give fund switching advice from time to time which might have helped you. You may, however, master about the fund decision and my advice is no compulsion. You should be taking into account your own risk appetite and impressions about the possibilities before you resort to fund-switching. However, i am at your service at all times.
Krishna Kumar Khandelwal

Fund Switching Advice as on 17 Jun 2010

2010-06-17T08:14:00.005+05:30

Dear Policyholders,
  I am happy to report at the time when we markets have steadily gone up for last seven days and Nifty closed at 5233. This is way up over the 4800 level when I had asked you to switch in to 'growth fund' entirely. There is now a possibility of RBI increasing the benchmark rates . The interest rate rise is a dampener for markets normally bur the advance tax instalments paid by corporates are higher this June compared to last year. This gives us some comfort and we need not go entirely out of the equity investment in rush. However, the occasional profit booking is never a bad idea. With this at the back of mind I give you the following advice:
a) the aggressive should now have 50% in 'growth fund' and 50% in 'defensive fund'.
b) the moderate should now switch into 'balanced fund entirely'.
c) the conservative may now come back to safety by switching in to 'defensive fund' entirely.
  I do hope that you have been enjoying the fund switching exercise as it surely has let you improve returns which no other asset class has given. Since this comes without costs and taxes, it is to be enjoyed more enthusiastically.
  I am sure that some of you have some points about which they are absolutely clear, I call upon those to contact me at my mobile nos. 09376168780 / 09724313034 or else contact khandelwal.kkinsurance@gmail.com
Krishna Kumar Khandelwal

Fund Switching Advice as on 26 May 2010

2010-05-26T07:17:00.002+05:30

Dear Policyholders,
  You may have wondered as to why I have not addressed you about fund switching while the markets have been in turmoil of late. The reason is that on one hand I do not attach much importance to Europe's troubles as far as Indian equity markets are concerned and on the other is the fact the funds managers of HDFC SLIC have been doing a great job of taking the value of 'growth units' high even in the kind of market that we see today.
  As a proof of what said about unit values, I may point out to you that 'growth fund (life products) unit NAV was Rs 68.17 on 6 Nov 2009 when the Nifty was at 4800 level and the NAV of the same is Rs. 72.91 on 25 May 2010 when Nifty closed at 4806. This shows the clear advantage of about 6% ie Rs 4.71 per unit.
  Since the Nifty is not at an attractive level and scope of further slide is limited, I am inclined to give the following advice about fund switching:
A) the aggressives should now switch into Growth Fund entirely.
B) the moderates also should now come into Growth Fund entirely.
C) the conservatives should now have their investment in Balance Fund entirely.
  Those who have Wealth Maximiser products should invest in Large Cap Fund Mid Cap Fund.
  I hope you have had very handsome rewards for choosing to opt for HDFC SLIC's ULIPs . Those who have investible funds in hand may buy more such policies before 30 Jun 2010 as there would be longer lock in period for withdrawal of funds. Pension Plan would have no provision of early encashment and would be converted to annuity, however, one third of the corpus would still come to you in cash upon maturity.
  Please feel free for asking for matters specific in your own case.
  Thanking you,
Krishna Kumar Khandelwal

Fund Switching Advice as on 19 Apr 2010

2010-04-19T07:13:00.000+05:30

Dear Policyholder,
The Nifty has corrected lately and the result season is on. I would advise you to now do as under:
a) the aggressive may now switch in to 'growth fund' to the extent of 80% and rest in 'secured fund'.
b) the moderates should now switch into 'balanced fund' entirely.
c) the conservatives should switch into 'defensive fund' entirely.
Wish you good returns in F.Y. 2010-11.
Krishna Kumar Khandelwal

SEBI and IRDA tug of war for ULIPs

2010-04-17T19:44:00.004+05:30

Dear Policy Holders,

A raging war is going on between the two regulators ie SEBI and IRDA . SEBI says that its going to be its own baby for nursing and looking after as ULIPs has a bigger element of stock market exposure. IRDA contends that it is primarily an insurance product. I would side IRDA for various reasons. The main reason is that the insurance is a much more tricky business. The liabilities are not easily determinable on the part of companies. Only highly qualified actuaries may do it for them. There has to specialised knowledge about how the premiums are fixed and how the eventual liabilities are going to be provided for. I do not think that SEBI can match up the requirement of being a body fit to regulate insurance.

I have come across material in press and on TV programmes which have tried to throw bad light on ULIPs on account of transparency issue and also on issue of commissions. In fact, I have been educating you all about the virtues of ULIP products. It stands absolutely transparent where every single charge and possible returns are shown separately in the illustrations (IRDA has prescribed format). Also the commission is minimal in these plans which allow only under 1% commission from second or third year on the premiums paid while the traditional plans which LIC has been selling for more than fifty years bring commissions of 5% on premiums over the life time of policy besides the first year commission is much more than in ULIPs.

There is some lobby behind the efforts at tarnishing the image of a product that has been much popular with public. It has all good features and none bad. I am ready to explain to policy holders if they let me know of the point they want to clear doubts about.

Would it not impress you that most of my ULIP holders have had a very satisfying returns which have been as high as 30% per annum and none have had it less than interest on FDs with bank. Needless to say that the returns have been tax free unlike interest on FDs.

The govt has clarified that the ULIPs already issued will stay unaffected. Whatever the regulators and courts finalise in the area of regulation of ULIPs will only be applicable to new offerings of the products.

Those interested may go for the exiting products of HDFC SLIC which I assure you are with low charges and good possibility of returns which has practically been the case with my present policy holders including you, if you hold a policy from me.

I do hope that those of you have substantial funds under your policy, are paying due attention my switching advices from time to time.

Krishna Kumar Khandelwal

HDFC ULIP's Fund Performance

2010-04-07T07:26:00.001+05:30

Dear Policyholders,

I have mostly sold ULIPs since HDFC SLIC introduced them in 2004. The returns for you all have been gratifying. These returns have come due to stellar performance of the Funds available to you for investment. The fund manager of HDFC SLIC deserve appreciation for their effort.

The 'Balanced Fund (Life)' has delivered returns of 16.52 % p.a. For last 5 years.

The 'Growth Fund (Life)' has delivered returns of 23.31 % p.a. For last 5 years.

The 'Defensive Fund (Life)' has delivered returns of 12.23% p.a. For last 5 years.

Those of you who have ULIPs and have been contributing regularly by way of premiums would have a fair idea how their own funds may have grown over the period (after life risk cover charges etc).

Those of you who have kept funds in 'Secured Fund' have also got more than what they would get in a fixed deposit with banks, it is also that no TDS is applicable on returns in Pension or Life plans of ULIPs. This makes ULIPs clear winners.

Those who have more investible funds may contact me at +919124313034 or write to me at khandelwal.kkinsurance@gmail.com for help in choosing a suitable ULIP. The charges on ULIPs have been reduced by HDFC SLIC and this is another advantage coming your way.

Krishna Kumar Khandelwal

Fund Switching Advice as on 19 Mar 2010

2010-03-19T19:46:00.002+05:30

Dear Policy Holders,

The time has come when I would like to address you about the fund switching. Since last advice, a lot of appreciation has taken place in the market. You may now do the following:

a) The aggressive investors should now come in to Secured Fund to the extent of 80% and into Growth Fund to the extent of 20%.

b) The moderate and the conservative policy holders should now be maintaining their entire fund in Defensive Fund.

The Nifty has closed above 5250 today and rewarded you handsomely. The next advice would be coming to you after the further developments have been observed and analysed.

Krishna Kumar Khandelwal

Fund Switching Advice as on 5 Feb 2010

2010-02-05T19:27:00.000+05:30

Dear Policy Holders,

It was a day which was feared but it offers an opportunity to get invested in equities to a greater extent. You may now do the following in respect of your funds :

A) The aggressive may now switch entirely in to 'Growth Fund'.

B) The moderates may now switch into 'Balanced Fund'.

C) The conservative may remain in 'Defensive Fund'.

The Oct-Dec 09 has turned out some good, some not so good and some poor results, still the overall sales growth and profit growth have been healthy. The budget may throw up some unpleasant measures but not much of it and the indices have already corrected on this account. There is therefore a possibility of markets consolidating at this level of Nifty (4700) and move upwards.

With best wishes,

Krishnakumar Khandelwal

Fund Switching Advice as on 1 Jan 2010

2010-01-03T15:41:00.005+05:30

Dear Policy Holders,

My last advice about switching to 100 per cent growth/equity fund when Nifty was 4550 , has delivered dream returns in a short term. The time has come to be slightly prudent for those who are aggressive. For those who are conservatives or moderates should be slightly more aggressive with their expectations of returns. I say this on account of very special times in the field of equity investments. A slight fear about equity investment in times of normal levels of prices is always there and this is what the aggressive should keep in mind. On the contrary, when the time has come when there is more than 50% possibility of big and broad upward moves in equity universe in not so distant future then it is the occasion to shed the overly cautious attitude and make a bigger opening in the investment edifice for the equity gains to flow in.

With above as back ground I recommend the following about the fund switching (the Nifty closed at 5201 on 31st Dec 09):

- the Aggressive should now switch 40% in to Secured Fund and 60% in to Growth fund.

-the Moderates should switch 60% in Secured Fund and 40% in Growth Fund.

-the Conservatives should be switching 80% in to Secured Fund and 20% in Growth Fund and raise the ratio of Growth fund by 5% every month.

Please stick to above till further advice. The change in environment will remain under my keen observation and the next advice would be promptly coming as soon as there is a need for switching for safety or for gains.

I welcome feedback and offer clarification readily, so you may interact with me at your pleasure.

Wishing you a very rewarding 2010 to all of you,

Krishna Kumar Khandelwal

ULIPs are clear winners

2009-11-18T10:51:00.002+05:30

Dear Policy Holders,

I do hope you have been continuously enjoying the benefits bestowed by the ULIPs you hold. I advise you to keep parking your savings in ULIPs you possess, as top-ups, as it would be at minimal cost and deliver all benefits due under a policy besides maintaining your short-term liquidity. The growth/gains will not be taxed even when you withdraw your gains.

For your information, the Renewal Premium under ULIPs for 6 months ended 30 Sept 09 have equaled Rs 25433 crs (up 34%) while the non-linked products have equaled Rs 36996 crs (up 10.2%). It is clear that ULIPs are finding favour with the public and rightly so because in non-linked products you lose a lot of you premium by way of higher commission paid to advisors which is normally 5% for renewal premium under such policies. The ULIP renewal or top-up attracts only 1% commission payable to advisors.

This apart, the companies have a larger share of earnings as their profit and distribute less in case of traditional non-linked policies. In case of ULIPs, they get only the fund management charge which is fixed and is low. In this light, the ULIPs are clear winners and are the exclusive platform for saving on payable taxes on returns/gains/growth.

Krishna Kumar Khandelwal

Fund Switching Advice as on 3 Nov 2009

2009-11-03T19:32:00.002+05:30

Dear Policy Holders,

I am addressing you once again about 'Fund Switch Advice' after 12 Sep 09.
Today has been a day of big fall on global cues. The Indian Inc has performed alright in the quarter ended Sep 09 and hence when the Nifty closed at around 4550, it is time that you exercise you switching option in the following manner:

- the aggressive investors should switch in to 'Growth Fund' entirely and patiently wait for further advice.

- the moderate investors should be switching in to 'Balance Fund' entirely.

- the conservative investors should be switching in to 'Defensive Fund' entirely.

You are aware that HDFCSLIC allows you to switch 24 times in a year, without charges. This is a great advantage, also no taxes are involved if you book profit under the exercise.

If any of you has any point to clarify, I am available at Mobile nos. +919724313034/++919376168780. My mail address is khandelwal.kkinsurance@gmail.com. Your queries are always welcome.

With best wishes,

Krishnakumar Khandelwal

P.S. You have a facility of topping up funds on your existing policy and your investment to the extent of 99% goes direct into investment in your desired fund. You must use this facility to the fullest extent. The withdrawals are permitted and hence your liquidity remains intact. Your topped up amount will qualify for rebate under section 80C.

If you have PPF account than please pay in minimum amount there to keep the account current. You should be aware that the fund grow faster in ULIPs you already have.

Some of you may have larger amounts to invest. You may write to me and I will suggest a ULIP meeting your precise requirements and at minimal cost.

Happy Diwali

2009-10-17T17:55:00.001+05:30

Dear Policy Holders,

Wish you all Happy Diwali and a rewarding new year like the past one. All of you must have been pleased to see your fund grow back to level which is best in the whole time since the policy inception.

Who have paid premiums regularly in past twelve months have had more to gain. The once who have actively switched funds have yet more to be pleased about. Now it is an established fact that the ULIPs are the best, in good times or bad. The proof is before you, the worst period in time (for the investors) has been seen and there has not been any damage rather there have been gains.

I once again tell you that the policy you have can absorb more by way of contribution, most of you can access your funds for your needs, in full as well in parts, the amounts paid as premium qualify for tax saving and what is most of all benefits is that the gains remain tax free and would remain tax free even when withdrawn.

So what are you waiting for, you must put all your savings in to the policy as top-up premium, leave it there for as long as you don't need funds and take out when you need it. Does it not defeat the Fix Deposit option in terms of convenience of liquidity without cost and does it not beat it also for attracting no tax while interest on FDs will be subjected to TDS.

Further more, you have also what a Mutual Fund offers but at lower to nil cost and have ultimate flexibility and freedom of switching. You can see your policy detail on line and do switching on line (just obtain the client I'd and pass word). You may contact me for any further guidance at khandelwal.kkinsurance@gmail.com or phone up at +91972431304.

The SIP (systematic investment plan) is so much talked about but you must know that this is inherent in ULIPs. I would appreciate if you discuss your financial goals and what plans you have. I think I would be able to give you some useful guidance about how you can plug leakages and grow money fast, how you would have necessary cover and have tax savings.

Wish you all best once again for Happy Diwali

Krishna Kumar Khandelwal

Fund Switching Advice as on 12 Sep 2009

2009-09-12T12:17:00.000+05:30

Dear Policy Holders,

You were addressed last 18 May 09 when the Nifty was at 4323. Since then almost four months have passed and the Nifty has advanced by about 500 points (about 12 pc up). The time has come when I share with you some concerns. I take it that funds in long term insurance plans should not be subjected to speculative risks but the aim should remain to keep out performing the other asset classes.

Of the policy holders, who are in their ripe years have to be more conservative, who are in middle years should be following the middle path and lastly, the young ones should be mostly keeping funds in 'growth fund' or 'equity fund' (this means that equity oriented funds should be preferred).

The present economic situation and the concerns of RBI governor about inflation indicate that the coming times may be seeing some contraction in money supply. This should prove to be slightly adverse for the share markets. In the long run, however, I do not perceive any big threat to markets. The prudent approach would be to switch funds as given below:

- the aggressive should switch in to 'balanced fund' entirely.

- the moderates should be switching in to 'defensive fund' entirely.

