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Old 24th July 2022, 16:25   #4216
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Re: The Mutual Funds Thread

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Originally Posted by ghodlur View Post
Experts,

Need to know how to update the changes to the residential address in the folios of the mutual fund post the update in Aadhar card. Is there any one quick possible way online to do this or will I have to submit the info to the MF's houses individually.
Submitting the info to one of the KYC agencies will do. But you'll have to do it in person, at their office. 5 minute job, if there's no line. I did it recently at the local CAMS (all my MFs use CAMS) office. They confirmed this can't be done online, which is an absolute bummer tbh.
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Old 30th July 2022, 13:37   #4217
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Re: The Mutual Funds Thread

Folks here, has anyone done comparative calculation between a ULIP and Term insurance + MF or Index for same premium amount and same insurance coverage.

Understandably so, none of the Insurer/Banking website show such comparison with numbers, but I am surprised that out of so many blogs and independent websites that I have checked I am unable to find such a comparison.

I am trying to do this on my own, getting cost of term insurance and return from Index ETF or Mutual fund is quite easy to determine.
But getting the "real returns" info about ULIPs appears not so straightforward.
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Old 30th July 2022, 15:21   #4218
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Re: The Mutual Funds Thread

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Originally Posted by alpha1 View Post
Folks here, has anyone done comparative calculation between a ULIP and Term insurance + MF or Index for same premium amount and same insurance coverage.

Understandably so, none of the Insurer/Banking website show such comparison with numbers, but I am surprised that out of so many blogs and independent websites that I have checked I am unable to find such a comparison.

I am trying to do this on my own, getting cost of term insurance and return from Index ETF or Mutual fund is quite easy to determine.
But getting the "real returns" info about ULIPs appears not so straightforward.
Here is the thing. Term insurance is for income replacement in case of sudden demise. And for that the sum assured should be = 15x annual expense atleast. For example if your annual expense is 10 lacs then u need a cover for atleast 1.5 cr. For a ulip to cover 1.5 cr it’s premium will be unaffordably huge. May be around 10 lac per annum.
Hence use term insurance for life risk mitigation.
Use ppf and mf for investment.
Keep it clean and separate.
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Old 30th July 2022, 21:59   #4219
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Re: The Mutual Funds Thread

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Originally Posted by alpha1 View Post
Folks here, has anyone done comparative calculation between a ULIP and Term insurance + MF or Index for same premium amount and same insurance coverage.

Understandably so, none of the Insurer/Banking website show such comparison with numbers, but I am surprised that out of so many blogs and independent websites that I have checked I am unable to find such a comparison.

I am trying to do this on my own, getting cost of term insurance and return from Index ETF or Mutual fund is quite easy to determine.
But getting the "real returns" info about ULIPs appears not so straightforward.

So I had done this exercise on my own when I bought a ULIP in the late nineties.

The ULIP was bought with a monthly premium payment option, so that I could benefit from the "market volatility" and compare the investment allocation part of it with a monthly SIP in MF terms.

The comparison in performance was tracked on an excel sheet for a little over 5 years, till it was clear beyond doubt that the "Term + independent MF" was better, as originally thought.

Do note that the comparison was done at that time with MF schemes that are now the so called "Regular" schemes. With "Direct" plans now available the result may be even more skewed in favour of the "Term + independent MF" option.

Unfortunately, haven't retained the workings else would have been able to share. Trust that the observation and outcome shared should satisfy your curiosity a fair bit.

Another point of observation is that while the insurance agents provide you with the illustrations of comparisons of performance, they will usually assume the same ROI (due to their conservative guidelines being followed) for both the ULIP and the MF being compared. This is the most basic flaw used by them to their advantage, since most MF schemes reflect better performance in reality than the comparable ULIP investment schemes.

The Tax advantage of the ULIP too is overhyped, keeping in mind the taxation changes over the years.
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Old 30th July 2022, 22:26   #4220
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Re: The Mutual Funds Thread

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Originally Posted by alpha1 View Post
Folks here, has anyone done comparative calculation between a ULIP and Term insurance + MF or Index for same premium amount and same insurance coverage.

Understandably so, none of the Insurer/Banking website show such comparison with numbers, but I am surprised that out of so many blogs and independent websites that I have checked I am unable to find such a comparison.

I am trying to do this on my own, getting cost of term insurance and return from Index ETF or Mutual fund is quite easy to determine.
But getting the "real returns" info about ULIPs appears not so straightforward.
Its a no-brainer really. Term insurance + MFs/Stocks is the ideal way to go. For lazy folks like me who don’t understand much of stocks, index MFs do the job. Have term insurance (15-20X of average annual expenses) and index funds. But do note post covid the costs are shooting up(noticed the same plan I have is ~50% costlier now within less than 2 years).So get one(Term insurance) asap.

