‘Achchhe Din’ ahead for ULIP customers
India witnessed a historic Lok Sabha Elections 2014 where the BJP won the elections riding on the Narendra Modi juggernaut. The BJP won 282 seats, 10 more than the majority mark, by itself and since then there’s been no looking back. January 2015 marks the completion of 7 months of ‘Modi Sarkaar’ at the Centre. So what does it mean for your investment options, such as ULIP?
Equity markets have done well in 2014 on the back of hopes with this new government and we are seeing a much higher participation of retail investors. Mutual fund AUM (Assets under Management) is about to touch Rs.11 lakh crores & the AUM of Life Insurers is currently at Rs.19.4 lakh crores. The year 2014 saw developments like tax norm changes for debt MFs, higher limits for tax saving options, mergers and acquisitions and digital platforms being leveraged by companies to educate existing & prospective customers. There is some good news also to welcome the New Year. The good news is that data released by the government data showed that the output of eight core industries hit a five-month high in November, growing by 6.7 per cent, mainly propelled by growth in cement, electricity and coal. The higher limit of Rs.1.5 lakhs in section 80 C has also presented a good opportunity to customers to increase their exposure to savings across various asset classes.
After a barrage of bad news over the last few years, investors in Unit-Linked Insurance Plans (ULIP) finally have good reason to cheer. ULIPs are investment products where one needs to stay invested for the long term of 15-20 years to get the best results & meet their financial goals.
Before 2010, heavy costs and charges on these plans ate away large portions of the return. And with the markets stuck in a narrow range, investors didn’t get to pocket much by way of returns either.
But with the recovery in the equity markets, many schemes have sharply improved their performance in the last one year. With costs also capped through regulatory limits, a larger portion of this is going into their wallets.
While ULIPs’ performance was extremely difficult to gauge earlier, the regulatory limits on expenses and aggregated data from independent research agency Morningstar India have made it easier today to take stock of this asset class.
Large-cap ULIPs delivered an average return of 35 per cent in the last one year, higher than the Nifty by 3 percentage points, shows data from Morning Star India. Topping the list are funds from Bajaj Allianz Life – Bajaj Allianz Life Insurance’s Growth Plus III has topped the one-year charts with returns of 66 per cent. That’s more than double the returns on the benchmark index CNX Nifty (return of 32 per cent in the same period). Our other funds, Pure Stock, Equity Gain and Pure Equity, too, have done well with returns of 49 per cent, 48.5 per cent and 46 per cent, respectively. The outperformance in most cases has been because fund managers went beyond the indices and picked up stocks in the BSE 200 or CNX 500 basket. The funds were first movers in taking exposure to cyclical stocks that weren’t a part of their benchmark index a year ago. That has paid off well in the rally.
In the mid- and small-cap category, ULIPs have delivered even higher returns. While the category average return here is 68 per cent, Bajaj Allianz Accelerator Mid Cap has delivered 75 per cent, in the last one year.
While these developments make 2015 a very exciting year for customers, it’s often seen that they enter market at peak points and sell when markets crash. On the other hand, some customers demonstrate a very conservative behavior. They would earlier stay away from equity stating the poor performance of the market as a cause. Now they still stay away, stating that markets are at their peak.
One good way to participate in the equity market is through ULIPS to stay protected & invested for the long term, make goal based investments, use an SIP approach, map investments to risk profile & asset allocation and review regularly.
The “achchhe din”, then, will not be very far.
By Mr. Ranjan Dutt, AVP- Marketing , Bajaj Allianz Life Insurance
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