- the conservatives should be coming to safety of 'secured fund' entirely and switch 5 pc of the fund value in 'growth fund' in each of the coming calender month.

The ones who have any confusion may write to me or talk over phone.

As most of you may be having larger investable surplus on your hands, I invite you to discuss the matter and know as to how best and at minimal cost your future goal may be achieved. Please keep in mind that your savings have to be grown in a manner where there is safety and where are returns capable of beating inflation. If this is not ensured, you may encounter difficulties in your years after retirement. This is particularly important for the people who are going to live for long years after retirement. Since nobody can know one's life span, it is only the way to take some steps in time to ward off financial incapability in old and older age.

We are all lucky to now have host of plans to take care of our needs, even health and disease related needs, please give me an opportunity to discuss them with you in person.

HariOm,
Krishna Kumar Khandelwal

Fund Switching Advice for ULIPs as on 18 Jun 2009

2009-06-18T20:52:00.002+05:30

Dear Policy Holders,

The time has come that you undertake switching exercise in respect of your Unit Linked Policies as under:

a) the aggressive investors may now switch in to 'equity managed fund' entirely.

b) the moderate investors should come in to 'balanced fund' entirely.

c) the conservative investors may stay in 'defensive fund'.

The Nifty has come below 4300 level today after scaling high above 4650 during the period since my last advice to you.

This advice is given without any obligation on my part and you have to form your opinion considering all facts. This advice is just a guidance to you based on my own experience and understanding.

I am pleased that my advice so far, has kept you in good stead.

HariOm,

Krishna Kumar Khandelwal

Fund Switching Advice as on 18 May 2009

2009-05-18T18:54:00.001+05:30

Dear Policy Holders,

My last advice in March '09 suggested you all to keep funds in 'Growth Fund' and 'Secured Fund' in ratio of 75 : 25.

Since Man Mohan govt is coming back to power the mood of market has changed for better.

Today has been a historic day in the sense that the trading had to be suspended due to Nifty and Sensex hitting circuit breakers on the upside twice, in the morning itself. Nifty closed at 4323 (+651) and Sensex at 14284 (+2110).

The application of circuit breakers on the upside have never been applied, however, when the NDA could not secure enough seats to come back to power in 2004, the markets had lost heavily. Over time the losses were made up. This time reverse is happening and in a manner that will put many to unintended or uncalled for losses whether a buyer or a seller.

You have now a very respectable level to get your funds parked in safety. You should be watching the markets till 2 PM tomorrow and if they are trading over today's closing, you should be switching funds entirely in to 'Defensive Fund'. This is for all classes of Policy Holders.

After the budget or even before, if there is a need, I would come back with fresh advice in light of new developments.

HariOm,

Krishna Kumar Khandelwal

Fund Switching Advice as on 27 Mar 2009

2009-03-28T19:45:00.003+05:30

Dear Policy Holders,

I last addressed you on 27 Feb 2009 on the subject of 'growth fund' portfolio of HDFC Std Life Ins Co and I had advised earlier in Dec 08 to all ULIP holders that the 'growth fund' pocket was best to be invested in. My one important reason to say that was that the valuations were already reasonable and market could not have declined much in worst of the circumstances and the other was that it would be difficult for any body to catch the bus when there is some good news and people rush to convert cash into equity (includiing MFs and FIIs). The circumstances did get worse in the mean time but Oct 08 lows were not breached. Then the news flows became positive on balance and people rushed for buying equities.

The last fifteen days have been historic and the Sensex is perched at above 10000 and Nifty above 3100 (gaining more than 20 pc). Now should we shy away from keeping investment in 'growth fund', I think not. However, my advice to all classes of people is to just move 25 pc value to 'secured fund' and rest should remain in 'growth fund'

I will be coming back with the required analysis and guidance whenever there is further need to switch funds.

Those who have some investible funds but do not have a ULIP policy to absorb it may contact me with details so that I may suggest a right plan to take care of their needs. Needless to say that the ULIP are ultimate products for all investment and risk cover needs. It is also a must that your financial advisor is capable of studying economic environment and advising rightly. So, choose your advisor first and the plan later.

HariOm,

Krishna Kumar Khandelwal

Remain invested in Growth Fund

2009-02-27T07:36:00.003+05:30

Friends,

The ULIPs (unit linked insurance plans) have gained popularity recently and have have given negative returns for the first time in past twelve months. Reason is not far to seek, the USA’s financial disorder has to do every thing with and therefore it was something which the fund managers could not have controlled or assessed. I decided to evaluate the ‘growth fund’ portfolio of HDFCSLIC. Their top holdings with more than 1 pc investment of the gross amount with the fund is as under (CMP on 020209):

ASIAN PAINTS (2.66 pc): Its book-value is 97/- against CMP of 778/- and EPS is Rs 37.10. Its 52W H/L happens to be 1314/778. This is good scrip and has good stability and brand image.It’s leadership is undisputed.It can be held for long term withiout fear as the management is top class.

BHEL (6.67 pc): Its book-value is 153/- against CMP 1308/- and EPS of Rs 59.3. The 52W H/L is 2366/984. This is company which has least worries on account of slowdown due to robust oerder-book. This is slated to give handsome returns over long period and is one of the best picks.

BHARTI AIRTEL (2.92 pc): Its BV is 106.3 and EPS is Rs 39.10. The CMP is 715/- and 52W H/L happens to be 950/484. This is a great company by all standards and is in a field that is growing by leaps and bounds. It has head start over other players in the field and should be one of the best bets at the time.

BLUE STAR (1.83 pc): Its B//V is 29.30 and EPS is Rs 17.70 while CMP rules at 140/- against H/L of 500/122. This is an old player in air-conditioning and has very resonable price against EPS.

COLGATE (3.18 pc): Its BV is 11.90 and EPS is Rs19.70 while the CMP is 415/- against 52W H/L of 460/341. This is one of the best managed companies and its brand value is tremendous. This should be a part of any good portfolio and for consistancy. FMCG sector is growing even in todays gloomy times.

CROMPTON (4.05 pc): Its B/V is 25/- and EPS Rs 10/- and CMP rules at 130/- against 52W H/L of 336/106. A player in elecrical equipment sector and with good pedigree , this gives absolute comfort in a portfolio.

DISHMAN PHARMA (1.59 pc): Its BV is 58.2 and EPS Rs 10.8 while CMP rules at 112/- against 52W H/L of 350/97. This pharma comapny is discouted very favourably just now and carries value.

DIVI’s LAB (2pc): Its BV is 135 and EPS is Rs 63.50 while CMP rules at 862/- against 52W H/L of 1635/797. This also falls in same catagory as Dishman Pharma and has scope of appreciation.

EXIDE (2.90 pc): Its B/V is 12.40 and EPS Rs 3.50 while CMP rules at 40/- against H/L of 84/37. This is at reasonable level of price and has no risk of further slide.

GLAXO SMITHKLINE (1.69 pc): Its B/V is 183.40 and EPS Rs 44.80 while CMP rules at 585/- against 52W H/L of 766/480. In packaged food business, this company has good track record and is good scrip to hold.

ICICI BANK (4.53 pc): Its B/V is 417.40 and EPS Rs 37/- while CMP rules at 385/- against H/L of 1245/282. This is a bank with great strides in expansion of business. It was under bad publicity but without substance, over time it gain old glory and will increase value of portfolio.

INFOSYS TECH (5.44 pc): Its BV is 235.60 and EPS Rs 94.90 while CMP rules at 1049/- against 52W H/L of 2017/1040. This company is known all over the world for right reasons and is a good addition to portfolio.

ITC (6.58 pc): Its BV is 31.80 and EPS Rs 8.40 while CMP rules at 132/- against 52W H/L of 232/178. A leader in all its field of operations and consistant growth in EPS this is best addition to portfolio.

L and T (4 pc): Its BV is 162.70 and EPS Rs41.30 while the CMP rules at 662/- against 52W H/L of 1937/611. This is under some cloud over investment in ’satyam’ but would soon regain glory. Its business is growing on compounding basis and would add good value to portfolio over time.

NESTLE (2.76 pc): Its EPS is Rs 70/- and CMP rules at 1477 against 52W H/L of 1520/1335. This is a company of high esteem and stable business and great brands. This would give stability to portfolio as also decent returns.

ONGC (4.21 pc): Its BV is 330.20 and EPS Rs 77.20 while the CMP rules at 639/- against 52W H/L of 1124/538. This is a company which may be called backbone of India. It global aquisitions have tremendous scope of giving profits. Its a ‘must-keep’ for any good portfolio.

RELIANCE (5.41 pc): Its BV is 608.20 and EPS Rs99.90 while CMP rules at 1278/- against 52W H/L of 2707/930. This company is capable of negotiating any rough patch without losing out. A very efficient refinery and oil exploration business make it a all time company. Should be improving performance in coming time.

SATYAM (2.30 pc): This would have been a dead investment but some how has been saved by the new team at work after being subjected to greatest fraud by its own executives.This may have been added due to more attractive ratios but due to concealed reasons. No further damage will be there on account of this investment.

SEIMENS (2.69 pc) :Its BV is 61.30 and EPS Rs 21.40 while CMP rules at 201 against 52W H/L of 865/186. At current price and the capacity generate profits in future give is a special status.

STATE BANk (6.73 pc) : Its BV is 772/- and EPS Rs 130/- while CMP rules at 1096/- against 52W H/L of 2310/991. This is pure value at current price. Would be star performer in coming time.

UNITED PHOSP. (3.99 pc): Its BV is 43.50 and EPS Rs 3.90 while CMP rules at 96/- against 52W H/L of 185/65. Catering to vast agri-sector of India , its a very effcient player in the field. Almost must for a good portfolio.

ZEE ENT. (3.64 pc): Its BV is 49.40 and EPS Rs 7.40 while CMP rules at 104/- against 52W H/L of 280/90. This has been picked for the sectoral preference. I have some reservations about the quality of corporate governance even though it may give good returns.

The above companies represent 82 pc of the investible funds under ‘growth fund’. The rest comprises of small investments in a few equities and rest is in bonds etc. As you may have noticed that the investments are of two types ie where the business is ever growing and is not subject to recessionery conditions and where there is value. The value stocks have been choosen keeping in mind the line of business which is again less prone to recessionery conditions. This is a good strategy adopted by the fund managers. I have looked in to each of above stock and may say that given time and given normal conditions, each of above companies may see doubling of the share price. It is for this reason that I have been insisting on investors/policy-holders remaining invested in ‘growth fund’. It could have been suggested that one remains partly invested in ‘growth fund’ but at such fantastic values which naturally ensure safety in long term, it is only advisable to remain invested 100 pc. The bus may be missed by those try to time the market and mid-way it may be more risky to enter. I hope you appreciate what I say, for confirmation please wait with patience.

HariOm,

Krishna Kumar Khandelwal

ULIPs are good for the long period of investment

2008-12-19T15:49:00.001+05:30

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

Fund Switching Advice - 29 Oct 2008

2008-10-30T16:54:00.003+05:30

Dear Policy Holders,

There has been a very bad fall in the world's indices and the volatility is continuing. My advice on 4 Aug 08 may have been followed and also my assessment of situation on 9 Oct 08 may have been seen. I am pleased that you may have had no anxieties during the period that followed. I may now tell you all to be only in 'Growth Fund' till further advice. There has been bench-mark interest rate reduction by banks all over the world. The Asian markets have therefore shown good upward move this morning while Indian market were closed.

As a further point that is in favour of the Equity preference is the fact that the HDFC SLIC fund managers are doing a good job. The Growth Fund Unit (ULEP/ULYS) has dropped by only 7.36% between 31/07/08 and 30/09/08 (from Rs 57.70 to Rs 53.45) while the NIfty lost 9.48% during this period (from 4332 to 3921). This trend is expected to continue and over the long term, it will add real value to your funds. Historically, between Jan 2004 when the Growth fund unit price was Rs 20/- has become Rs 38.47 on 29/10/08 (gain of 92%) while the Nifty has advanced from 2000 in Jan 04 to 2697 on 29/10/08( gain of 34.85%). The out-performance by HDFC SLIC is clearly evident.

As the market today is down due to excessive selling by FIIs and does not reflect the real strength which is far higher, it is the time when you may have extra advantage which is available only rarely.

I would invite the NRIs to come forward and have the savings and investments taken care of by HDFC SLICs policies along with meeting the risk cover requirements and tax shelter.

You are all welcome to send your financial particulars, present portfoio details, job details and family structure as also your aspirations and goals, I will send you a free written assessment of the same along with information about the required change etc. You will also know where you are incurring higher costs etc. and where the leakages may happen.

Wishing happy Diwali and prosperous new year,

HariOm,
Krishnakumar Khandelwal

Switching Advice - It would be better to be in equity pockets now

2008-10-09T10:40:00.007+05:30

Dear Policy Holders,

I do always tell my clients in the first meeting that they may understand it fully well that any long term saving can not should not be kept in banks as deposits and these should necessarily get pooled through a policy with an Insurance Co. . You have seen the melodrama on world financial stage and the collapse of banking institutions and investment bankers. The insurance companies have been unaffected in this melt down. In the next para I tell you as to why an Insurance Co is immune to financial upheaval and why the banks may go down under over a longer period.

The difference lies in the ways you leave money in hands of Insurance Co and in hands of Banks. While the money gets transferred to banks, it is given without any future control over its uses. The are supposed to pay you interest which they offer to pay at competitively high rates due to the need to get more money than the peer banks. To service debt they have to lend at the earliest point in time as other wise they would have to invest in govt securities at lower rate and would not be able to service debt together with meeting the cost of establishment. While lending the banks have to further face competition and do it at best rates to the best borrowers. If there is more money to deploy they dilute norms and lend to weaker borrowers. In times of bad economic cycle borrowers default in paying back . The default may be wilful or compulsive. The wilful defaults rise due to some compulsive defaulter getting concessions ( the farmers loan waiver is the case in point and in late nineties many industrial borrowers did the same and a new act had to passed enabling banks to take possession of collateral security bypassing the courts). Coming to know that banks are in trouble the depositor take back their deposit and make difficulties compounded. Some weaker banks fail and the depositors of some limited amounts are left with the deposit insurance corpn's promise to pay which is fulfilled over a long-long period of time. The big money depositors have no where to go and forget they had money. Now, look at Insurance Co's case, here the money is invested in govt securities to the extent of 85 pc and rest goes to infrastructure projects or municipal bond leaving just 5 pc at the discretion of insurance co (in case of traditional policies under the govt rules) . Now under the more popular unit link policies you remain the master of your money ie it is as per your own decision to keep it invested in govt securities, in high rated secured bonds, in call money market or in equities . You have freedom to decide the proportion ( between different pockets) and have freedom to switch at will and without cost (in case of HDFCSLIC policies particularly).

Even if the insurance company fails to make profits out of its fees and decides to go out of business, the policy holders money remains safe. The accounts and record are handed over to another company and the policy holders are given back their money along with returns on maturity or when demanded. You may now have the full realisation as to why it only best to go for long term pooling of funds through insurance companies only.

