Are ULIPs really bad? A detailed analysis

[shashank08]

Wo sab chodo bhai apna portfolio share kar do bus. Itni mehnat karne ki jarurat hi nhi kya le kitna le.

hahaha.. Problem yehe hai k I am not a certified financial planner..
as per SEBI rules.. koi bhe suggestion can come under scanner.. 🤣 🤣

 

[Hemang]

Tax harvesting is simple.
This is how I do..

Sell and buy for the equal amount same day in the same fund and scheme.. sell the units which are already 1 yr or more old.

Mf and stocks selling follow FIFO methodology..

Reach till 1.25L of capital gain and stop..

Thats it..

Isme jo STT lagta hai, for redemption, that is miniscule on every tax benefit we get which is currently Rs 1.25 lac is exempted, to iska 12.5% tax save hua which comes to Rs 15,625 every year of this exercise.
Bs iss ke liye jitna amount ka MF portfolio hai ya stocks hain, utni spare money honi chahiye account me to buy on the same day and not wait for redemption money to reflect in account.

 

[drvirag]

hahaha.. Problem yehe hai k I am not a certified financial planner..
as per SEBI rules.. koi bhe suggestion can come under scanner.. 🤣 🤣

Suggestion thodi Mang rhe hain. U can share ur portfolio it doesn't come under sebi regulation..
Bus problem ye hai ki invest karne k liye paise kahan se aayenge

 

[shashank08]

In the case of ULIPs, we are stuck for a very long time; we can't take breaks or reduce our investment size. In case of MFs we have full liberty.

Also tax free is now 2.5L so thats around 20-25K per month. For people looking for big corpus and good investment size its nothing. So I would say MFs win here.

Yes this is also a point.. ULIP doesnt provide you flexibility of stepping up or down as per requirement which you can easily do in MFs..

I usually invest 70K PM in SIPs in MFs and for the same price ULIP doesnt provide tax benefit as well.

And I don't want to for ULIP for diversification as this is not a diversification as you are ultimately investing in the equity so why not MFs instead of ULIP which gives you better control.

I checked HDFC ULIPs funds performance here

https://www.hdfclife.com/content/dam/hdfclifeinsurancecompany/fund-performance/pdf/fund-factsheets-individual.pdf

I found that most of the funds rarely beat their benchmarks and even if they beat then Alpha is very less hardly 1%.

For me, I may not need a highest return from MFs but I need a MFs which beat its benchmark and category return.

Idea is to make inflation beating return not the highest return..
paisa banaana hai jo ki inflation ko handsomely beat kare na ki sabse jada paisa banaana hai.. 😉😉😉

 

[HumorSimpson]

paisa banaana hai jo ki inflation ko handsomely beat kare na ki sabse jada paisa banaana hai.. 😉😉😉

Could you please post in English. This made me hungry

 

[shashank08]

Suggestion thodi Mang rhe hain. U can share ur portfolio it doesn't come under sebi regulation..
Bus problem ye hai ki invest karne k liye paise kahan se aayenge

Paisa to humne cashback wala invest kiya na upar 😉 😉 🤣🤣.. just kidding..

for portfolio, i consider 3 things..

• SIP amount.. this decides max no. of funds in the portfolio. No matter how big is the monthly SIP amount, max funds should be 4-6.
• Tenure - should be minimum 5 years for equity.
• Risk taking ability - defines how much drawdown one can bear.

last 2 helps in creating the mix and proportion of market cap based funds.
higher the risk taking capability and larger the tenure.. one can move more towards smallcap side..
like conservative - more focus on large and flexi
balanced - can keep equal proportion in large/flexi vs mid/small caps.
Aggressive - more focus on mid and small and thematic funds can also be looked if one understands market cycle.

Resources i use..
Valueresearch, moneycontrol, morningstar and advisorkhoj.

 

[shashank08]

Could you please post in English. This made me hungry

Sir..

Idea is to make inflation beating return not the highest return.. ------ English
paisa banaana hai jo ki inflation ko handsomely beat kare na ki sabse jada paisa banaana hai.. ---- Hindi

 

[hender]

Sir..

