HOW HIGEST NAV GUARANTEED PLANS WORK
(Theoretically)
This product is a sub type of ULIP plans,
Normally in these Products highest of below 3 is paid out.
1) Highest NAV in 7
years, 2) 1.5 Times your initial investment (This requires 7- 10 Year Lock in)
3) The NAV of the fund as of the end date. Looks very enticing isn’t it?
But now the working of the plan is explained below,
The Fund manager of these plans employs various strategies
for this ASSURED Service the technical name for the strategy is Dynamic
Hedging. In this strategy the Fund manager will keep shifting the funds between
Equity & Debt in order to keep the NAV of the fund to manageable levels,
So initially fund
Manager will invest aggressively in Equity portion let us say 100% so now
You can see a Dummy scenario Below, Note the change of
Equity & Debt Proportion changing over the years. So the Fund manager will
make sure that your NAV does not grow beyond a point by allocation of Funds
accordingly.
You will notice that the Manager will shift the Funds more
towards debt as soon as The Equity Portion yield good result in order to ensure
Highest NAV can be paid out.
So effectively you are investing in Fixed Deposit while paying higher Charges (FMC, Allcation Chrg. Etc) & Higher Risk (Equity Exposure) & also taking along unnecessary Life cover. I do not know why anyone should pick this product at all except the Agent who gets the commission.
So effectively you are investing in Fixed Deposit while paying higher Charges (FMC, Allcation Chrg. Etc) & Higher Risk (Equity Exposure) & also taking along unnecessary Life cover. I do not know why anyone should pick this product at all except the Agent who gets the commission.
Proportion
|
Start
|
1st year
|
2nd Year
|
3rd Year
|
4th Year
|
5th year
|
6th Year
|
7th year
|
Equity %
|
80%
|
80%
|
85%
|
60%
|
60%
|
50%
|
40%
|
25%
|
Debt %
|
20%
|
20%
|
15%
|
40%
|
40%
|
50%
|
60%
|
75%
|
Equity Returns
|
15%
|
-16%
|
25%
|
15%
|
22%
|
-8%
|
9%
|
|
Debt Returns
|
8%
|
8%
|
8%
|
8%
|
8%
|
8%
|
8%
|
|
NAV Rs.
|
10.00
|
11.36
|
9.95
|
11.76
|
13.20
|
15.18
|
15.42
|
16.69
|
Less: FMC @ 1.35%
|
(0.15)
|
(0.13)
|
(0.15)
|
(0.17)
|
(0.20)
|
(0.20)
|
(0.22)
|
|
Guarantee Charge @ .50%
|
(0.06)
|
(0.05)
|
(0.06)
|
(0.06)
|
(0.07)
|
(0.07)
|
(0.08)
|
|
Less: Alloc. Charges @ 2%
|
(0.23)
|
(0.19)
|
(0.23)
|
(0.25)
|
(0.29)
|
(0.30)
|
(0.32)
|
|
Less :Policy Admin Charges
|
(0.04)
|
(0.03)
|
(0.04)
|
(0.05)
|
(0.06)
|
(0.07)
|
(0.09)
|
|
Net NAV
|
10.00
|
11.36
|
9.48
|
11.37
|
12.72
|
14.64
|
14.79
|
16.05
|
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