You may wonder what will happen to life risk cover part. Here also the companies already have an arrangement with the re-insurers and carry little risk with themselves. Further more the returns are not taxed by govt and this remains the only pocket where tax relief is available and for all time come.

As for the switching advice, I would say better to be in equity pockets because what is going on all over the world is that the money supply is being increased and interest rates are being lowered. When this will have effect, it will dilute the currency values and increase the profitability of corporates and raise the value of their assets. The equation is simple. When there is credit crisis and the borrowers have to be given some comfort, it is buy lower the interest cost to them and let the real value of money go down. So, please be comfortable with equity investments, here you become owner of asset yourself and are not a creditor in some entities books which may or may not be strong enough to pay back. In case of equity holdings you do not have to file suit for recovery, you are paid your share automatically on liquidation of a company. I may remind you here Indian businessmen are quite conservative and after years of good profitability they have reduce leverage and have too little debt on their balance sheets. I have had to write all this at length but the occasion demanded it.

Wishing you brighter festive times ahead,

HariOm,
Krishnakumar Khandelwal

Fund Switching Advice 4 Aug 08

2008-08-04T09:30:00.004+05:30

Dear Policy Holders,

The markets have had good come back from low levels and in the mean time the RBI has raised bench-mark interest rates. This has resulted in 'bond' prices going down and yields going up. This situation calls for some adjustment in the 'fund mix' under your ULIPs. You may now do switching as advised below:

The aggressive should now have 20 p.c. exposure in 'secured fund' and rest in 'equity managed fund'.

The conservatives and moderates should now have 30 p.c. exposure in 'defensive fund' and rest in 'balanced fund'.

The above is tentative advice and if and when the 'Nifty' moves up in the range of 4600 to 4700 points , I will come back with fresh advice to take advantage of the situation and also ensure greater safety.

Thanking you for letting me serve you.

Hari Om

Krishna Kumar Khandelwal

Downward movement in indices in the stock market

2008-07-04T07:05:00.002+05:30

Dear Policy Holders,

There has been a lot of downward movement in indices in the stock market. However,HDFC Insurance has been able to out-perform the Nifty over the last one month in respect of 'growth fund' ie between 03/06/08 and 03/07/08 by a margin of 1.4% which is good in space of just one month. We may expect this feat from the company's fund managers over the next whole year and that way not gain very handsomely when the markets rebound.

The 'equity managed fund' has lost lost only 13.33 % value against Nifty's loss of 16.75% from 4715 to 3925 over the same period. In light of this there is no fear in sticking with the position at present.

Whatever is happening is on account of the high oil prices which would not remain high as has been seen over last so many decades and the normal times will return shortly. The result season is round the corner and expectedly the companies will be posting positive growth only in my expectation and when this will be practically seen by people the change in mood is bound to occur.

Hari Om

Krishna Kumar Khandelwal

Fund Switching Advice as on 13 Jun 2008

2008-06-13T09:41:00.002+05:30

Dear Policy Holders,

I do hope you have been following the analysis of the present economic scene posted on our blog www.birdinfostock.blogspot.com. It is regularly given so that there is an understanding about the background against which I give the switching advice.

Now is the time for the aggressive amongst you to switch in to 'growth fund' completely.

The moderates also should be switching in to 'equity managed fund fund' where the equity holding ranges between 30 p.c. And 70 p.c.

The conservatives should now be wholly in to 'balanced fund' and hopefully there would not be any adverse surprise and the capital will grow more than the present rate of inflation. In the present circumstances the interest may barely cover it hence the need to be in equities to a greater degree.

I do hope the you have appreciation of the facility of twenty four switches allowed by HDFC SLIC without any charges. Most other companies allow on four free switches and than charge between Rs 100 to Rs 500 per switch.

I have to further point out to you that the funds are presently beating the bench mark indices and would keep doing so till the end of July month as the dividends received are added to fund value in the months of June and July.

Hari Om

Krishna Kumar Khandelwal

Fund Switching Advice as on 28 Mar 2008

2008-03-29T16:30:00.002+05:30

Dear Policy Holders,

The markets have come in to bullish mood and result season is around the corner. You were advised lastly on the 17 Feb 08 and you must be keeping 50% in Growth Fund and 50% in Secured fund. This was applicable for all the categories of investors as there was no substantial risk of down slide.

Now I would like the aggressive amongst you to go for full investment in Growth Fund, the moderates may keep their funds in Equity Managed Fund where the equity component is between 30% to 70%. The conservatives should be ready to book profits when the Nifty goes past 5400 points.

I hope that you are keeping track and benefiting. Those of you who do not have I-PIN for online switching convenience may write to me for the necessary forms etc. Please make sure before you apply for it that you should have your own E-mail ID.

I have also to tell that those who have on line banking facility may pay premium on line. The company site www.hdfcinsurance.com provides this facility to all policy holders.

Hari Om

Krishna Kumar Khandelwal

What may be the solution to be out of the clutches of 'inflation' ?

2008-03-06T11:35:00.002+05:30

Dear Friends,

It is often forgotten that today we face a grave risk of out living our savings due to medical advancements and with knowledge about how to prolong life which though may not be very productive yet requires maintenance of high order. Therefore one of the big risk of all is shortfall risk.

In India too now people retiring at 60 face the serious prospect of spending two to three full decades in retirement.

That means investors using an overly conservative approach, investing in Gilt-edged securities, FDs and other money market instruments for earning safe interest, are often taking a big gamble with their portfolios and their retirement lifestyle needs than is generally realised. This is almost a sure thing to happen that you face the money crunch in late years when you consider that 'inflation' continuously eats into our savings worth.

What may be the solution to be out of the clutches of 'inflation' ? The solution in fact lies in building up your retirement provision through the use of 'Unit Linked Pension Plan' of a good reliable company which has past record of beating the benchmark indices on an ongoing basis and remain invested and keep contributing in the 'balanced fund' where there is about 50% equity flavour to be enjoyed. It is an established fact that no other investment beats the inflation as the equity portfolio in professional hands.

There is a further imperative that you have this plan early in age and contribute a sum of not less than 10% of your income or not less than 25% of your yearly savings, depending on what is the character of your income. If you still are without a 'Unit Linked Pension Plan' what ever your age at present please go for one immediately. The tax implications are benign under this plan hence your savings remain intact and are not eaten away by taxes. I have a further point to make and that is that you must compare fund management charge before choosing a company for this purpose. This charge applies to the whole corpus and year after year. I also have to tell you that 'HDFC SLIC' scores over the peers on both counts ie in respect of quality of fund management and the charges.

Please do give me an opportunity to explain any thing that remains unexplained to you by asking for it.

Hari Om

Krishna K Khandelwal

MFs can not perform better than the funds under ULIPs

2008-02-24T06:18:00.001+05:30

Friends,

I come across very many people who have leanings towards MFs. I find it difficult to explain to them that the MFs can not perform better than the funds under ULIPs because of variety of reasons.

Past and recent past experience has shown beyond doubt that the MFs have done poorly against the Bench-Mark indices while the funds under ULIPs have exceeded the returns on Bench-Mark indices. The 'growth fund ' of HDFC SLIC' has beaten the bench-mark index by a margin of over 4% over the last more than five years ie since inception.

MFs have their assets under management divided in to two many pockets and remain under pressure of redemption all the time. They therefore do not deploy entire fund available. They have higher fund management charges to take care and can not have very long term view. The ULIPs have no such problem and have continuous fund flow and can afford to have longer term view and have predetermined points of exit as per the policy terms already known.

Why then the MFs should be there at all, is the natural question that comes to mind. In fact mutual funds too have a role to play and that is in the area of sector specific funds. Those of the investors who have identified a certain sector that according to them would be giving better returns can use MF route more conveniently than do their own direct investment. Where however , an investor has interest in a particular company or set of companies, then of course the direct investing is the answer and non other pocket

I think I have given you good idea as how to use the different options available to take advantage in given situation. In this light regular savings should flow only in an Unit Linked Plan of the insurance companies, which are now having certain very valuable advantages on account of their current features like of having equity flavoured funds and bonds and debentures oriented funds besides giving the invaluable facility of allowing the policy holder to switch between the funds according to need of the hour and personal leaning. The perfect liquidity in respect of the funds is also possible after a three year period. Needless to say that in policies with life risk cover , no taxes on the gains, growth or interest earned are payable or applicable as per the section 10(10)D, before or after withdrawal. I have told only some of the advantages to keep this brief. Those interested are welcome to interact with me for more.

Hari Om

Krishna Kumar Khandelwal

Fund Switching Advice for ULIP holders as on 17 Feb 2008

2008-02-17T08:05:00.004+05:30

Dear Policy Holders and Friends,

I had, on the 21/22 Jan 08 suggested you all to get your policy fund switched in to 'growth fund' and 'secured fund' in the 50:50 ratio. On 22 Jan08 the unit price of 'growth fund' was Rs 67.68 and the latest price (15/02/08) happens to be Rs. 71.15 and this is quite an smart move. The time has come to give an advance notice that that past 5700 of Nifty level it will be time to move entirely in to 'defensive fund'. For your information the Nifty closed at 5300 level on 15 Feb 08.

This advice holds good for all of you, the conservatives, the moderates and the aggressive. You are welcome to write to me clear any confusion that you may have.

Thanks for your support and good wishes.

Krishna Kumar Khandelwal

Case for investing in ULIPs

2008-01-29T08:03:00.000+05:30

Friends,

The following what appeared recently in 'The Hindu' and represents excerpts of an interview of Mr. Suresh Parthasarathi of Bharati AXA Life and explains ULIPs in a good way:

" What differentiates ULIPs (Unit-linked insurance plans) from other market-linked savings schemes? Should you invest in them? In an e-mail interview with Business Line, Mr V. Srinivasan, CFO, Bharti AXA, makes a case for investing in ULIPs, highlighting their flexibility and tax efficiency as reasons that make them an attractive “wealth management- financial protection” solution. Excerpts from the interview:

Why should one invest in ULIPs?

Unit-linked plans (ULIPs) are a category of financial solutions that combine financial protection with market-led investment returns. Today, ULIPs have developed to becoming an able financial partner at important life stages of diverse customer segments.

ULIPs enable long-term wealth creation for a future need, such as children’s higher education, marriage and retirement, which is typically the foremost objective of any financial planning exercise. They offer long-term financial protection and scope for wealth creation and management in accordance with the customer’s risk appetite. Financial protection encourages the customer to confidently live a quality life, as it provides scope to protect his dependents financially should an eventuality arise. All this, while allowing for investment.

Again, doing a cost-return comparison between ULIPs on the one hand, and other market-linked saving instruments and separate financial protection on the other hand, ULIPs indicate a better performance than such instruments and standalone life insurance put together. Also, the cost of purchasing life protection separately through a term plan is more than the in-built mortality charge within ULIPs. The ULIP charge structure is comparable and at times, even competitive to other market-linked products over a term of over eight years.

Some ULIPs offer special loyalty additions over longer tenures, thus ensuring that the fund value grows at a pace faster than the returns generated, helping the customer beat the pressure of inflation.

In what way are ULIPs more flexible than other market-linked savings schemes?

ULIPs allow the flexibility of switching funds for a given number of switches every year for free. However, the customer bears the entry load (and even exit loads in some cases) for moving into a debt or equity fund from the other, in other forms of market-linked investments.

ULIPs also provide flexibility to decrease or increase protection over the term of the plan, as the protection needs of an average customer changes over his/her lifespan. Further, ULIPs offer the flexibility to add health insurance coverage by adding critical illness riders. Most ULIPs also offer customisation whereby the customer can enhance or reduce or even totally drop such additional insurance covers during the term of the product.

Flexibility in premium payment is another benefit provided by ULIPs. Most ULIPs provide options to increase or reduce premiums after three years. While stopping premium payment is not conducive to long-term wealth generation, ULIPs, with their low or nil surrender charges, are customer-friendly in that they allow withdrawal of fund value in emergencies. ULIPs also provide an option to “enhance” the kitty using top-ups that add to the existing fund value.
Such flexibility to add, reduce and shift funds within the same policy is unique to ULIPs.

ULIPs are as transparent as other market-led investments. Every time the customer chooses a ULIP, he/she is provided a sales benefit illustration that explains the premium utilisation and charges, year by year, for the term of the plan.

From a tax perspective, the premiums paid and the maturity proceeds from ULIPs are generally tax-free. However, the maturity proceeds from debt-oriented funds are classified as capital gains.

All these benefits rolled into one single product category is available only with ULIPs, making them an attractive ‘wealth management-financial protection’ solution.

Do you have any unique offerings within ULIPs?

AspireLife, our best-selling product, is the first-of-its-kind for the Indian life insurance industry.
It offers the customer a clear benefit that differentiates it from other products in this category — the first year premium is kept aside to provide the customer guaranteed special additions, up to 175 per cent of the first year premium, at maturity.

From the second year onwards, if the premium is Rs 50,000 or more, the premium allocation charges are waived i.e. 100 per cent of the premium is invested in the funds.

In addition, the product promotes long-term and systematic investments by offering term options of 15, 20 and 25 years.

What differentiates Bharti AXA Life from its competitors?

Bharti AXA Life benefits from the product strengths of its global parent. AXA has proven expertise in product design to suit diverse consumer segments. The company’s product blueprint serves as a ready reckoner for any of its markets to launch products to suit the local market condition.

For us, such expertise has offered our products not just quick time-to-market but also the opportunity to bring to the Indian customer the best of product benefits available in global markets. One key benefit is the long-term nature of our products, which offers scope for wealth creation while providing insurance protection over the term.

In addition, AXA believes in providing insurance solutions based on a thorough understanding of customer needs. The company follows a research-based approach to understand customer trends and protection and investment attitudes. The AXA Retirement Scope launched in 2004 evaluates retirement attitudes of people across the globe. This year, research was conducted in 26 countries, with India as a first-time participant.

Are your charges competitive to your peers?

The charge structure of every product is different and cannot be the only measure of product benefit to customers. It is important to evaluate the net return to customer in the light of total investments made. This can be ascertained by comparing the IRRs (Investment Rate of Returns). "

Krishna Kumar Khandelwal

Fund Switching Advice after the fall on 21/22 Jan 2008

2008-01-22T19:31:00.000+05:30

Friends,

My clients having Unit Linked Insurance and Pension policies may now get in to 50% secured and 50% growth fund by switching today. I request you to visit krsnakhandelwal.wordpress.com or birdinfstock.blogspot.com to keep abreast of the capital market related issues.

Now is the time to shed all fearful tendencies, now the valuation have reached a point where you have opportunity of picking up good stocks. Please stop looking at indices and concentrate on "panch-tattva" and go for the scrips recommended and you just have to spend a sum of Rs100/- per scrip to check the advice for taking action. In the end, where ever you have in any scrip in mind, ask for the points and contact at 09376168780 right today. The Nifty has bottomed out, I may assure you that.

