The document is a project report submitted by Harmanjot Kaur, an MBA student at MIMIT, Malout, analyzing and comparing ULIP plans offered by Bajaj Allianz Life Insurance Co. Ltd. and mutual funds. The report was conducted under the guidance of faculty member Mrs. Rajinder Kaur and is submitted in partial fulfillment of the requirements for Harmanjot Kaur's MBA degree. The report includes an introduction, literature review, objectives, research methodology, and limitations of the study.

1. PROJECT REPORT
ON
“A Comparative Analysis of ULIP of Bajaj Allianz Life
Insurance Co. Ltd with Mutual Fund”
FOR
PARTIAL FULFILMENT
OF
MASTERS OF BUSINESS ADMINISTRATION
(2011-2013)
UNDER THE GUIDANCE OF
Mrs. Rajinder Kaur
(Asst. Professor)
Submitted To: Submitted By:
Mrs. Rajinder Kaur Harmanjot Kaur
Asst. Professor MBA 4th Sem.
1174471
MALOUT INSTITUTE OF MANAGEMENT &
INFORMATION TECHNOLOGY
1

2. (Affiliated to PTU, Jalandhar)
DECLARATION
I, Harmanjot Kaur, do hereby declare that this project work entitled “A
Comparative Analysis of ULIP of Bajaj Allianz Life Insurance Co. Ltd with Mutual
Fund” is an outcome of my study and is submitted in partial fulfillment of the
requirement for the award of the degree of Master of Business Administration, MIMIT,
Malout, and Punjab Technical University.
I also declare that this report has not been submitted by me fully or partially for
the award of any degree, diploma, title, recognition or any other fellowship of any other
university before.
HARMANJOT KAUR
2

3. ACKNOWLEDGEMENT
It is my pleasure to place on record my sincere gratitude towards my project guide Mrs.
RAJINDER KAUR (Asst Prof.) who spent her precious time providing continuous ideas
and expert guidance to my Report work. It was her direction and encouragement at every
moment and step that motivated me to steer the research work confidently and
successfully.
I would like to acknowledge my sincere thanks to Mrs. JIWAN JYOTI MAINI, who
gave me an opportunity to carry out this project and had been a constant inspiration.
I am also thankful to all faculty of Management Department, who encouraged,
gave moral support and valuable guidance whenever needed, which has been a source of
inspiration to me.
Last but not the Least, I would like to thank my friends who directly or indirectly
helped me in completing this Project in time.
3

4. INDEX
Serial No. PARTICULARS Page No.
1 CHAPTER 5-10
Executive summary
Introduction
Literature Review
Objectives
Research Methodology
Limitations
2 CHAPTER 11-52
Industry Introduction
Company Profile
Ulips
Mutual Funds
Ulips vs. Mutual Funds
3 CHAPTER 53-79
Data Analysis & Interpretations
4 CHAPTER 80-84
Findings
Conclusion
Bibliography
5 CHAPTER 85-87
Appendix
Questionnaire
4

5. CHAPTER 1.
EXECUTIVE SUMMARY
“A comparative Analysis of ULIP plans of Bajaj Allianz Life Insurance with mutual
funds” an analysis to be done be by Harmanjot Kaur student (MBA) of MIMIT, Malout.
Total Investment scenario is changing, in past people were not interested in investment
because there were no good options available for investment. Now there are many
options available for investment like life Insurance, Mutual fund, Equity market, Real
estate, etc.
Today people want more services and more return on their investment. So, most of the
insurance companies are providing more value – added services with the basic insurance
operation.
Another option for investment available is Mutual Fund. Mutual Funds are providing
good returns. So while investing people tend more to words mutual fund as they are
providing more returns than Insurance also, with a good investment portfolio. Mutual
fund companies are providing more liquidity.
The project was taken to know about, what are the main aspects in Bajaj Allianz Life
Insurance Company, and its USP (Unique Selling Preposition).Which gives it highest
business and customers. Customers always prefer to invest in a good option and in a
company which is market leader.
After survey and analysis I came to know that most of the people go for ULIP insurance
policies to cover the risk of life, and invest it in a good Portfolio but there is big portion
of customers have taken the policies to save the taxes. And people are aware about the
tax benefits they get for insurance policies. Therefore, while investing in any Investment
option investor checks whether his money is safe or not, Mutual funds provides good
returns but investments are directly exposed to risk. As in ULIP returns are related to
5

6. stock market but they are having some insurance benefit and IRDA regulates the
investment.
Many people are getting the tax benefits in ULIP. In Mutual Fund they have to invest
their money in tax saving funds to get the tax benefit.
INTRODUCTION
To make comparison of ULIP plans with Mutual funds in Bajaj Allianz Life Insurance
Co. Ltd. and to Create awareness about Unit Linked Insurance Plan (ULIP) Benefits. The
overall goal of this project was to create awareness about investments. The Above
problem arises because every life insurance company has their products having different
positive and negative aspects.
Life Insurance is booming sector in today’s economy. So the responsibilities of the
insurance companies have been increased as compare to the past. Because in past people
were taking insurance policies for protection tool only. In present scenario insurance
sector is providing more services with the basic life insurance. Bajaj Allianz Life
Insurance has number of products, which gives the right way to save the money and earn
good profit by invested premium. Today people want more services and more return on
their investment. So this insurance company is providing more value – added services
with the basic insurance operation.
By doing this type of study in this Insurance sector and looking at the vast scope and
opportunity to study this booming field of Life Insurance and the growing awareness
among the public regarding insuring their life through Life insurance policies as well as
the growing contribution of Insurance in GDP of country with the number of private
players making entrance in this booming industry of Insurance.
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciations realized are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost.
6

7. REVIEW OF LITERATURE
Mr.Madhu T, made a study on ‘ULIPs hold edge over mutual funds’. The findings shows
that distributors would push unit linked insurance plans (ULIPs) to earn better
commission. ULIPs offer attractive front-end commissions to agents. However,
independent financial advisors believe that though there is a possibility of some
distributors favoring ULIPs in the short term, the new directive would be beneficial for
both the industry and investors in the long run. (Mr.Madhu T, The Economic Times, June
2009).
Mr. Deepak Shenoy ,in his article “Comparing ULIP returns to Mutual Funds”, he reveals
that, over the last three years, their growth mutual fund has given better returns than the
"MAXIMISER" option of their ULIPs.(Deepak Shenoy, The Indian Investor’s Blog,
August 2006).
Mr.Murthaza and Sony, in their article ‘An Overview on ULIP’, This article is an initiative
from Bajaj Allianz to create better understanding of ULIPs and its benefits so that
investors can avail maximum returns from their investments.
Mr.Bernz Jayma P, made a study on “Mutual Fund disadvantages”. He suggested that, if
you're new to stock market investing you may have heard that mutual funds would be a
good way for you to get started. That's actually good advice, but mutual funds have their
own pitfalls to watch out for.’
7

8. OBJECTIVES OF STUDY
• To compare ULIPs with Mutual Funds.
• To understand the reason for which customers prefer ULIP as one of the best
insurance investment mode rather than Mutual fund.
• To Compare Investment Options of customers in ULIPs and Mutual Funds.
.
8

9. RESEARCH METHODOLOGY
DATA COLLECTION: In this study two types of data is used:-
• Primary Data
• Secondary Data
• Primary Data: - Primary data is that type of data which is collected for first time
by the researcher himself. I have collected primary data for my study by using
structured questionnaire that is filled by respondents.
• Secondary Data: - Secondary data is already collected by someone for his own
purpose. I have used secondary sources like internet websites, magazines,
newspapers, pamphlets, and brouchers.
RESEARCH DESIGN: Descriptive & Analytical Research is used to draw
conclusions from available information.
SAMPLE DESIGN:
Sample Size - 50
Sampling Technique - Convenience Sampling
DATA ANALYSIS TOOLS:
o Tables
o Pie-Charts
9

10. o Percentage analysis
LIMITATIONS
• The findings of my research are from a small sample size.
• The middle class people do not know basic concept of ULIP so creating
awareness is a big challenge for me.
• Hesitations on the part of respondents to disclose financial information.
• The study was limited only to Bajaj Allianz’unit linked policies.
10

