How do Highest NAV Guarantee Plans work ?

POSTED BY Jagoinvestor ON March 17, 2010 COMMENTS (496)

Now a days, we are seeing a new “Innovative” product in the market. They’re called Highest NAV Guaranteed Plans .These products have come in, after the recent crash in the market, and companies are taking advantage of the fact that Investors are looking for some kind of a safe investment equity product. Hence, they’ve launched these Highest NAV Return ULIP’s which confuse investors and make them (the investors :)), believe that they are going to get the highest return from the Stock market in long run – generally the tenure is 7 yrs, for these plans .

In this article, we look at how Highest NAV Guarantee ULIP’s work, and you will understand, how any Guarantee product can be created by simple methods . The simple catch, here is that these schemes, are structured in such a manner, that the collected funds can be invested either in equities, debt instruments or in money-market instruments in proportions varying from zero to 100%

How Highest NAV Guarantee Policy Works ?

These plans use strategies like Dynamic Hedging and CPPI (Constant proportion portfolio insurance), which are advanced strategies used in Derivatives world. But, let me explain a simplified version of the whole process.

Supposing a policy starts today and is guaranteed to give highest NAV in next 7 yrs  and we can control how money moves to debt and equity, its pretty simple.

In the beginning, let’s assume a NAV of Rs 10, and the Asset allocation is 100% in equity and 0% in debt . Now suppose, the market moves up and NAV goes upto Rs 15 by the end of the first year, at this point, try to understand what Insurance company has to provide – they have to make sure, that they provide at least Rs 15 as the return after 6 yrs . Now in order to achieve this, all they have to do is keep X amount in debt instruments which will mature in next 6 years and provide Rs 15 at the end of 6 yrs, so assuming the debt return at 7%, they need to put around Rs 10 in Bonds , so that the maturity of the bond is Rs 15 at the end of 6 yrs .

=>  10 * (1.07)^6
=>  15.007

They can now invest the rest Rs 5 in Equity as Rs 10 is allocated to Debt . So, now they’ve made sure that whatever happens to the market, they get Rs 15 for sure at the end of 6 yrs. Now, there are two possibilities

Case 1 : Market Goes down : If market goes down, the NAV will go down correspondingly, but as per the strategy, the maturity value will be at least Rs 15.

Case 2 : Market Goes up again : If market goes up at this point and the NAV rises above 15, for example say to Rs. 18, now again they will pull out money from Equity and allocate such an amount to debt, that the maturity at the end of total 7 yrs would be Rs 18 and so on…

Note :

  • These highest guaranteed schemes do not provide wide range of product categories, such as equity-oriented growth funds, balance funds and debt funds.
  • Guarantee on highest NAV is available only if you survive the term. If you die during the term, your nominees will get the prevailing value of the fund. This is inferior to even a regular debt product because of the high cost structure involved.

Following is a pictorial description of how the Guaranteed NAV plan works with assumption of a 7 year tenure.

How does a Highest NAV guarantee plan works

How Investors get Confused

You have to read in between the lines; Investors need to understand that these schemes guarantee the “Highest NAV”,  READ AGAIN! , it’s Highest NAV and not “Highest Returns” .  Normal Investors don’t give much thought before buying these products and normally assume that the returns will be linked to the Equity Markets .

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Returns from Highest NAV Guarantee Plans

So, what are the return expectations of these funds? We know, that long-term equity returns, are normally in the 12-15% range while, debt returns turn out to be 6-7%. So, considering the fact, that these products will shift most of their money to debt, by the end of the tenure , we can expect the returns to be in range of 9-10%. We do get some equity upside in these products, but that will be limited. After a point, this product will turn into a debt oriented fund with a major portion in debt . Also if you factor in costs, like premium allocation charges , fund management charges and other yearly charges, the returns will not be what you actually expect.

You will be amazed to know, that the returns expected from these schemes, may be lower than the returns offered by equity-oriented Ulips. The reason being, that the basic objective of protecting the previous high NAV of the fund, may constrain the fund manager’s ability to take risks while allocating funds. So if the market has fallen down, the fund manager can’t take the risk of shifting the money from Debt to Equity to gain from the potential upsides in future , because they have to provide the “Guarantee.”

Read : Important Questions you should Ask an ULIP Agent ?

Source :  LiveMint Research

Current Products in Market with Highest NAV Guarantee

  • ICICI’s Pinnacle
  • Birla Sun Life Platinum Plus-III
  • Bajaj Allianz Max Gain
  • SBI Life Smart Ulip
  • Tata AIG Apex Invest Assure
  • LIC Wealth Plus
  • Reliance Highest NAV Guarantee Plan.
  • AEGON Religare Wealth Protect Plan

Controlling your emotions with these products

Let’s talk about mistakes from the investors point of view. We, as investors, don’t think with inquisitive, susceptive minds. Getting good returns from stock markets is anyways a tough thing in itself. So when these companies come up with plans like these, which say “highest NAV in 7 yrs”, we have to ask, “How is this possible?” . Dont say it’s not possible at all, just ask how? How do they achieve it? Stop seeing dreams of getting high returns without looking at the risk involved, and try to find out – what is the strategy they’re using , Is there something in between the lines ?

We all want to get great returns, but we have to shed this belief that, companies come up with plans specially for us. All the companies out there exist to earn money, and their motive behind every product is to make money, & generate profits for their companies, so that they keep their shareholders happy. So next time a product like this comes up , you have to control your emotions before getting in and first investigate. The worst part of this whole business, (of guaranteed highest NAV products) is the timing and how it gives naive investors, high illusions about the product. Products like these, take major advantage of psychology of the ordinary saver. Many Investors in smaller towns have broken their Fixed Deposits and taken some loan to invest in products like these, especially SBI Life Smart Ulip and LIC Wealth Plus because of the trust factor with LIC and SBI . See How Agents are Misselling LIC Wealth Plus

Why you should be “Pissed off” At these Insurance Companies

  • Do you Know that, The Securities & Exchange Board of India (SEBI) , the stock market and mutual fund regulator, does not allow mutual funds to guarantee returns. Therefore Mutual funds can not provide guaranteed products which are related to stock markets, but IRDA can approve things like these and all these insurance companies come under the ambit of Insurance Regulatory and Development Authority of India (IRDA). So any Insurance Company can come up with a new Plan , link it with market and start providing “Guaranteed products” . You have to understand that “equity markets” and “guarantees” are a very risky idea together , so please stay away.
  • Do you observe when do all these “Innovative” products come up in Market ? The answer is around end of the year, which is a premier Tax Investment time (Jan , Feb , Mar) . Is innovation in Finance space limited to End of the year ? Why dont these products come through out the year? Why ? The answer is simple , if it comes after anytime other than last 4-5 months of the Financial Year (ie Dec , Jan , Feb , Mar) , no body will bother to invest in these, because no body is bothered to “invest” at all . Companies very well understand investors psychology and their helpless ness at the end of the year because they have to provide investment proofs for Tax exemption as soon as possible . This is not just limited to these products , its true for NFO’s , IPO’s in booming markets , More Sales calls at the end of the year, and other new products .
  • The so-called “Guarantee” is a marketing gimmick and is implicitly a result of the way the investment is structured . what it means is that the strategy they use itself is such that it will provide you the highest NAV , even we can create our own Plan and do what they are doing . But they make sure that Investors  feel like they have done years of research and came up with these amazing plans .
  • You have to understand that there is nothing “Innovative” in this product , the fact that 7 companies have come up with the same product proves that its not “innovation” because Innovation is unique . Aegon Religare has gone ahead in this stupidity and introduced their Guaranteed Plan which guaranteed 80% of the Highest NAV , Looks like they think that it makes them look different from others .

Who should Invest in These Products ?

If you are looking for modest returns, like 8-10%, you can invest in these policies. The return of these policies may be high in the beginning, if market does well; but when market starts performing badly, the returns can take a hit and then be in a tight range. Your NAV will be protected for sure, but the returns wont be, since over time the CAGR return will go down. Remember, if your NAV is 10 today and you highest NAV is 20, for a 2 year period, the return is a good enough 41%, but by the 4th year it’s just 18.9% and by the end of 7th year it’s a measly 10.4%. So what you really need, is protection of returns, not the NAV which is just a fixed number.


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496 replies on this article “How do Highest NAV Guarantee Plans work ?”

  1. Sidhesh says:

    I invested in ‘HDFC LIFE SL Crest’ in 2010 with the following attributes.

    SA – Rs. 500,000/-
    Premium – Rs. 50,000/-
    Premium Paying Term – 5 years
    Maturity – 10 years

    Premium paying term is over and the current value of fund is Rs.277,000. Can you please advise that should I surrender my policy and invest this money in some other plans or should I wait till it gets matured. I am not sure how much will I get after maturity (if we take an average what would be the amount after maturity)?

    1. Hi Sidhesh

      The best answer you can get only from the agent you invested through or just contact the company. The thing is your case is a bit personalised and other than company, no one can give accurate information


  2. Raj says:

    Dear Manish,
    I want to invest 50000 every year…and i just read your article about Highest NAV schemes…now what do you suggest for me to invest..?

    1. You can invest in mutual funds. If you are new to this, my team can help you to setup everything for FREE –

  3. Taranpreet says:

    Dear Manish,

    I had bought Reliance Highest NAV Guarantee program in 2010 & continued investing Rs 25000 in last 6 years. My agent tells me that if i have to avail the maximum benefit of this scheme i should invest in for at least 1 more year , which would make this 7 Years. Do you think i should invest for 1 more year or switch my Tax saving investment to some other instrument.


  4. Balu says:

    Hi Manish,

    I have a doubt in MFs vs SIPs. Could you clarify me?
    I have an HDFC bank-trading-demat (3 in 1) account. Instead of choosing SIP options provided by HDFCSEC I want to invest in MFs in disciplined manner and chose “DSP BLACKROCK EQUITY FUND – REGULAR PLAN – GROWTH”. Lets say if I buy and add to this MF every month for 1000INR for 3 years, at the end If I encash it how is tax calculated?

    – Thank you,

    1. There wont be any tax after 1 yr of selling on profits.

  5. Faiyaz says:

    Dear Manish
    I have read your explanation about NAV and Policies… really it provides fact info., about policies… Many Thanks for keeping all your efforts to write these..and helping hands towards people…

    Since longtime i am trying to explore on internet for some good policies, where i can invest…but got messed up with lot of them and confused..

    Actually I am a techie, don’t have much knowledge about Policies…
    Looking for anybody who has very good knowledge about all these Policies..
    Really if you can help me, I will be thankful to you..

    What is your opinion on “SBI Life – Smart Elite” which is a ULIP..for long term investment.., in this you have option to choose Funds were I can invest in %..

    Here in this online there are NO words like Highest NAV or Highest Guarantee Returns..

    Please guide me…Plus if you can give me u r contact info.. i wanna contact you for more information..

    1. Better stay away from most of the ULIP’s , why not invest in mutual funds through SIP ? You can choose some good funds and then invest in them. Or you can also invest through our guidance under our financial planning program?

      1. Faiyaz says:

        Many Many Thanks !!! Manish

        I have started reading all of your articles in this website and I am observing a tons of knowledge about Insurance, policies, ulips, MF, etc…

        Really I like most of your articles…

        I will approach your financial planning program.. once after I complete reading your most of the articles and gaining with good knowledge about finance and planning…

        Sure I will come back to you !!!
        Please if can you provide your contact details and email…. so that in near future I can contact you for your guidance…in investment through SIP or MF …

        1. Hi Faiyaz

          Once you are clear you want the program, you can get in touch with us using

  6. chandru says:

    Hi Manish,

    i have invested 1,00,000 in last two yr in sbi smart performer daily protect iii.

    i have three more yrs to pay. A total of 2.5 lac have to be paid.

    They are telling i will get the highest of nav in first seven yrs. so can tell me how much will i get at the end of 10th maturity year..

    Till date the highest nav is 16.5, assuming this can you tell me the amount which i will get?

    also suggest should i withdraw the plan or continue, coming jan i have to pay my third year due.

    Thanks in advance !

    1. Highest NAV thing is just a marketing gimmick .. you dont get amazing returns in that .. have you read the article fully ?

  7. ritesh says:

    This is a brilliant article! i had saved it in my inbox when i first read it in 2010. It is still relevant. Simply (Yet Wonderfully) explained
    Kudos Team JI!

  8. Anupamita says:

    Dear Manish,

    I have ING Market Shield Plan started in nov 2012.
    Sum assured : 4,80000
    Premium paying term : 5 years
    Total term : 15 years
    Premium : 4000 per month

    The policy completed 18 months this july 2014

    Policy gives:
    Guaranteed NAV
    Flexible premium payment term.
    Charge free withdrawals

    Death benefit: In case the Life Assured passes away during the policy term, the beneficiary will receive higher of Sum Assured or 105% of the premiums paid deducted by partial withdrawals made in last two years preceding death will be deducted or special fund value.
    Special fund value will be calculated based on higher of daily NAV or Guaranteed-NAV.

    Maturity Benefit: The special fund value as a lump sum is paid to the policyholder.
    Flexibility in Premium Payment Term: The time period to pay premium can be increased or decreased if the requirements are met.

    Kindly guide on this manish. Should i continue further investment??
    I am greatly concerned after reading your articles.
    Your opinions are awaited.

    1. Any ULIP , we suggest one should just stop and use the money instead in something more simpler

  9. jimmyjose2980 says:

    Hi Manish,

    I invested in ‘ICICI Pru Pinnacle II’ in 2011 with the following attributes.

    SA – Rs. 500,000/-
    Premium – Rs. 50,000/-
    Premium Paying Term – 5 years
    Maturity – 10 years

    ‘ICICI Pru Pinnacle II’ claims to give returns based on the highest NAV recorded at any time during the 7 years, instead of that based on the final NAV.

    Do they really keep up to their terms as stated OR is there any hidden clause that goes makes it a usual ULIP?

    What percentage can I expect at maturity?


    1. There is nothing hidden , things will happen as per the Document you got !

  10. Ansar says:

    Hello Manish

    As you have answered to Ashu “No , your HIghest NAV is only the one which happens after your investment date” , I think the highest NAV is recorded from the date of inception of the scheme and not when one takes the policy.
    In my case, I took the policy in Dec 2011, the scheme was implemented in 2010, I was clearly informed that the highest NAV recorded so far is 10.something which will be guaranteed at the end if not higher. Now, the highest NAV recorder is 11.02
    Please enlighten me…thanks

    1. As per my understanding .. Its from the date you buy the policy . It cant be a fixed date , because its an ongoing policy .

  11. Ansar says:

    Not only they hold your money for 5 years incase you stop further premium payment, they would also charge hefty surrender charges, rather penalty for discontinuing the policy.

  12. Mehul says:

    I have already invested in this product around 50K, and thinking of stopping my next premium. But there is catch that then this 50K will stay for 5 yrs lock in and will earn me only saving bank interest. what should be done now. how can I get my 50K back now.

    1. You knew it when you invested , correct ! . So now its your pick !

  13. Manish says:

    Again i found one more Point here
    Highest NAV in between March2010 to March2013 was 11.02.
    i found it from here “”
    actually i was started this policy on March2010.

