Friday, April 20, 2007

ULIPS are a long term investment

I have recently come across agents selling ULIP's as three year plans. You might hear them ask you to invest for just three years and then reap the benefits. All this in my opinion is miselling. Investing in ULIP's work only if your investment horizon is more than 10 years.

Below is an illustration of returns from HDFC Unit Linked Endowment Plus based on term of the plan. These illustrations are for a 34 year male. Assuming returns of 10% per annum the following is what the figures look like.

Term Premium Sum Assured Fund Balance Net Returns
3 Years25,0001,25,00068,796LOSS
10 Years25,0001,25,0003,17,6577.17%
15 Years25,0001,25,0007,37,7908.07%
20 Years25,0001,25,00013,01,4478.43%
25 Years25,0001,25,00021,74,3108.62%

Clearly, if you look at the net returns, investment in ULIPs only work if you plan to stay invested for long term. If someone is selling you a ULIP for a time frame of 3 to 5 years, it will not work. All he is doing is mis-selling


Rshandilya01 said...

I think the investment returns for government issued bonds like KVP is also around 8%. If this is correct, then i think it is not advisable to invest money for a long period of 20-25 years for a low return like 8.5%.

Unknown said...

In ULIP, if i invest for 3 years(50,000 per year) and leave it as such...will i get better returns after 5 or 6 years....