11. CHAPTER 2.
INDIAN INSURANCE INDUSTRY
The history of life insurance in India dates back to 1818 when it was conceived as a
means to provide for English Widows. Interestingly in those days a higher premium was
charged for Indian lives than the non-Indian lives as Indian lives were considered more
risky for coverage. The Bombay Mutual Life Insurance Society started its business in
1870. It was the first company to charge same premium for both Indian and non-Indian
lives. The Oriental Assurance Company was established in 1880. The General insurance
business in India, on the other hand, can trace its roots to the Triton (Tital) Insurance
Company Limited, the first general insurance company established in the year 1850 in
Calcutta by the British. Till the end of nineteenth century insurance business was almost
entirely in the hands of overseas companies. Insurance regulation formally began in India
with the passing of the Life Insurance Companies Act of 1912 and the provident fund Act
of 1912. Several frauds during 20's and 30's sullied insurance business in India. By 1938
there were 176 insurance companies. The first comprehensive legislation was introduced
with the Insurance Act of 1938 that provided strict State Control over insurance business.
The insurance business grew at a faster pace after independence. Indian companies
strengthened their hold on this business but despite the growth that was witnessed,
insurance remained an urban phenomenon.
The Government of India in 1956, brought together over 240 private life insurers and
provident societies under one nationalized monopoly corporation and Life Insurance
Corporation (LIC) was born. Nationalization was justified on the grounds that it would
create much needed funds for rapid industrialization. This was in conformity with the
Government's chosen path of State lead planning and development. The (non-life)
insurance business continued to thrive with the private sector till 1972. Their operations
11

12. were restricted to organized trade and industry in large cities. The general insurance
industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and
grouped into four companies- National Insurance Company, New India Assurance
Company, Oriental Insurance Company and United India Insurance Company. These
were subsidiaries of the General Insurance Company (GIC).The general insurance
business was nationalized after the promulgation of General Insurance Business
(Nationalizations) Act, 1972. The post-nationalization general insurance business was
undertaken by the General Insurance Corporation of India (GIC) and its 4 subsidiaries:
Oriental Insurance Company Limited; New India Assurance Company Limited;
National Insurance Company Limited; and United India Insurance Company
Limited.
Some of the important milestones in the life insurance business in India are:
1850:
Non life insurance debuts with triton insurance company.
1870:
Bombay mutual life assurance society is the first Indian owned life insurer
1912:
The Indian Life Assurance Companies Act enacted as the first statute to regulate the life
insurance business.
1928 :
The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.
1938:
Earlier legislation consolidated and amended to by the Insurance Act with the objective
of protecting the interests of the insuring public.
12

13. 1956:
245 Indian and foreign insurers and provident societies taken over by the central
government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956,
with a capital contribution of Rs. 5 Crore from the Government of India.
Some of the important milestones in the general insurance business in India are:
1907:
The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes
of general insurance of India.
1957:
General Insurance Council, a wing of the Insurance Association of India, frames a code
of conduct for ensuring fair conduct and sound business practices.
1968:
The Insurance Act amended to regulate investments and set minimum solvency margins
and the Tariff Advisory Committee set up.
1972:
The General Insurance Business (Nationalization) Act, 1972 nationalized the general
insurance business in India with effect from 1st January 1973. 107 insurers amalgamated
and grouped into four companies’ viz. the National Insurance Company Ltd., the New
India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United
India Insurance Company Ltd. GIC incorporated as a company.
1993: Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N.
Malhotra- was formed to evaluate the Indian insurance industry and recommend its future
direction. The Malhotra committee was set up with the objective of complementing the
reforms initiated in the financial sector.
2000: IRDA starts giving licenses to private insurers:Kotak Life Insurance ,ICICI
potential and HDFC standard Life insurance are the first private insurers to sell a policy.
13

14. 2001: Royal Sundaram Alliance first non life insurer to sell a policy 2002 Banks allowed
selling insurance plans.
Major Players In Indian Insurance
Life Insurance:
Public:
♦ Life Insurance Corporation of India
Private:
♦ HDFC Standard Life Insurance
♦ Max New York Life Insurance
♦ ICICI Prudential Life Insurance
♦ Kotak Mahindra Life Insurance
♦ Birla Sun-Life Insurance
♦ TATA AIG Life Insurance SBI Life Insurance
♦ ING Vysya Life Insurance
♦ Bajaj Allianz Life Insurance
♦ MetLife Insurance
♦ AMP Sanmar Life insurance
♦ Aviva Life Insurance
♦ Sahara India Life Insurance
♦ Shriram Life Insurance
♦ BharathiAXA Life Insurance
General Insurance
Public:
♦ National Insurance
♦ New India Assurance
♦ Oriental Insurance
♦ United India Insurance
Private:
♦ Bajaj Allianz General Insurance
14

15. ♦ ICICI Lombard General Insurance
♦ IFFCO-Tokyo General Insurance
♦ Reliance General Insurance
♦ Royal Sundaram Alliance Insurance
♦ TATA AIG General Insurance
♦ Cholamandalam General Insurance
♦ Export Credit Guarantee Corporation
♦ HDFC Chubb General Insurance
Re-insurer
♦ General Insurance Corporation of India
INSURANCE MARKET –PRESENT
The insurance sector was opened up for private participation seven years ago. For years
now, the private players are active in the liberalized environment. The insurance market
have witnessed dynamic changes which includes presence of a fairly large number of
insurers both life and non-life segment. Most of the private insurance companies have
formed joint venture partnering well recognized foreign players across the globe.
15

16. MARKET SHARE OF VARIOUS LIFE INSURANCE COMPANIES
IN INDIA
Here is the market share of various Life Insurance Companies in India at the end of FY
2011.
Company Name Market Share (in %)
LIC 48.1%
ICICI Prudential 13.7%
Bajaj Allianz 10.3%
SBI Life 6.2%
HDFC Standard 4.1%
Birla Sunlife 3.4%
Reliance Life 3.4%
Max New York 2.4%
OM Kotak 1.9%
AVIVA 1.8%
Tata AIG 1.5%
MetLife 1.4%
ING Vysya 1.2%
Shriram Life 0.3%
Bharti Axa Life 0.2%
16

17. COMPANY PROFILE
BAJAJ ALLIANZ LIFE INSURANCE
Profile
Bajaj Allianz Life Insurance Co. Ltd. is a joint venture between two leading companies-
Allianz AG, one of the world’s largest insurance companies, and Bajaj Auto, one of the
biggest 2 and 3 wheeler manufacturers in the world. Bajaj Allianz Life Insurance is the
fastest growing private life.
Insurance Company in India Currently has over 440,000 satisfied customers. We
have a presence in more than 550 locations with 60,000 Insurance Consultant providing
the finest customer service. One of India’s leading private life insurance companies
Indian Operations:
Growing at a breakneck pace with a strong pan Indian presence Bajaj Allianz has
emerged as a strong player in India. Bajaj Allianz Life Insurance Company Limited is a
joint venture between two leading conglomerates Allianz AG and Bajaj Auto Limited.
Characterized by global presence with a local focus and driven by customer
orientation to establish high earnings potential and financial strength, Bajaj Allianz Life
Insurance Co. Ltd. was incorporated on 12th March 2001. The company received the
Insurance Regulatory and Development Authority (IRDA) certificate of Registrahon (R3)
No 116 on 3rd August 2001 to conduct Life Insurance business in India.
Shared Vision:
17

18. Bajaj Auto Ltd. the Flagship Company of the Rs. 8000crore Bajaj group is the largest
manufacturer of two-wheelers and three- Wheelers in India and one of the largest in the
world.
A household name in India, Bajaj Auto has a strong brand image & brand loyalty
synonymous with quality & customer focus. With over 1 5.000 employees, the company
is a Rs. 4000 crore-auto giant, is the largest 2/3-wheeler manufacturer in India and the 4th
largest in the world. AAA rated by CRISIL, Bajaj Auto has been in operation for over 55
years. It has joined hands with Allianz to provide the Indian consumers with a distinct
spoon in terms of life insurance products.
As a promoter of Bajaj Allianz Life Insurance Co. Ltd. Bajaj Auto has the following to
offer:
♦ Financial strength and stability to support the Insurance Business.
♦ Strong brand-equity.
♦ Has good market reputation, as a world-class organization.
♦ Has an extensive distribution network.
♦ Have adequate experience of running a large organization.
♦ A 10 million strong base of retail customers using Bajaj products.
♦ Extensive use of advanced Information Technology.
♦ Experience in the financial services industry through Bajaj Auto Finance Ltd.
Allianz Group
Allianz Group is one of the worlds leading insurers and financial services providers.
Founded in 1890 in Berlin, Allianz is now present in over 70 countries with almost
174,000 employees. At the top of the international group is the holding company, Allianz
AG, with its head office in Munich.
Allianz Group provides its more than 60 million customers worldwide with a
comprehensive range of services in the areas of:
♦ Property and Casualty Insurance
♦ Life and Health Insurance
♦ Asset Management and Banking.
Allianz AG- A Global Financial Powerhouse
♦ Worldwide 2nd by Gross Written Premiums - Rs.4, 46654 Cr.
18