    1. But whats you question ?

  14. Manish says:

    i passed 3.07 year with this plan. still remail 3.05 year.

  15. Manish says:

    Hi Manish,

    I am having LIC Wealth Plus Plan.
    No. Of Unit – 27511.383
    Rates Per Unit – 10.2362

    I pay 3.06 lacs in 3 year. And then wait for return. As per your understanding and Experience? How much return I can get it with this plan.
    Again ask a question that, can i stick with plan for 7 year or i can surrender it. Right now I am in loss of 25k approximately.

    1. You can never know that because its linked to market. Also how much can you expect is already explained in article

  16. Rajesh Bachani says:

    Hi Manish
    What are your views on the ICICI Pinnacle 4 Highest Nav B Fund?
    The highest NAV has been 11.24, so 110percent of it is 12.36.
    Current value is around 10.15.
    The plan is to pay 50K or 1lac per year, for 5 years, and the maturity is 10 years.
    They tell me that based on the current NAV and highest, a return of 23percent is sure. That of course is excluding the charges, but still with a guarantee, it could be 16-17 percent.
    If this is true, it is a good idea, than investing in FDs. But is it really true?

    PS: By the way am thinking about your 100 action program, and have send a query as well. And I really think your website is an awesome initiative, and hats-off to you for beingso dedicated and professional in trying to educate investors. I also respect the fact that you are so close to your reader, by replying to them so quickly – that it just feels that you are one of us, and not someone on the television who just speaks for some publicity or other goals.

    1. Thanks Rajesh

      I have sent you mail on 100moneyactions .

      Now coming to your query , all the highest NAV plan are same , very minor difference. Highest NAV plans can beat FD over long term . But not pure equity funds.

  17. Shafi says:

    I read your article and am wonder if I should continue paying my monthly premiums for Bajaj Allianz Max Gain Fund 1 (Pure Stock), starting from December 2009. Premium term is 7 years (December 2015) and Policy Term is 10 years.
    I am thinking of surrendering it and payoff my car loan. What do you suggest? Out of Rs. 1,32,000/- till now current value is Rs. 1,13,000/-

    1. Check out what is the return you have got till now and the prospects in future and then decide it .

  18. Yogesh Kumar says:

    Hi Manish,
    I really don’t know much about Equity & Debt. I have a simple question.
    i want to invest Rs 50,000 p.a. to a fund for next 5-8 years, and i want maximum return at last. i don’t need insurance as i already have that. So kindly suggest me in which fund i have to invest. I am thinking of SBI SUPER HIGHEST NAV plan. Should I invest in it or some other plan is better for me.

    1. I would suggest a plan SIP in mutual funds , rather than a policy !

      1. Yogesh Kumar says:

        Thanks, can you also suggest me which SIP mutual fund guarantees maximum return.

  19. Vikash says:

    Hi Manish,
    I am only one year old in investment market and by mistake took ICICI LIFE STAGE WEALTH II plan for premium of 30000/- annum. i have paid 1st instalment only. should i continue or exist?

    1. If I were at your place, I would not have continued !

  20. Raj says:

    Hi Manish,

    I have 2 policies which areULIPs, one is ICICI Prudential life insurance and other is Kotal Life Insurance Safe Investment Plan II

    I had made a partial withdrawal in the fifth year from the ICICI Pru life insurance plan and my sum assured has come down from 3lakhs to 1.75lakhs. I am planning to surrender the policy now. Please suggest.

    Regarding the Kotak Safe Investment Plan II
    This is my fifth year of paying premiums as seeing the aritcle i feel to surrender this policy too.

    Kindly suggest and let me better options for tax savings.


    1. If lock in is over, better get out of this

  21. Ramesh says:

    What is your view on SBILIFE – Smart ULIP Life Cover. It seems the Highest NAV is staying at 13.13 for a long time. Your comments required on it.

    1. Avoid any kind of ULIP i would say . Markets are not moving , then how will NAV move !

      1. nitin says:

        Hi Manish
        i am invest ICICI wealth builder maximiser fund they r good or not
        And please advise me other good product I invest money

        1. I think you should do mutual funds

  22. malkeet says:

    hi i had bought kotak invest maxima plan unit linked endowment assurance plan, premium period 5 years,75000/annum and maturity after 15 years,so please tel me i should go further

    1. NO i think you should come out of it !

  23. sachin aher says:

    I had taken lic wealth plus policy in 2010,with amount 50,000 for 3 yrs can u pls tell me what will be the amount with the highest nav if want to withdraw.

  24. Arun says:

    Mr Manish,

    I took Max New York life insurance (Maxlife)in 2007, since last 5 Years i am paying 50000 Every year that comes to 250000 in 5 years. now today when i want to surrender my policy i am getting 256000/-. only 6000 rupees more. shall i wait for it or surrender my policy. i think this will never come up in future. i have already burnt my hands by investing in Maxlife insurance ULIP plan. Please suggest

    Arun Reddy

    1. Just surrender it if you do not feel its going to serve you in future.

    2. Akshat says:

      Well Arun, mid term surrender of the policy will be a loss making proposition for you or for anyone else. This is because of 2 reasons 1. several charges are loaded upfront in a ULIP policy and 2. equity market gives you best returns in a long run.

      Please remember that the insurance policy is designed to give you protection and growth in ‘long run’. It must be at least a 10 years contract. By surrendering you are violating the initial contract and therefore it is not fair to compare growth rates of a ULIP policy mid-term with any other instrument which is designed to give you growth in short run.

  25. Vishal Jain says:

    I have a Bajaj allianz max gain policy. I have paid premium for 3 years. Should i continue to pay or stop and make it paid up or surrender. I think if i dont pay after 3 years i will not get highest nav. to get highest nav i will have to invest for full 7 years. Is it correct?

  26. santosh says:

    Thanks Manish for your clear explanation on Highest NAV…

    Can you explain whether taking ICICI prud Maximeser V policy is good or not? if not what is the best policy to get maximum returns?.

    1. We dont recommend any kind of “Policies” . we generlly recommend going with simple products like Mutualfunds

  27. Akshay says:

    Thanks Manish for your insight… this is the first time i am visitng this site.

    can you pls tell us abt your credentials, just wanted to understand if you have prior exp with these products.

    1. Akshay

      What do you mean by credentials . I have no selling experience. I am just a blogger

  28. Gupta says:

    Dear Manish,

    I am lucky for being a member in JIwealth club. I am fortunate to see this blog on highest guaranteed NAV. As i am about to sign and submit documents to ICICI Prulife for pinnacle highest nav guaranteed plan. Thanks for saving me in these type of policies. Thanks once again.

    1. Good to hear that 🙂

  29. aashish says:

    Dear Manish,last year in december i had taken a plan under ICICI PRU PINNACLE Super LP and invested a sum of Rs 50,000/-.I am further told to deposit d same amount of money for the next 4 years.Since i do not have much idea about these plans so i would request you to please guide me whether the plan i have taken would yield me good returns and whether i should go ahead with this plan?the reason i am growing sceptic is that i came across people who told me ULIPs are not a safe investment option.So i am at a total loss to understand what should i do-should i go ahead or drop/cancel the plan if there is such an option?Pl help me out of this.

    1. These kind of plans are not the best thing you can do . I would suggest that as you dont understand all this for now , better stop the payment of premium for now and take back the fund value .

  30. nag says:

    Hi Manish,
    It is very informative post indeed. In 2009, when TATA came up with this kind of fund my brother recommended me TATA-AIG apex invest assure fund. Now I understand that I am in a trap. I have made three payments of 90K each till now. my policy due date was March-2012 for fourth payment, which i din’t pay. Even though market doubled my NAV moved only 15%. Also I have no gain with this fund. Hence I am planning to surrender or stop paying the premium.
    Given this situation what can you suggest me. your suggestion will be highly appreciated.

    1. You are thinking in right direction , just get out of this.

  31. AJAY says:

    I investing in TATA AIG Pension plan (APEX 10) under return on Highest NAV. How Can I get the NAV for last four years.

    1. You should be able to get it on the website of Tata Aig !

      1. rahul says:

        dear manish why r u suggesting all of us not to invest in ulip

        1. Thats exactly what is explained in the article

  32. Veepul says:

    Excellent post. I was on the verge of buying one from BirlaSunlife and thats how i reached here (Google obviously!)

    1. Good to hear that, so what action you have taken ?

  33. manju says:

    Hi Manish,

    Just happened to go through the article today but felt should have read it a year ago…
    Now I understand that this plan is not like I have thought of…
    I saw it as a long term investment which is going to give me good return without taking much risk…So i took two similar plans …one from Birla and the other from Tata and has paid the first premium for both…
    ie. Birla foresight plan(5 pay-guaranteed ) and paid 1,35,000 last feb..
    and the similar one from Tata
    Let me ask you in the least case how much will I get at the end of 10 years.
    I thought it would give me around 10-15,00,000 each.
    Should I continue with these plans…if I withdraw now will I lose my 1st premium.
    I need your advice in a very simple way ….

    Thanks and Regards,


    1. Manju

      The end result would depend on the stock market performance, but you can expect equity linked returns , it would also depend on the charges you have paid on your funds. I think you should expect close to 10-12% return on your investment amount after charges.

      I dont think you can close it now , see what the brochure says about stopping premiums before 5 yrs


  34. Sanjay says:

    Hi Manish,

    Thanks for the very good post. I wish I had read this before I bought ICICI Pinnacle policy last year. As you have pointed out, it it complete rip-off.

    To prove this, I am giving some comparative returns (from Jan-12 to Aug-12) by the same policy in different funds available below. Not to be surprised, the Highest NAV plan has the least returns !!! It is even less than pure debt funds…can you believe it !!!

    Maximiser Fund V 21.25%
    Multi Cap Growth Fund 14.65%
    Multi Cap Balanced Fund 14.30%
    Dynamic P/E Fund 13.08%
    Opportunities Fund 12.55%
    Money Market Fund 9.7%
    Income Fund 9.21%
    Highest NAV Fund B 8.26%

    1. Yea .. thats exactly what I said in the post, Its pretty much mathematical , that it will happen because of the way it works ! , better get out of it

  35. Dr A Maitra says:

    Dear Manish.

    Stumbled across your very nice article that says all. Recently getting pestered by some guys who wants to sell ING MarketSheild – apparent the only guaranteed NAV plan available able that they claim to be “unique and different”. This is with regards to transferring of a substantial corpus from ICICI Pru Life Time pension plan (that has not performed that well since the market downturn) into this plan

    Just wondered your thoughts

    Best wishes

    Dr Maitra

    1. Just dont take any policies like this , DO you understand them and how they work and over all benefits and returns , If answer is NO , then first you need to learn more about it .

  36. Mahim kaushik says:

    they can’t say leave it bcoz it gives benifit to company but i want my benifits.

    1. Which benefits are you talking about ?

      1. Mahim kaushik says:

        about return’s. how much i am gain after 15 years a round figure.

        1. You can get around 10% return

  37. Mahim kaushik says:

    Hello sir,
    i am take this policy from reliance in dec. 2010 with the investment of 25k/pa. can you plz tell me how much i am getting after 5 years. and one more thing can i continue it or not for 15 years.

    1. You should be talking to reliance on this

  38. mudasir says:

    well guyzzzzzz ,such a pessimism regarding investment hits ur economy ,the economy of our country, these pessimistic ideas r responsible for recession ,depression etc kindely stop dis and besides if u have money u dont have any other option but to invest otherwise pay taxes,if any one of u wna invest in any plan of hdfc,there r fund options for u, u can take income,oppotunity,blue chip———————etc u can take balanced funds too,depending on ur age and and ur attitude towards risk ,returns. u can go in hdfc mutual fund,hdfc top 200, last time i met a customer hey is not earning more than 20 th per month ,but the man has invested only 1thousand rupee per month from 1999 now he is having 9 lacs in his fund, it is enough and clever saving,more than any fd.
    i m in the system from last few months i may be rong, but wna convey wat i know and know ur sujjestions

    1. Which pessimistic idea are you talking about ? Which fact stated here is incorrect and can you also share your profession ?

      1. Sri Hari says:

        I wish I had read this article 2 days earlier…

        I just took investment plan CREST in HDFC life.

        Before I read this article I was scared about market performance. Now I am scared about Manish revealing so much about highest NAV.

        Manish can you explain this using some numbers as examples? Like say I invested 60K every year for 5 years, After 7 years what will be the returns assuming highest NAV?

        Others sorry for ignorance…

        Sri Hari.

        1. Sri Hari

          Now Highest NAV products are banned by IRDA , how did you but it ?

          Next , the returns will depend on the NAV at that time after 7 yrs, but still you can expect near FD returns in good scenario !

  39. Kumar says:

    Can someone clarify the below…

    The premium is paid over 3 – 7 years.
    Year1 : If the starting NAV is 10 – 1000 ==> 100 Units
    NAV is gone up to 15 in 1st year and back to 12.
    They have to move the funds to debt to protect the gurantee of 15 for 100 units. So far so good…

    Year2 : Next Premium 1000 @12 ==> ~83 Units : Total Units : 183
    At this juncture they have to gurantee NAV of 15 for entire 183 units.

    Secondly, how do they determine the peak point to move funds to protect capital, because they consider the highest NAV within the year.

    1. Kumar

      You get the highest NAV for all the units , if you keep those units for atleast 7 yrs . So you get the highest NAV for all the units


  40. krish says:


    you are suppose to write an article on children education plan. its completed if yes pls fwd to all


  41. mohan says:

    out of all the avenues i looked for everything fall under 6 to 11 percent returns nothing more except directly opening a demat and trading. manish plz tel me whether am i right or wrong coz my conclusive decision is 2% of individuals annual income can give life cover of 20 times of his annual income if we buy it on internet (iterm) hlv human life value what insurance company spells it as n even i think its fair enough.(C aegon iterm they are the cheapest i found) (only buy insurance from insurance company coz they just cant beat banks and market in terms of returns). keep saving your disposable income in normal savings bank acc which keeps earning 5% or in a flexible breakable fixed deposit and when u feel market is beaten down to 12 or 13 PE invest 50% of the savings in little decently placed good stocks like banking sectors(good banking stocks like axis,etc..) which has to bounce when market rises (this way u dont pay for the salries of fund managers of insurance or mutualf companies and all their back office charges to run the company) coz i feel market is mostly liquidity driven (so go with the wind kind of a strategy with a bit of study of the company u r investing as well) and every two years once atleast u have this upswings and down swings in market and if the market further slides down keep investing in parts with the remaing 50% of savings and as soon as u get ur intented returns (keeping in mind decent returns which beats all the returns available financial instruments) say 20 to 40% of returns from ur investment get out of it and back to savings and FD. this way i think we can get the maximum returns coz u dont pay anyone in between, u r covered for life, u r earning atleast bank returns min and every two years once atleast u get atleast u get about 30 to 40% of returns upon the 50% of the total money u have and last but not least long term capital gains available if u stay invested for an year or else if u get good returns before the year then don wait for it to become one full year get that out and invest in some bonds for 6 or 7 percent or c if u have any other tax evasion plans (caveat: little knowledge about is a must).
    whats ur opinion about this??

