Don't go for guaranteed return plans

1. Don't Go for Guaranteed-
Return Plans: Gurus
You should buy insurance separately and invest in other products with
higher returns, they say

2. Contd…
The Reserve Bank has cut the benchmark interest rate by 125 bps till now in
2015 and is expected to lower it further. Investors are already feeling the
pinch due to the reduction in bank fixed deposit rates and the thought that
they will go down further is making them nervous. Insurance companies are
using this opportunity to push `guaranteed return' products.
How do these plans work? Let's explain this by analysing AEGON Religare
Guaranteed Growth Insurance Plan. If a 30-year-old male puts `1 lakh for 8
years to get `10 lakh insurance cover, he will get back 150% of the annual
premium (excluding taxes) at the end of every year from the 10th year to the
17th year.While the total investment will be `8 lakh (plus taxes) over the first
8 years, he will get back `12 lakh between 10th year and 17th year.
Though the `150% guaranteed return' sounds lucrative, it is not the case
because this does not consider the `time value of money'. And if you
calculate the annualised returns, it will be only around 4%.

3. Contd…
What should you do then? Financial planners suggest you to keep your
investments separate from your insurance. You should buy a simple term
cover to meet your insurance requirements and look at more remunerative
avenues for investment. Since the time frame is very long, investors can
consider equity mutual funds if they have the ability to take risk. This way ,
the final proceeds will also be tax-free in your hands. If you are risk averse,
then you should consider Public Provident Fund (PPF).Though the rate may
come down in coming years, PPF is offering 8.7% tax-free interest now. Debt
MFs are another option worth considering.For example, liquid funds have
returned 8.66% in the last five years and 7.57% in the last 10 years. The only
glitch is that these returns are taxable as long-term capital gains at 20% after
indexation benefit.

4. For details and bookings contact:-
Parveen Kumar Chadha… THINK TANK
(Founder and C.E.O of Saxbee Consultants & Other-Mother
marketingandcommunicationconsultants.com)
Email :-saxbeeconsultants@gmail.com
Mobile No. +91-9818308353
Address:-First Floor G-20(A), Kirti Nagar, New Delhi India Postal Code-110015