19. ♦ 3rd largest Assets under Management (AUM) & largest amongst
insurance-AUM of Rs.51, 96,959cr.
♦ 12th largest corporation in the world
♦ 49.8 % of global business from Life Insurance
♦ Established in 1890, 110 yrs of insurance expertise
♦ 70 countries, 173,750 employees worldwide.
Bajaj Auto:
Bajaj Auto Ltd., the Flagship Company of the Rs. 8000 crore Bajaj group is the largest
manufacturer of two-wheelers and three-wheelers in India and one of the largest in the
world. A household name in India, Bajaj Auto has a strong brand image & brand loyalty
synonymous with quality & customer focus.
A strong Indian brand- Hamara Bajaj:
♦ One of the largest 2 & 3 wheeler manufacturers in the world
♦ 21 million+ vehicles on the roads across the globe
♦ Managing funds of over Rs. 4000 Cr.
♦ Bajaj Auto finance one of the largest auto finance cos. in India
♦ Rs. 4,744 Cr. Turnover & Profits of 538 Cr. in 2002-03
♦ It has joined hands with Allianz to provide the Indian consumers with a
distinct option in terms of life insurance products.
♦ As a promoter of Bajaj Allianz Life Insurance Co. Ltd., Bajaj Auto has the
following to offer -Worldwide financial strength and stability to support the
insurance business.
♦ A strong brand-equity.
♦ A good market reputation as a world class organization.
♦ An extensive distribution network.
♦
Why Bajaj Allianz?
It provides an impeccable track record across the globe in providing security and cover
for you and your family. We, at Bajaj Allianz, realize that you seek an insurer who you
can trust your hard-earned money with.
Allianz AG with over 110 years of experience in over 70 countries and Baja)
auto, trusted for over 55 years in the Indian market, together are committed to offering
19

20. you financial solutions that provide all the security you need for your t4mily and
yourself. Bajaj Allianz brings to you several innovative products, the details of which you
can browse in this section.
Key Achievements:
♦ Races past GWP of over Re. 1 001Cr, with growth of over 357% over
previous years GWP of Rs. 219 Crores
♦ FYP of Rs 860cr a 380% growth over last years FYP of Rs 179 or.
♦ Rocketed to No. 2 position as against No 6 at the end of last financial year
amongst Pvt. Life Insurance cos. with a clear lead of Rs 240 Cr.
♦ Fastest growing insurance company with 380% growth
♦ Market share jumps almost 4 times from 0.95 % to 3.39 % amongst all life
Insurance cos.
♦ Increased its product portfolio from 7 to 19 simple and flexible products
♦ Launched complete suite of employee benefit solutions (Group products
for Corporate)
♦ No.1 Pvt. Life Insurer FY 20006. Leading by RS. 78Cr.
♦ No.1 Pvt. Life Insurer in Retail Business Leading by RS 339 Cr.
♦ Whopping growth of 216% for the FY 2005-06
♦ Have sold over 13,00,000 policies to satiated customers
♦ Is backed by a network of 550 offices spanning the country
♦ Accelerated Growth
♦ Assets under management Rs 3,324 Cr.
♦ Shareholder capital base of Rs 500 Cr.
Bajaj Allianz -The Present
♦ Product tailored to suit your needs
♦ Decentralized organization structure for faster response
20

21. ♦ Wide reach to serve you better — a nationwide network of 700 + branches
Specialized departments for Banc assurance, Corporate Agency and Group Business
♦ Well networked Customer Care Center’s (CCC5) with state of art IT
systems
♦ Highest standard of customer service & simplified claims process in the
Industry
♦ Website to provide all assistance and information on products and
services, online buying and online renewals.
♦ Toll-free number to answer all your queries, accessible from anywhere in
the country.
♦ Swift and easy claim settlement process experience of running a large
organization.
PRODUCT PROFILE
Unit Linked Plan
• New family gain
• New unit gain plus
• New unit gain premier
Traditional plan
• Invest gain
• Cash gain
• Child gain
Retirement Solutions
• Swarna visranthi
• New unit gain easy pension plus
Health Plan
• Care first
21

22. • Health care
Term Plan
• Risk care
• Term care
UNIT LINKED INSURANCE POLICY
(ULIP)
A unit linked insurance policy is one in which the customer is provided with a life
insurance cover and the premium paid is invested in either debt or equity products or a
combination of the two. In other words, it enables the buyer to secure some protection for
his family in the event of his untimely death and at the same time provides him an
opportunity to earn a return on his premium paid. In the event of the insured person's
untimely death, his nominees would normally receive an amount that is the higher of the
sum assured (insurance cover) or the value of the units (investments).However, there are
some schemes in which the policyholder receives the sum assured plus the value of the
investments.
Every insurance company has four to five ULIPs with varying investment options,
charges and conditions for withdrawals and surrender. Moreover, schemes have been
tailored to suit different customer profiles and, in that sense, offer a great deal of choice.
22

23. The advantage of ULIP is that since the investments are made for long periods, the
chances of earning a decent return are high.
Just as in the case of mutual funds, buyers who are risk averse can buy into debt schemes
while those who have an appetite for risk can opt for balanced or equity schemes.
However, the charges paid in these schemes in terms of the entry load, administrative
fees, underwriting fees, buying and selling charges and asset management charges are
fairly high and vary from insurer to insurer in the quantum as also in the manner in which
they are charged.
Tax benefits
The premiums paid for ULIPs are eligible for tax rebates under section 80 which allows a
a maximum of Rs. 1,00,000 premiums paid for taxable income below Rs 8,50,000 and
Proceeds from ULIPs are tax-free under section 10(10D) unlike those from a mutual fund
which attract short term capital gains tax.
Key features
Premiums paid can be single, regular or variable. The payment period too can be regular
or variable. The risk cover (insurance cover) can be increased or decreased.As in all
insurance policies, the risk charge (mortality rate) varies with age. However, for an
individual the risk charge is always based on the age of the policyholder in the year of
commencement of the policy. These charges are normally deducted on a monthly basis
from the unit value. For instance, if there is an increase in the value of units due to
market conditions, the sum at risk (sum assured less the value of investments) reduces
and so the risk charges are lower. The maturity benefit is not typically a fixed amount and
the maturity period can be advanced (early withdrawal) or extended.
Investments can be made in gilt funds (government securities), balanced funds (part debt,
part equity), money-market funds; growth funds (equities) or bonds (corporate bonds).
The policyholder can switch between schemes (for instance, balanced to debt or gilt to
equity). The investment risk is transferred to the policyholder. The maturity benefit is the
net asset value of the units. The value would be high or low depending on the market
conditions during the period of the policy and the performance of the fund manager.
23

24. Thus there is no capital protection on maturity unless the scheme specially provides for it.
There could be policies that allow the policyholder to remain invested beyond the
maturity period in the event of the maturity value not being satisfactory.
POINTS TO REMEMBER ABOUT ULIP
First-year charges: Usually, a minimum of 15 per cent. However, high premiums attract
lower charges and vice versa. Charges can be as high as 70 per cent if the scheme affords
a lot of flexibility. Subsequent charges: Usually lower than first-year charges. However,
some insurers charge higher fees in the initial years and lower them significantly in the
subsequent years.
Administration charges: This ranges between Rs 15 per month to Rs 60 per month and
is levied by cancellation of units and also depends on the nature of the scheme.
Risk charges: The charges are broadly comparable across insurers.
Asset management fees: Fund management charges vary from 0.6 per cent to 0.75 per
cent for a money market fund, and around 1.5 per cent for an equity-oriented scheme.
Fund management expenses and the brokerage are built into the daily net asset value.
Switching charges: Some insurers allow four free switches in every year but link it to a
minimum amount. Others allow just one free switch in each year and charge Rs 100 for
every subsequent switch. Some insurers don't charge anything.
Top-ups: Usually attracts 1 per cent of the top-up amount. Top-up normally goes directly
into your investment account (units) unless you specifically ask for an increase in the risk
cover.
Surrender value of units: Insurers levy certain charges if the policy is surrendered
prematurely. This levy varies between insurers and could be around 75 per cent in the
first year, 60 per cent in the second year, 40 per cent in the third year and nil after the
fourth year.
Fund performance: You could check out the performance of similar schemes (balanced
with balanced; equity with equity) across insurance companies.
24