My thumbrule is “Never combine insurance with investment”, period!!!

Last edited by SoumenD : 30th July 2022 at 22:32.
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Old 31st July 2022, 10:12   #4221
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Re: The Mutual Funds Thread

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Originally Posted by alpha1 View Post

Understandably so, none of the Insurer/Banking website show such comparison with numbers, but I am surprised that out of so many blogs and independent websites that I have checked I am unable to find such a comparison.

I am trying to do this on my own, getting cost of term insurance and return from Index ETF or Mutual fund is quite easy to determine.
But getting the "real returns" info about ULIPs appears not so straightforward.
The problem lies with the regulation in India. MFs are regulated by SEBI, and SEBI has been strict with disclosure mandates. Fund categorisation, introduction of direct plans, limiting expenses that a fund can charge, mandates for portfolio allocation etc have been steps in the right direction in the last few years. Notwithstanding the Franklin Templeton or Axis MF shenanigans, the MF industry has been well-regulated and investor friendly.

In contrast, IRDA (and PFRDA) has been very lax. The insurance companies run the show, and are totally opaque. Opaque expenses and returns is one problem , but the bigger hidden problem is lack of portfolio disclosures. What debt papers are they investing in? How much are they investing in group companies? What Zomato/Paytm or worse shares are they buying? A lack of fund categorisation means the fund manager can buy any risky smallcap that he/she fancies. Even the fund manager's name is not known.

My employer has an (optional) superannuation plan with ICICI Prudential Life Insurance (not to be confused with ICICI Prudential AMC, the MF company). 10% of my basic salary goes to the funds managed by ICICI Prulife, and hence becomes tax free investment above the 80c limits. The service levels and portfolio disclosures are apalling. They don't even send regular statements. As everyone knows, the ex-ICICI bank CEO is being investigated for giving favourable loans to companies of family members. Given that how can one be sure what toxic investments these ULIPs and pension funds are doing?

The tax aspect is the only thing that's keeping me going.

Further reading : Mint article on the same lines.
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Old 31st July 2022, 13:55   #4222
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Re: The Mutual Funds Thread

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Originally Posted by DigitalOne View Post
10% of my basic salary goes to the funds managed by ICICI Prulife, and hence becomes tax free investment above the 80c limits.

The tax aspect is the only thing that's keeping me going.


Some relevant points for you if you want to rethink on this aspect:
  • On attaining superannuation, only 1/3rd of the value can be optionally withdrawn tax-free.
  • The balance amount has to be compulsorily invested to purchase an annuity. The annuity rates are not at all attractive. Further, the Corpus termed as "Purchase Price" will be impacted upfront by 18% GST and the corresponding annuity reduced correspondingly.

So more a case of moving your impact from one pocket to another.
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Old 1st August 2022, 13:22   #4223
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Re: The Mutual Funds Thread

Thanks for all your responses, but as I said, I wanted to do a calculation on my own.

I am viewing ULIP more from a tax free MF point of view.
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Old 1st August 2022, 14:47   #4224
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Re: The Mutual Funds Thread

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Originally Posted by DigitalOne View Post
My employer has an (optional) superannuation plan...The tax aspect is the only thing that's keeping me going.
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Originally Posted by Fx14 View Post
Some relevant points for you if you want to rethink on this aspect:
  • On attaining superannuation, only 1/3rd of the value can be optionally withdrawn tax-free.
  • The balance amount has to be compulsorily invested to purchase an annuity. The annuity rates are not at all attractive. Further, the Corpus termed as "Purchase Price" will be impacted upfront by 18% GST and the corresponding annuity reduced correspondingly.
One can move the entire SA plan contribution accrued till date to NPS without any tax impact. Of course, NPS has 40% mandatory annuity purchase requirement if you want that 40% to be tax free. The balance 60% can be withdrawn tax free upon retirement.

I am thinking of doing this switch from SA to NPS one or two years before my retirement date. Will the government keep this "switch" option open indefinitely? I am not sure of this.
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Old 1st August 2022, 15:16   #4225
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Re: The Mutual Funds Thread

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[*]The balance amount has to be compulsorily invested to purchase an annuity. The annuity rates are not at all attractive. Further, the Corpus termed as "Purchase Price" will be impacted upfront by 18% GST and the corresponding annuity reduced correspondingly.
The GST on the purchase price of a single premium is 1.8%, not 18%.
Source

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In case of insurance pension plans or annuities, where you pay a lump sum and receive an annual income in return, GST of 1.8% is applicable. In this case, if you pay a lump sum of ₹10 lakh to get an annual income of ₹80,000, the GST component of the purchase cost will be ₹18,000.
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Originally Posted by skumare View Post
One can move the entire SA plan contribution accrued till date to NPS without any tax impact. Of course, NPS has 40% mandatory annuity purchase requirement if you want that 40% to be tax free. The balance 60% can be withdrawn tax free upon retirement.