    1. Mohan

      Can you rephrase your questions in small points . Your comment looks too complicated to understand !


  42. This article has provided some ponderable insights to the investor.

    One straight question I want to ask you is, “How SBI SMART ULIP plans I & II are performing?”.

  43. Krishh says:

    sorry again disturbing you I am having mediclaim form National insurance it will work or shall i try something else?

    1. Krish

      It comes with limited options .. and less cost ..

  44. Krishh says:

    thanks manish for the quick reply pls write the article as early as possible and also advice me regarding Term plan for my husband and what about Gold etf?
    And if you will suggest me for my portfolio. Thanx & regards

    1. Krish

      Forum is the best place to get into detailed discussions :

  45. Krishh says:


    I am one of the sufferer of this highest NAV Plan. I had taken this plan last year with annual premium of Rs. 20,000/- . May i stop paying premium and use some other tools for investment. Other than this i have two LIC plan one of them is money back. My aim to make money for my child education. what you will suggest how can i achieve not this goal but make right investment. Pls also tell shall i buy term plan for my husband he is 34 years old.
    Pls advice

    1. Krishh

      You should make changes in you portfolio. Stop your investments in the the endowment and the highest NAV plan . Better start SIP in mutual funds and I am going to write an article soon on children education plan


  46. praveen says:

    Yes, please shed some light on the new Birla Sunlife Foresight Plan.


  47. Jitendra says:


    I have talked to a person in Birla sunlife and they explained me about the Birla Sunlife Foresight Plan, The plan involve both the Highest NAV return and Lowest NAV (in a year) allocation.

    Can anyone gives me more thought on the same?

  48. Ajay says:

    I have invested last year in HDFC SL ProGrowth Maximiser in which I took an investment option of “Highest NAV Guarantee Fund – offers the Guaranteed NAV applicable at maturity of your policy will be the higher of Rs. 15 or the highest NAV recorded daily during the first 7 years from the launch of the Highest NAV Guarantee Fund.”
    My premium was Rs.50,000/- single premium and sigle frequency.
    My policy promises assured amount Rs.2,50,000 after 10 years of maturity period.

    My concern is Assured means will I get this amount for sure after 10 years or is it linked to anything…

    (It also says choose between 1.25 x Single premium or 5 x Single premium ??)

    Please can anyone who is aware of this policy give me some clarity…


  49. pradeep says:

    Hi Manish,

    I want to try my investment in ULIPs. I want to go with minimum amount per annum and after several reviews I feel ICICI wealth stage II and kotak invest maxima have lowest charges. Can you please give some advice on which to take.


  50. vijay das says:

    sir, kindly tell me that should i continue in SBI SMART ULIP ie highest nav garanty plan because i have deposited for two yrs. and agent told me to deposit my last instalment then company will give me highest nav. is there any solotion because i am not in condition to pay it . kindly reply me soon. thanks.

    1. Vijay

      If you cant make further premiums , better you dont .. .mostly you will get the fund value after 3 yrs of lock in , did you look at the policy document ?


  51. sonali says:

    I am offered a plan Pinnacle Super II which will allow me to switch my fund among 9 options. Can anyone suggest me if i should go fot it? all other things are same as Pinnacle plan but switch option is present.
    and in case of death , they offer sum assuered and fund value

  52. PN Rao says:

    Dear Manish,
    I think now i am in water. I have taken insurance for my father in Reliance a policy called RLIC-Highest NAV Advntg (sum assurance 3,50,000/15 yrs term). From last one and half year i am paying premium of Rs. 25,000 /six months. So till now i paid 75,000 but the present fund value is 60,458 Rs only. I am worried whether to continue or exit, if i have to exit suggest me the appropriate way. Please help me with your kind suggestion.



    PN Rao

    1. PN Rao

      Better not pay any more premium and get out of it


  53. Umesh says:

    continuation from the previous comment……

    that i have done a sincere mistake beleiving on my insurance agent..

    Can u please suggest some of the good mutual funds where we can expect a good return after 5 years or so..

    1. Umesh

      There are good MF like DSPBR Top 100 and HDFC Top 200

  54. Umesh says:

    Hi Manish,

    I have invested in SBI Ulip plan two years back with an assurance and i was given a assurance that the returns can be up to 30-32%. After reading this article, i can understand

  55. Sam says:

    Did anyone get a chance to research on the lowest NAV schemes. I have been offered one which says; enter at the lowest without timing the market and you are also guaranteed highest NAV in 5/7 years. So does this combination take care of the concerns raised above by others or this is another trap ?


    1. Sam

      no , I didnt get any chance on that .. but it should work on similar way


  56. Nilesh says:

    Truly Informative Post…! Thanks…!
    I have invested in ICICI Prudential Life Stage Wealth II Plan. I have paid premium of 25000 in Dec.2010. My 2nd premium is due now. I am not sure if I should continue with this plan.
    I am 27 yrs now & I took this Plan just for Income Tax saving purpose.
    Will you guide me please ?

    1. Ashraf says:


      Well even before one goes into the merits of the plan you outlined, please note, all these plans have a 3 year lock in period given its tax saving nature and hence if you choose not to pay, you are effectively kissing your 25K good bye.

      In general the overall review of this plan has been that its a plan with one of the lowest charges compared to other ULIPs, however in order to give you a more comprehensive comment, could you outline what portfolio strategy have you selected.

      I hope this is helpful.


    2. Nilesh

      mostly this policy can be stopped , but your money will be returned only after lock in period. Whats written in your policy documents ?


  57. Sam says:

    It seems there is another scheme floating in the market where they are offering guaranteed buy at Lowest NAV as well. SO even if i pay my money today, they will give me the lowest NAV of the year. What is the catch there ?

    1. Sam

      Just liei this high NAV thing it would be working ..


  58. ASHU BANSAL says:


    1. Ashu

      No , your HIghest NAV is only the one which happens after your investment date 🙂


  59. Ameet says:

    I had read this article before n I am thankful to author bcoz few days ago an agent came to me to sell Highest Return Guaranteed product but he himself did not had actual idea how it works n as i read this i explained the basic concept and then he understood

    1. Ameet

      Great to hear that “:)

  60. commodity says:

    well i am a learner in this field and keep visiting the site for your updates

    1. Good to heat that .. keep coming

  61. Ashraf says:


    Well said and i could not agree more. Infact I went to the extent of saying in my blog post that Highest NAV can only ONLY if its a debt fund. I might be wrong, but would to hear your thoughts on my post given your extensive indepth coverage of this topic.


    1. Ashraf says:

      Sorry missed out the link to my post for your review [ LINKS ARE NOT ALLOWED LIKE THIS, Please EMAIL ME]
      I am not sure if i have summarized all the facts correctly, any correction you could suggest would be helpful.


      1. Ashraf says:

        Could yuo share your email ID please? I do not have your email ID and hence couldn’t send it directly.

        1. Ashraf

          I have already looked at your site . Truely speaking its very early to comment on the content as there is still more time to come and unless you have 50-100 posts , one can not judge .

          You should move to wordpress asap , I made the mistake of being on blogger for 2 yrs , which If I had avoided , I would have been 4 times of what jagoinvestor is today. So if you are serious about blogging , be on wordpress .


          1. Ashraf says:


            Actually this is my third attempt. I was initially using b2evolution and twice the blog got hacked, and was about to give up. Finally thought will give one last try using blogger as I had not heard good reviews about wordpress.

            Given your experience with blogger/wordpress, would surely try to plan the move over to wordpress. For newbies like me, could you help advise what wordpress would give me leverage with as well?

            Best Regards

            1. Ashraf

              I am not sure if you are first clear about wordpress ,there are two type of wordpress .. one is , where if you make an account , it would be totally FREE and your webaddress looks like , its same as blogger . But all the articles, images and comments are stored at wordpress website (hosting) .

              Another thing is , its a software which you install at your own space (hosting) , and then you run your website (Like mine) , this option will require some investment , but its worth , because everything is in your control and the whole blogging experience is very good . You should not be surprised to hear that 90% of the “good” blogs are on wordpress and 90% of the TOP 100 blogs in the world are also on wordpress . Its something which is not worth debating ,so just move !


            2. Ashraf says:


              Just picked up hosting space and the wordpress software also, hopefully will complete the moving this month.

              Thank you for your guidance.


            3. Good to hear that . best of luck

  62. Satish says:

    Thank you Manish Sir!
    I missed to mention some details.
    ICICI Pru Pinnacle Super Highest NAV fund B and C gurantee minimum of 11 and 15 respectively, for a NFO of 10.
    The returns would be tax free, but at the same time we have charges of 6% for first year , 5 % , 3%, 3%, 3% for following years. ( these are w.r.t annual installment). In addition there is 1.35+0.5% fund management charge, 1.25% policy amc, 0.01% mortality charges. So total deductions are 9.11% for first year , 8.11%, 6.11%, 6.11%, 6.11% for following years.
    So in effect, it is equivalent to returns of a savings A/C.
    They say that these charges are offset by the 2% loyalty on fund value, but fund value itself has a cap.
    So really it is foolish to go for such “investment traps” expecting higher returns than FD.

    1. Satish

      Yes .. you learned it very late


  63. satish says:

    Hello Manish Sir,
    The article is very useful. Alas I read it after going for such a plan.
    How do Highest NAV guarantee ULIPs fair against FDs?
    Consider say 7 year FD with compounded interest calculation with some average interest rate. To be fair, lets not consider tax exemption for premium as we get that even for 5 year FD. Further, I understand that FD returns are taxable, while those for ULIP will not. So we should consider effective interest rate ( i.e – tax) for FD.
    What happens if we break in between? For FD we get interest ( with rate corresponding to actual FD period) with some penalty.
    Of course if a person is going for FD he is not greedy. He wants safe and guaranteed returns ( mainly to reduce loss due to inflation). In such cases, I see that Private sector banks are recommending Highest NAV guarantee ULIPs against FDs for relatively better returns.
    I agree that if objective is insurance then ULIP is a bad choice. What if objective is investment?

    1. Satish

      FD investment is purely safe , so there is no risk , with ULIP its risky .. so that way both are different and in a way not comparable 🙂 . Its not just your intention of putting money but also the structure of hte product ..

  64. Suhrud Patel says:

    The tragedy lies exactly when the investor/ buyer dont understand that returns in equity/market linked ULIPS and gaurented NAV have a vast difference. The insurance companies never expalin this fact to the buyer nor do their brochures or policy speak about this . Also IRDA is also not interested , even when notified because they have been heavily bribed by insurance companies

    1. Suhrud

      Thansk for your comment ,do you have any personal experience in this ?

      1. sekhar says:

        Dear manish,

        I took HDFC SL crest plan one year back, When i check today my fund value , it is arond 16% less to original premium. I would like to stop paying next premium. is it right decision. I need your help.


        1. Sekhar

          There is some discussion here about that plan :

          Note that you have invested in a equity product and its movement is purely dependent on markets and markets are not doing well from last 1-2 yrs .. so its not your fund , but the markets and relative corelation which is affecting your fund performance , also the costs in your funds are high


      2. Suhrud Patel says:

        Dear Manish ,
        I bought Tata apex assure highest nav gaurented plan on 30th Mar 2009. I did not recieve any nav statement or any other statements, as I usually recived in other equity linked ulips. When I contacted tata aig i was surprised to know that nav didnot even appreciate by 5% tilll dec 2009 even when market had apprecited in that time by almost 70-80% , surprisingly after deducting the charges the return was -20% . On contacting the higher authorities , I was surprised to find the two facts :
        1. the fund was invested in(1st reset date) 30 june 2009 even when I had paid the amount/premium on 30 mar 2009, On further enquiry the senior officials told me that this date was printed on my policy information page (the 1st page of policy document), I told them there was no such information in my policy document, i send them scanned copy, also i visited the local Ahmedabad office of tata-aig and presented my policy document for their perusal . I presented my case and also told them the person who sold me the policy had also told me that 1st reset date or date of investment of my fund was 31st March 2009, I told them this was cheating and they should return back my money.
        2. Iam regular equity investor for last 20 years, I had also invested in some equity ulips, with good returns, After one year I discovered that there was big difference between regular equity linked ulips and this gaurented highest nav plans , but this is not reflected anywhere in the policy document, also the person who sold the product also never described this difference , Isnt it surpring that an equity linked product gives -10% return in year Mar2009-Mar2010 when equity market aprreciated by almost 90% . NOW IHAD LONG CORRESPONDENCE AND TELECON WITH TATAAIG OFFICIALS , I DEMANDED CANCELLATION OF POLICYAND FULL REFUND WITH INTEREST AND COMPENSATION, THEN I APPROCHED IRDA , THROUGH IGMS PORTAL BUT SEEMS IT IS OF NO USE , I TRIED TO CONTACT IRDA OFFICE ONE OF THE OFFICIALS OF IRDA TOLD ME THAT TATA, RELIANCE , AVIVA HAVE BRIBED IRDA AND ITS OFFICIALS TO THE EXTENT THAT , NO ACTION WOULD BE TAKEN EVEN IF THEY ARE CAUGHT RED HANDED , NOT ONLY IRDA , TOP OFFICIALS OF FINANCE MINISTRY HAVE ALSO BEEN BRIBED BY THESE BIG COMPANIES.

        1. Suhrud

          Nice to get some good info from you on these issues ..What is the current status of this case and can you also tell us what did the company officials told you ?


          1. Suhrud Patel says:

            Dear Manish

            1. Suhrud

              I know its a tough time for you , but didnt you find the irregularities in the policy functioning ? I mean did they cut more charges than they told you , did they run the policy in any other way as explained in the policy document ?

              Agent might have made a wrong dipiction of the policy , and i am not talking about that .. When you say “fraud” , how do you claim that in policy functioning ..

              I am planning to write an article which will highlight this part


            2. Suhrud Patel says:

              Idid not have look at charges till now , BUT Ifeel it was a fraud because;
              1. I was told my funds would go for investment on 31st Mar 2009, 1st reset date(ie as soon as my cheque is cleared, by the tata aig employee who sold me the policy) , Now when the fund didnt perform , they did not send me any statement or any other communication , I follwed up with the company , I came to know that even when sensex appreciated by more than 90% , the fund didnt even appreciate by 5% , INFACT IT DEPRECIATED, I raised my concern strictly and asked the company local office the reason , they made me talk to senior officials and oficers who handled investment , they told me that my fund was invested in month of june2009(ie 1st reset date was in june 2009) and most of appreciation was till june2009 , I was shocked, I told them I would not let my funds be idle for 3 months , Had I known this I would have never invested or returned back the policy within freelook period. The senior officals told me that the 1st reset date was mentioned on policy information page . I told them it was not there , I send them scanned copy, also presented my policy document to local office, BUT TO MY SURPRISE AFTER COUPLE OF DAYS , I RECEIVED A MAIL INDICATING THAT THE DATE WAS MENTIONED ON SIS(SALES ILLUSTRTION SHEET), ONCE AGAIN I CONVEYED THEM : ” IT IS INSCRIBED ON TOP OF SHEET : ONLY FOR SAMPLE ILLUSTRATION , IT IS INSCRIBED ON BOTTOM OF SHEET : THIS IS NOT AN INSURANCE CONTRACT, MORE OVER WHY SUCH IMPORTANT INFORMATION IS GIVEN ON XEROX PAPER WHICH IS HARDLY READABLE AND NOT ON POLICY DOCUMENT/POLICY INFORMATION PAGE AS CONFIRMED AND ACCEPTED BY SENIOR OFFICIALS.