25. Look at NAV performance over a period of at least two to three years. This can only give
you some indication about the credibility of the fund manager because past performance
is no guarantee to future returns, especially in insurance products where the emphasis is
on long-term performance (10 years or more).
Since insurance is a product, which entails a long-term commitment on the part of the
insurer, it is important not to go only by the features or the cost advantages of schemes
but by the parentage of the insurer as well.
Comparing schemes based on costs is a fairly complex exercise. As a rule, the higher the
initial years' expenses the longer it takes for the policy to outperform its peers with low
initial years' costs and slightly higher subsequent year expenses.
Retire unhurt
Pension plans are essentially tailored to meet old age financial requirements. But there
are certain advantages in joining a pension plan.
First of all, contribution to pension funds upto Rs 10,000 is eligible for tax deduction
under section 80CCC. In other words, your pension contribution will get deducted from
your taxable income.
So if you are in the top tax bracket, liable to pay to a 30.6 per cent tax, then your tax
savings will be that much.
All life insurance companies offer pension products - both conventional and unit-linked.
In both cases you pay a certain premium amount for a specified length of time.
Usually, the minimum entry age is 18 years and the maximum age is 60 years. You can
choose to pay the premium for five to 30 years. When the policy matures, you receive
one-third of the value of the accumulated amount as a lump-sum payment.
For the remaining, you can buy annuities either from the existing insurer or any other
insurer.
25

26. While in a conventional scheme, your money is managed through the insurer's pooled
investment account and you are entitled to bonuses every year, in a ULIP you receive the
value of the investment in your individual account.
In a ULIP you have the flexibility to choose between a conservative scheme or an
aggressive scheme with high allocation to equities. Pension policy imposes huge
penalties for early termination.
HOW DOES ULIP WORK
Sara is a thirty-year old who wants a product that will give him market-linked returns as
well as a life cover. He wants to invest Rs 50,000 a year for 10 years in an equity-based
scheme. Based on this premium, the sum assured works out to Rs 532,000, the exact
amount of premium being Rs 50,032.
Based on the current NAV of the plan that Sara chooses to invest in, he is allotted units in
the scheme. Then, units equivalent to the charges are deducted from his portfolio.
The charges in the first year include a 14 per cent sales charge, an administration charge
(7 per cent for the first Rs 20,000 and 3 per cent for the remaining Rs 30,000) and
underwriting charges, which are deducted monthly.
Besides, mortality charges or the charges for the life cover are also deducted. For the
remaining nine years a 3.5 per cent sales charge and an administrative charge of 4 per
cent (for the first Rs 20,000 and 2 per cent for the remaining Rs 30,000) are levied in
addition to mortality charges.
Fund management fee of 1.5 per cent (equity) and brokerage are also charged. This cost
is built into the calculation of net asset value.
On maturity - that is, after 10 years - Sara would receive the sum assured of Rs 532,000
or the market value of the units whichever is higher.
Assuming the growth rate in the market value of the units to be 6 per cent per annum Sara
would receive Rs 581,500; assuming the growth rate in the market value of the units to be
10 per cent, Sara would receive Rs 7, 24,400.
In case of Sara's untimely death at the end of the ninth year, his beneficiaries would
receive the sum assured of Rs 532,000 or the market value of the units whichever is
higher. Assuming the growth rate in the market value of units is 6 per cent per annum, the
value of investment would be Rs 510,200.
However, his family will get Rs 532,000 as it is the sum assured.
26

27. Assuming a growth rate of 10 per cent per annum, the value of units at the end of the
ninth year would be Rs 621,900. Hence, the beneficiaries would get Rs 621,900.
OBJECTIVES OF ULIPS
1. To give customer flexibility 10 Choose
♦ Sum Assured
♦ Premium
♦ payment term
♦ Increase sum assured
♦ Add riders and,
♦ Customize the policy according to needs.
2. To give customer a decent inflation beating returns, in accordance with market
returns.
3. To protect the purchasing power of customers money in future times and to
protect them against inflation and constant erosion in moneys value there of.
4. To give a broader fund choices to customers according to their risk appetite
5. To give customers a transparency and keep them fully informed about fund,
management and expenses involved.
6. Ability to increase / decrease sum assured according to changing life situations
(such as loans) and increasing Human Life value.
7. To provide liquidity to the customers in cases of emergency
8. To enable customers to actively manage their own funds according to their
perceptions and changing market situations.
ADVANTAGES OF ULIP
• Can easily rebalance your risk between equity and debt without any tax
implications.
• Best suited for medium risk taking individuals who wish to invest in equity and
debt funds (at least 40% or higher exposure to debt). No additional tax burden for
those investing mainly in debt unlike in MFs.
27

28. DISADVANTAGES OF ULIPS
1. Wide choice of fund options.
2. Ability to withdraw money after some time, to avoid long lock, Bird in hand is
worth 2 in the bush.
3. To get inflation beating returns on investment
4. Breaking up of premium into insurance and investments.
5. Ability to make the ULIP as mainly insurance oriented (low premium and high
sum assured) or predominantly Investment oriented (reverse)
6. Enables customers / policy holders to understand the company’s Investment style,
through investment reports.
7. Premium holidays - accommodating fluctuating and unpredictable incomes.
8. Policy never lapses, thus , making the optimum usage of insurance benefit
9. Flexibility.
10. Suitable to business classes with unsure incomes.
RISKS ASSOCIATED WITH ULIPS
ULIPS as the name suggests are directly linked with the investments made by the
insured. Though he does not have a direct say in this but he does offer his choice in the
form of investment.
With stock markets soaring high a few months back, ULIPs were offering a good rate of
return, but now with a sudden downfall of the stocks, ULIPs are bound to become
negative investments.
At present, a policy-holder cannot understand the growth of his investments vis-à-vis
other funds in the market, since there is no benchmark to measure one fund against the
other. Usually a policy-holder could ask his investment in a ULIP to be, for example, 55
per cent in equity and 45 per cent in debt. These components can be mixed according to
28

29. his risk-taking ability. An investor, therefore, would have to look at quarterly statements,
where the fund would be compared with benchmarks. However, this may not be a true
representation of the NAV, as the ULIP could be a mix of debt, liquid and equity
investments.
The reality is that most of the ULIPs take more than 5 years to break even. Policies where
the costs are 65 per cent and upwards have not even recovered the principal despite the
strongest bull market we have ever witnessed.
Allianz Bajaj launches its first unit linked policy
Allianz Bajaj Life Insurance Company has launched Unit Gain, the company’s
first unit linked policy. Unit Gain allows customers to combine the benefits of life
insurance with higher investment returns from equity and debt markets.
Unit Gain was launched with a choice of four funds to the customer- equity,
debt, balanced and cash funds. The cash funds come with the guarantee that the value of
units in the fund will not go down.
Unit Gain is one of the most flexible unit linked plans in the market, and allows the
customer to change the sum assured during the term of the policy to match their changing
life insurance requirements. Also the plan offers a premium holiday feature, where the
policy is kept in-force even when premiums are not paid as long as there are enough units
to cover charges.
29

30. The policy provides customers flexibility in paying additional premium through
single premium top-ups, as well as in increasing the level of regular premium in later
years (along with increase in income). In addition, the facility of cash withdrawals allows
the Bajaj Allianz ULIP’S products.
Bajaj Allianz ULIP’S products
1) Unit Gain Regular Premium:
The Bajaj Allianz unit comes with a host of features to allow you to have the best
of all words –protection and investment with flexibility like never before.
Some of the features of this plan are:
 Guaranteed death benefits.
 Choice of 6 investment funds with flexible investment management you can change
funds at any time.
 Attractive investment alternative to fixed investment securities.
 Provision for full/partial withdrawal any time after 3 full years premiums are paid.
 Unmatched flexibility –to match tour charging needs.
How does the plan work:
30

31. The premiums paid are invested in fund/funds of your choice (depending on the
allocation rate) & unit is allocated depending on the price of units for the fund/funds.
The value of your policy is the value of units that you hold in the fund/funds. The
insurance cover charges are deducted through monthly cancellation of units . The funds
administration charge and fund management charge are priced in the unit value.
 Minimum sum assured= 5 times the annual premium.
 Maximum sum assured =y times the annual premium where y will be as per the
following table.
Age 0-30 31-35 36-40 41-45 46-55 56-60
Group
Y 125 105 75 55 30 20
Important details of “Bajaj allianz unit gain RP” plan
Minimum age at entry: 0(risk commences at age 7, and ceases after age 70)
Maximum age at entry: 60
The minimum age at entry for all additional benefits is 18 years.
The maximum age at entry for all additional benefits is 50 years.
• All additional benefits are available till age 65.
2) Unit Gain Single Premium:
The bajaj allianz unit gain SP comes with a host of features to allow you to have
the best of all worlds- protection and investment with flexibility like never before.
31