Hari Om

Krishna Kumar Khandelwal

Fund Switching Advice as on 10 Jan 2008

2008-01-11T11:03:00.000+05:30

Dear Policy Holders,

I am speaking to you after 9 Nov 07 regarding fund switching. The Nifty now is around 6200 level and you have already had four occasions to switch 10% each time in to 'growth fund' and thus you have 40% investment in 'growth fund' and rest in 'secured fund'.Now please read carefully and note the following:

The conservative amongst you should now come back to 'secured fund' fully and stay there till the next advice.

The aggressive investors should now stop taking further exposure in 'growth fund' and should maintain their funds in the present proportion till next advice.

I do hope you are helped by what comes from me under these columns, please do not hesitate to consult me in case of need.

Hari Om

Krishna Kumar Khandelwal

Investment Wisdom over the years

2007-12-24T18:48:00.000+05:30

Friends,

Since 1991 , investment in Sensex has appreciated to roughly about 18 times. It is also very closely correlated with the GDP growth according to Kiran Kabra. The real estate in Mumbai has grown in value by about 4 times and the bank deposits have grown roughly about 5 times since 1991 . Gold prices too has grown by 5 times since than.

In my opinion the Sensex returns are after one has continuously adjusted portfolio to represent Sensex which involved effort and attention as the Sensex composition has been altered many times. The real estate seems to have appreciated by lesser degree but it has given the benefit of occupation and use or some nominal returns by way rent but not without some costs of maintenance and taxes. The investment in Banks’ FDs and gold has been slightly less bothersome to hold.

Supposing we divide the period since 1991 in to up to 2000 and after , the returns from Sensex stocks would be far lesser than the other avenues of investment for the earlier period of nine years and would be astronomical for the period after 2000. This very character of the equity investment makes it not entirely advisable. You have to move in and move out at right times to be able have the real advantage of equity investment or else shun it. Further , you should be engaging services of some experienced consultant to guide you as an ordinary citizen can never find out when to get in out.

The ones who keep their investible funds in all the four pockets will not come to grief ever. Investment through insurance policies will be a good replacement of the need to invest in FDs of Banks and direct equity holding being easier to manage. ULIPs are getting popular for this very purpose besides being giving tax relief and saving costs.

Hari Om

Krishna Kumar Khandelwal

Sixty out of 154 MF schemes have underperformed

2007-12-24T18:45:00.000+05:30

Friends,

Sixty out of 154 MF schemes have underperformed their benchmarks by over 30% or so in a year that saw the BSE Sensex gain over 40% according to ‘value research’. During 2006 , 85% funds legged behind the leading indices. India has 3.4 million MF investors and just 3 to 4% of total household savings find way in to MFs. The record of the funds under ULIPs of Insurance Companies is better as there size is big and they don’t remain under threat of redemption. They are also able to take longer term view of the market compared to MFs . Insurance companies are more prudent too, for they can not start new schemes after some of the existing have been spoilt as is done by MF industry.

Hari Om

Krishna Kumar Khandelwal

Fund Switching Advice

2007-11-09T20:11:00.000+05:30

Dear Policy Holders,

I had advised you last in the first week of October 07 about the funds to be switched to Secured Fund completely and to switch back in to Growth Fund at the rate of 10% of total fund after every competed month. The time has come for all of you to now have the investment in the ratio of 90% in to Secured Fund and 10% in to Growth Fund.

In the mean time the stock markets have been to a high point of Nifty 6000 and are back to Nifty 5680. This is for the leading index only , the broader market did not go to comparable height. The outlook is now bearish only and would remain so for some more time and the advice is based on this premise only that the equity exposure will be averaging out at lower level only over the next six / seven months and we will have an opportunity of booking profits on jumps in part and lower our costs. The interest earning on our investment in secured fund will however continue and would stabilise our over all fund value without the sleepless nights.

As already told to you that I take utmost care of the funds in your policy as these funds are long term funds and should be seeing a little downside , if at all otherwise these funds should only be growing at a pace faster than the Banks' F.D. rates. The end result in the long run would be that your funds growth will be higher than in any other pocket.

Wish you a very happy Diwali,

Hari Om

Krishna Kumar Khandelwal

Fund Switching Advice as on 5 Oct 2007

2007-10-06T18:58:00.000+05:30

Friends,

There was some sobering of market on Friday, 5 Oct 07, when the Sensex closed at 17773 (Nifty closed at 5173) almost after a continuous rise for over last thirty sessions. While main index has been moving up so much, the broader indices have not kept pace and all the gains are under influence of large stocks. The Reliance Pack has actually added most of the incremental points. The news through out has not been good and still we have seen this kind of behavior. The reason is not far to seek and it has been the FII money inflow that has done the trick. What is still unknown who these foreign players are and whether the local operators have any truck with them. The FM has gone to the extent of advising the members of public to be cautious in investing which is very rare from such quarters. SEBI, keeping a watchful eye, has reason to believe that what is going on is not normal, and suspects some old groups to be back in market.

More than 100 stocks have PE ratios in excess of 100 today while number of such stocks was 80 when the Sensex was at 14000 level. High PE denotes high expectations. The catch is that the expectations may be belied without any one to blame as the investing class itself has built up the expectations. Even company managements have given some projected figures of performance and an idea about high profitability, the promise is still not there. Even if there is a promise, it may still not come true as there are innumerable factors at play and things may not remain in such equilibrium, as it is necessary. The gullible are being pushed into believing that there are no risks, just as the prices keep moving up. In fact high profitability areas keep attracting higher investments and the present times give way to gloomy times due to unabsorbable capacity additions. Only a monopolistic hold on the production front, raw material front, technology, markets etc and the brands' unmatched acceptability may deliver ever-increasing results but only at a slower rate, otherwise, any high profit industry is vulnerable to see bad times ahead. My simple words of caution and hope are 'BEWARE OF RISK IN HIGH EXPECTATIONS AT HIGH POINT IN MARKET AND BE COURAGEOUS ENOUGH TO HARBOUR HIGH EXPECTATIONS AT LOW POINT IN MARKET'.

I advise the ULIP Policy Holders to switch in to safety of 'secured fund' completely and switch back in to 'growth fund' at the rate of just 10% at the end of every month from now onward, till you find a fresh advice here.

Needless to say, this advice is as per my understanding and is no binding on you and you are best to judge where your interest lies.

Hari Om

Krishna Kumar Khandelwal

Case of a Carpenter in mid thirties

2007-10-03T08:17:00.000+05:30

This gentlemen, coming from rural Gujarat ,settled down in Ahmedabad a few years ago. He came in touch with me in 2004. His income ranged between 70000 to 90000 rupees per year and was growing. He consulted me and told that he wanted better returns and had an idea
that stock markets were doing well. I had no difficulty convincing him about Unit Linked Endowment Plan . The premium fixed was Rs 2500/- and life risk given was Rs 200000/-. The plan commenced in Jan 2005. His life risk cover charges have been around Rs65/- per month. He topped up Rs 15000/- in the March 2007 and has given ten quarterly premiums so far. His fund value stands at Rs 41900/- on 27 Sep 07 and has given him returns of above 35% on net investment.

Does it not show that India has come of age and people from humble rural back grounds and artisans in traditional ways have started participating in modern economy through ULIPs.

Hari Om

Krishna Kumar Khandelwal

ULIPs more cost effective and transparent

2007-10-01T19:01:00.000+05:30

Dear Policy Holders,

Do you know that close ended MFs charge 6% of the funds generated as fee but amortise them over a few years thus giving distorted NAVs to that extent till the charges are fully reflected? The open ended funds mostly charge 2.25% as entry fees. The govt. is contemplating to allow only 2.5% as the entry level charge for the open ended schemes also and they would have to show the NAV post this charge from the beginning itself.

Should you , therefore , not regard the ULIPs as much more cost effective and transparent . In case of the ULIPs from HDFC SLIC further top ups and premiums after two years are charged only 1% in contrast.

Hari Om

Krishna Kumar Khandelwal

Have confidence in the Unit Linked Plans

2007-09-22T17:48:00.000+05:30

Dear Policy Holders,

Please note that Life Insurance Companies cannot out source their fund management work as per IRDA guideline and hence there would be consistency in returns and approach. They would adhere to pre-defined norms on risk and generally have a long-term view. The most critical
norm for investment manager of the insurance companies is that it is process driven with adequate stress on risk management.

I am sure you would have confidence in the Unit Linked Plans on account of this piece of regulation by IRDA. Cost cutting resorted to by the MFs by outsourcing is a factor to be wary of MFs although all must not be doing so.

Hari Om

Krishna Kumar Khandelwal

Unit Linked Plans as Investment Options: Different perspectives

2007-09-16T15:23:00.000+05:30

by Rajbir - September 12, 2007 as published in Money Times and analysed by Krishna K Khandelwal (given in bold)

Unit Linked Plans were once hot selling plans of LIC and few other players in India. Especially after the abolition of separate sub-limits under section 80C or earlier section 88, for rebate, investor’s preference has shifted from conventional insurance policies to ULIPs. As for me, I have always been biased against taking insurance cover, though insurance policies have saved many homes from ruin after unfortunate premature death of breadwinner of a family. My main grouse against insurance policies is that they have not passed the benefit of increasing average age to the investor and it relies too much on exploiting social fabric and high incentives to agents to trick public into policies. (I beg to differ here, the mortality charges have become lower, and it was only until the LIC was in the field that it was keeping the rising age advantage to itself but the scene has changed. The HDFC Std Life Ins Co even has lower rates for women as they have low mortality as compared to men)

When mutual funds, IPOs, Post Office agents get no more than one odd percent of investment, why should insurance agents get something link upwards of 30% and sometimes touching 50% and then for life for every installment. This high incentive straightway hits return that an investor hopes to earn.( Here also the perception is misplaced, the insurance selling involves much more effort than selling a MF product or Post Office deposit. Further, apart from the extra effort involved in selecting a plan, the term and other riders according to age, the constitution of family, the income size and the job profile, the possibility of the proposal converting in to a policy depends on the medicals undertaken which involves cost for the company and if rejected, it costs to agent as well as the company without any gain. Besides the extra commission is for the initial year and only on premium from the first year and not for the rest of the policy period. In case of ULIPs of big-ticket investment in pension plans, the charges come to far lower percentage than even the MFs)

Even Unit Linked Plans are being sold to gullible investors as they net higher commission; still they are better than Pure Insurance Products. Here are a few key answers you must know before deciding about investing in these.( Both types of plans have some special features, actually the selection of capable adviser is a must otherwise 'Neem Hakim Khatarey Jaan' is true in case of insurance products.)

How it befools a consumer.

Unit Linked Insurance Plans typically are a mutual fund type investment where a part of the earnings is diverted towards insuring your life. (Again, the wrong impression, this covers two needs in a beautiful way. When your investment gets growing, the risk cover amount gets automatically reduced and the charges become low accordingly while the primary objective of provision for the family in case of unfortunate death of income earner is fully met)

Part of annual installment you pay comprises of annual insurance premium and balance is invested as mutual fund. Now as the returns on insurance are pathetically low, average returns as worked out by adding mutual fund return and insurance return work out to be better than typical insurance policy; and hence apparently such products appear attractive on the first instance. (There is an evidence that the MFs have not performed better overall than the Funds in ULIPs. Actually the MFs present before you the best performing schemes only and do not give investor the idea of the poor performing schemes which are far more in number than the good performing schemes where as the ULIPs have only one scheme in a category i.e. Growth, Balanced, Defensive and Secured etc and hence there is full disclosure available. The second reason is the size of MF schemes and a certain category of big investor getting advantage by moving out at crucial junctures and harming the others being privy to some information due to connections in side the MF organisation. You may recall as to how a big-ticket corporate investor moved out of Unit Trust's UNIT 64 scheme leaving others in lurch, which even raised a mini political storm too. This type of happening may not happen in case of insurance company products. Insurance companies have far more prudence being the long-term capital/asset managers)

You are not able to choose the type of mutual fund such as whether diverse of mid cap or debt fund etc. Then here the question comes, why not invest yourself part in mutual fund of your choice as SIP and part as insurance premium?( This is right , the ULIPs do not offer this sort of choice, those who are savvy enough in knowing the sectoral advantages and the scrip specific advantage may choose the routes of direct investing. However, it must be remembered that none of your investible funds should exposed to such risks. Supposing the death f income earner occurs just at a time when the market is down the loss will be very difficult to sustain even may make life of the family so orphaned very difficult and ULIPs keep you safe by this angle.)

At least you would be able to choose the type of fund yourself. The answer is Firm Yes! If you are a bit educated investor then do go for such arrangement. ULIP is for naïve investors and the ULIPs deliver average return only.( The switching between the funds is without cost or negligible cost and saving the fund value in uncertain times is a mighty advantage even for the market savvy investor. The tax advantage and saving of impact cost and time value of money in practicing it is again a valuable advantage. These advantages are just not possible with any other type of saving or investment scheme.)

These products typically come with a three-year lock-in period. A typical ULIP plan will have the following components: insurance premium towards your life and investments in different asset classes. Some ULIP plans now offer choice of plans as whether to invest only in equities or to invest in 70:30 equity and debt etc. The buyer is allowed a limited number of switches between the plans. (This is perfectly true)

Typically, in an ULIP plan about 25% of the premium is allocated towards insurance, commission of about 10% in first year (this gets reduced to 5 percent in later years), administration charges of 1.5 % percent are charged.( This very factually wrong, firstly the ratios given is wrong by a wide margin, these should be checked out first secondly without speaking for other companies , I may say that in ULIPs from the HDFC SLIC stable charge only 1% from the second year and/or third year and there fund management charge is also just 0.8% )

You need to understand following before subscribing to ULIP

1. Choose proper fund type before choosing a plan.

2. Before you decide no to pay a premium or plan to withdraw funds ensure that there is enough left to cover mortality charges and other administrative charges. The insurance cover may lapse without your knowing it.

3. Try to understand the fund management and return; believe me it is not going to be tough.

Take following precautions

1. Don't get taken in by past record of a particular scheme. Rather go by the fund manager. Past record of a particular scheme could be an aberration or may be the markets moved that way during a period.

Example; when markets rose by about 50% in 2006, any fund that gave just 50% annualized return should be counted as an average fund only and not a progressive one.

2. Don't buy a ULIP on the promise that you no longer have to pay your premiums after the third year and that you can withdraw funds anytime. (You do have the advantage of part withdrawals in UNIP with exception of UL Pension Plans and there is evidence that HDFC SLICs Growth Fund under ULIPs has beaten the benchmark index by a good percentage points through out its existence since Jan 04)

(The opinion in bracket is of Krishna Kumar Khandelwal, Certified Financial Consultant with HDFC SLIC)

Fund Switching Advice as on 7 Sep 2007

2007-09-08T21:19:00.000+05:30

Dear Policy Holders,

I am advising you at the end of the week after the indices have had a ten session upward move with the last day’s slight move downward and Nifty resting at 4509 points. The 20% parking of funds in growth fund on 17 Aug 07 as per last advice has given around 10% returns since then and now you should book this wind fall profit. So, please once again, move in to safety of 100% holding in secured fund if you are conservative. The moderates may switch in to 50% Defensive Fund and 50% in Secured Fund and the aggressive amongst you may switch in to 100% defensive fund.