              2. Tata aig officials had been calling up for quite a long time may be 6-8 months to sell the product , I was not sure to invest in equity ulips as for past some period the returns were not so good, I am regular equity investor for last 20 years, As a practice of diversifying my investment across different instruments , i decided to go for this product only because of guarenteed highest nav, THE DIFFERENCE BETWEEN REGULAR EQUITY ULIP AND GAURENTED NAV WAS NEVER BROUGHT TO MY KNOWLEDGE BY THE SELLER (HE DID NOT GIVE ME BROCHURE , SAYING THEY WERE BEING PRINTED, THE BROCHURE ALSO DOESNOT CONTAIN THIS INFO) , NOR DID THE POLICY DOCUMENT REFLECT THIS DIFFERENCE.

            3. Suhrud Patel says:


            4. Suhrud

              Send it to me on manish at jagoinvestor dot com


            5. Suhrud

              I think lets do a story on this .. I will also try to get hold of some one senior in TATA AIG and ask for an explaination .. Please send more info on my mail at manish at jagoinvestor dot com , which some proofs which can make your side more stronger .


  65. Ajith says:

    Hi Manish,

    Need you help badly i just took a HDFC SL CREST ULIP policy with Highest NAV 15 option.I still havent received any documents and bonds.After reading the blog i just wanna come out of it please advise me what to do already i have paid 50k as first year instalment.Whats the procedure to comeout and what will be the penalty?

    Also the main reason i took it was to save IT can you suggest some better options and good returns products.

    Thanks in advance…

    1. Ajith

      When did you get the policy ? If you have lost the first 15 days ,then you have lost opportunity to give it back , you have to live with it .. read this :

  66. Praveer Kumar says:

    Hi manish,

    thanks for the nice article.
    The thing I could not understand is the difference between ‘Highest NAV’ and ‘Highest Return’.
    I called up ICICI pru agent for the same policy but I was not convinced how ICICI can pay me 2-3 times of the invested amount (they tried to be over smart).

    A simple Question.
    suppose I invest 50,000 every year (I know they charge for allocation) and buy some units (say 50000)@10.

    now after 2 years NAV reach @18 which is highest in next 7 years.

    then where is the ‘hidden’ catch? don’t they return all the purchased usnit @10 per unit?
    Please reply. I am confused.

    1. Praveer

      Did you read the full artcile , its mentioned how they calculate the NAV , note that its on them how they can calculate NAV , what if they put all the money to Debt funds ?


  67. share tips says:

    good post but any one should have a good financial IQ and should improve ..
    inoredr to explore good ways of earning money..

    1. What is the point you are making ?

      Can you elaborate ?

  68. vishal gupt says:

    Nice article. Actually i am new in this market and don’t have much more knowledge about where i should invest money . I want to know secure way where i can invest money and will get good return in future and should be tax free. but i don’t want to go with Mutual funds because i don’t have much knowledge about that . I am looking forward for your help .

    And can u please provide me some good links about Mutual funds so i can start study on it.

    1. Vishal

      You dont need to make it complicated ,the reason you should invest in MF is because you dont have much knowledge 🙂 . Mutual funds are the best way for common man to participate in markets without getting involved > the only thing you have to control is your cool and be disciplined in investing .


  69. Ajaya kumar parida says:

    Dear manish,
    Alas, I am already in the trap. I have already invested Rs 1 lakh in two years in Bajaj max gain. Actually for the 2nd Year I was in a dillema wheather to continue or not but I was given idea that if stop I will loose much. Pl. suggest wheather to continue or not.

  70. mcx tips says:

    thanks for create a guideline for me.

  71. mcx tips says:

    thanks for giving me a awesome advice dear

  72. Vivek says:

    manish sir,

    I have already taken this HIGHEST NAV plan from relaince. Is there any way to transfer my money in other plans ?? if it is posible… then which will be better..?? and if it is not posible.. pls help out .. for further. actions..


    1. Vivek

      You can only come of those plans (ULIP’s) if it has been less than 15 yrs of taking the policy , else you are trapped now .


  73. Equity Tips says:

    Nice always wanted to know abt the NAV structure. thanks buddy

  74. Sushil says:

    Are yaa, ek baat kahnaa to bhool hee gaya, Agar koi stock market main invest karta hai to , us co. main jiske direct share liye aur woh co. main kisi bande/bandon ne excellent kaam kiyaa jiskaa credit leke teesra/managment ne us co. kaa business and NAAM record height pe le gayaa (just optimistic situation , never happens 🙂 ) to bhee aap ko uskaa kitna fayda hoga I cant guarntee, But surely if outside india some body sneezes and theer are chances your share may get down due to that US/European/outside worlds issues 🙂 .
    Aisa hai apna stock market aur top pe kaam karne waale kabil log.

  75. Sushil says:

    Yaar tum sab log itna time kyon barbaad kar rahe ho ye insurance aur stock ke business pe… yehaan to 200 saloon se public kee lutaayee chal rahee kisi na kisi tarah. Koi health kaa dar bataa ke loot raha hai, koi future kee insucurities bata ke , koi future kaa “RET KA MAHAL- JO KABHEE NAHEE HOGA ” so called 1 crore kaa plan…etc, kul mila ke lutaaee hui, ho rahee hai aur hotee rahegee.
    Jio dar gaya woh mar gayaa….
    Simple see baat hai ye desh pahle bhee bhagwaan ke bharose thaa abhee bhee hai aur hameshaa rahegaa. Now if you are atheist than why fear , if you are believer than also why worry?
    1) Health/accident Insurance – PAhle kal kee chitaa chhodo aur aaj pe dhyaan do achchaa khaao , apane liye time nikalo , kaise sehat kharaab hogee? Agar accident ki chintaa hai to bhee in sabkaa itnaa cover lo kee jaydaa se jyaada 1-2 % anual CTC se jyaada naa ho poore pariwar kaa, else over coverage is begger accident :).
    Say your annual CTC is 3 Lack , so your health insurance expances must not be more than 6000/- else you are over-cautions i feel.
    2) Family shielding (to continue financial support, after your death – Jitnee annual income ho uskaa -3-4 % max. Sufficient to support yur family in case of death.
    i.e I am earning 5.5 Lack P.A. , my age is 42 years, I need 25 years coverage to help my family in case of death – so approx. 3% = 15,000/- is enough to support 50,00,000 Lakh/- coverage for my family.
    In first 2 plan you are paying only to overcome / protect your family in misfortune and get simply nothing for that money if every thing is fine.
    So thats why keep it upto 4-6 % of your monthly/annual income.
    Now coming to do something which is really rewarding-
    i.e. saving /investing.

    I feel minimum 10-20 % must be saved for future life when there will be no service / source of income.
    Again be very practical-
    Save first in your PPF of at least 2 to 5 % whatever you are planning
    say 5% in option 1 & 2 and you have 15% to save , so save at least 5% in PPF
    So if you annual income 5.5 lakh so at least 2% = 11,000/- or 5 % i.e 27,500/-
    Its good amount yearly and safest 🙂 you will be happy to see every 5 years its going steady and up…
    Now its time to take risk and earn money from 0 to 25% as per market growth
    4) Take help of some good stock market ad visor, be in touch , keep your eys open and invest as per your wish and risk taking capacity you are already safe by first 3 option and have enough money for monthly and daily expanses, and what ever is remaining invest with risk and get/llose be happy

  76. AANAND PENDSE says:

    Extremely useful article. I asked the same question to some of the financial advisors “How?” but fruitless. The only thing that came to my mind was that the entire corpus would be investe in Bonds and Govt Securities and the NAV won’t rise proportionate to the index. Thanks for the elaboration. Now I can ask them to read this article saved by me.

    1. Aanand

      Great to know that 🙂 . Let them know this 🙂

  77. sravi says:

    Hi Manish,
    Very useful article. After i have gone through this, i realized that i am the victim of this stupid ulips. Agent sold me 2 ulips SBI Unitplus 3 pension plan and SBI unit plus 3 fixed term. Agent told me to pay 50k for 5 years and after that we can get he pension per month. At the time i was completely unaware of financial planning. so blindly i paid. Please suggest what i can do now.
    1. I paid 50k last year june , that was my first premium and in 2 months down the lane i have to pay 2 nd premium. Please suggest me wether i can continue the policy or terminate the policy ..which is good.
    Incase of continuation how many years i need to pay the amount and can i surely expect atleast 8% of profit after charges and tax?

    Please provide me your valuable insights on thease two ulip policies and suggest me what i can do.
    Awaiting your inputs. Thank you in advance.

    1. Sravi

      There is a minimum 3 yrs of lock in for you . You would be getting around 8-10% return in long run from these policies .


  78. DK Bhardwaj says:

    Sir, how can anyone blame a particular person in the chain. In Sep 2010, IRDA lowered charges to abysmally low levels, agents commission was reduced in percentage and restricted to mere 3 years but premium paying term increased to 5 years. How does IRDA expect agent to service the client when he is not being paid beyond 3 years. Agent is also being exposed to same inflation levels as anyone in the country. How do insurers/IRDA/ Clients expect a fair deal when survival is at stake. Regulator and agencies have to be realistic. There was a news item in a magazine wherein Chairman IRDA was overheard accepting that Indian agent was poorly paid. Why can’t corrective action be taken through agencies like Jago Investor.

    If the efforts of writer are towards educating masses, I am more than willing to partake. Thank you.

  79. DK Bhardwaj says:

    Sir, I addressed your article in entirity, hence a line or two are irrelevant. Let’s accept policy is prepared by Actuaries, accepted by insurance companies and approved by IRDA before launch, hence where is the rationale of mis-representation. Buyer is supposed to read and sign the Illustration but does he/she show inclination and time to learn. Answer is a big NO. Mis-selling is done not of Highest NAV Plans but all products inmarket including in insurance sector because of;
    a) Attempt to push products by companies
    b) Achievement figures of high targets by sales teams set by companies
    c) luring of sales persons( both at agency level and agents level) by offering of incentives though rebating in any form is an offence
    d) ULIPs are most transparent product in all aspects

    If the Highest NAV policies were so poor in performance how did the insurers garner such heavy premium collections and how do ULIPs account for 75:25 ratio compared to traditional products. Why, because everyone wants higher returns but does not want to accept his / her risk appetite because one can blame the Agent and insurance company. Client wants only higher gains to the extent he/she not shy away from depriving the agent of his rightful earnings despite being conveyed of rebating clause being an offence. It does not effect him and is easily ignored.

    I think greater emphasis should be educating the masses against mis-selling, understanding the product, need to buy and overall bringing higher honesty levels and education levels in insurance sector.

    Thank you

    1. NKanani says:

      @DK Bhardwaj

      The education of masses against the product mis-selling is what Manish has been doing…

      IRDA has been approving for all the policies sold – good or bad… there are many of us here who have burnt hands in ULIPs as well. The charges of initial ULIPs were high and were approved by IRDA – those have come down now – but, I am sure, it was due to such awareness being spread out – not voluntarily by IRDA. Same is the case for highest NAV plans.

    2. DK Bhardwaj

      I take your point. The misselling part is mainly from agents (not all)


  80. DK Bhardwaj says:

    In my view the article is biased and ill advised. The writer seems pessimistic about the market growth. From 100 points in 1979 it is at nearly 18000 pts today Mar 2011 even with all ups and downs experienced like Harshat Mehta, IT Bubble, Gold secuirty to UK, fall of BJP etc etc. A huge growth of 118times if one had remained invested without any effort from his side. Again have all investors gained from market rise. Answer is NO because all equities have not risen to same levels. Markets have never remained at low ebb for very long and always bounce back. Longest downtrend was in 1929 for about 2 years plus. No company promises the highest of Sensex but highest NAV of their investment strategy. The companies would need to prove their worth by showing better returns than Sensex and competition. One company has shown returns at 27%+ since launch in Jun 2009. Can a normal investor have the knowledge and time to invest and gained values at 27% increase in a short span of 20 months and stay at the level of 27%.. Charges are not high after Sep 2010 IRDA ruling. Companies are bleeding with new regulatory changes to ULIPS as also the agents. The writer is right in that initial exposure to equity is high and very gradually reduces to debt but does not a wise investor revert to debt fund once he has booked profits. Comparing with MFs is rather naive because in any other investment, only the invetsed amount and value of date is payable but in ULIPs even after one premium, a minimum of 10 times of yearly premium equivalent sum is payable should some catastrophy happen to investor. As for these plans being launched only in certain months is a fallacy though Indians by nature wake up only at the time of I.T. returns filing time. Who is to blame the companies or the individuals? In my personal opinion, such plans take away the worries from an investor’s mind and help him/her to be looked after by the insurers. In the end, one can’t have the cake and eat it too. Lastly, pleasae avoid providing one sided and half cooked facts to the readers.

    1. DK Bhardwaj

      Which part of article do you disagree with ? Give me the line .


  81. nagess says:

    hdfc crest closes 31st march.

    all charges , fund management, switching, etc

  82. nagess says:

    HDFC crest closes on March 31st – extended

    i want to know the charges in MFs

    1. Which charges of MF ?

  83. Sanjay Dua says:

    How do the people sell : – I invested in Super Pension Plan of ICICI prudential, & the police was India Infoline where i was asked to invest with 3 yrs locking period for Rs. 18000/- per annum, for 3 years & after that If I want to continue I can if i want to discontinue then i can do that even. IN that case I will get my full money back without any deductions, we people put our money in schemes where we can make profit & not to lose money, here when I contacted ICICI they said that my Fund Value is Rs. 44000/- & 96% of that amount will be paid to you, It means that i am losing Rs. 12000/- & interest of my invested money if I would have invested in bank at least I would have got Interest along with my principal amount. We people feel totally cheated who is responsible for this? All agencies make their money & leave people in Pain, is there any way to get my complete money immediately.

    1. Sanjay

      I would not like to blame anyone but you .

      How can you believe some one from a company , if they would say your money would be 10 times in 3 yrs , will you still beleive. Is it not your responsibility to verify what a person on telephone or face to face tells you ?

      Its a known fact that you dont get 100% money after 3 yrs , you get around 95% only ,also ULIPs are market linked , so your money will move as per market movement , How come you didnt try to find out what you are buying ? After all we investigate and make sure we are buying good quality fruits and vegitables ,why not a policy ?


      1. nagess says:

        HDFC crest closes on 28 th feb.

        Premium allocation rate(96% yr 1,2),(97% yr 3),(98% yr 4,5)

        That is the amt invested in HDFC(short term fund, income fund, balanced fund, blue chip fund,opportunities fund) MFs.