32. Some of the feature of this plan is
• Convenient single premium payment, with option to pay top-ups later.
• 100% of the single premium/top ups are allocated.
• Guaranteed death benefits.
• Choice of 6 investment funds with flexible investment management you can with
between funds at any time.
• Attractive investment alternative to fixed interest securities.
• Provision for full/partial withdrawal any time after the single premium is paid.
• Unmatched flexibility – to match your changing needs.
How the plan does works?
100% of the single premium is invested in a fund/funds. The value of your choice
and unit are allocated depending on the price of units for the fund/funds the value of your
policy is the total value of units that you hold in the fund/funds . The insurance cover
changes are deducted through monthly cancellation of units. The funds administration
charge and fund management charge are pried in the unit value.
• Minimum sum assured =1.01 times the single premium.
• Maximum sum assures =y times the single premium where y will be as per the
following table.
Age 0-30 31-35 36-40 41-45 46-60 61-67
Group
Y 45 40 25 15 5 1.01
Important details of the “Bajaj allianz unit gain SP” plan:-
32

33. • Minimum age at entry :0(risk commences at age 7, and ceases after age 70)
• Maximum age at entry :67
• Minimum single premium: Rs .25000.
• Minimum top-up: Rs 10000.
3) Unit Gain plus Regular Plan:
The Bajaj allianz unit gain plus RP comes with a host of features to allow you
to have the best of all words – protection and investment with flexibility like never
before.
Some of the key feature of this plan is
 Guaranteed death benefit.
 Choice of six investment funds with flexible investment management you can
change funds at any time.
 Attractive investment alternative to fixed –interest securities.
 Provision for full/partial withdrawals any time after 3 full years premium are paid
 Unmatched flexibility –to match changing needs.
How does the plan work?
33

34. The premium paid is invested in a fund or funds of your choice (depending on
the allocation rate) and units are allocated depending on the price of the units for the
fund or funds.
The insurance cover and administration charges are deducted through cancellation of
units. The fund management charge is prices in the unit value.
 Minimum sum assured = 5 times the annual premium.
 Maximum sum assured = y times the annual premium where y will be as per
the following table.
Age 0-30 31-35 36-40 41-45 46-55 56-60
Group
Y 125 90 60 40 20 15
Important details of the “Bajaj Allianz Unit Gain plus RP” plan
 Minimum age at entry :0(Risk commences at age 7 and ceases after age 70)
 Maximum age at entry :60
 Minimum age at entry for all additional benefits is 18 years.
 The maximum age at entry for additional benefits is 50 years.
 All additional benefits are available till age 65.
4) Unit Gain Plus Single Premium Plan:
The bajaj allianz unit gain plus Sp comes with a host of feature to allow you to have
the best of all words – protection and investment with flexibility like never before.
34

35. Some of the key feature of this plan is
 Convenient single premium payment, with option to pay top-ups later.
 98% of the single or top-ups are allocated.
 Guaranteed death benefit.
 Choice of five investment funds with flexible investment management you can
change funds at any time.
 Attractive investment alternative to fixed –interest securities.
 Unmatched flexibility – to match your changing needs.
 Provision for full or partial withdrawal any time after the single premium is paid.
How the plan does works?
98% of the single premium is invested in a funds or funds of your choice and
units allocated depending on the price of units for the fund or funds . The value of
your policy is the total value of units that you hold in the fund or funds. The insurance
cover and fund administration charges are deducted through cancellation of units. The
funds management charge is priced in the unit value.
 Minimum assured =1.01 times the single premium.
 Maximum sum assured = y times the single premium where y will be as the
following table.
Age 0-30 31-35 36-40 41-45 46-60 61-69
Group
Y 45 35 20 10 5 1.5
Important details of the “Bajaj Allianz Unit Gain Plus SP” Plan
35

36.  Minimum age at entry :0(Risk commence at age 7,and ceases after age 70)
 Maximum age at entry :69
 Minimum single premium: Rs. 25000.
 Minimum top-up: Rs .5000.
5) Unit Gain Life Pension plan:
With Bajaj Allianz, you can take control of your future and ensure a retirement you
can look forward to. This plan has been be signed to take of your retirement and
insurance needs, there by providing you with a comprehensive solution for life time.
There are two packages choose from:
1. Unit gain life pension regular premium.
2. Unit gain life pension single premium.
Defending on the amount of premium you want to pay, you choose sum assure as per the
condition given below:
1. Minimum sum assured =5 times annual/1.01 times single premium.
2. maximum sum assured =y times the annual/single premium where y will be as per
the following table:
36

37. Age group 18-30 31-35 36-40 41-45 46-55 55-60 61-65
Y for 125 90 60 40 20 15 10
regular
premium
Y for 45 35 20 10 5 5 1.5
regular
premium
How does the Bajaj Allianz Unit Gain Life Pension Plan Work?
The premium paid is invested in funds of your choice (depending on the
allocation rate) and unit is allocated depending on the price of unit for the fund or funds.
The value of your policy is the total value of units that hold in the fund or funds. The
insurance cover and administration charges are deducted through cancellation of units.
The fund management charge is priced in the unit value.
Important details of the “Bajaj Allianz Unit Gain Life Pension” Plan:
Minimum Maximum
Age of entry 18 65
Deferment period 5 40
Age at vesting 45 70
6) Unit Gain Easy Pension Plan:
With bajaj allianz, you can take control of your future and ensure a retirement you
can look for word to. There are two packages to choose form:
37

38. 1. Unit gain easy pension regular premium.
2. Unit gain easy pension single premium.
How does the Bajaj Allianz Unit Gain Easy Pension Plan works?
The premium paid is invested in a fund/funds of your choice (depending on the
allocation rate) and units are allocated depending on the price of units for fund/funds. The
value of your policy is the total value of units that you hold in the fund/funds. The
administration is deducted through cancellation of units. The fund management is priced
in the unit’s value.
Important details of “Bajaj Allianz Unit Gain Life Pension” Plan:
Minimum Maximum
Age of entry 18 65
Deferment period 5 40
Age at vesting 45 70
38

39. MUTUAL FUNDS
INTRODUCTION
A mutual fund is simply a financial intermediary that allows a group of investors to pool
their money together with a predetermined investment objective. The mutual fund will
have a fund manager who is responsible for investing the pooled money into specific
securities (usually stocks or bonds). When you invest in a mutual fund, you are buying
shares (or portions) of the mutual fund and become a shareholder of the fund.
Mutual funds are one of the best investments ever created because they are very cost
efficient and very easy to invest in (you don't have to figure out which stocks or bonds to
buy).
By pooling money together in a mutual fund, investors can purchase stocks or bonds with
much lower trading costs than if they tried to do it on their own. But the biggest
advantage to mutual funds is diversification.
ACCORDING TO AMFI (ASSOCIATION OF MUTUAL FUND OF INDIA):
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciation realized is shared by its unit holders in
proportion to the number of units owned by them.
Thus a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost. The flow chart below describes broadly the working of a mutual fund.
39

40. CHARACTERISTICS OF A MUTUAL FUND
• Investors own the mutual fund.
• Professional managers manage the affairs for a fee.
• The funds are invested in a portfolio of marketable
• Securities, reflecting the investment objective.
• Value of the portfolio and investors’ holdings, alters with
• Change in market value of investments.
ADVANTAGES OF MUTUAL FUNDS
The advantages of investing in a Mutual Fund are:
1. Professional Management: You avail of the services of experienced and skilled
professionals who are backed by a dedicated investment research team which analyses
the performance and prospects of companies and selects suitable investments to achieve
the objectives of the scheme.
2. Diversification: Mutual Funds invest in a number of companies across a broad cross
section of industries and sectors. This diversification reduces the risk because seldom do
40