Idea is to make inflation beating return not the highest return.. ------ English
paisa banaana hai jo ki inflation ko handsomely beat kare na ki sabse jada paisa banaana hai.. ---- Hindi

Sir knows 😉 Very well, he is asking what do you say banana in English...

 

[HumorSimpson]

Sir..

Idea is to make inflation beating return not the highest return.. ------ English
paisa banaana hai jo ki inflation ko handsomely beat kare na ki sabse jada paisa banaana hai.. ---- Hindi

Money is the universal language, let it's dialect be English so all of us can understand.
Even I got preyed by HDFC ULIP when I was young, so I wish everyone understands financial matters at least to an extent that not to get fall prey to RMs tunes.

 

[hender]

Money is the universal language, let it's dialect be English so all of us can understand.
Even I got preyed by HDFC ULIP when I was young, so I wish everyone understands financial matters at least to an extent that not to get fall prey to RMs tunes.

You are still 😉

 

[shashank08]

Sir knows 😉 Very well, he is asking what do you say banana in English...

Now I got it..
@HumorSimpson Your humor went above my head.. 🤣 🤣

Thanks @hender for making me understand..

 

[shashank08]

You are still 😉

Sweet 16 forever.. 😉😉

 

[HumorSimpson]

Sweet 16 forever.. 😉😉

That's where the ROI in an ULIP stays, forever at 1-6 % effectively

 

[hender]

Now I got it..
@HumorSimpson Your humor went above my head.. 🤣 🤣

Thanks @hender for making me understand..

Sir don't mind, time to vacate the wonderful thread or Mr @Lobogris
Let's shift somewhere else please.

 

[BhaiyaJi]

I checked HDFC ULIPs funds performance here

https://www.hdfclife.com/content/da...erformance/pdf/fund-factsheets-individual.pdf

This is there NAV performance.

Say for 100 rupees investments, NAVs worth 94-95 are allotted (for example). So I would like to see actual fund performance instead of just NAV performance.

 

[BhaiyaJi]

Sir knows 😉 Very well, he is asking what do you say banana in English...

K E L A ?

 

[hender]

K E L A ?

@HumorSimpson Forwarding for your further review and necessary action। Sir

 

[HumorSimpson]

K E L A ?

It's not about Kela or mela,
Hinglish makes one feel akela due to language barrier

--- thread is getting derailed ---- stopping here--

request to post the analysis in English for better comprehension.

 

[shashank08]

This is there NAV performance.

Say for 100 rupees investments, NAVs worth 94-95 are allotted (for example). So I would like to see actual fund performance instead of just NAV performance.

You can see trailing returns of the various funds offered by HDFC ULIPs in the PDF and performance of its benchmark as well.

Something like this :



But if you are looking for the growth on the investment after deducting the charges then it is hard to get. one has to calculate by himself similar to the calculation which I did in excel.

 

[Lobogris]

Attaching the analysis with best of my assumption. If you can provide fund flow illustration I can refine this sheet more.

• I assumed 14% return in case of both ULIP and MF where MFs return is after tax whereas there is no tax on ULIP.
• ULIP gave 13190077 as final corpus after adding back all the charges like mortality, fund management etc. whereas MF gave 16344780.
• I havent calculated the tax benefit you are going to get in MFs if you tax harvesting which will further increase the final corpus of the MFs.

If you can provide me illustration sheet then it will reduce the assumption errors which I may have in the sheet.

So summary is even without favoring tax harvesting benefits which MFs will give you, MFs with similar post-tax returns are always better than the ULIP which you have analyzed. Approx 25% more corpus in MFs.

Excellent analysis. Thank you so much for making this sheet. You are correct in general but have neglected the tax benefit.
Take the MF value of 16344780 and deduct 12.5% tax and it becomes 14301683. Now, we are much closer to the ULIP. In addition, the tax rate is very likely to rise to 15 or even 20%. So, your calculation underscores my initial analysis. A MF is slightly better than a ULIP but the ULIP, if held to maturity, isn't as bad as most people make it seem.