        Two option(Free allocation or Highest NAV)

        If highest NAV,(for those who doesnot know fund management like switching at the right time)

        then the following applies
        extra 0.5% charge
        Higher of Rs.15 or highest NAV recorded daily during first 7 years or Nav on date of maturity

        Premium should be paid for 5 continuous years(min 50000),
        lockin period 5 years. if discontinued within 5 years, then the fund value will be set aside and paid at the end of 5 years(+ 3.5% SI calculated annually).if discontinued after 5 years, the current fund value is paid.

        if free allocation chosen,

        then u can manage the fund by switching between the given 5 MFs.

        This scheme if only for those who cannot keep watch on the shares all the time.

        The insurance part is also covered (10 or 20 times annual premium).

        After 5 years,
        Another possibility is that when u feel that the current NAV is good , then u can close ur scheme right away(only after the lock in period), no guarantee applies then. the insurance will be closed as well. no extra charge applies then.

        I think this is the best option compared to other highest NAV schemes.

        but it closes on 28th this month.

        why this scheme(or ulip) came?
        i think
        noone cares to take the conventional insurance plans which gives min 6% returns. so it is in the mentality of the people who opt for more return insurance scheme.

        When we approach a person with money-back policy, they say what returns it gives, as if insurance is for making money. it is just mutual help in adverse situation. they want to make money in everything possible. so no way for term insurance.

        I want to ask a question.

        let us say i invest in MF and bought the shares(units) at a high rate.
        what happens when it falls. Only person who made money in shares can speak that u can make easy money there.

        dont u fix charges on MFs there, for brokerage, switching etc.
        how much is the charges?

        1. Nagees

          Please ask brief questions .


  84. srinivasu says:

    yes, now we all can see the fund performance of such ulips.
    thanks for this good work.

  85. Arpan M says:


    One should not compare an apple with an orange. I can talk about AEGON’s Assure Plus plan. This plan is different in lot of ways as mentioned in my earlier post and provides every kind of flexibility and guarantee one can provide to a policyholder. The mantra for the customers should be to follow Caveat Emptor and to understand whether his/her portfolio requires it or not.

    Oh! By the way the company as already given a 19% return on this NAV Guarantee fund since inception (1.5 yrs).


    1. Arpan

      Yes I agree one has to find the reasons for having a plan in their portfolio .

      Regarding the returns in last 1.5 yrs .. 1.5 yrs has seen markets move 150% up side .. 19% returns look less to me ?

      1. nagess says:

        I prefer HDFC Crest…

        One should not forget the ups and downs in market.
        let us say market goes with nav 10 , 9, 7, 9, 10 then what happens to my money?

        i will get 15 rs for each invested money(15-10,15-9,15-7,15-9,15-10) will be my profit..

        in the worst of situations(hypo)…

        if market goes up say 13, 15, 17, 18, 20 i have to purchase the units at the highest navs..
        then at closing time the nav is down say 14, then it shocks me as an investor (prev experience)

        then the guaranteed nav 20 will make me safe(what ever means they invest, either equity or debt)

        Even in MF one should keep track of the navs lest we miss out a good opportunity to close..

        And today when we contact people, they dont want conventional insurance plans..

        Not term insurance(no return input) for middle class people..

        That way HDFC 7 year highest NAV(15 nav guaranteed) is my safe proposal.

        Charges are more or less the same compared to other highest NAV guaranteed schemes..

        1. Nagess

          How is this plan different from other Highest NAV plans ? Are you not agreeing with the article ?


  86. Arpan M says:

    I can talk about AEGON Religare which has a single premium plan with a 10 year horizon till maturity. The plan is different in 3 ways vis-a-vis all NAV Guarantee plans available in the market following the CPPI model.

    They are:

    1. 80% of the highest NAV recorded on any reset day (520 approx) during the whole policy term is guaranteed. If the current NAV is higher than the 80% clause, then the policy holder gets units multiplied by the higher of special NAV or current NAV. Benefit of the 80% guarantee over 100% NAV guarantee plans – A fund manager who has to provide 80% of the highest NAV guarantee can take 20% more exposure in equity. This will result in to comparatively higher returns.

    2. AEGON Religare’s NAV Protector Fund is an open ended scheme unlike many other funds which are close ended, thus safeguarding policyholders from a DEBT LOCK scenario.

    3. ALL other players who has a NAV guarantee fund does not tell us what happens if the customer decides to quit after 5th year. Obvious terms and conditions are that the NAV guarantee factor goes out of the window. The payout is based on the current NAV. Here the risk factor is that in case the current NAV is lower than the 100% guarantee factor, the customer is not given the NAV Guarantee benefit. BUT in case of AEGON Religare Assure plus, NAV guarantee is applicable at any exit, be it Surrender,Death or maturity.

    1. Arpan

      May be its better than other highest NAV plans, but still not sure what makes it an absolute better plan comapared to other alternatives


  87. Gary Shah says:

    SBI smart performer looks great currently as the current NAV as of today for daily protect fund is 9.31 and the highest NAV is 10.73 which was back in November. If I enter today, I am already getting around 15% of return as my NAV will be locked at 10.73 though I enter at 9.32.
    In there benefit illustration chart, I am already getting my money at least 4 times in 10 years at 15% after deducting all the charges.
    Am I missing anything here?

  88. Sathya says:

    Hello Manish,

    What you have explained here is very helpful and illuminating! Without clear knowledge, I have invested on HDFC SL Crest HNAV plan this year. Now, I realize and wish to quit from this. Given the circumstance, I thought I should wait for a year period and then quit this. But I might incur some penalty too. Please guide me, if I’m right and provide your suggestions, to get off this mess.

    1. Sathya

      ahh … you have already paid the charges now and it would have the lock in period now .. Can you get into the brochure and find out the detials also .. Can you imagaine we are disucussing this plan in our fourm , I am copy pasting a readers comments below

      HDFC SL Crest:-

      Fund managers / Agents do not reveal all the charges involved. It’s only after you read the literature about the Fund do you see the “fine print”.

      What charges are revealed by them:-
      – Premium Allocation charge for 5 years – 4%, 4%, 3%, 2%, 2% of premium.

      The “fine print” charges:-
      – Fund Management Charge – 1.35% p.a. of fund’s value charged daily
      – Policy Administration Charge – 0.31% per month of annual premium !!
      – Mortality Charge – Not specified but depends on age & level of cover but is charged monthly !!
      – Misc. Charges – If opting for Highest NAV Guarantee then an Investment Guarantee Charge of 0.5% p.a. will be charged daily !!!

      Use MS Excel to make a simple calculation based on your annual premium for 5 years. Apply all these charges. For 1 lakh x 5 years (5 lakhs) you will be shelling out almost Rs. 39000/- as charges. Now compare with investing in a normal FD at 7% p.a.(after TDS) – assuming you invest 1 lakh on 1st January every year for the next 5 years – you will get a total interest of Rs. 105000 on 31st Dec of the 5th year. For the Fund to give you the same the NAV has to attain a value of Rs. 19.70. If it stands at Rs.15 (Guaranteed NAV) you will earn lesser than an FD.

      Please note that these are the views of a conservative investor ! I am not taking into account the benefits of the insurance part. An unfortunate incident will certainly give anything between Rs. 10 lakhs and Rs. 20 lakhs to the nominee. My main aim was to show readers the “unrevealed charges”.


  89. OP Poonia says:

    Dear Manish Jai Hind
    Please explain me the following:
    You said that returns is in the range of 8%-10% but then how they show the NAV on their official web site to 30-40 they also show the record of past 3-5 years. and suppose I invest 50000 rupees annually for 5 years and in between market goes down and recovers back and this time NAV is 15 and at the ending of 7th year NAV is 30 how much amount I will get. pl clerify.

  90. Guru says:


    Recently an agent from SBI had called up to inform about the SBI smart performer plan and he kept on saying about the Highest of Highest NAV. I am new to this finance terminology.

    He said that if I invest Rs. 50,000 every year for five years, then we shall be getting Rs. 8Lacs in 11th year. Is this true? How does it work? Appreciate if you could explain taking the amount mentioned as example and reply to my email.

    A good article with good number of responses.


    1. Guru

      Avoid it , If its that complex to understand , it not worth the common man . There is nothing like “Highest of Highest NAV” ! . he might be using jargons to impress you !


  91. Jags says:

    Wonderful article…an eyeopener !!

  92. Balaji says:

    @ Manish,

    Excellent article. Recently i went to SBI life and asked details about Term plans. But the manager kept talking about “Highest NAV plan”….Now I know the truth.

    It is high time that IRDA should take concrete action against these plans.


    1. Balaji

      Yea .. Now you will be able to co-relate with what all he told you 🙂


  93. Mani Kumar says:

    I dont’ agree.

    If i go as mentioned in your example, I go on investing every year even the NAV at low (5 or 6 or 7). still i can redeem my units at highest NAV @ Rs.14 at the end of 7th year.

    More over, ULIPs always creates the discipline of investing at frequent intervals just like SIPs.

    1. Mani

      What point you dont agree on , I agree with you that you can redeem it at 14 , if thats the highest point ..

      Also I agree that ULIP bring discipline , so do endowment plans


  94. Raju says:

    Hi Manish,
    I don’t agree that it works like this.
    Its not as simple as you have shown.

    Pl illustrate regular premium paying plan also.

    Regards raju

    1. Raju

      Can you explain how does it work then ? Also the post is suppose to give a high level idea , yes agreed that there might be some more internal details . but overall idea is the same


  95. Shiv says:

    Excellent Article

    1. Shiv

      Thanks 🙂 . Keep commenting


  96. Anoop says:

    The article is well written and posts a balanced view. But, even if the returns are in the range of 8-10%, given that its insurance linked – it would be tax free. Isn’t that better than options like Fixed Deposits, NSC, PO deposits?

    1. Anoop

      True that returns can turn out to be in range of 8-10% , however its not guaranteed, it can be 12% also and can also go upto 5-6% depending on markets, so at the end its market linked only . given that 8-10 yrs of time frame you can generate a better return like 12-15% . Its all about loosing opportunity by investing in these products .

      Overall it might be same as Bank FD


  97. Manikanta says:


    There is nothing like Guarantee Returns in the Money markets, If NAV itself is not going to increase because ot the investment n debt fund, then what is the use of having highest NAV guarenteed…


    1. Manikanta

      thats the catch , there is no use as such . Thats a marketing gimmick


  98. PremiumFinance says:

    Hey manish

    It’s very interesting these Highest NAV Guarantee Plans and thanks for great detailed explanation.I must do some research in this area of finance but cheers for the head up .

    1. Thanks 🙂


  99. Vijay Jadhav says:

    I am not clear about the statement “Your NAV will be protected for sure, but the returns wont be, since over time the CAGR return will go down.” The example provided mentions the reducing returns with guaranteed NAV but what are the underlying calculations that results in low returns? Please explain with calculations/equations for more clarity.

    1. Vijay

      All it means is that the NAV might remain same (implying safety in NAV) but overyears the returns will be lower . Nav from 10-15 in 1 yrs means 50% return , but if NAV remain at 15 only , in 5 yrs the returns would be at 7% .


      1. Vijay Jadhav says:

        Got it! Thanks a lot Manish!

  100. PRAVEEN says:

    Dear Sir,

    I have taken LIC weath Plus policy from LIC on date 07-05-2010. I want to know LIC has invested the premium collected through Wealth Plus in the Market or not ?
    The nav of wealt Plus Fund is showing Rs 10 from date 09-05-2010 t0 14-05-10 on LIC website. NO gain No Losss ……..


    1. Praveen , one reason can be they are not showing the daily NAV ?


    2. Rahul says:

      The Last date for premium collection might have beyond 14/05/2010. Can you check with your LIC agent and ask for the start of the policy ? The LIC site generaly shows daily NAV.

  101. shan says:

    Thanks for the info……

  102. Rakesh Goyal says:

    Very good analysis of the plan,

    But as every coin has two sides, so is this plan ..good for investors who think for a guaranteed return around 10% …remember it provides a risk cover too…interest is tax free unlike FD…better go for this than FD…! Whut if stock ,market crashes and all ur money is stuck ..this product is comparable to FD only….
    Second thought ..u can park ur money to debt or balance option in ulips or MF too…

    1. Rakesh

      one can take tax FD also which have lock in for 5 yrs , in that way you can compare them to those .


  103. ravi says:

    hi manish,

    i feel that a longterm bull run has started.can u name some 4/5 star rated funds in equity diversified largecap and some midcaps which give the option to swap or transfer to any other defensive(debt based) in the same fund house (like hdfc top200offers) in case of some thing worse happens (like another recession in west and wars).

    can u please tip of such mfs.iam planning to take part very agressively say3-5 years.iam eagerly waiting for ur reply.


  104. Dilip says:

    I am a first time investor and had no idea about NAV plans like this. Thanks for your informative article. As you have mentioned in your About US page, as an ordinary Hindustani I have never gave a thought about investment. But I couldnt hide from it longer. Anyways..keep up the good work. I appreciate your time and energy.

    1. Dilip

      Thanks 🙂 , looking forward to read more comments from your in future .


  105. Ban on ULIPs.

    🙂 🙂 “I’m lovin’ it” 🙂 🙂

  106. Jignesh says:

    What will happen when market will crash in the very begining when equity portion is more? Currently market is overvalued, possibility is there. But in long run, they can manage to regain 10 Rs NAV, but what will happen to return to the investor?

    1. Even if markets go down in begening , they can still shift to debt and regain NAV of 10 , So what ever they said “Highest NAV” is still achieved .


  107. Karthi says:

    Hi Manish,

    Kudos to you for demystifying how these plans work…

    I am just adding few more assumptions (though not very sure if these are right!) to complicate the model to bring it close to the reality..
    assume that company xyz starts highest nav scheme in 2010, and i enter this scheme in its very first yr of operation… over a period of time definitely capital will keep moving into debt… but that capital is not a constant amount.. AUM keeps growing as many investors join the scheme… there may be several 1000 investors joining every year.. so the new money coming will first hit the equity (this is analogous -> like that year is the first year for me in 2010…)… in this case the scheme is sort of perpetual, and only i exit in year 2017… this will give leeway for the fund manager to have something (actively) in equities at any point of time… thereby there is good chance that nav will rise decently (though not like equity related MF) and deliver higher returns than your projected 9-10%… easily it could be well beyond this…

    1. Karthi

      Thanks , your assumption of “when people buy next year, its will go in equity” is not correct , thats not how it works with ULIPs . So asset allocation is always intact . so if at some point , a ULIP has 50% in Debt and 50% in Equity , so when you buy that ULIP , the NAV you get is just reflection of current situation , the treatment for you will be same .


      1. Karthi says:


        Then in this case say after 3 years, people will see the portfolio mix (debt heavy) and figure out things… then who ll buy it after that? so the ppl buying in the first 2 to 3 yrs will feel betrayed… what do you think?

  108. rajesh cally says:

    Grt to read your articles. any thing more on misselling and the pressures the managers handle in life insurance companies which make seeling ulips even worse…

    1. Rajesh

      yup , I think pressures from top to sell more and more and Attractive commissions are the two top most things which lead to misselling .