41. all stocks decline at the same time and in the same proportion. You achieve this
diversification through a Mutual Fund with far less money than you can do on your own.
3. Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps
you avoid many problems such as bad deliveries, delayed payments and unnecessary
follow up with brokers and companies. Mutual Funds save your time and make investing
easy and convenient.
4. Return Potential: Over a medium to long-term, Mutual Funds have the potential to
provide a higher return as they invest in a diversified basket of selected securities.
5. Low Costs: Mutual Funds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in brokerage,
custodial and other fees translate into lower costs for investors.
6. Liquidity: In open-ended schemes, you can get your money back promptly at Asset
Value (NAV) related prices from the Mutual Fund itself. With close-ended schemes, you
can sell your units on a stock exchange at the prevailing market price or avail of the
facility of repurchase through Mutual Funds at NAV related prices which some close-
ended and interval schemes offer you periodically.
7. Transparency: You get regular information on the value of your investment in
addition to disclosure on the specific investments made by your scheme, the proportion
invested in each class of assets and the fund manager’s investment strategy and outlook.
8. Flexibility: Through features such as Systematic Investment Plans (SIP), Systematic
Withdrawal Plans (SWP) and dividend reinvestment plans, you can systematically invest
or withdraw funds according to your needs and convenience.
9. Choice of Schemes: Mutual Funds offer a variety of schemes to suit your varying
needs over a lifetime.
41

42. 11. Well Regulated: All Mutual Funds are registered with SEBI and they function
within the provisions of strict regulations designed to protect the interests of
investors. The operations of Mutual Funds are regularly monitored by SEBI.
DISADVANTAGES OF MUTUAL FUNDS
• No Guarantees: No investment is risk free. If the entire stock market declines in
value, the value of mutual fund shares will go down as well, no matter how
balanced the portfolio. Investors encounter fewer risks when they invest in mutual
funds than when they buy and sell stocks on their own. However, anyone who
invests through a mutual fund runs the risk of losing money.
• Fees and commissions: All funds charge administrative fees to cover their
day-to-day expenses. Some funds also charge sales commissions or "loads" to
compensate brokers, financial consultants, or financial planners. Even if you don't
use a broker or other financial adviser, you will pay a sales commission if you buy
shares in a Load Fund.
• Taxes: During a typical year, most actively managed mutual funds sell anywhere
from 20 to 70 percent of the securities in their portfolios. If your fund makes a
profit on its sales, you will pay taxes on the income you receive, even if you
reinvest the money you made.
• Management risk: When you invest in a mutual fund, you depend on the fund's
manager to make the right decisions regarding the fund's portfolio. If the manager
does not perform as well as you had hoped, you might not make as much money on
your investment as you expected. Of course, if you invest in Index Funds, you
forego management risk, because these funds do not employ managers.
42

43. A measurement of an option position or premium in relation to the underlying instrument.
In mutual fund also there is certain amount of risk-return factor associated according to
the investment option these are as follows:
RISK RETURN
Equity High High
Balanced Medium Medium
Debt Low Low
CLASSIFICATION OF MUTUAL FUNDS
I. Closed-end or Open-end
Open-end Funds: An open-end fund is one that has units available for sale and
repurchase at all time. An investor can buy or redeem units from the fund itself at a price
based on the Net Asset Value (NAV) per unit.
Close-end Funds: A close ended fund makes a one-time sale of a fixed number of unit. It
does not allow investors to buy or redeem units directly from the funds. However, to
provide liquidity to investors many closed-end funds get themselves listed on stock
exchange. Funds do offer “buy-back of funds/units” thus offering another avenue for
liquidity to closed-end fund investor.
II. Load vs. No Load: Marketing of a new mutual fund scheme involves initial
expense. These expenses may be recovered from the investors in different ways at
different times. Three usual ways in which a fund’s sales expenses may be recovered
from the investors are:
1. At the time of investor’s entry into the fund/scheme, by deducting a specific amount
from his initial contribution: front-end or entry load.
2. By charging the fund/scheme with a fixed amount each year, during the stated number
of years: deferred load.
43

44. 3. At the time of the investor’s exit from the fund/scheme, by deducting a specific
amount from the redemption proceeds payable to the investor: back end or exit load
These charges made by the fund managers to the investors to cover
distribution/sales/marketing expenses are often called “loads”. Funds that charge front-
end, back-end or deferred loads are called load funds. Funds that make no such charges
or loads for sales expenses are called no-load funds.
In India, SEBI has defined a “load” as the one-time fee payable by the investor to allow
the fund to meet initial issue expenses including brokers’/agents’/distributors’
commissions, advertising and marketing expenses.
III. Tax-exempt vs. Non-Tax exempt Funds: Generally, when a fund invests in
tax-exempt securities, it is called a tax-exempt fund. In India, after the 1999 Union
Government Budget, all of the dividend income received from any of the mutual funds is
tax-free in the hands of the investors. However, funds other than Equity Funds have to
pay a distribution tax, before distributing income to investors. In other words, equity
mutual fund schemes are tax-exempt investment avenues, while other funds are taxable
for distributable income.
Types of Mutual Fund:
Once we have reviewed the fund classes, we are ready to discuss more specific fund
types. Funds are generally distinguished from each other by their investment objectives
and types of securities they invest in.
A. Broad Fund Types by Nature of Investments
Mutual funds may invest in equities, bonds or other fixed income securities, or short-term
money market securities. So we have Equity, Bonds and Money Market Funds. All of
them invest in financial assets. But there are funds that invest in physical assets. For
example, we may have Gold or other Precious Metal Funds, or Real Estate Funds.
B. Broad Fund Types by Investment Objective
44

45. Investors and hence the mutual funds pursue different objectives while investing. Thus,
 Growth Funds invest for medium to long term capital appreciation.
 Income Funds invest to generate regular income, and less for capital appreciation.
 Value Funds invest in equities that are considered under-valued today, whose
value will be unlocked in the future.
C. Broad Fund Types by Risk Profile
The nature of a fund’s portfolio and its investment objective imply different levels of risk
undertaken. Funds are therefore often grouped in order of risk. Thus, Equity Funds have a
greater risk of capital loss than a Debt Fund that seeks to protect the capital while looking
for income. Money Market Funds are exposed to less risk than even the For internal use
by Training Department of Prudential ICICI Mutual Fund Bond Funds, since they invest
in short-term fixed income securities, as compared to longer-term portfolios of Bond
Funds.
 Money Market Funds: Lowest rung in the order of risk level, Money Market
Funds invest in securities of a short-term nature, which generally means securities
of less than one-year maturity.
 Gilt Funds: Gilts are government securities with medium to long-term maturities,
typically of over one year (under one-year instruments being money market
securities).
 Debt Funds (or Income Funds): Next in the order of risk level, we have the
general category Debt Funds. Debt funds invest in debt instruments issued not
only by governments, but also by private companies, banks and financial
institutions and other entities such as infrastructure companies/utilities.
45

46.  Diversifies Debt Funds: A debt fund that invests in all available types of debt
securities, issued by entities across all industries and sectors is a properly
diversified debt fund. A diversified debt fund is less risky than a narrow-focus
fund that invests in debt securities of a particular sector or industry.
 Focused Debt Funds: Some debt funds have a narrow focus, with less
diversification in its investment. Examples include sector, specialized and
offshore debt funds. Other examples of focused funds include those that invest
only in Corporate Debentures and Bonds or only in Tax Free Infrastructure or
Municipal Bonds.
 High yield Debt Funds: There are funds which seek to obtain higher interest
rates by investing in debt instruments that are considered “below investment
grade”. e.g. Junk Bond Funds.
 Assured Return Funds – an Indian Variant: The SEBI permits only those
funds whose sponsors have adequate net-worth to offer assurance of return. For
e.g. MIPs Investors have some lock-in period.
 Fixed Term Plan Series – Another Indian Variant: These are essentially
closed-end. These plans do not generally offer guaranteed returns. This scheme is
for short-term investors who otherwise place money as fixed term bank deposits
or inter corporate bonds.
Equity Fund: As investors move from Debt Fund category to Equity Funds,
They face increased risk level.
• No guarantee returns
• High potential for growth of capital
Types of Equity Fund
a) Aggressive Growth Fund
46

47. • Maximum capital appreciation
• Invests in less researched or speculative shares.
• Very volatile & riskier.
b) Growth Fund
• Growth fund invest in companies whose earnings are expected to
• Rise above average rate. e.g. Technology Fund
• Capital appreciation in 3 – 5 years
• Less volatile then aggressive growth fund.
c) Specialty Fund
They invest in companies that meet predefined criteria.
i) Sector Funds
• Technology Fund
• Pharmaceutical Fund
• FMCG Fund
ii) Offshore Funds
Invest in equities in one or more foreign countries.
iii) Small-Cap equity Funds
Invest in shares of companies with relative lower market capital.
d) Diversified Equity Funds
A fund that seeks to invest only in equities, except for a very small portion in liquid
money market securities, bur is not focused on any one or few sectors or shares, may be
termed a diversified equity fund. While exposed to all equity price risks, diversified
equity funds seek to reduce the sector or stock specific risks through diversification.
47