I have advised above out of my concern for the safety of your capital and without a trace of speculative stance. I hold a firm view that the markets (in light of latest developments) do not call for any attempt at making a quick buck hence lying low is the need of the hour.

Will address you again well in advance, if any change in proportion will be necessary.

Thanks to those who have been heeding the advice, it may however be understood that you are the ultimate authority to do as you please and I advise only in light of what I perceive based on my own inputs and is no binding.

Hari Om

Krishna Kumar Khandelwal

Comparison of Insurance Rates

2007-09-02T20:51:00.000+05:30

Dear Policy Holders,

One of the most over riding concerns for you must be the cost of insurance. The best bench mark for the cost comparison is the term plan (which covers the death risk cover only without any other benefit). I give below the comparable term plan premium rates of HDFC SLIC along with the LIC's plan below:

Age of Life Assured : 30 yrs/20yrs
Sum Assured: Rs five lacs/Rs five lacs
Term of Policy : 25 yrs/20yrs
Premium Paying Term : 25 yrs/20yrs
Premium Payable:Annually/Annually
Premium Chargeable by HDFC SLIC :Rs 1600/-/Rs 3885/-
Premium Chargeable by LIC :Rs 1911/-/Rs 5311/-

You may see clearly the stark difference in rates of both the companies. Similarly there is lesser rate applicable for the HDFC SLIC's other plans also for the same type of benefits. The true maturity values will be reflected in the standard illustrations provided by companies as per IRDA norms and you must insist on these illustrations before finalising the choice of plan and the company from whom you would like the take the policy.

Hari Om

Krishna Kumar Khandelwal

Happy Insurance

2007-08-26T14:32:00.000+05:30

Shashwat with five children of his cousins - A HDFC ULEP policy holder since 2004 with high return (26% per annum), a bachelor NRI working in a multinational company

Young Star Plan for a term of 25 yrs and held by an NRI professional

2007-08-25T18:35:00.000+05:30

Dear Policy Holders,

This is about Young Star Plan for a term of 25 yrs and held by an NRI professional gentlemen working in USA for the benefit of his daughter.The policy was issued in April 05 and Rs.25000/- premium is annually payable. The risk cover is Rs 5 lacs. The three instalments of premium paid add up to Rs.75000/- out which initial charges of Rs. 13500/- were deducted from first two premiums and the net investment made totalled Rs.61250/- and the present value of fund as on 10 Aug 07 stands at Rs.89 K ( Growth Fund Units Held :1454) and works out to annual return of 41% after accounting for the risk cover charges at around Rs.1200/- annually.

The policy holder has the following options available to him:

a) He can top up amounts and 99% will be invested in the fund/s of his choice.
b) He can withdraw money without any deduction/charge to the extent
of Rs.74000/- and the policy will remain in force.
c) He can go on premium holiday and policy will remain in force.
d) He can surrender the policy and full value of units standing at Rs. 89000/- will be paid out to him.

The returns on this remain tax exempted under section 10 (10) D. The contributions are covered U/S 80C qualifying for the income tax rebate.

In case of his unfortunate death , his wife/child will receive the sum assured of Rs. 5 lacs just then and the future premium till the policy maturity date will be paid by the company itself and the total fund value including returns would be paid to the beneficiary at the end of the term. This duel advantage is the core of the this children oriented plan.

Hari Om

Krishna Kumar Khandelwal

Benefits of Life Insurance (as a savings/investment medium) Over Real Estate (as an investment medium)

2007-08-24T11:53:00.000+05:30

Sr. No.	Attribute	Life Insurance	Real Estate

1	Taxability aspects of maturity/ returns proceeds.	Maturity/Claim is tax free under section 10(10D)	Short term / long term captial gains applicable.

2	Risk Coverage	Risk coverage/protection for the nominee/beneficiary, in case of death.	No risk coverage.

3	Inherent nature of Risk in the savings/investment medium.	No risk associated with this medium. The medium has been tried and tested. The returns are very secure and decent.	Inherent risk associated with this medium. Most of the civil disputes in the civil courts today, pertain to real estate (multiple ownership claims of title deeds/people other than the title owner squatting on the estate, etc.)



4	Tax Rebates under Section 80C	Applicable	Not applicable

5	Protection of asset in case of bankruptcy/court decree for seizure of asset.	Absoute protection for the asset in case of endorsements under MWPA.	No such protection available. The asset could be seized/frozen in case of court decree/bankruptcy/seizure by the financer of asset


6	Liquidity	Liquidity is comparatively higher (subject to policy acquiring surrender value).	Liquidity is comparatively lower. It is not easy to sell real estate in times of emergency, easily.


7	Securing dreams of family	Life Insurance helps a person to be assured of fulfilment of dreams (Child's higher education/marriage) irrespective of whether he is alive till the occasion OR not.	No such security is there in case of real estate. The client can invest only till the time he is alive.



8	Using Life Insurance for planning for post retirement life	The client could plan for a decent life, with dignity and self-respect, with regular flow of income after retirement from work, for himself and wife, till the time of last survivor of the two.	It is certainly not prudent to depend on the real estate built, for the post-retired life. Even assuming that the client sells off his asset after retirement, it may not be easy to say no to children who may want to use the proceeds from the sale of real estate for their own use.


9	Chance for maximising returns	In UL products, the client could use the switching options available, for maximimising returns.	No options available for maximising returns, except depending on the market.

Switch 20% of your total fund in to Growth Fund

2007-08-17T12:28:00.000+05:30

Dear Policy Holders,

Please refer to my last advice to you all about the fund switching on 25 Jul 2007. The nifty on 24 Aug 2007 had closed 4620 points and now it is under 4180 points . You were advised to switch in to secured fund completely. I am very glad that the advice proved to be golden. Now the time has come when you may take exposure in to equity funds partly.

Please switch 20% of your total fund in to Growth Fund and the rest may be kept in Secured Fund only. This advice holds good for all the policy holders across the board.

Hari Om

Krishna Kumar Khandelwal

Where Education is Critical - Informing the customer is the key for the success of ULIPs

2007-07-30T10:23:00.000+05:30

While ULIPs offer the best of both worlds - high returns and stable investment - policyholders must be made fully aware of its working, observes D. V. S. Ramesh while also spelling out how this can be achieved.

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As the Chinese adage puts it so aptly, 'Gather ye rosebuds while ye may'. The life insurance needs of a person crop up as soon as one enters life itself. However, various factors convince individuals against opting for life insurance products. The marketing of life insurance is always a matter of top priority at all levels. Over and above the recent concepts of globalisation, competition and innovation, the fundamentals of marketing concepts, such as keeping the policyholder well informed and making transparent disclosures will never fade out. In markets like India, people often consider insurance a waste, as one is over-sure of never requiring it. Against this backdrop, a savings element, which is made a part of the insurance premium in respect of endowment type of products, encourages people to view insurance products as savings together with protection.

As interest rates dwindle, insurers have to look towards shifting the investment risks on to the policyholders by adopting investment-linked products, from the traditionally guaranteed long-term policies with prefixed premium rates. On the other hand, customers of insurers are also looking towards the market-linked returns on every bit of their investment. Unit-linked insurance products (ULIPs) allow customers to enjoy market-linked returns together with the option of having an insurance element based on their risk bearing capacity. It is the best option for the insurer to retain customers when interest rates look southward. Need for education on ULIPs By means of product design, the embedded characteristics of these products are transparency, flexibility, segregation of charges with the saving element and market-linked returns with a hedge against inflation. However, in a budding insurance market like India where the life insurance industry has stuck with conventional products and where awareness of the capital market is abysmally low in the retail segment; the concept itself requires customer education before being introduced in the market. Education in this context, as in any other, is a continuous process.

The marketing of life insurance is always a matter of top priority at all levels. Over and above the recent concepts of globalisation, competition and innovation, the fundamentals of marketing concepts, such as keeping the policyholder well informed and making transparent disclosures, will never fade out.

Policyholders have a right to all information pertaining to the policies they propose to take. This may be analysed in two parts - pres ale education and posts sale education.

Pre-sale education Since the product design is different from that of a conventional product where the sum assured may be based on the underlying fund value, the following are to be explicitly spelt out to the policyholder:

Functioning of the products The manner in which these products work, how they are different from the traditional/conventional life products and how the returns under these products are linked to the performance of the underlying capital markets have to be explained. For instance, a friend of mine once sought a clarification - when a life insurance company launched a unit linked plan, whether it was coming out with a public issue at Rs. 10!

Sum Assured

As against traditional products, where a policyholder can see the sum assured and claim it as well, in ULIPs, the life assured cannot see the sum assured. It is quite often linked to the premiums paid or the underlying policy fund value. The statement of accounts received by the policyholders offer information on the number of units and its underlying policy fund value. In quite a few products, the sum assured even affects exercising certain options like partial withdrawals. This is the area where the prospect is expected to know what exactly the sum assured is under the policy and how this is subject to various factors.

Charges

In conventional life insurance products, the charges are embedded in the policy features and are not shown separately. In ULIPs, the charges are segregated and thus made known to the policyholder, so that overcharging cannot be hidden.

Other options

One of the characteristic features of these products is said to be flexibility. The following are some of the key points:

- Availability of various investment fund options that suit the risk appetite

- Flexibility of premium payment options

- Availability of liquidity features like partial/full withdrawals

- Room for additional premiums called top-ups

- Switching of investment funds from one fund to the others

- Premium redirection offers

- Status of policies due to non-payment of premiums, lapsing and its revival

- Maturity options

- Terminology and nomenclature of terms, charges and procedure regarding the appropriation of charges.

-Post-sale education Avoiding a possible mis-sale

Under the provisions of the IRDA (Protection of Policyholders' Interest) Regulations, 2002, policyholders are entitled to the refund of premiums if they feel that the policy offered is not according to their choice. This is to be done within 15 days. This particularly suits ULIP policyholders in India. One of the solutions to avoid a mis-sale is for the insurers to bring the factors influencing the ULIP specifically to the notice of the policyholders at the time of dispatching the policy bond.

Re-design the policy bond Providing the requisite information in a precise manner is one way of educating the policyholders. The policy bond is such a document that neither it entices the policyholders to read it nor can they understand the intricate terminology of these contracts. Re-design the policy bond in such a way as to draw the attention of the policyholders to the main factors, such as the funds offered, the terms of the contract and charges. Place all the charges and their appropriations in a tabular form at a single place.

Switching option

Switching amongst the available funds of the ULIP is one of its unique features. Unlike conventional policies, ULIPs allow policyholders to intervene at different points of time to transfer the funds either partially or fully from one fund account to the other.

In most ULIPs, the policy features generally offer more than one fund for the policyholder to choose from. This option is a special purpose tool that facilitates the policyholders in changing the investment portfolio based on their risk appetite and life stage. It will be prudent for the insurance advisors to not advise their policyholders to switch without specifically explaining its implications. In some markets, the regulators lay down certain guidelines for advisors. The policyholders are to be doubling cautious while exercising the switching option. The insurer should educate the policyholders on the pros and cons of this feature on a continuous basis.

Think long-term

As in all capital market-linked investments, the money in ULIPs needs sufficient time to grow. This is especially so in cases where higher upfront charges swallow a considerable share of the first few years' premium. The duration of investment horizon will have a significant effect on the final returns. With the investment fund options including a higher portion of investments in equity, policyholders need to be informed about the requirements of longer durations to enable the funds to grow, accumulate and generate reasonable and higher rates of returns.

Benefits of rupee cost averaging

The regular premium plans of life insurance premiums enable investors to benefit from the advantages of rupee cost averaging. The contractual obligation of the policyholders to pay continuously in regular intervals effectively reduces the volatility risks related with capital markets. This factor, if the policyholders are aware of, will significantly nullify the option of the risk cover being allowed to continue even in case of non-paymentof the premiums by appropriation of relevant mortality costs from the available policy funds. This awareness may reduce the policy lapse under these types of plans. This further will not lead to too many surrenders in the early years though policy provisions allow such options.

Working of equity returns

Policyholders should be aware that the returns under equity-linked investments outperform any other type of investments.

Investment does not translate into experience

Quite often, the investors may decide to invest in the stock market directly once they are exposed to such similar products. Let the policyholders be aware that investing in the stock markets directly needs dedication, study and analysis of the market and the possibility of their being carried away by market rumors. A less risky way will be to continue to rely on the professional fund management of the life insurers. The policyholders should be aware that by this means, the monies invested by them are diversified across various sectors of the markets. Thus, the risk is equally diversified.

Educating the stakeholders is part of business ethics. With innovative conceptual products breaking into the markets and with the introduction of alternative channels in the life insurance sector, the customers now have a more mechanical approach where they may be missing a personal, thorough and extensive personal finance review by their life insurance advisors. Hence, the role of life insurers is paramount in educating the holders of these policies. Policyholders invariably have a set of frequently asked questions (FAQs) on the available products and services. It may be appropriate for the life insurers to place the replies to these FAQs in various communications, advertisements and web portals (See list below.)

Educating the real stakeholders is one of the paramount duties of every agency, be it the government or the regulator. The agencies that are still striving to educate the public on various related matters are:

- The Investor Education and Protection Fund established by the Central Government in exercise of the powers conferred by clauses (a) and (b) of sub-section (1) of Section 642 of the Companies Act, 1956 read with sub-section (3) of section 205 C of the Act vide Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001.

- RBI educates the depositors on various matters like holding the deposits under 'either or survivor' mode, exercising the 'nominations'

It will be prudent for the insurance advisors to not advise their policyholders to switch without specifically explaining its implications. The insurer should educate for hassle free settlement of deposits and creating awareness on 'Grievance redressal forums' available in the print media at periodic intervals.

- In order to protect investor interests in the securities market, SEBI has launched the Securities Market Awareness Campaign, under which SEBI has made available educative
materials in various regional languages in addition to other measures.

- As per Section 38 of PFRDA Ordinance, 2004, PFRDA shall establish a fund for educating and protecting the subscribers of the pension fund. With the entry of private players and the consequential introduction of novel products, there is a need to educate the main stakeholders of the insurance industry as to the latent and intricate aspects of capital market-linked life insurance products. It is rare for the policyholders to have a close and clear study while choosing the products. Already, in shouldering the responsibilities of developing the nascent insurance industry, IRDA is spearheading a public awareness campaign at various fronts, both in the print and audio-visual media. It may be relevant to specifically focus on ULIPs at periodical intervals, inculcating greater awareness in the public.

The author is Assistant Director, IRDA. The views expressed here are his own.