  109. Srujani says:

    Hi Manish

    Congratulations on this brilliant article. I googled & gooled to find out exactly how these plans work, but cudn,t come up with much. This article really says it all.

    My biggest problem with the insurance space is IRDA’s attitude. The moment they feel that SEBI or any other regulator is trying to enter their turf – they get mighty defensive. What is the point of having a regulator like that? Are you so power hungry that you don’t give a hoot about investors?

    Sometimes I genuinely sympathize with mutual funds when they raise objections on the special treatment meted out to insurance companies. You are right – ”equity” & “guarantee” don’t go hand in hand. At the end of the day, we investors are responsible for our own hard earned money.

    1. Srujani

      I agree , thanks for the comment . I am glad you found what you were looking for .


      1. Shaibal says:

        Hi Manish,

        Its really good one man. Actually I also searching and trying to gain some knowledge in ULIPs(mainly LIC Wealth Plus). Actually I would have never come to know the inner story of these policies. I was just planning to go for this LIC plan. Thanks for this really valuable info.
        Actually now m really confused in investing in any ULIPs. Actually all these Type-II ULIPs are somewat like that. I guess ULIP type-I is nt hving any such rubish faulty gurrenties but a bit better from these. Wat u say?

        1. Shaibal

          ULIP’s are generally confusing and not recommended ,just go with plain mutual funds and a term plan , thats all . Read more on the blog and you will find out 🙂


  110. Rajat says:

    Nice explaination given here. Making things transparent.

  111. Priyanka says:

    If you had to invest in the stock markets for seven years, it would definitely give you better returns than any guaranteed product. But I came across the Aegon Religare Wealth Protect plan that gives 80% of highest NAV guarantee even after three years. If you really think of it, as soon as you guarantee 100% of NAV, the risk taken is lower, hence returns would simply come down. But they seemed a little more honest in their product offering. 80% still seems achievable and reasonable!

    1. Priyanka

      hmm.. May be , but still its the same kind of product . I am still not excited 🙂


  112. Ramesh says:

    Hi Manish,
    Thanks for posting such a wonderful articles and making me literate in finance. I need some suggestion in finance planning. What is the best option to invest a 7 lac rupees to provide some decent results. I just need your opinion only.


    1. Rahul Sadawarte says:

      I would suggest to define your decent result first. What kind of expectation you have from this 7 lacs ? What is the time horizon your are looking for investment ? What is the purpose ? I could suggest you somr of the ways through which you can invest this amount but we need to understand the basic information about above queries.

  113. raja says:

    hi manish

    i feel that chit business(must be highly trusted one) gives more return s than mfs for shorter term like 1-3 years.chits always gave me atleast 18% cosistently(1.50interest) .i have been in chit group and consistently earned 18%and sometimes24%(re2.00 interst).of course chit doesnot has compounding effect..for long term i feel ppf is better ,what do u think so.

    1. @ Raja

      Will you give me all your savings I will pay you 3% monthly interest? I think answer will be big NO bcoz you don’t know me & there can be risk.

      Similarly Chit Funds are risky.

      Why someone will pay you 18% or 24% return, when banks are lending at 11-12%? Because his credit profile is risky & bank don’t want to take a chance. But you are taking risk & you are getting higher returns. As you said you are getting similar returns from last 3 years. You may get these returns for 3-5 Years & one day you can lose capital.

      Return is not the only thing that matters in investment RISK, tax, inflation & liquidity are also important.

      Credit Risk
      The higher the perceived credit risk, the higher the rate of interest that investors will demand for lending their capital. Credit risks are calculated based on the borrowers’ overall ability to repay.

      Extract Chit Fund Fraud:
      “A spurt in the number of chit fund fraud cases reported in the last few months is causing serious concern for the Greater Chennai police.
      Though police authorities said they registered only 10 complaints, a senior officer says the police was the last resort for depositors who lost their money in chit fund companies.
      Available data with the police reveals that 368 persons had lost money to chit fund companies. The victims lost cash totalling about Rs. 2.77 crore and the police were able to recover about Rs. 1 crore, the officials say.”

  114. Naresh Kumar says:

    Great job Manish.
    Best article I have ever read. I got perfect answer of my question.

    I was about to invest in this type of fund, although I am dealing in equities for last 6 years but still I loose my emotions for guaranteed returns.

    Thanks for this great effort.

    1. Naresh

      Thanks , Good to know that you are in equities from last 6 yrs, , its rare to see experienced people in equity 🙂 .


  115. @ All readers

    Money Life Article that looks inspired from our article

    Money Life: Mis-selling of LIC policies continues


    “Agents are painting a rosy picture and promising guaranteed returns to clueless investors”

    “Often, agents show a performance chart to the investor which is invented by themselves and not LIC. The performance chart shows impressive compounded annual growth rate (CAGR) returns of 20%-25% over a period of one year.”

    “Numerous misleading advertisements of LIC are being circulated in regional languages carrying a logo of LIC, in smaller towns. These ads promise astronomical returns.

    Apparently LIC is not responsible for publishing such misleading claims but it is the agent who takes investors for a ride. Usually the product literature is not on the letterhead of LIC.

    “There are umpteen instances where clients are promised exaggerated returns. One of them was promised a return of 35%. This example is just the tip of the iceberg,” adds the source.

    Earlier, LIC’s Money Plus—launched in 2007—was also rampantly mis-sold by distributing pamphlets promising unrealistic returns.

    The reason for this mis-selling is the high commissions doled out to agents.”

    I request all readers who are reading this please share below link with your friends, so that we can save many more financial lives. Still we have 20 days (including 15 freelook days of April)

    Every effort counts.
    Your friends need your advice on this mess.
    Please help them.

  116. ashish says:

    manish in intial para how you can say that after the launch of product and parking maximum corpus in equity will shoot-up the nav by 2-5 rs. that is illogical..if the market got crash immediately after the launch…how they can mange the fall in their nav…plz assume things in a right way…i do resect your other host of articles…but your initial assumptions are wrong…

    1. Ashish

      Some Misunderstanding , Please tell me exact location in the article , where I say something like that , i am not able to find .

      from what I understand you said , I meant that to guarantee Rs 10 (start NAV) one has to put most of the things in equity , but in the worst case when markets starts going down , imagine market went down by 20% on day one . then NAV will be close to 8 , now to guarantee Rs 10 , what can they do ?

      They have to put somewhere around Rs 5 in the debt and let Rs 3 be in equity . Now in 7-8 yrs, this equity part can perform how much ? I think a good assumption would be around 15% per annum which is close to 9-10 Rs . so total NAV would come out to be 8 . So total NAV would be 17-18 .. so in 7 yrs , the NAV can go upto 17-18 max .. thats not 2-5 .. thats 7-8 Rs .

      What is the reason you disagree to this ? What is your argument ?


      1. ashish says:

        argument is if market falls continously for 2 year and than it became stable…for an instance think of our market to be like nikkei which didnt show any great movement in last 10 years…than how company will manage that fall in nav…bcoz as per your assumption 100 percent is allocated in equity at initial years….this are some of my doubts which i will be disucussing with country head of icici pru life…and another misselling their branch and unit managers are doing in chattisgarh is by telling distributors that they will be invested in equity(85%)throughout the tenure…i m CFP and involved in imparting training to executives working in banks,mutual fund and insurance sector…

        1. Ashish

          I get your doubt , Talking of ICICI Pinnacle , looking at fine prints tells us that they have said “If the NAV of Pinnacle Fund falls below allowable limits, assets will be completely reallocated to debt” , 5th point , page 6/8 :

          So they start at NAV 10 , and the moment NAV falls below 10 (as per my understanding) , they will move everything to debt . so even if market keeps going down for 2 yrs they are not going to wait for 2 yrs .

          What do you say ?


        2. Only for Ashish

          I think these links will help you to understand CPPI.

  117. Pensioners kidnap financial advisor – angry about bad advice 🙁

    Yes, this is a true story – a group of pensioners between ages 60 and 79 kidnapped a 56 year old financial advisor, gagged and bound him and kept him in captivity in a remote town. They were furious about huge losses in their investments due to alleged bad advice from this advisor. This bizzare episode happened in Germany.

  118. ajay mahajan says:

    in equity fund your return can be 100% but in highest nav plan it is not as equity fund because they will invest your money in debt more for secure retun in pure equity fund more risk more gain in secure fund may be we didnt get any return because of insurance comapines initial expenses so i think we should invesi in mutual fund by sip way is good idea for better returns

  119. ajay mahajan says:

    i think invest through sip in mutual fund is best way insurance companies has differnt type of charges which reduces your return today sbi people come to me for highest nav plan i argue them for how can any company invest my fund only in equity

    1. Ajay

      they are actually not investing in only equity .. only equity is the best option .. Ajay Which company was it ? Did they give you unrealistic numbers ?


  120. harashal says:

    Nice article. Easy to understand. Its important to educate people regarding such adds of financial products.

    1. harshal



  121. SudfromCBE says:

    Brilliant article… thanks v much for this info

    1. SudfromCBE

      thanks . what are your views on this whole Highest NAV thing . put your views ?


  122. yogesh says:

    Hi Manish,Hemant & all,

    Suppose any orgranization(public or private) gets bankcrupt what happens to investor money?

    Will investor gets back there whole invested amount back or its lost & investor can’t do anything?


  123. anonymous says:

    One general question Off the topic …
    Banks are also asking for KYC these days for SB A/C holder, is this KYC is the same as “KYC” required for Mutual Fund and done by …
    Banks are asking only for Proof, which I believe will remain with them, they don’t bother about doing KYC for A/C holders…
    Any idea about it ? Anyone face in Bank ?

    1. Anonymous

      KYC is a concept , its Know your customer , its a kind of form or guideline which an institution has to follow to get information about their customer , I dont think its same as mutual funds or may be .. I am not sure .. any one ?


    2. Jitendra Solanki says:

      @ Anonymous

      The way KYC is done in banks is different form Mutual Funds.Banks KYC is to be done at time of A/c opening only.They just take your documents and the concerned form is attached with A/c opening form.Since you are signing A/c opening form you don’t need to sign KYC form seperately.Thats the reason banks only take your documents for the proof.
      Even later also you need to give only the proof.

  124. Smita says:

    There are many instances now that Highest NAV Gauranteed products are sold by distributing pamphalets that guarantee high figures sometimes even bearing Company logos.
    IRDA does nothing.
    And why buy a product that has such a high cost?
    SIMPLE-Your AGENT & his company wants to become rich by taking money from your pocket.

    1. Smita

      Yup .. you are correct 🙂 ..


  125. Neeraj says:

    Hi, In a hypothetical scenario, say market closes at upper circuit for one day before 3 pm so the NAV is highest but it can’t be encashed and something horrible happens next day and the market closes at 2 lower circuits consecutive for next 2 days so it can’e also be encashed, then the portfolio is down by about 40% instantaneously and it is down by about 40-50% from the highest NAV. So, how can they manage such scenarios as in markets, nothing is impossible.

    This is the question I asked from a senior and experienced ICICI representative selling such policy and he was dumb folded and started giving weird explanations that such things can’t happen, Govt or RBI won’t let it happen as markets are controlled by them blah,blah. But, surely if such a thing happens, they will be in big trouble. To me, all ULIP plans till date seem highly cost-intensive and contain lots of charges which will eat good pie of profits even if they are there.

    1. Neeraj

      good one .. The situation you have created is a good one and a tricky one . So there is say 7 year long period and lets say companies do the rebalancing every 15 days or 1 month to make sure they give guarantee .. now within 1-2 yrs , they will shift good amount in Debt anyways .. But suppose in the worst case what are the chances that this event which you mentioned occurs ? I think it will be so low , so low that Insurance companies might want to skip it !! and take the risk . Suppose markets move down by 40% , and still there are 6 yrs left . even then those companies will be able to provide the highest NAV ,as they will shift everything to Debt , but if you say if market moves down by 80% before they can take any action .. then thats something one can not cover .

      However , I feel in the start only when the policy starts , they might be making sure that they have some part in debt .

      What do others feel ?


  126. Is LIC the New Unit Trust ?

    “If you sit back and think for just a moment, you’ll realise that there is reasonable outward evidence that the Unit Trust’s history could repeat itself with LIC. It’s true that there’s a lot that is different about the regulatory framework and the nature of LIC’s liabilities. However, the core reasons that led to UTI’s collapse also exist for the LIC today: there is an unapologetic tendency to use the LIC as a bottomless pit of money of which there wasn’t enough accountability. The blatant use of this money to bailout the public sector IPOs is only the most recent and the most visible example-given the lack of public information, it’s not possible to make any assumptions that everything else must be OK with LIC’s investments-just as it wasn’t with the Unit Trust.” Dhirendra Kumar

    1. Hemant

      That will be the scariest day of India if LIC goes Bankrupt . Literally millions of people have invested in LIC and have faith in LIC . If things fail , it will be embarassing and a bloodbath day . Riots and chakka Jaam are the least I can expect .


    2. Jitendra Solanki says:

      @ Hemant

      Rightly Said by Dhirendra.

      But do you think government will not be aware about this.Or there is no mathematics involved when such decisions are taken.LIC going UTI way looks difficult in thoughts may be not on papers.
      LIC is also investing yearly 40000-1000000 crore in equity markets and has been a very big beneficiary of this.
      Do you think we should investors should be worried about this.Because LIC losing trust will not have impact on insurance indsutry but also on other sectors too.

      1. NKanani says:

        I am not authorized to comment on this – but, from figures LIC has been registering profit each year… Still is there a chance of LIC going UTI way?

  127. @ Manish

    You rightly said every day.

    Every trading day at 3.00 PM computer (CPPI Model) will through a number on asset allocation & fund manager will implement it. But any day if market opens with gap down COMPUTER can’t do anything.

    1. Hemant

      Thanks , i didnt knew this .. so the rebalancing can happen almost daily , in that case guaranteeing the highest return is almost possible .. we can rule out the cases when markets will open lower for many days and create a situation with guarantee cannot be done .


  128. Neeraj says:

    Hi, what if the NAV rises so much(say 100% in a year) that too in between the year before they withdraw money from equity market, then the market falls substantially and the value reduces, then they can’t guarantee that much return through debt based schemes even. Say on X date the NAV is 18 during some time in year and at the end of the year the nav is 9 when they will shift money to debt market. So, how will they ensure return at NAV of 18.

    1. Neeraj

      thats a good doubt , So companies are not waiting so long to restructure the asset allocation , we have just given gist of the strategy , it depends on the company how much time they are waiting for shifting the funds . Some companies might do this everyday or 1 month . depends on them .


  129. Swathi says:

    Great article is too small a comment to appreciate your work. I remember an agent from TATA AIG who called me and told ” madam we have launched a new plan in which the NAV doesn’t fall !! “. When I asked how is that possible , he said that the company has excellent fund managers and they will see to it that NAV doesn’t fall !!