48. e) Equity Index Funds
An index fund tracks the performance of a specific stock market index. The objective is
to match the performance of the stock market by tracking an index that represents the
overall market. The funds invest in share that constitute the index and in the same
proportion on the index.
f) Value Funds
Value Funds try to seek out fundamentally sound companies whose shares are currently
under-prices in the market. Value Funds will add only those shares to their portfolios that
are selling at low price-earnings ratios, low market to book value ratios and are
undervalued by other yardsticks. Fund concentrate on future growth prospect having
good potential.
g) Equity Income Funds
There are equity funds that can be designed to give the investor a high level of current
income along with some steady capital appreciation, investing mainly in shares of
companies with high dividend yields.
• Hybrid Funds – Quasi Equity/Quasi Debt: Many mutual funds mix these
(money market, debt and equity) different types of securities in their portfolios.
Such funds are termed “hybrid funds” as they have a dual equity/bond focus.
• Commodity Funds: While all of the debt/equity/money market funds invest in
financial assets, the mutual fund vehicle is suited for investment in any other- for
examples- physical assets.
• Real Estate Funds: Specialized Real Estate Funds would invest in Real Estate
directly, or may fund real estate developers, or lend to them, or buy shares of
housing finance companies or may even buy their securities assets.
48

49. REGULATORIES OF MF IN INDIA
• SEBI - The capital markets regulators also regulates the mutual funds in India.
SEBI requires all mutual funds to be registered with them. SEBI issues guidelines
for all mutual funds operations - investment, accounts, expenses etc.
• RBI as supervisor of banks owned mutual funds - As banks in India came
under the regulatory jurisdiction of RBI, bank owned funds to be under
supervision of RBI and SEBI.
• RBI as supervisor of Money Market Mutual Funds - RBI has supervisory
responsibility over all entities that operate in the money markets. Hence in the
past Money Market Mutual Funds scheme of Mutual funds had to be abide by
policies laid down by RBI.
Recently, it has been decided that Money Market Mutual Funds of registered mutual
funds will be regulated by SEBI through SEBI (Mutual Fund) Regulations 1996.
49

50. ULIP VS MUTUAL FUND
COMPARISON OF ULIP VS MUTUAL FUND
Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual
funds in terms of their structure and functioning. As is the cases with mutual funds,
investors in ULIPs are allotted units by the insurance company and a net asset value
(NAV) is declared for the same on a daily basis.
Similarly ULIP investors have the option of investing across various schemes similar to
the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds
and debt funds to name a few. Generally speaking, ULIPs can be termed as mutual fund
schemes with an insurance component.
However it should not be construed that barring the insurance element there is nothing
differentiating mutual funds from ULIPs
1. Mode of investment/ investment amounts
Mutual fund investors have the option of either making lump sum investments or
investing using the systematic investment plan (SIP) route which entails commitments
50

51. over longer time horizons. The minimum investment amounts are laid out by the fund
house.
ULIP investors also have the choice of investing in a lump sum (single premium) or
using the
Conventional route, i.e. making premium payments on an annual, half-yearly, quarterly
or monthly basis. In ULIPs, determining the premium paid is often the starting point for
the investment activity.
This is in stark contrast to conventional insurance plans where the sum assured is the
starting point and premiums to be paid are determined thereafter.
ULIP investors also have the flexibility to alter the premium amounts during the policy's
tenure. For example an individual with access to surplus funds can enhance the
contribution thereby ensuring that his surplus funds are gainfully invested; conversely an
individual faced with a liquidity crunch has the option of paying a lower amount (the
difference being adjusted in the accumulated value of his ULIP). The freedom to modify
premium payments at one's convenience clearly gives ULIP investors an edge over their
mutual fund counterparts.
2. Expenses
In mutual fund investments, expenses charged for various activities like fund
management, sales and marketing, administration among others are subject to pre-
determined upper limits as prescribed by the Securities and Exchange Board of India.
For example equity-oriented funds can charge their investors a maximum of 2.5% per
annum on a recurring basis for all their expenses; any expense above the prescribed limit
is borne by the fund house and not the investors.
Similarly funds also charge their investors entry and exit loads (in most cases, either is
applicable). Entry loads are charged at the timing of making an investment while the exit
load is charged at the time of sale.
Insurance companies have a free hand in levying expenses on their ULIP products with
no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and
51

52. Development Authority. This explains the complex and at times 'unwieldy' expense
structures on ULIP offerings. The only restraint placed is that insurers are required to
notify the regulator of all the expenses that will be charged on their ULIP offerings.
Expenses can have far-reaching consequences on investors since higher expenses
translate into lower amounts being invested and a smaller corpus being accumulated.
3. Portfolio disclosure
Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis,
albeit most fund houses do so on a monthly basis. Investors get the opportunity to see
where their monies are being invested and how they have been managed by studying the
portfolio.
There is lack of consensus on whether ULIPs are required to disclose their portfolios.
During our interactions with leading insurers we came across divergent views on this
issue. While one school of thought believes that disclosing portfolios on a quarterly basis
is mandatory, the other believes that there is no legal obligation to do so and that insurers
are required to disclose their portfolios only on demand.
Some insurance companies do declare their portfolios on a monthly/quarterly basis.
However the lack of transparency in ULIP investments could be a cause for concern
considering that the amount invested in insurance policies is essentially meant to provide
for contingencies and for long-term needs like retirement; regular portfolio disclosures on
the other hand can enable investors to make timely investment decisions.
4. Flexibility in altering the asset allocation
As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are
largely comparable. For example plans that invest their entire corpus in equities
(diversified equity funds), a 60:40 allotment in equity and debt instruments (balanced
funds) and those investing only in debt instruments (debt funds) can be found in both
ULIPs and mutual funds.
If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt
from the same fund house, he could have to bear an exit load and/or entry load.
52

53. On the other hand most insurance companies permit their ULIP inventors to shift
investments across various plans/asset classes either at a nominal or no cost (usually, a
couple of switches are allowed free of charge every year and a cost has to be borne for
additional switches).
Effectively the ULIP investor is given the option to invest across asset classes as per
his convenience in a cost-effective manner.
This can prove to be very useful for investors, for example in a bull market when the
ULIP investor's equity component has appreciated, he can book profits by simply
transferring the requisite amount to a debt-oriented plan.
5. Tax benefits
ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This
holds good, irrespective of the nature of the plan chosen by the investor. On the other
hand in the mutual funds domain, only investments in tax-saving funds (also referred to
as equity-linked savings schemes) are eligible for Section 80C benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example
diversified equity funds, balanced funds), if the investments are held for a period over 12
months, the gains are tax free; conversely investments sold within a 12-month period
attract short-term capital gains tax @ 10%.
Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-
term capital gain is taxed at the investor's marginal tax rate.
Despite the seemingly similar structures evidently both mutual funds and ULIPs have
their unique set of advantages to offer. As always, it is vital for investors to be aware of
the nuances in both offerings and make informed decisions.
53

54. CHAPTER 3.
DATA ANALYSIS AND INTERPRETATIONS
(A) Gender:
Gender
Cumulative
Frequency Percent Valid Percent Percent
Valid Male 37 74.0 74.0 74.0
Female 13 26.0 26.0 100.0
Total 50 100.0 100.0
54

55. INTERPRETATION:
The above graph shows that, out of 50 customers, 74% of the respondents are male policy
holders and the rest 26% are female policy holders.
(B) Marital Status:
Marital
Cumulative
Frequency Percent Valid Percent Percent
Valid Married 33 66.0 66.0 66.0
Unmarried 17 34.0 34.0 100.0
Total 50 100.0 100.0
55

56. Married Unmarried
34%
66%
INTERPRETATION:
From a sample of 50 customers, 66% of the policy holders are unmarried and the rest
34% of the policy holders are married.
(C) Age:
Age
Cumulative
Frequency Percent Valid Percent Percent
Valid 20-30 6 12.0 12.0 12.0
30-40 14 28.0 28.0 40.0
40-50 17 34.0 34.0 74.0
50-60 11 22.0 22.0 96.0
60-70 2 4.0 4.0 100.0
Total 50 100.0 100.0
56

57. 20-30 30-40 40-50 50-60 60-70
4% 12%
22%
28%
34%
INTERPRETATION:
The graph shows that majority of the sample respondents were in the age group of 40-50
yrs ie,34%, 12% were in the age group of 20-30 yrs & 28% of them were 30-40 yrs, 22%
were in the age group of 50-60 yrs and 4% were in the age group of 60-70 yrs.
(D) Occupation:
Occupation
Cumulative
Frequency Percent Valid Percent Percent
Valid Government 18 36.0 36.0 36.0
Private service 14 28.0 28.0 64.0
Business 11 22.0 22.0 86.0
Others 7 14.0 14.0 100.0
Total 50 100.0 100.0
57