P.S. By means of product design, the embedded characteristics of ULIPs are transparency, flexibility, segregation of charges with the saving element and market-linked returns with a hedge against inflation.

HDFC Fund Peformance

2007-07-28T20:29:00.000+05:30

Dear Policy Holders,

It is important for you to have an eye on the fund performance of the company relative to Index. I have tried to present before you some useful details about the fund performance of HDFC SLIC’s funds for life policies and pension policies over the last one year.

Fund		NAV 27.6.06	NAV 27.7.07	% age Return

Liquid
	Life	21.51	24.31	13.01
	Pension	21.51	24.31	13.01
Secured
	Life	21.28	23.01	8.1
	Pension	20.95	22.74	8.54
Defensive
	Life	25.75	30.01	16.54
	Pension	23.74	27.43	15.49
Balanced
	Life	31.1	38.69	24.4
	Pension	28.95	36.22	25.11
Eqity Managed
	Life	36.54	50.57	38.34
	Pension	34.55	46.07	35.01
Growth
	Life	42.74	61.7	44.36
	Pension	41.35	59.01	43.91

Nifty		3156	4445	40.84

You may note that the HDFC growth fund has actually managed to out beat the index by over 3%. This ability of the fund has kept you in safety against erosion in value and has given you higher returns. I hope you have followed the advice on the 25 Jul 07 and have stayed invested in secured fund.

Hari Om

Krishna Kumar Khandelwal

About switching in respect of Unit Linked Policies

2007-07-25T10:21:00.000+05:30

Dear Policy Holders,

Please refer to my last post about switching in respect of your unit linked policies. Since then the share markets have gone up but making it prone to substantial correction whenever any trigger in that direction comes to be noticed by big players.

This is the juncture where it is advisable to be cautious for the long term investors which is necessarily the character of the insurance/pension policy holders under the aegis of the Insurance Companies. I have no reservation in suggesting the move out from funds with equity flavour and get into Secured Fund completely. After the correction actually taking place and with fresh assessment of the situation then prevailing I would address you with the necessary suggestion with regard to proportions needed to maintain for safe growth of funds.

For the sake of record please note that the Nifty closed on 24 Jul 07 at 4620.

Hari Om
Krishna Kumar Khandelwal

Latest ULIP fund switching advice as on 3 Jul 2007

2007-07-04T10:43:00.000+05:30

Dear Unit Linked Policy Holders,

You were last advised on 18 May 07 when the Nifty was ruling at 4219 and now on 3rd July it ended the day at 4357. There are some developments that have suggested that the further advance in indices would be the result of some kind of misplaced optimism and there is now need to be in safer waters. In this light I suggest you the following:

A) People in Aggressive category may now switch in the following proportion:

Equity Managed Fund ...30%
Defencive Fund..............40%
Secured Fund................30%

B) People in Moderate category may now switch in following proportion:

Equity manged Fund......10%
Defensive Fund................30%
Secured Fund................60%

C) People in Conservative category may now switch in following proportion:

Defensive Fund..............30%
Secured Fund................70%

This advice is given with an understanding that the funds in insurance policies and pension policies are long term funds and there should always be an attitude with tilt towards conserving the capital than growing it at risk. Some of the policy holders are young and may be exposed to more risk in interest of the higher growth and some may be in their late years and require safety of their capital foremost. You should be understanding your own temperament and life stage and act accordingly.Whenever there would be risk free times for investing in equity , you will be advised at the right time . At such times the full exposure in to equity may be preferable to just keeping the money in interest bearing instruments/bond funds as the returns may turn out to be very very rewarding. Presently the times are not such hence the patience is required.

Wish you good times ahead,

Krishna Kumar Khandelwal

ULIP Fund Switching Advice as on 18 May 2007

2007-05-18T19:44:00.000+05:30

Friends,

Now is the time to look at the possibilities ahead. Stock Market now is at a juncture fraught with slightly dangerous signals. The market portends to be cautious. The Nifty has moved up by over 14% to close at 4219 since 30 Mar 07 when it was advised to remain in to equity funds preferably. I now advise my Unit Linked policy holders to act in the following manner :

The Aggressive and Young of you should be switching in to Equity Managed Fund (60%), Defensive Fund (30%) and Liquid Fund (10%).

The Moderates amongst you should be switching in to Equity Managed Fund (40%) , Defensive Fund (20%) , Secured Fund (20%) and Liquid Fund (10%).

The Conservative and Senior should be switching into Defensive Fund (60%) , Secured Fund (30%) and Liquid Fund (10%).

You would be given the necessary advice in future too when the developments demand it. You may contact me personally through e-mail at khandelwal.kkinsurance@gmail.com in case of confusion or need. I hope you have been served well. Please understand that the decisions have to be your own and the consequences also your own , I would not assume any responsibility in this regard as per the rules.

Hari Om

Krishna Kumar Khandelwal

HDFC SINGLE PREMIUM UNIT LINKED PENSION PLAN

2007-05-14T20:48:00.000+05:30

Friends,

The above plan of HDFC STANDARD LIFE INSURANCE CO LTD has many features that are unique and very useful and cost saving. Under this plan, the charges are minimal and returns are quite rewarding, please see the charge structure and features as given below:

a) This may be taken with minimum contribution of Rs.25000/- and amounts larger than this, initial charges are 6% of premium and are reduced for premiums over 200000/- and further reduced for premiums over 500000/-.

b)You do not have to commit for paying future premiums,however,you may top up amounts (minimum at one time Rs 5000/-) any number of times at your will and be invested in funds of your choice to the extent of 97.5% in the first two years and later to the extent of 99%.

c) You will have the option to switch between the six funds with varying combination of equity and debt for 24 times in a year without any charges.

d) You will be allowed to surrender the policy after three years and obtain your fund value including returns without any charges or deduction (no TDS deduction either).

e) After the policy has run for the full term , you will be entitled to receive pension depending on the then prevailing rate of interest and if you choose you will be paid one third of the fund value in cash without any charge and without attracting any tax. The mode, period and pension for spouse after demise are all your choices to be made not now but at the time of commencement of pension.

f) Nomination facility is available as in case of any other policy.

g) This can be taken for a minimum term of five years or maximum term of 30 years but the pension receiving age should be 50 years and this factor has to be kept in mind while choosing the policy term.

You are advised to refer to companies brochures too before taking a final decision to go for this policy.

The above may seem to be theoretical discussion. I am giving you the case histories and actual performance of some policies under this plan taken at different times since 2004 by different class of people for better understanding:

1- Policy no 1000xxx3 dated Feb 04 initial payment Rs 25000/- less initial charge Rs.1500/- Net Investment 23500/- , present fund value on 04.05.07 Rs 38 K (units under Equity Managed Fund) yielding flat return of over 19% per annam - policy holder is a middle aged lady without any regular income.

2- Policy no 1000xxx1 dated Feb .04 initial payment Rs 25000/- less initial charge 1500/- , net investment 23500/-, present value on 04.05.07 37 K (units held under growth plan) yielding flat return of over 18% per annum - policy holder is a young married women with two children without any regular income.

3- Policy no 1000xxx7 dated Aug.04, initial payment Rs 25000/-, initial deduction 1500/-, net invested Rs23500/- in Balanced Fund, present value as on 04.05.07 Rs 42 K yielding flat return of above 28% per annum - policy holder is a young executive with a investment/broking firm in Lucknow, he preferred it for the simplicity and growth prospects.

4- Policy no 102xxx01 dated May 05 , initial payment Rs 25000/- , initial deduction 1500/-, net invested in Growth Plan , present value as on 04.05.07 Rs48 K yielding flat return of over 52% per annum - the policy holder is near his retirement and works with a Govt. corporation wanted parking place for funds and some pension inflow after about five years of growth taking advantage of booming markets, needless to say his strategy paid off and expertise of HDFC SLIC fund management team delivered very well.

5 - Policy no 103xxx70 dated Aug 05 , initial payment Rs25000/ , initial deduction 1500/-, net invested in Balanced Fund, present value as on 04.05.07 Rs 32 K yielding flat return of over 20% per annum - policy holder is retired Doctor and had some free funds to invest. He would not be waiting until the policy matures and would surrender and withdraw his fund value any time when needed as the lock in period of six months has passed, no deductions would be made and no TDS will be attracted.

6 - Policy no 10370xxx dated 09.09.07 , initial payment Rs25000/- and top up of Rs 25000/- within a few weeks, initial deduction 1500/- and deduction on top up amount 250/-, net invested 48250/- in Balanced fund and switched to Defensive Fund later on, the present value as on 04.05.07 stands at Rs 56 K yielding flat return of roughly 10% per annum - policyholder a middle aged housewife without regular income, but has conservative out look about money management, she would want the commencement of pension after ten years.

7 - Policy no 103xxx76 dated Aug 06 , initial investment Rs25000/- , initial deduction 1500/- , net invested 23500/- in defensive fund, present value as on 04.05.07 Rs26 K yielding a flat return of about 14% per annum - policy holder is of ripe age now and wanted some place for safe keeping of funds with moderate growth prospects and safety and the goal is fulfilled, he has option to withdraw funds by surrender of policy after lock in period of three years or go for pension on expiry of five years.

8 - Policy no 1079xxx5 dated Dec 06 , initial payment Rs 25000/- , initial deduction 1500/-, net investment 23500/- in Balanced Fund, present value as on 04.05.07 Rs 23 K and the yield has so far been negative return of about two per cent - policy holder is a house wife without regular income and the purpose of purchasing the policy is to top up monies that will be received from husband from time to time, her choice is Balanced Fund as she was explained that over long period of time and with investment from time to time the Balanced Fund would be giving better returns along with needed safety.

9 - Policy no 109xxxxx dated Mar 07 , initial payment Rs 25000/- , initial deduction 1500/- , net invested 23500/- in Growth Fund, present value as on 04.05.07 stands at 26 K yielding a return of over 60% per annum -policy holder is a Muslim businessmen who wanted the funds to meet the obligations later in life like for children education etc., he wants to top up funds every year of about one lac as and when possible to spare from business, would keep funds only in Growth Fund as the interest earning is not preferred in Islam. he has not opted for risk cover policy also due to such considerations, since policy may be surrendered any time after three years without penalty he sees no problem in meeting his future needs.

There many policies which have been given to people who have topped up large monies and have had satisfying returns but the same have not been mentioned here as the top ups have been many and varied. Since on top up only a nominal deduction of 1% (after policy has matured for two years) is attracted, the Unit Linked Plans of HDFC SLIC have a tremendous edge over the Mutual Funds , along with the free switching for 24 times in a year between six funds the advantage over MFs becomes so pronounced as to make Mutual Fund investment risky and costly. Further the dividend distribution tax is not applicable on Pension Plans and the Endowment Plans of the insurance companies the advantage is even more.

You are welcome to seek clarification regarding any aspect that may crop up in your mind.

Hari Om

Krishna Kumar Khandelwal

Case of a Reluctant Policy Holder

2007-04-22T11:53:00.000+05:30

This gentleman, now in his middle years, holds the very first Unit Linked Policy sold by me after it was introduced in Jan 2004. His policy no.1XXX030X issued on 29 Mar 04 is called Unit Linked Endowment Plan. When contacted, this man was all sold to LIC's strength and pedigree and was reluctant to look at any other company’s plans. On great persuasion and convincing that, the HDFC Std Life Ins Co Ltd is no ordinary company, he agreed to go for a policy with it. HDFC SLIC is in fact a joint venture between two conservative giants i.e. Standard Life Insurance Co of Europe with 170 year standing and HDFC group which is held in high esteem not only in India but the world over where the FIIs have taken up stakes to fullest extent possible under the rules. It may surprise you but the Housing Development and Finance Corp. Ltd, the parent company, has annual profits of about Rs.1500 crs per year and may fulfill funding requirements of HDFC SLIC as its business grows.

The policyholder works with a private organisation and has many commitments in respect of savings qualifying for rebate under section 80 C. This policy has risk cover of just one lac rupees and he is charged about Rs 350/- per year as risk cover charges, which are adjusted by cancellation of units on monthly basis. The annual premium amount of Rs 10000/ is paid by him in quarterly installments of Rs. 2500/- .He has so far paid 13 such installments of premiums totaling Rs.32500/-. The amount that has gone in to investment in net Rs.26975/- as on first two years premiums 27% was deducted as companies charges amounting to Rs.5400/- and further premiums were invested to the extent of 99%. He holds 361 units of balanced fund and 412 units of growth fund as on 13.04.07 and the fund value stands at Rs.37151/-. The returns have been of the order of 24% per annum. The policy was sold to him for the sake of higher returns/growth as he had no further requirement for risk cover otherwise.

He has following options with him under provisions of policy:

1. He may withdraw money out of the policy fund at any time leaving just a balance of Rs.10000/- , without any deduction and without any tax incidence, in one or more installments. No interest is payable on the amount withdrawn and there would not be any commitment to pay it back. So long as the minimum policy fund is maintained at more than Rs.10000/- the policy will remain in force and the risk cover continues.

2. He has option of topping up monies, which will go straight in to investment in the fund/s of his choice in the desired proportion to the extent of 99%. These topped amounts qualify under section 80 C for tax rebate.

3.He will not be charged any tax on the gains under the policy at any time by virtue of section 10(10) D which says that if the total premium paid in a year is less than 20% of the sum assured no tax would payable on returns. Therefore, he will have to make sure that during the year the amounts topped up plus the regular premiums are not in excess of 20% of risk cover i.e. the sum assured.

4. He has the option of going on premium holiday and later resuming the premium payments.

5. Common to all unit linked plans, he can switch between the funds without attracting charges for twenty four times in a year. The fund value is after the fund management charges of 0.80%, the lowest in industry.

6. Needles to say that he can surrender the policy and get his full fund value without any deduction as three years have passed.I do hope that you have good idea how the policy works.

Hari Om

Krishna Kumar Khandelwal

P.S. Option to switch funds was excercised just once since beginning.
2. Presently the company give risk cover of up to 40 times of the annual premium. The option to take the Critical Illness cover and accident risk cover for an equivalent amount is also there.

Case of a middle aged company executive at middle rung

2007-04-17T22:06:00.000+05:30

The gentlemen was looking for some investment with a view to getting tax benefit under provision of exclusive pension saving . He was tied up with many policies issued by LIC for different sum assured and some were money back policies. I explained to him that money back policies are never meant for those in service who have to save for long term over long years. After enough life risk cover has been taken, any further risk cover policy is waste of money on risk cover charges. Since he was looking for pension plan himself, the matter was simple enough. He was already quite satisfied with the credentials of HDFC SLIC, so I had only to explain him what he would get in ULPP againstthe traditional plan. I explained to him that in traditional plans, the funds remain entirely under control of the insurance company and the same may never be used for investing in equity even if the market iscrying for rewarding you and is at a very comfortable level from the angle of risk / reward. The provision of free switching is itself very valuable from the angle of cost saving and opportunity grabbing.