I am thinking of doing this switch from SA to NPS one or two years before my retirement date. Will the government keep this "switch" option open indefinitely? I am not sure of this.
That could be a good option. Somehow I am not comfortable with the superannuation/pension plans run by these insurance companies. There is simply not enough regulation or scrutiny of the portfolios.

Also I was under the mistaken assumption that NPS equity funds are invested in a defined index. Only recently I came to know that even NPS equity are "actively managed" funds and managers have the choice to buy shares of their favorite nephew's companies . One can only hope that the higher scrutiny in NPS will ensure that the fund managers don't go astray.
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Old 1st August 2022, 16:05   #4226
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Re: The Mutual Funds Thread

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I was under the mistaken assumption that NPS equity funds are invested in a defined index. Only recently I came to know that even NPS equity are "actively managed" funds and managers have the choice to buy shares of their favorite nephew's companies . One can only hope that the higher scrutiny in NPS will ensure that the fund managers don't go astray.
I guess more than the scrutiny, the competition from the 5..6 other fund managers in NPS will ensure the funds are as efficient and profitable (in terms of returns) as possible.
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Old 1st August 2022, 16:51   #4227
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Re: The Mutual Funds Thread

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Originally Posted by skumare View Post
One can move the entire SA plan contribution accrued till date to NPS without any tax impact. Of course, NPS has 40% mandatory annuity purchase requirement if you want that 40% to be tax free. The balance 60% can be withdrawn tax free upon retirement.

I am thinking of doing this switch from SA to NPS one or two years before my retirement date. Will the government keep this "switch" option open indefinitely? I am not sure of this.
Isn't the fund management ratio higher in NPS than the superannuation fund? If so, isn't the switch beneficial only closer to attaining the superannuation or retirement age to get the lumpsum?
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Old 1st August 2022, 16:56   #4228
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Re: The Mutual Funds Thread

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I guess more than the scrutiny, the competition from the 5..6 other fund managers in NPS will ensure the funds are as efficient and profitable (in terms of returns) as possible.
Apart from that, I am sure they have their share of compliance as well. NPS activities, right from the time a subscriber puts in form for registration to the POP, have to be reported to PFRDA in form of strict monthly compliance by all those involved. For eg. if your contribution amount has been deducted from your bank and collected in the pool account by any POP, they need to transfer the same to the trustee bank in T+1 day, else the subscriber is entitled to get compensated by the POP for each day of delay. Same goes for registration delays.

Plus, the scope of funds to be managed under NPS is so huge that even the minuscule looking fund management charges of the fund managers can be a substantial amount and hence, no fund house would like to loose on it. Apart from that, being a NPS fund manager is also a sign of goodwill for a fund house, even if in a small way.

Regards,
Saket

Last edited by saket77 : 1st August 2022 at 16:59.
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Old 1st August 2022, 18:36   #4229
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Re: The Mutual Funds Thread

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Originally Posted by thanixravindran View Post
Isn't the fund management ratio higher in NPS than the superannuation fund? If so, isn't the switch beneficial only closer to attaining the superannuation or retirement age to get the lumpsum?
I believe NPS is one of the cheapest in terms of funds' expense ratio, not sure how exactly SA funds are managed though. The switch to NPS closer to retirement age will help you to max out tax exemptions (both NPS and SA) till you switch, applicable only if one is keen to max out the tax exempt retirals from his/her salary.

Employers' contribution to PF (12% of basic), SA (15% of basic) and NPS (10% of basic) are tax exmpt subject to a combined limit of 7.5L per annum.

Last edited by skumare : 1st August 2022 at 18:41.
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Old 5th August 2022, 09:24   #4230
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Re: The Mutual Funds Thread

I recently switched units from "regular" to "direct" option of the same MF and same scheme, which is equity oriented. This switch order was placed on MFU. Will the MF or MFU take care of the STT (0.001%) or do I need to pay it separately myself?

When I looked into the transaction details, MF/MFU has dedcuted only the stamp duty and allotted the "direct" units net of stamp duty. There is no provision/deduction made for STT though.

Last edited by skumare : 5th August 2022 at 09:47.
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