    I asked if their fund managers have magic wands and asked to lend one. 🙂

    1. Swathi

      It was a humorous reply from agent .. They have made fund managers as a GOD . I know how much fund managers know .. I saw Canara Robeco Fund manager recently in Bangalore (I went for a show from CNBC) and that fund manager didnt even know one recent rule about mutual funds which even readers at this blog know about .

      So forget that fund managers know very much .. there are good FM no doubt , but taking it for granted is not right .


  130. Jitendra says:

    I too saw the ad and its very dissapointng that a regulator is pushing an investment product.
    Might be consequence of war with Mutual Funds-Lagta hai IRDA ne dil pe leya liya.
    Who is going to tell them-Yahan dil se nahin dimaag se kamm lena chahiye.:)
    Its pity on investors.I am sure many investors will get a misleading message from this ad.

    1. Dil aur Dimaag ki to chodiye janab , yahan Ethics and Logic se kaam lena hai .. But its tough to do I know 🙂


  131. @ All Readers

    Regulator acts like an industry association; IRDA promotes ULIPs! 🙁

    The insurance regulator has launched an unprecedented advertising campaign, hard-selling ULIPs. Not only is this a bizarre action for a regulator, but the ad is also misleading as it fails to provide any concrete evidence of ULIPs’ superior performance

    Can you imagine the Reserve Bank of India (RBI) hard-selling recurring deposit schemes of banks or the Securities and Exchange Board of India (SEBI) bombarding investors with ads asking them to buy infrastructure funds? That is exactly what the Insurance Regulatory and Development Authority (IRDA) is doing. Cont…

    1. Hemant

      Who are on IRDA board ? Who are these people ? I want to understand how they are selected and what is their qualifications , I am not saying this out of any rage , but i really want to understand , if we general people can understand ULIP’s are not right for retail investors , how come they are not ?


  132. Sanjay Pandey says:

    Hi Manish,

    Superb effort. I really like your sensible approach. If was in UP, I would have sought your FP services.
    Meanwhile, I wonder whether you have seen Moneylife magazine. They have been consistently advocating the interest of consumers and investors.
    As far back as 2006, they had written about how harmful ULIPs are

    Again, recently they have exposed how banks are misselling insurance

    I am told insurance companies have decided not to advertise in Moneylife because of their expose.

    1. Sanjay

      I am in Bangalore , I just belong to UP .

      Moneylife has taken a good initiative ..


  133. Aditya says:

    The last time (Nov 2009) I was on holiday to India, the ICICI fella tried to sell me Pinnacle with the term ‘Highest NAV’ repeating in every sentence. The sheer desparation and agressive selling by the local bank ppl put me off, and neither could they explain, atleast to my layman terms how ICICI are able to ‘guarantee’ such plan. Thankfully I did not opt for it, and for a long time been waiting to read some review about such plans. Manish, you nailed it.

    After reading the article i understand if the returns are so meagre, and the plan involves other fund mgmt charges, why cant we simply invest in a debt oriented mf (and i see you have already said that to one of the readers). good work manish, thanks.

    1. Aditya

      I am glad you didnt take it that time , and now you understand how it works and atleast can educate others who dont understand it , please pass this link to everyone you know 🙂 .


  134. ravii says:

    Thanks for the effort put in coming up with this article, you exposed well the point how ‘Highest NAV’ doesn’t mean ‘Highest Returns’ than what investors get through normal ULIP’s/Equity funds etc..

    Actually i was surfing to understand the logic behind these ‘Highest NAV’ funds, its good you saved my time 🙂

    Well, it has been lot discussed and exposed the reality… let me not repeat same!

    How ever i would like to mention few points.

    1. As the ‘Highest NAV’ applicable for investors only under condition that he doesnt redeem before maturity, its more like [‘Close Ended’] NFO which gurantte protection for capital. {Also the way fund manager protects Higher NAV for stipulated time frame is similar with concept of NFOS’} with the only difference here is, ‘Capital Protectio’ is Obligation as well 🙂 [But its dishearting to see insurance companies marketing theseproducts in ugly way with the support of bad regulation from IRDA]

    2. Instead of opting with this complicated products [in layman perspective] i would suggest to construct a genuine capital-guaranteed fund himself. Go to the nearest post office and replicate the fund manager’s strategy as explained by manish above in this article.The post office will pay you 7.5 per cent compounded quarterly so for a five year period so you can deposit 69 per cent of initial investment and have 31 per cent left over for equity investment. The equity part can be invested in any good large cap equity fund and that’s that, you have your very own home-made capital-protection fund.

    Not just that, this home-made capital protection fund is actually way better than the factory-made ones on three crucial parameters. One, the equity part is liquid. Two, the equity part is exempt from capital gains tax. And three, the capital-protection is genuine, underwritten by the Government of India. Not just that, you can also construct an SIP-style version of this fund by using the post office’s Recurring Deposit scheme instead of its Time Deposit scheme.

    3. I hope you dont talk about Insurance benifits from these funds, its just peanuts compared to what you are paying to them. Instead take 2 term policied combing total insurance cover you need, one from religare iterm & another from LIC which covers accident,critical illness cover as well.

    4. if one may can leverage his brain, he can take advantage by choosing index funds for the same 10 years period [my favorate ‘Benchmark CBX 500’] & stay invest in VIP mode. Surely u will smile at your cubicle mate who signed for ‘Highest NAV fund’ after 10 yars down the line 🙂 [provided 15% CAGR post tax returns, its comparably decent return over so called ‘High NAV’ funds which probably result around 10-12%]

    Like to see more of your insights 🙂

    1. Ravi

      2nd is a good point .. i agree. also i would say if the time frame is that high like 7-10 yrs , then pure debt does not make sense , better use equity .. atleast balanced.

      3. & 4th Makes sense totally ..

      You explained things so well .. does not need much insight 🙂


    2. Krishna says:

      I didnt get what you mean by opening the RD account in PO and investing in Equity. ?Do you mean Post office offer capital protection funds like you mentioned above………Could you explain in detail?.

    3. Tarun says:


      If you consider this product in totallity. Interest of around 10% + Insurance cover + Tax benefit I think its not bad. Especially for people who would want to put huge chunks of money say 2 lacks+ premiums per year. The main problem with this class of people is tax is 30% . If you put 60% of the portfolio into say FD you would end up paying 30% tax. While there is PF which is also not taxed but its kind of locked money.

      While there are allocation charges etc we should see the ROI on total investment. It is saving us our effort as a (one-solution product) from managing differnt FDs + MFs + Taxing for a good amount of time. Overall I would say its not a bad product given that fund managers make sure that atleast I get 10% return overall. Given the fact that Indian markets are on boom atleast for next 10 years I think these funds will return average more than 12% and for the last Pinnacle story (Now there is Pinnacle II avaiable in market) People have got more than 15%.

  135. Jitendra Solanki says:

    CM Vyas

    I do not question the returns generated by the company OR THEIR INVESTMENT PHILOSOPHY.My question is the way these schemes are marketed and AUM is generated.What benefit it is giving to an investor if he is in a misconception of returns?My personal feeling is these schemEs shoudl not be targeted to retail investors as they are.Either they should be made simple and underlying investment should made in a laymans language or they should be targeted only to class of investors who has understading of the same.
    I still do not get an answer of marketing these schemes in areas where even equity is not understandable?WHO WILL UNDERSTAND NAV…………AND if NAV is not understandable then how do you convince them to invest.Will a plain traditional scheme of LIC is not better than this.At least apart from Bonus,Sum Assured and Maturity you don’t have any highfi words for them.

    1. C M Vyas says:


      I think you must have missed the whole point of my reproducing my series of comments. I will enumerate the same in short:

      Guaranteed returns: Guaranteed for the scheme period only. No mention of equity or debt.
      Investment style: high debt, medium debt, high equity. I have mentioned higher proportion of debt rather than equity.
      Marketing gimmick: Hah! Its marketing terminology. Highest return? They will give highest return but by taking a safe investment style. Have they said “Only Equity”? Or lottery ticket? Never. So why are you assuming Equity type returns? Especially since you said CPPI. If CPPI assumes safe investment strategy, then your readers already know what to expect. So if the expectation is only limited returns based on your explanation and that of Manish’s and Hemant’s, then why should the readers think anything better? How does that become a scam? That’s because most investors assume super normal returns! And that is the precise point I had reproduced my posts. From a marketing angle it may be “building a dream”. But from a purely investment perspective, as I have outlined, it is certainly not a bad deal. The whole point of this blog (I seriously believe!) is to educate investors on what to expect and not scare them away!! Manish’s post started clearing the doubts about high expectations. Don’t have very high expectations and you will not be disappointed (or feel cheated). That was the essence of Manish’s initial post. I reproduce a portion of my first post below:

      Disclaimer:: I am an investment adviser for the salaried persons only. I do have an interest in creating a sense of trust among people who have to and want to invest. Insurance, Shares, FDs, MFs etc.

      1. CM Vyas

        There is some misunderstanding here .. The first point of “Is This product Worthy or not?” .

        So every product has some Risk , return , Cost , simplicity , liquidity etc . So product A is worth investment , “if and only if” there is no other product B in market which can beat A in all the factors combined .. now talking about this product , the return expectations are in range with MIP’s and debt oriented funds , Now if that is so .. why to pay So much of Alloocation and other charges in these policies ?

        Why not take simple Debt oriented funds directly from MF , that will save cost , this is more simpler , have no liquidity issue , Lets say its same on risk . But return for investors would be larger in pure debt products even though the returns for fund is 9-11% in these funds . let us know your thoughts on this ?

        Now issues 2 : No where company says “only Equity” so why people are calling it as “scam” and “If CPPI assumes safe investment strategy, then your readers already know what to expect.”

        So in that case , we have to assume there is no “misselling” in the country , because investors can always read the policy document and take informed decisions .. but thats not the case, India is one of the most ill-educated in financial literacy , and corporates , comapanies knows this , investors are not going to read papers or calculate things , if that was the case this country would not have been sitting with average insurance of less than 1 lac per insured person in a county where There is a 50+ yrs old Insurance company , the point is people assume things here , and people selling and designing products know allthis , so they have to act responsibly , but they do not .

        What do you think abiout points mentioned in “Why you should be pissed off at these Insurnce companies” section ? Share your views ? NIce discussion .. i am loving it


      2. Jitendra says:

        CM Vyas

        My question is not on Investment Model or Returns from Equity/Debt.
        My question is if you want to have a guarantee on product why through NAV….I repeat NAV.Why not make it simple like a traditional plan.I am raising this question because i m not getting my answer how to make an investor understand NAV when he cannot even understand equity/debt? and NAV is only in equity and debt.
        “Guaranteeing Highest NAV in 7 years.”How will you make this understand without talking on equity or debt.
        An dmind you if you do not mention equity or debt investment you cannot mention NAV.Then how do you explain the product? Isn’t it complex.Because you will have to give an expectation of returns to investor.
        My question is simple-Can you go with such kind of product in tier2 or tier3 cities (Thats what insurance companies are focussing on for their second phase ogf growth) and to rural areas.
        By getting premium from customers on such product which even agent don’t understand is “misselliing”.And i am 200 % sure even 5 % of pupulation who has bought thi sproduct will actually be knowing whats their in the product.Sinple reason-maximum contribution is from retail investors.
        And If its such a good product why not launch in April to March.

  136. jagofan says:


    1. Jagofan

      Nice screen name 🙂 .. what are your views on this whole thing .. I would love to hear more 🙂


  137. deepak moond says:

    hi !
    when the companies offering highest NAV return and approx. 8-10%
    return is expected on maturity then what’s wrong with these policies.

    1. Deepak

      The thing is that after you have read this post , now you understand that the returns will be 8-10% , but the investors out there do not know this , they feel the returns would be market linked 100% . Also you can get 8-10% with lesser cost , then why pay to ULIP’s


  138. Jitendra Solanki says:

    CM Vyas

    The product is too complicated to understand for layman (Here i am talking on Investment Philosophy-CPPI).I believe more than 80% of the agents will not be aware about this.
    Now if such a product is to be launched why not restricted to only a class which can understand this.Just by marketing “Highest NAV Guaranteed in 7 years” companies are trying to genrate business from all segments.

    I know these products are being sold very heavily in Rural areas also.Firstly,An agent in rural area -Will he be able to understand the product?What about a villager?

    Go to area like Saharanpur in U.P. ULIP is being sold to villagers like a bread from a bakery.Still customer know what is there in bread?And this i know because i happen to open an office for a stock broking company there.

    So basic question is why complicated product and if it is there how can you go an market to layman who doesn’t even understand what is equity or debt?Any knowledgable advisor can tell this product is only to gereate more business?

    What say Hemant & Manish?

    1. C M Vyas says:

      Jitendra Solanki

      Yes, CPPI provides for safety and reasonable growth. That is the way the schemes are hedged. In fact another version is what I follow for my own investments in ULIPs. I judge the market and within a reasonable range, I shift between high equity and high debt switches as required. I am permitted 4 free switches per year.

      In these schemes the fund managers do the switches. In fact in the recent Pru ICICI policies, there is the trigger option which automatically signals a predefined increase in the equity based portfolio and shifts a portion of the surplus to debt based exposure. This further hedges against risk. Yes, it is complicated for the layman to understand, but decent checks and balances have been incorporated in the schemes nowadays. I believe most of these schemes would give 15% average returns along with insurance cover.

      1. C M Vyas

        But most of the investors in india are not that savvy like us when it comes to taking fast decisions of swithcing and all .. i am talking about majority .

        Also what is your rational or reasoning that these funds will be able to give 15% plus return ? Why ?


    2. Jitendra

      I might have a very different take on this .. Villagers do not understand Equity and mutual funds well and will not invest in it. . the only things they can think of is FD and LIC policies .. so in one way if they buy this .. they will make a better return compared to what they could have made on FD or Endowment .. may be a little level of risk is still there but they can take this ..

      what are your views on this ?


      1. Jitendra says:


        I am just making a comparison on complexity of the product.Yes FD and LIC are a good investment becaus ethere investor in villagers understand whts there in th eproduct.How do you explain NAV to them?

        1. Jitendra

          I understand that explaining NAV to them would be tough task , but considering that these policies are sold to them can be a “ok” think , as the returns from these would atleast beat LIC or FD .. Do you agree ?

          I understand that customer will not understand it very well , but it will still be beneficial to those category .


  139. hi…….Keep it up!

  140. sanchit says:

    I really like the diagrammatic explanation, it was very simple and straight forward. Keep up the good work

    1. Sanchit

      Thanks 🙂 . Keep coming


  141. yogesh says:

    Hi Hemant,Manish & all,

    Till now how many corporate FD fraud had happened now ?

    Few time back TATA Motor has launched same kind of FD..Is it totally unsafe to
    put money or are there any precuation which can be taken while opting for corporate FD?
    Can we go for big corporate’s?


    1. Yogesh

      One can go for big corporates .. there is nothing wrong in it .. but only after you accept the risks involved .. i would actually enourage if you want .. but do you accept the risks and are ok with it when they happen ?


  142. C M Vyas says:

    I am reproducing my comment made earlier as I feel most other commentators are missing point. It is GOOD to comment but BETTER to read before doing so and Best if all points of view are considered. Remember, in addition to the returns you are insured for the entire period!!