After deliberations, he decided to go for ULPP with Rs. 10000/- annual premium payable half-yearly for 25 years. In the month of March 2004 when the policy was taken, markets were already high after two-year Bull Run. Although optimistic, I did not want him to put money in growth fund initially and suggested for balanced fund. I told him when ever in doubt or whenever you do not want to risk by switching frequently but wish to stay for long term, the balanced fund is the best thing. How ever during the year 2005 on a suitable date the switching to growth was done. Now, on 13th April 07 he holds 327 balanced fund units and 542 growth fund units and his fund value stands at Rs.44000/- while he has paid seven installments of Rs 5000/- so far. Adjusting for the initial charges his growth has been 18% p.a. (compounded basis).

His tax saving and other option are the same as for any other ULPP holders and detailed in 'Case of a Lady Teacher’. Don’t you think this is a dream like growth compared to traditional plans and we aretalking of a three-year long period not a flash in pan? We will track the progress later on too and for reference, the policy no. is 1XXX684X issued on 13 Mar 04.

Krishna Kumar Khandelwal

Fund Switching Advice under ULIP as on 5 Apr 2007

2007-04-06T10:20:00.000+05:30

Dear Policy Holders,

The current financial year has started with some doubtful prospects about the stocks related returns. You may recall that about an year ago you were told that the returns through equities would not be as much as through the interest bearing securities and the strategy has paid off. Also, during the year the opportunity came about to keep funds in growth funds and some of the policy holders took advantage but my advice of going out of equity completely in Feb 07 beginning also kept you in safe waters.

I expect the future now holds promise and the conservative ones amongst you should now be getting in to at least balanced fund fully , the aggressive ones may go for 100 % equity managed fund where the equities form between 30% to 70% of total and the rest is in govt. securities/bonds. Those who are least interested in equities and are more concerned with capital safety should go in to 100% defensive fund. Those who decide to be entirely in to secured funds may miss the chance of safely improving the returns.

For your information the Sensex closed yesterday at 12856 and Nifty closed at 3752. The fund values are available on www.hdfcinsurance.com, you can have the historical values also here . You should be referring this site more often to know your own fund value under unit linked plans. Please write to me at khandelwal.kkinsurance@gmail.com for any matter in this regard.

Wishing you a good financial year ahead,

Krishna Kumar Khandelwal

The case of a Lady Teacher - Born in March 1973

2007-04-01T14:15:00.000+05:30

Brief introduction: This lady married in the year 2001, joined as a teacher in school at a monthly salary of 6000/- per month in the year 2002. She contacted me in the month of March 2004 and wanted a suitable way to have pension income by the age of 50. By this time the HDFC Std Life Ins. Co. had introduced Unit Linked pension plans. Without a hitch I suggested her to go for the regular premium ULPP . She had some fear about the performance of the stock related investment but upon being told that it is as safe as any other instrument she went for it. The product feature have been given here under:

Policy No.10005XXX Plan Start Date: 23 Mar 04
Policy Term : 20 yrs
Mode: Annual Premium Amt : 10000/- per year.
Fund allocation Rate for the first two years 78% and thereafter 99%
Initial choice of Fund : 100% in Balanced Fund
Premiums paid till 23 Mar 07 - Three
Present Holding of Units: 336 Units in Balanced Fund and 841 Units in Defensive Fund as on 23 Mar 07
Total Fund Value as on 23 Mar 07 : Rs.32370/-(Post Charges)

Annualised Return on investment works out to 14% per annum for the last three years.

Her choices in this plan are:

She can Top-Up any amount besides paying premium, any number of times but each time the amount of top-up has to be more than Rs.5000/-
She may choose to go on premium holiday and the policy would remain in force.
She may surrender the policy any time now after passage of three year period and receive full fund value without any deduction.
She has exercised switching between the funds for the sake of safety and did not have to pay any thing. Her present fund choice is tilted towards security.In the month of April 07 she will be having a feel of the market after company results are out and take a suitable action of switching in to Equity Manged Fund or Growth Fund.
She has the freedom to choose one out of the many options for receiving the pension when the plan matures including the option of receiving 33% of the corpus in cash without inviting any tax incidence.
She has the option of nomination change at will.
She is getting the benefit of section 80C on her premium payments.
She has option of switching between the funds for twenty four times in a year without any charges.
The fund value at maturity will work to Rs. 10 lac at the rate of return so far achieved i.e. 14% and would translate in to monthly pension of 8000/- to 9000/- per month depending on the long term yield on govt. paper. Her fund value would paid to nominee after her death , or else the pension may continue to be received by her husband , if she so chooses.

HDFC SLIC has performed most satisfactorily as far as the fund management goes. Their performance has been best in the industry.

This is the practical out come of a wise decision and had a traditional plan been chosen the returns would have been a meagre 5-6%. You will be given glimpse in to many more plans under unit linked schemes after obtaining no objection from the policy holder concerned.

Hari Om

Krishna Kumar Khandelwal

Good times ahead for Unit Linked Policy Holders

2007-03-02T10:46:00.000+05:30

Dear Policy Holders,

I am happy to see that the last advice must have kept you , the Unit Linked Policy Holders, safe and the time has now come that you transfer 30% of your fund in to Growth Fund and rest in to secured fund. Those who are more aggressive may keep it in the ratio of 50:50. I would be coming back with fresh advice if the development in the markets so demand.

You would further notice that the MFs are absolutely out of favour and should be avoided by all who want their long term savings to grow at good rate without getting pruned by the dividend distribution tax like provisions affecting the MFs and on top of it the Dividend Distribution Tax has been raised by FM in his latest budget to 25% from 12.5%.I may now surely say that for individuals the Insurance and Pension Plans offer the best alternative to the problems of risk cover, growth, tax shelter(first on savings and later on the returns as well). Experience shows that the exchange of information and management of funds as well as cost of management of funds has been most satisfying by the Insurance companies in general and HDFC Std Life Insurance Company in particular. You may have noticed reports in Economics Times and other newspapers that the performance of the Growth Fund and the Balanced Fund has been the best in case of HDFC SLIC. To be exact their Growth fund NAV increased from Rs.20/- in Jan 04 to over Rs.55/- in Jan 07 giving more than 35% compounded annual return. This sort of return out performs the Sensex and Nifty by about 10%. Facts can not be suppressed and can not be manipulated, they are there for every body to see. You may visit the company's site www.hdfcinsurance.com and see historical data and the present composition of investment sector wise.

You are ware that out fund management charge is meagre 0.8% as against 2.25 % for ICICI Prudential. We have provision of allowing twenty switches between the funds and most others have four free switches. From July 07 onwards the annual premium contribution in an Unit Linked Plan gives you risk cover of up to forty times , as per you choice. Our risk cover charges happen to be lower than most others . Should you have any requirement of going for an Insurance Policy in this year for the purpose of availing the tax savings under section 80 C or you require risk cover after getting married or you have had a new arrival in home whose future you wish to secure, please do not hesitate in contacting me and sending me your particulars of your specific requirement to enable me to present before you the best
solutions.

The prospects after the budget have stabilised and over time some good would emerge.

Hari Om

Krishna Kumar Khandelwal

Switching advice for the unit linked plan holders in Jan 2007

2007-01-30T19:02:00.000+05:30

The Nifty and Sensex have improved and the results for most of the major companies have come out during the month. It is of course the time to pay some thought to the possibilities ahead and to keep the funds in safe pockets.

For about a year you have been advised to be a safe player in light of the fact that the insurance and pension schemes policies are for long term and it is more advisable to avoid risk. I am happy to say the average rate of return for the whole body of the policy holders under my consultancy have got returns of over 27% annually for the past three years inspite of taking only reasonable exposure in equity related funds. Since Jan 04 the Nifty has delivered returns of about 25% annually.This is very satisfying in every way.

If we look at the Indian markets at present , the P/E discounting (almost 22%) here is very optimistic and is on par with the other optimistic and performing big economies of USA and China. The latest quarterly results have been good beyond expectation but the markets have not shown the kind of stable up move as may be expected. These two things do suggest that the risk reward ratio has tilted in favour of playing safe and be mostly invested in debt funds. Since there still would be some companies doing better and the smaller proportion of holdings equity stocks in any fund would possibly give returns far better than the whole equity fund due to its power of shifting in to and out of the debt in some proportion for making funds available for the opportunistic equity investment and moving back after opportunistic disinvestment. Our quest for such a fund ends with defensive fund. Please do keep your entire fund in defensive fund at present till the next advice.

This view would get further confirmation with RBI's policy declaration . It is expected that the dear money policy would be pursued and it would then be the only best thing to do as has been suggested in the previous para.

Further more, your gains would be booked, all without tax . Your future investments would automatically go in to balanced fund as in most cases this has been the choice.

Now I suggest to those who have Unit Linked Endowment Plans and those who have Unit Linked Young Star Plans, to top up more money equal to the 20% of the risk cover including the premium installment. This additional and other investment would entitle them to earn interest and gains entirely tax free. They would be entitle to claim exemption u/s 80 C for the top up amount also. Your benefit does not end here, your interest earning and gains would also be free from tax when you withdraw money ( the policy holders before 30 Jun 06 are entitled to withdraw money any time ). You should therefore not loose the opportunity of making two way tax saving investment, this is the only scheme with such an advantage now.This is also the precise reason that I prevailed on you to go for this plan.

The modified plan still has the given advantages but with the restrictive period of three years. You may consult me for your future requirements.

Hari Om

Krishna Kumar Khandelwal

Success in Unit Link Insurance Plans as an ultimate alternative to traditional investing

2007-01-01T21:04:00.000+05:30

Once the year is out, we look back to know where the returns have been bountiful and whether our own parking places have been rewarding enough. The following charts gives an idea but my contention is to tell you about the success in Unit Link Insurance Plans as an ultimate alternative to traditional investing. Those who kept their funds in growth fund have been able to get returns of 43.8%, the conservative ones have been able to get returns of 23.85 % by keeping funds in balanced fund and still more conservative have been able to get return of 14.96 % in through defensive fund ( with HDFCSLIC) during the year just out. These returns are tax-free and therefore have more value and HDFC SLIC has been able to out perform the indices and the peers by a wide margin. Now those who judiciously took efforts to switch funds at right time in right proportion were able to raise returns handsomely and kept themselves in safe waters. Have a look at the tablebelow:

Asset class				Returns
Art				104.08%
Gold				48.47%
Direct Equity
Sensex				42.30%
Nifty				33.90%
Equity Mutual Funds
Diversified
Best performer - Sundaram select midcaps				56.70%
ELSS
Best performer – Birla Tax Relief 96				40.70%
Balanced
Best performer – JM balanced fund				35.50%
Real estate: Premium Residential
Tier I & Tier II cities				15-20%
(Source: Narains Corp)
Debt
Bank FDs – Best rate				8%
Post office savings				8%
Debt Mutual Funds
Long term debt
Best performer – Pru ICICI Gilt Investment				9.70%
MIP
Best performer – Reliance MIP				14.40%
Floating rate
Best performer – LIC MF floating rate fund				7%

I invite my readers to extensively discuss the merits of the Unit Linked Plans. I would appreciate if you let know your precise financial goals and risk profile, I would be able to show to you how efficiently these goal may actually be achieved.

Wish you a year of all-round success and fulfilling times ahead,

Hari Om

Krishna Kumar Khandelwal

Achieve the objectives of tax saving, risk cover, liquidity and most of all higher tax free returns

2006-12-26T19:36:00.000+05:30

This is a reproduction of letter to one of the policy holder aged 28 years for you to get an idea of how the Unit Link Policies practically work for achieving the objectives of tax saving, risk cover, liquidity and most of all higher tax free returns... You may compare these with any other instrument that you may be having... Please come forward for further queries that you may have.

Ref.Your Policy No.xxxxxx... 0f 04/05/06 under Unit Linked Endowment Plan with life risk cover of INR 5.00 Lacs along with accident rider, half yearly premium payable is INR 12500/-

Dear Policy Holder,

I am pleased that you decided to go for this policy. You have had an annualised return of over 25% p.a.on your funds invested (precharges) so far and the next premium falls due on 04/05/07.You presently hold 257 Units under Balanced Fund and 362 Units under defensive Fund.

Your policy allows you to pay extra premiums called top ups and these funds would also gain in the same fashion as explained earlier also qualifying for tax saving under section 80 CC , all without attracting tax on returns as well . You should however make sure that the top up amount together with annual premium does not exceed 20% of the risk cover in a year in accordance with the provision under section 10(10)D which says that the returns will not attract tax if the total premium paid in a year is up to 20% of the risk cover.

In light of above, I suggest that you must pay in extra some of up to INR 75000/- until 31 March 07 in accordance with availability of funds in your hands. As your policy allows you to withdraw moneys once or more times without restriction, you would not face liquidity problem. Further more your funds are invested to the extent of 99% as against mutual fund investment attracting entry load of 2.5% or more. You are further advantaged because of the switching option without cost or delay, twenty four times in a year. Discretely used, this facility may raise your returns handsomely during the year as well as in the long run. My clients have been able to get up to 60% returns during last one year.

For your information, a risk cover charge roughly @ Rs 16/- per Lac per month is being deducted presently.

I call upon you to consider buying more such policies, as your income grows, for your self and for the members in your family as nothing else is so complete and so rewarding a financial instrument in our country presently. It takes care of all your needs in short run as well as in long run with the life risk cover and tax shelter and perfect liquidity. You would be glad to know that HDFC SLIC has been out beating the index by over 10% p.a .HDFC SLIC has been rated as best fund manager amongst the industry players.

I would be glad to provide further clarifications required.

Wish you a very Happy New Year.

Hari Om

p.s. Kindly visit www.panchtattvainsurance.blogspot.com regularly for guidance regarding switching time and strategy.

Krishna Kumar Khandelwal
Certified Financial Consultant: HDFC SLIC

Switching Advice for Unit Linked Policy Holders in last week of Dec 06

2006-12-26T09:37:00.000+05:30

Dear Unit Linked Policy Holders,

The markets have gone up by over 35% during the year 2006 as far as Nifty goes and have gone up by over 25% for the whole equity universe. Your company has been able to perform beautifully and has beaten the indices by a wide margin while maintaining their performance as top rated in the entire industry.

At this juncture I would advice my Conservative customers to switch their funds to secured and liquid funds in the ratio of 50:50. Those who have some inclination towards remaining in equities to some extent may switch their funds to Defensive Fund for the time being.Those of the policy holder who are averse to switching every now and then may continue to keep funds in Balanced Fund.

My detailed stock market review is available on www.birdinfostock.blogspot.com and those interested may visit the same.I welcome interaction with people hence please feel free to write about any thing that you have in mind.

Thanks for giving me an opportunity to serve you, when the time comes I would be willing to share my views .It may however be understood that final decision is your own and I do not hold any responsibility in this regard . My advice is based on my own study and is no binding on you.