58. Government Private service Business Others
0%
14%
36%
22%
28%
INTERPRETATION:
The graph shows that majority of the policy holders are working in the Government
sector i.e.36% , 28% of them are engaged in Private service, 22% of them are business
field, 6% of them are NRIs and 8% of them are engaged other works.
(E) Annual Income:
Annual income
Cumulative
Frequency Percent Valid Percent Percent
Valid Below 2 lakhs 19 38.0 38.0 38.0
2-4 lakhs 23 46.0 46.0 84.0
4-6 lakhs 6 12.0 12.0 96.0
58

59. 6-8 lakhs 2 4.0 4.0 100.0
Total 50 100.0 100.0
Below 2 lakhs 2-4 lakhs 4-6 lakhs 6-8 lakhs
0%
4%
12%
38%
46%
INTERPRETATION:
The graph shows that 46% of the policy holders get a salary of 2-4 lakhs, 38% of the
policy holders get a salary of below 2 lakhs, 12% of the policy holders get a salary of 4-6
lakhs, 3 of the policy holders get a salary below 2 lakhs and 4% of them above 6-8 lakhs.
1. Sources that helps you in making investment decision.
Sources that helps you in making the investment decisions.
Cumulative
Frequency Percent Valid Percent Percent
Valid Financial journal 5 10.0 10.0 10.0
Television 2 4.0 4.0 14.0
59

60. Brokers/Agent 27 54.0 54.0 68.0
Friends 13 26.0 26.0 94.0
Consultants 3 6.0 6.0 100.0
Total 50 100.0 100.0
Financial journal Television Brokers/Agent Friends Consultants
0%
6% 10% 4%
26%
54%
INTERPRETATION:
From the sample of 50 customers, 54% of the customers are strongly agree that the agents
or brokers helps them to make investment decision, 26% of the customers point out their
friends take part in the investment decision. And 10% customers reveal that the financial
journals help them, Remaining 6% is from consultants, and 4% selects television as the
source.
2. Factors that influence your investment decision in a particular
company.
Factors that influence your investment decisions in a particular company.
Cumulative
Frequency Percent Valid Percent Percent
Valid Attractive schemes 2 4.0 4.0 4.0
60

61. Tax benefits 27 54.0 54.0 58.0
High reputation 3 6.0 6.0 64.0
Rate of return 14 28.0 28.0 92.0
Variety of products 4 8.0 8.0 100.0
Total 50 100.0 100.0
Attractive schemes Tax benefits High reputation Rate of return Variety of products
8% 4%
28%
54%
6%
INTERPRETATION:
54% customers agree that the tax benefit is influence them to buy policy ,28%
looks the rate of return what they will earn, variety of products from the company attracts
8% customers, and high reputation of the company attracts 6% of the customers, and
remaining 4% pointing out the attractive schemes.
3. You generally like to invest money in.
You generally like to invest money.
Cumulative
Frequency Percent Valid Percent Percent
Valid Insurance 13 26.0 26.0 26.0
Stock market 1 2.0 2.0 28.0
61

62. Mutual fund 6 12.0 12.0 40.0
Bank deposit 28 56.0 56.0 96.0
Both insurance and mutual 2 4.0 4.0 100.0
fund
Total 50 100.0 100.0
like to invest money in
Insurance Stock market Mutual fund Bank deposit Both insurance and mutual fund
4%
26%
2%
56% 12%
INTERPRETATION:
From a sample of 50 customers, 56% of the customers invest money in bank deposit,
26% in insurance sector, 12% in mutual fund, then 4% in both insurance and mutual
fund, and remaining 2% in stock market.
4. According to you who among the following life insurance company is
best.
According to you who among the following life insurance companies is best.
Cumulative
Frequency Percent Valid Percent Percent
Valid Bajaj Allianz 27 54.0 54.0 54.0
HDFC Standard life 5 10.0 10.0 64.0
Tata AIG 4 8.0 8.0 72.0
62

63. Aviva Life 3 6.0 6.0 78.0
SBI Life 11 22.0 22.0 100.0
Total 50 100.0 100.0
Bajaj Allianz HDFC Standard life Tata AIG Aviva Life SBI Life
22%
6%
54%
8%
10%
INTERPRETATION:
From a sample of 50 customers, 54% customers select Bajaj Allianz is the best insurance
company, and 22% customers choose SBI Life, 10% select HDFC, 8% for Tata AIG and
remaining 6% stands for Aviva Life Insurance Company.
5. How would you rate products of Bajaj Allianz?
How would you rate our products?
Cumulative
Frequency Percent Valid Percent Percent
Valid Excellent 2 4.0 4.0 4.0
Good 37 74.0 74.0 78.0
Fair 9 18.0 18.0 96.0
Poor 2 4.0 4.0 100.0
Total 50 100.0 100.0
63

64. Excellent Good Fair Poor
0%
4% 4%
18%
74%
INTERPRETATION:
From a sample of 50 customers,74% customers thinks that the products offered by Bajaj
Allianz Life insurance co. is good,4% thinks its excellent,18% of them select Bajaj
Allianz products are fair, and remaining 4% not satisfied with our products.
6. I would like to invest money in ULIP.
I would like to invest money in ULIP.
Cumulative
Frequency Percent Valid Percent Percent
Valid Strongly agree 2 4.0 4.0 4.0
Agree 33 66.0 66.0 70.0
Neutral 8 16.0 16.0 86.0
Disagree 5 10.0 10.0 96.0
Strongly disagree 2 4.0 4.0 100.0
64

65. Total 50 100.0 100.0
Strongly agree Agree Neutral Disagree Strongly disagree
4% 4%
10%
16%
66%
INTERPRETATION:
From a sample of 50 customers, 66% agree, 4% of them strongly supporting that fact, and
16% has no opinion about it. And 4% strongly disagreed; remaining 10% also disagree
with investment in ULIP.
7. Reason for choosing ULIPs because of insurance coverage.
Reason for choosing ULIPs because of insurance coverage.
Cumulative
Frequency Percent Valid Percent Percent
Valid Strongly agree 14 28.0 28.0 28.0
Agree 32 64.0 64.0 92.0
Neutral 2 4.0 4.0 96.0
65

66. Disagree 2 4.0 4.0 100.0
Total 50 100.0 100.0
Strongly agree Agree Neutral Disagree
4%
4%
28%
64%
INTERPRETATION:
From a sample of 50 customers, 64% of the customers agree, 28% of them strongly
support it,4% customers didn’t say anything, and remaining 4% disagree with that fact.
So we can see that most of the Customers choose ULIP because of insurance coverage.
8. I would like to invest money in Mutual Funds.
I would like to invest money in mutual funds.
Cumulative
Frequency Percent Valid Percent Percent
Valid Strongly agree 3 6.0 6.0 6.0
Agree 13 26.0 26.0 32.0
Neutral 14 28.0 28.0 60.0
Disagree 18 36.0 36.0 96.0
66

67. Strongly disagree 2 4.0 4.0 100.0
Total 50 100.0 100.0
Strongly agree Agree Neutral Disagree Strongly disagree
4% 6%
26%
36%
28%
INTERPRETATION:
From a sample of 50 customers, 26% of the customers agree with that fact,6% of the
customers strongly support it, and 28% customers have no idea about it. And remaining
10% disagreed, out of this 10%, 4% strongly disagreed with it.
9. Mutual funds are more risky than ULIP products.
Mutual funds are more risky than ULIP products.
Cumulative
Frequency Percent Valid Percent Percent
Valid Strongly agree 17 34.0 34.0 34.0
Agree 27 54.0 54.0 88.0
Neutral 4 8.0 8.0 96.0
disagree 2 4.0 4.0 100.0
67

68. Total 50 100.0 100.0
S trongly ag ree Ag ree N eutral dis ag ree
4% 0%
8%
34%
54%
INTERPRETATION:
From a sample of 50 customers, 54% of the customers think that mutual funds are more
risky than ULIP products, 34% strongly agree with this statement.8% customers have no
opinion about it, and remaining 4% disagree with it.
10. ULIPs have advantage over Mutual funds.
Ulip has advantage over mutual funds.
Cumulative
Frequency Percent Valid Percent Percent
Valid Strongly agree 12 24.0 24.0 24.0
Agree 31 62.0 62.0 86.0
Neutral 5 10.0 10.0 96.0
Disagree 2 4.0 4.0 100.0
68