Please accept my heartiest new year greetings,

Hari Om

Krishna Kumar Khandelwal
Certified Financial Consultant: HDFC SLIC
Mobile: +919376168780
email: krsnakhandelwal@yahoo.com

Unit Linked Young Star Plan:An all aspected and friendly Plan from HDFC SLIC

2006-10-25T23:13:00.000+05:30

I have been specially advocating unit linked plans for a variety of reasons.Two most important reasons are that unit linked plans are most cost effective,transparent and have capacity to grow your money faster.There are four such plans :

1)Unit Linked Endowment Plan

2)Unit Linked Pension Plan

3)Unit Linked Pension Plan (Single Premium)

4)Unit Linked Young Star Plan

I discuss below what each of the above is meant for:

1) Unit Linked Endowment Plan: This covers your life risk at up to 40 times of your chosen yearly premium. Like for example if you decide to opt for the premium payment of INR 10K per year(this is the minimum level) you may get the life risk cover of INR 4 lacs and also may get INR 4 lac of Accidental Risk Cover additionally.There is a further provision where you may take the rider of Health Insurance Cover and get INR 4 lac coverage for the health i.e. cover against six life threatening diseases.

Under the provisions of plan you are compulsorily required to pay premiums for the first three years.Beyond three years many more useful provisions unfold for the policy holder.You may then go for premium holiday and you policy continues.You may withdraw you money in one or more instalments including the growth subject to maintenance of balance equal to one years' premium in the policy fund.You would be able to top up extra monies from time to time.The choice of six fund for the investment is common to all plans and the special provision of allowing you to switch between the funds in any proportion for up to twenty four times in a single year free of cost , is a special benefit provided by HDFC SLIC.This enables you to stay in safe waters and still grow your money faster.You may refer to the enclosed sheets giving the actually achieved returns by the policy holders whom I have given Unit Linked policies since Feb '04. You may further see that the team managing your funds has beaten the bench mark index by over 10% each year since inception in respect of the growth fund.Not only this HDFC SLIC stands ahead of peers as per the study by the AMFI.The facility of nomination is common to all Unit Linked Plans.All the payments as premiums qualify for rebate under section 80 C.

2) Unit Linked Pension Plan: This plan does not provide the risk cover but the other features are common excepting that after three years you may not withdraw money in instalments but in case of need may get the whole sum without any deduction by surrendering the policy.The pension starts at the end of the policy term as per you instructions as there are four different ways that you may choose for getting the pension.This decision is not required to made now but at the time of commencement of pension payment. For getting this plan the medicals are not required.

3) Unit Linked Pension Plan ( Single Premium): It has all the feature given above except that this can be taken with Single Premium of INR 25 K or more and further premiums are not required to be paid. However, you may keep topping up extra money according to your need and availability of free cash for accumulation for pension needs.This is particularly useful for the people with erratic/uncertain income.

4) Unit Linked Young Star Plan: This is a plan which has all the features under the ULEP discussed in the first para.It is empowered with a special provision of payment of premiums for the full policy term by the company itself in case of an unfortunate event of demise of the policy holder as well as in case of his suffering from one of the six dreaded diseases(if health cover is also chosen).Thus there are payments by the company first at the time of the unfortunate happening equal to the sum assured and then second time when the plan matures equal to the money invested out of the premiums along with the growth ( this usually would be much more than the sum assured).This provision makes this plan particularly useful for people who have children of tender age and have in mind to take care of their welfare and have to make provision for their higher education or marriage.I have seen practically that those who opted this plan for their children's sake are having blissfully peaceful mind.It is not that what you save under this plan can not be used by you during the policy period.You as policy holder may withdraw money more than once after first three years have passed. You may like wise increase, decrease premium or go on premium holiday as is the case with ULEP.This is why I call this plan as the most useful single platform for money management,tax saving, provision for children and life/health risk management.

Coming to specific charges I would request you to refer to brochures of the company and also refer to the comparative study of charge structure of different leading companies offering Unit Linked Plans.I am sure you would have some further points to clarify,please do call me at 09376168780 and let me visit you personally to explain in light of your income pattern, family structure and your personal leanings and safety concerns.

Hari Om

Krishna Kumar Khandelwal

Panch Tattva Insurance - A Rational Analysis

2006-10-17T23:28:00.000+05:30

Dear Friends,

PANCH-TATTVA PHILOSOPHY

You may be wondering as to how I have called my insurance philosophy as Panch Tattva Insurance. The insurance is a very vast field and the complications have arisen due to the differently named products by different companies. Further, these products are sold to less/no knowledgeable by the less/no knowledgeable in the most cases. The career in insurance was not a likeable one until the time you had the single player, which also worked under pressure to only look for the safety of the capital of the insurance policy holder, and had no desire or the need to show exemplary savings growth. They even did a very wrong thing i.e. reward the policyholders in an skewed manner. Some had to be satisfied with lesser share in the fund growth pie and some had larger share than it should have been rightly given. The gullible public had no choice; it did not know exactly what was happening to really be able to raise a finger.

Now I take the opportunity of explaining what the vedic Panch Tattvas namely Prithvi, Jal, Agni, Vayu and Akash mean and where they fit in to the philosophy of insurance that I have given you.

PRITHVI-TATTVA: The Gross Basis to Life

The Prithvi Tattva is the grossest of all, it denotes the physical building blocks that can be seen, felt etc.In our scheme of things the property owner ship is the first thing for it can not be stolen, it can not be destroyed, it yields returns as rent and may be used in other requirements etc., it grows in value but has the disadvantage of hassles in managing it and of illiquidity and there are costs involved in exchanges. Therefore, you have to invest in it but only to the extent of 25% of your saved capital for having the feeling of stability and as hedge against inflation. I may further tell you that a house in the hometown may not be considered as having the asset acquired out of the savings for security. It is properties apart from the family house in the hometown that I am discussing about.You may buy property only in middle years when enough capital has been saved for the purpose,till then this notional 25% of the yearly saving will form part of Unit Linked Endowment Plan and would be topped up with extra money if available for creating a money pool for buying property and growth(Under Vayu Tattva catagory this has been suggested in follwing paragraphs).

THE JAL-TATTVA :The Sustainer of Life

After this comes the 'Jal Tattva'. The water is needed every day and all through ones life. When the sources on the surface are no more there, we dig well to have water. Similarly, the Unit Linked Pension Plans are necessary to be taken early in one's life and regularly an amount affordable i.e. roughly 25% of your current savings should go in to balanced fund under this plan. This represents such part of income which sinks in to form a reservoir like rainwater seeping in below the earth's surface forms an under ground water reservoir out of which we take out water when the surface water is not sufficient. This pool, created over the years, comes in handy at the start of no income period due to retirement or due to loss of income earning capacity. Since the money is kept in balanced fund and not tinkered with, it keeps growing very steadily without worry or anxiety(it has been obseved that at times the interest bearing instruments give better returns and at other times the equity investemnt gives better return,since this is for long term both give balanced returns without making you sorry for deciding this way or that). The insurance companies manage the funds under pension plans in more conservative ways hence one may be rest assured about the out come.

THE AGNI-TATTVA: The Enhancer of Life

Third comes the 'Agni Tattva'. The fire is considered the basic need of the civilised world. It has to be handled with care. It rewards by adding value to otherwise non-usable stuffs. We should have 25 % of our savings in Gold and Silver, which are very good carriers of purchase power and easy encashability in case of need. These metals also beat the inflation surely. As the fire cannot be left without keeping an eye, these metals also we have to be kept an eye on and handled with care.This is such an asset which can be stolen or misplaced(in todays times it can be kept in bank lockers for safety).You have to buy it from the most reliable source as mixing of cheaper metals is done very commonly.You may even convert it in to gold ornaments and silver utensils for use otherwise than for security.With this your feelings would remain elated and you would not feel under thumb of some body in case of emergent needs to be fulfilled.This is also good for meeting partly the marriage related expenses as some gold or silver is necessarily bought on such occasions.

THE VAYU-TATTVA: The Provider of Riches

Now comes the case of 'Vayu Tattva'.This is a still more subtle element. We cannot see the currents of winds changing course but the winds are the most responsible factor for weather changes. Similarly, the stock market trends have to be carefully understood and at times, you should have investment in shares and at other times not in shares. This reshuffling is a difficult task and involves costs of brokerage, depository charges, and govts' taxes like STT, LTCG TAX, STCG TAX etc. but the Unit Linked Endowment Plan has the features where these taxes and brokerage and other charges are avoided. Since for faster growth, money has to be kept invested in shares also, we may do so by keeping 25% of our investible savings in to the growth fund under a Unit Linked Endowment Plan. This gives you the tax saving advantage under section 80 C and gives you protection under life risk cover in proportion to your chosen premium level. You are further able to have health related cover in this plan. These plans also have the liquidity after a period of three years. Because of the facility of topping up, you can manage your extra savings on this platform and withdraw money for any big-ticket purchase or for expenses for marriage in family or for any other big need. Switching without charges for 24 times in a year is special feature in HDFC SLIC's plans. Besides HDFC SLIC's fund managers have beaten the index by a margin of about 10% p.a. over last three years. With power of compounding, the money here grows so much faster that can only be understood by the real life examples; if you have the time, your consultant has the inclination to demonstrate it to you.You gain complete control in case of this plan after the third year and the policy continues even if you decide to go on a premium holiday due to tightness of funds in hand due to change in circumstances.You are allowed to resume paying premium later on.Is it not a wonderful thing?

THE AKASH-TATTVA: The Most Subtle Element of Life

In Indian mythology the five basic elements are considered necessary for the life to be sustained, it is the combination of these five elements in balance that the life has its course without problems. You have seen here that the economic life also has to have the balance in order to keep the physical existence fully enjoyable. Worry is the worst of the afflictions of mind. We must try and keep our worries at bay. We also know that death is a reality and a certain one but at the same time when it will occur is the most uncertain phenomenon. In addition, we know that families find stability as long as the income is regular and supposing the income earner for the family meets an end to life suddenly, the miserable times for the family ensue. Last of the 'Panch Tattvas' i.e. Akash-Tattva' is subtlest of all. It is said we keep marching towards death continuously and the footfalls of approaching misfortune can not be seen and they don't make noise either and this can be likened to 'Akash Tattva' which also is neither seen nor does it make noise. It is a householder's mundane duty to have ample provision for the family in case of his sudden demise. This need, however, in today's times can easily be taken care of. Therefore, the first advice for the person just starting the working life and the family life is to have life risk cover under a term plan, which comes at quite nominal premiums in younger years. It should be with the double benefit in case of accident. Businesspersons know that the creditors flock at the doors of the person who has just passed away and the debtors are not seen anywhere near. Therefore, the funds involved in business are not recoverable by the family members and hence the risk cover should be bought with this in mind.

TIMES HAVE CHANGED SUDDENLY BUT YOU DO NOT HAVE THE FACILITY/TIME TO LOCATE THE RIGHT PERSON FOR THE RIGHT ADVICE IN RESPECT OF YOUR INSURANCE NEEDS. YOU SHOULD WAIT UNTIL YOU COME ACROSS A PERSON WHO UNDERSTANDS THE NUANCES OF INSURANCE AND FINANCIAL CROSS CURRENTS AND NOT SETTLE FOR ANY LESSER PERSON AS ADVISOR.

NAME OF THE INSURANCE PLAN DOES NOT CONYEY MUCH

As you may be aware now that just the name of plan does not convey much. I have simplified the matter by telling you that the Unit Linked plans are the most transparent and the money growth opportunities are immense here(you may refer to earlier posting titled 'you are in your middle years and are afraid of old age'). I have further analysed as to how much should be kept where with the long-term view without having to suffer unduly on account of sudden changes in the environment. By the principles expounded there, you may yourself take care and stay afloat. In case you have an advisor still more experienced, you will be enabled to take extra advantages by scientific switching between the funds.

Your Consultant: A Freind

The broader framework has been explained. An expert will make it still more suitable after the facts about the income are given and if he knows expenses and structure of family along with personal leanings. Please talk to him with an open mind and know him as your friend and if required make him your confidant..

I may have missed out some point, please do not hesitate to bring it to my knowledge to enable me to explain.

Hari Om

Krishna Kumar Khandelwal

You are in your middle years and AFRAID of old age,if so, please read on

2006-10-06T21:25:00.001+05:30

Dear Friends,

The joint family system is breaking down. Earlier fewer needs were taken care of by just hoarding some precious metals and buying up some property. Today you live in a nuclear family. In addition, the life span has increased and we see people short of money in old age. Some families, we see, have suffered due to sudden death of income earner. There are still more families who have suffered due to investment of savings in wrong areas. Most of them also suffer due to inflation eating away their meagre savings.

There is an adage in India that ‘Lakshmi’ is ‘Chanchala’ by nature. The ‘Chanchala’ nature of ‘Lakshmi’ is more at play in modern times .Melt downs and frenzy like conditions are playing havoc with people’s money. You are at a loss to understand as to what is best for yourself.

An approach to saving and investment with an eye on SAFETY and suitable return is necessary. Precisely, to take care of all the anxieties, the following two-step approach would work well:

First Step: At the beginning of the career, a term cover along with health cover according to income should be bought. Luckily, good companies at nominal premiums are offering this.

Second Step: Transfer, pooled savings, year to year, to following pockets:

25% of gross savings of the household should be kept in the form of gold and silver (ornament or bullion).
25% of gross savings should be invested in landed properties(till such time the money available is not sufficient to buy property it should remain invested in the desired fund through the top up on your regular premium Unit Link Plans. When the money is accumulated is sufficient to buy property it may be withdrawn and used for buying the property)
25% of the savings should be saved in pension plans ((preferably through investment in to balanced fund under Unit Linked plans)
25% of saving should be going into Growth fund in a Unit Linked Endowment Plan, which will provide you the life risk cover and health risk cover too.

You may wonder why I have pressed upon the Unit Linked Plans. This is slightly intricate matter.Acually my experience has shown that these plans are most cost effective and transparent and provide perfect tax shelter under section 80 CC as also the returns on the funds invested remains tax free when received in hand upon maturity or earlier withdrawal also.

Your worries have a solution now. There are institutions, which are reliable and offer to meet the precise needs for protection, for growth etc. Since the time of launch of Unit Linked Plans in Feb 04 by HDFC Standard Life Insurance Company Ltd., I have sold only these policies and none of the traditional policy although the commission to the agent is one of the lowest in these plans. To my satisfaction, the funds have grown at over 20% p.a. for most of the holders; however, those who desired to remain invested only in interest bearing and gilt-edged securities for fear of stock markets meltdowns have far exceeded in returns compared to Bank FDs. and all without the TDS headaches.

You may rest assured that if you follow the above policy would find your self smoothly sailing through any kind of circumstances and trying times that develop in your life in future.

I am sure you would want to be enlightened about certain aspects you have in mind. You may contact me at my mobile no. 09376168780 and I would only be too happy to call or pay you a visit.

Wish you the best in your life.

Hari Om

Krishna Kumar Khandelwal