    C M Vyas March 18, 2010 at 7:53 am

    Dear Manish,

    Good to read your article. But I have certain points to make.

    Indians tend to invest during the Jan- Mar period to save tax: That is because they have “declared” they will invest in tax saving schemes and now don’t know what to do. They do not want to pay tax now! The solution to this crisis is to have a planned approach to ALL investment options. Take a straw poll and you will find 90% people don’t bother to PLAN THEIR INVESTMENTS! My advice No 1: make investment a talking point as a matter of routine with someone you trust and who will advise you.

    All insurance schemes have their strong and weak points, good and bad points, advantages and disadvantages. You have to select the one best suited to your investment needs. You need to assess them. So follow my advice no 1. I do not mean advisers of specific Insurance Cos but people who do financial planning diligently. Not just CFPs. Again trust plays an important part here. The easiest way to identify such people are those who give a lot of time to you and who do not push you towards specific products. Secondly, they will explain the schemes fully. Advice no 2: Give importance to learning about investments. You will be able to understand who is a good adviser.

    Personally, I feel that the highest NAV is just a marketing terminology, but the underlying benefits should not be lost sight of. Let us not assume it is a scam! If you want insurance, with least medical hassles, which gives better than inflation and better than Fixed interest returns(12-15%pa), safety of capital, which does not require you to invest directly in the stock market and lose your shirt and gets you your Sec 80C benefits for three years in one shot, you should go in for this. The only other investment that can “guarantee” high returns and can be safe is to buy land!! Would you want to? Advice No 3: Don’t expect every product to meet you every need.

    Disclaimer:: I am an investment adviser for the salaried persons only. I do have an interest in creating a sense of trust among people who have to and want to invest. Insurance, Shares, FDs, MFs etc.


    38 Manish Chauhan March 18, 2010 at 5:29 pm

    C M Vyas

    Nice points .. you said “The only other investment that can “guarantee” high returns and can be safe is to buy land” .. I guess you meant this for long term , If you are talking about short term , then its not true .. for long term , Equity is also one option 🙂

    What do you say ?



    39 C M Vyas March 19, 2010 at 1:50 pm

    Yes Manish, I do mean land for a long term only. I compared Guarantee NAV product with land purchase only due to the long term. Otherwise, the point of difference is the heavy amount required for land investment. So it is not comparable.

    As far as Equity is concerned, it requires a lot of time and dedication to get good returns and I don’t think it is comparable with Insurance when we are recommending investment options for salaried people. If some trustworthy and knowledgeable person is there, then why not?

    My argument in favor of these schemes is that it gives a 30% return by way of tax savings for 3 years almost immediately on payment (tax saving season!), or Rs 15000 X 3 years =Rs 45000 in all for a Pru ICICI Pinnacle with Rs 50000 pa premium amount for 3 years. In addition even if it returns an average of 12-15 % for the next 7 years, it is OK.

    Seven years later, after the highest NAV is determined from the first 7 year performance, the Co can change the investment style from safety (for guaranteeing highest NAV) to a more aggressive investment style ( say full equity) depending upon the market conditions obtaining then. So at the end of 10 years, when the repayment is due, the Guarantee NAV acts as the minimum base return and the aggressive investment style of years 8 to 10 act as “higher return” period.

    Pru ICICI Pinnacle will most likely be investing in protector/ preserver versions of investment for first 7 years and which has returned 12-15% since inception as I indicated in my mail.

    Just think about that. I don’t see anything wrong in that.

    1. @ CM Vyas

      I am sorry but I am not able to comprehend your long message but my eyes stick on this line “in addition to the returns you are insured for the entire period!!”.

      Insurance is not free; you have to pay mortality charges for this. Or we can say Insurance is not over & above returns, your units are diluted for mortality charges, guarantee charges (for repair of computer 🙂 ) and other ABC & XYZ charges.

      Yesterday I calculated Term Insurance premium for a male (Age 30) for 30 years it comes to Rs 8000 yearly. I don’t know how much you are paying for so called free insurance.

      1. C M Vyas says:

        Hello Hemant,

        My message never said Insurance for free! I say despite the various fees and charges, Pru ICICI Protector/ Preserver Investment styles have been giving decent returns despite being heavy on debt. 30% upfront tax saving + even 10% pa (cumulative) return on fund invested for 7 years and a higher %age return during the last three years can give a substantial growth. Definitely not comparable to Equity/ Equity oriented MFs. After all this is a savings protected fund with insurance cover!! During years 8, 9 & 10, after the Highest NAV (during last 7 years) has been determined, what is to prevent Pru ICICI from investing in pure Equity? Remember they pay you only at the end of year 10! Their maximizer style of investment have been returning anything between 25-40 % till now. Why not then?

  143. kshitij says:

    Excellent article.. mazaa aa gaya pad ke.
    Now I am thinking of starting an insurance company with highest NAV guarantee. All I’ll do is collect the money from “investors” and invest it in these highest NAV guarantee schemes. Enjoy life for 7 yrs. After 7 yrs collect the money and distribute it to the investors(but not before charging my own fee 😉 ). Hing lage na fitkari rang bhi chocka aaye 😀

    What do you think why people ignore this simple principle while investing that high returns can’t be generated without high risk? Guarantees and good returns don’t go hand in hand good returns don’t come with guarantees.

    1. Kshitij

      Beta aakhir tune kar hi diya comment itne saalo baad .. i am glad

      The answer to your question is simple as per my understanding .. General Investors feel that these companies who hire fund managers , hire CFA’s , research analysts , big acturies .. they have some magic tool which will beat risk free returns , they feel like if they (general investors) can get just 8% risk free from bank and there has to be some thing magical or some hidden knowledge which will give them better returns .

      Its like they feel “If they will not come up with these idea’s then who will 🙂 ” . Its overconfidence in the abilities for these funds .. other thing is past perforance , last 4-5 yrs are a big culprit to make this impression that companies can give any kind of return .


      1. kshitij says:

        Thaks for your warm welcome but it’s my 2nd comment not the 1st 😛
        Ok I take your 2nd point past performance, but I think more than high returns it’s the fear of repetition of last yr when markets plunged and people lost so much money in stocks. So if someone is shielding me against it by giving guarantee about highest NAV, I being a common stupid man will fall for it.
        Now about the 1st point I won’t call someone stupid if they can’t differentiate b/w highest NAV and highest returns, but I’ll call them stupid if they fail to ask how and blindly trust any investment company/scheme.
        For example if I want to start a business and ask someone for 20,000 rupees, he’ll ask me 1000s of questions and still decline my request even if I assure him guaranteed high returns. But he’ll happily invest 100,000 rupees(he’ll even take loan for this as you mentioned in the article) in these schemes, without even asking a single question. But he should think before investing that how is it possible for the investment company to give me high returns with guarantee. The company primarily has two options
        1. Invest in equity. This can generate the high returns but the guarantee is not there at all, the investing company may lose all it’s money. And by investing in the equity the company is ultimately investing in businesses like mine(for which I asked the money but the investor declined to give any but now he’s indirectly investing his money in my business :D). I agree that the investment firm will do thorough research(like the investor did initially) about the businesses it wants to invest in but ultimately all the businesses(and hence equity) are risky and so you can’t guarantee any returns.
        2. Invest in debt. Now this can guarantee the returns but they won’t be high and the investor himself can invest in debt then what’s the need for these companies for him?
        So, people go for the brand name of these companies and fail to ask this simple question HOW? and later they feel cheated because what they had in mind was the highest returns of the equity(the highest NAV) without any fall(the guarantee) but what they get is little better returns than debt.
        And you’re doing a great job in making people understand how important is this question HOW. How should I achieve my financial goals, how should I invest, how does mutual funds work, how am I getting cheated by money back policies.
        In fact you should have a how forum 😀 where people will ask these how related question and you’ll answer them. Will that be possible, HOW? 😀

        1. Will add it soon 🙂


  144. Shrikant says:

    Hi Manish,
    Thanks for this eye opening article. I have purchase ICICI Pinnacle few days back and after going thru this article I will cancel it immediately.

    Here I would like to mention my experience – the ICIC Agent did not told me about the Admin charges that would be deducted before premium getting invested in the units. This was substantial charge 7.2 % P.a. The agent was smart enough in talking and convincing. And despite I asking him the direct hidden costs involved he did not mentioned anything about this cost. I accidentally came to know this fact when I read the broacher from ICICI site.

    Also he failed to explain ‘how’ part i.e. how ICICI will invest in the equity and still conform the guarantee. Which is very well explained in your article.

    I was careful this time as I have bunt my both hands (till sholders) in ICICI Lifetime super and Smart Kid. Still the agent created lucrative picture and convinced me. Yes I was fool.

    He suggested me to stop paying for my other ULIP Plans – Smart Kid and instead invest in Pinnacle. I do not know whether it is right or wrong. Any guidance on this will be very useful.

    From my experience – One thing is sure ‘investor’ should think rationally and should not fail in trap of lucrative looking factors. Sorry for using crude words but investor should apply brain than heart.
    Thanks Again.

    1. Shrikant

      You are correct .. You should immediately cancel this policy if you are in free look up period of 15 days . If not .. you can still close it if you have paid 1 quarterly premium , above that , things are damaged beyond repair .

      You should have read the brochure before buying the product. Regarding agent didnt tell you about “How” part .. agents dont even know themselves 🙂 …
      It was not a right decision to stop other ulips and invest in pinnacle, we dont marry some one just to leave them when we think some one else is “Attrative” .. you choose financial products after lot of investigation and for long term .. trust factor should be there , give time for your products to prove their worth .


      1. Shrikant says:

        Fortunately I have opted for Cover Continuance Option for Smart Kid and that was something only good in rest of the bad happened.
        Is there any way I can complain the agent especially agent being the ICICI Pru employee ?

        1. Shrikant

          I dont that that can be any basis for a complaint .


    2. anonymous says:

      Not doing your own homework is SIN… Yes Agent are doing SIN,
      But our ignorance allows them to run on our shoes

  145. Devil says:

    Insurance companies have launched a spate of funds promising investors a guarantee of the highest NAV achieved. Can these schemes deliver what they are promising?
    Over the last few months, one after another, a number of insurance companies have launched ULIPs which promise to repay the investor on the basis of the highest NAV that the fund has achieved. The pitch is that these funds’ NAV effectively does not drop. Once a level is achieved, then the investor is assured of getting at least as much, no matter what happens to the market. It’s certainly a very attractive idea. From the way insurance companies are stampeding into launching such products, I’m sure investors must be putting down their money in good numbers-in just a couple of months, six insurance companies have launched such products. Any investor who is told of this concept will immediately start salivating at the thought. Imagine how rich you could have been had you been invested over the last ten years and had been able to lock your investments at the magical value that the markets achieved on the day when the Sensex touched 20,873!
    Any investor thinking about this product would say, “What a wonderful idea!” Why don’t all investment schemes-whether mutual funds or ULIPs or even portfolio management schemes offer this kind of a protection on all their products anyway. The answer to this obvious question is simple. There is no free lunch. These products don’t actually offer what you think they are offering. That is, they do not offer equity returns that never fall. Instead, they offer an investment system with a very long lock-in (seven to ten years) in which protection is achieved by progressively putting your gains in a fixed income assets which will give returns far more slowly than a pure equity option. The lock-in and the non-equity assets make this a very different kind of investment than the equity-gains-without-losses dream that these funds’ advertising seems to imply.
    However, even that’s not the real reason that these funds are useless. The real reason is that if you are willing to lock-in for seven to ten years, then practically any equity mutual fund would deliver this dream of equity-gains-without-losses. Seven years is a very long time. Over such a period practically any equity portfolio into which any kind of thought has gone would capture substantial gains. This is not mere conjecture. Since at least 1997 the minimum total return that the Sensex has generated over its worst seven is 12 per cent, which was over the seven year period from 6th July 1997 to 5th July 2004. The truth is that in a growing economy like India’s it’s extremely hard to lose money over a long period like seven years. If you are willing to lock in your money for seven years, then for all practical purposes, you have a guarantee of making a profit.
    Of course, this is not a guarantee that is signed in a contract and legally enforceable, but it’s the kind of guarantee that any thoughtful investor would be willing to believe in. Mind you, this is also not a guarantee that you will get the highest NAV achieved but again, that’s the kind of thing that can’t be attained if you want the gains of pure equity anyway.
    The most instructive thing in this whole business of guaranteed highest NAV products is the contrast between the illusions spun by those peddling complex financial products and the reality of simple, straightforward investing. It just reinforces one’s belief that financial products are being designed whose goal is nothing more than to create a marketing hype which can manipulate the psychology of the ordinary saver.

    1. Devil

      Hi , thanks for this .. I remember that this was an article by Dhirendra Kumar ? NO ?


      1. Devil says:

        Very Much Manish…I myself bought ICICI Pinnacle and don’t think it was a bad decision as i am inclined to believe that this one should give a return of 10 to 11%. Hence this is a good product for people with low risk appetite or for people like me who already have most of savings in high risk Midcap funds and real estate. In a way this balances my portfolio (although to a very very small extent but it does anyways).

        But i agree that best strategy is Term Paln+ELSS.

        In Long Term assets must be diversified into:-

        Mutual Funds/ELSS (15% CAGR)
        Corporate FD’s/only in AAA (12% CAGR)
        Real Estate (8% CAGR)
        Gold (Manish can take this up)
        Cash in hand/Bank (minimum Rs 3 Lacs)

        Along with this Term insurance of atleast Rs 1Cr (if annual package is around 10 Lacs/pa) and Health Insurance 5 to 7 Lacs (this amount must be revisited every 5 years depending on inflation in medical services )


        1. @Devil & Manish

          I think something is seriously wrong with ICICI Pinnacle. I have read somewhere that they are guaranteeing Rs 20 NAV.

          Boucher is also misleading “The highest NAV recorded on a daily basis in the first 7 years of Pinnacle Fund (from 24-Oct-2009 to 24-Oct-2016), subject to a minimum of Rs.10, will be guaranteed on maturity. This is illustrated in the table below.”

          Below this it’s showing Rs 20 Guarantee. Am I missing something? ;(

            1. Hemant

              Its just an illustration .. Its just taking a case to show what an investors gets in different scenario .

              It does not say that Rs 20 is the max NAV . Or am I missing something , do you also agree .. have a look once again .


            2. @ Manish

              This is Information Risk. 🙂

            3. dr. kishan says:

              yes manish u r right. page6 point no 7 clarifies this, doesn’t it
              dr kishan

            4. Devil says:

              Hemant, they do not guatrantee anything above Rs 10. As per IRDA guidelines they can only show illustrations at 6% and 10% annual growth.


        2. anonymous says:

          Devil ..
          Corporate FD/AAA (12% CAGR) … from where you get this info…
          AAA rated FD will be max 8% only by NBFC … as of now …
          Don’t forget CRB Capital Scan … (Chain Ram Bhansali) … Probably in 2003-2004 (if my memory is with me)

          1. @ Anonymous

            You have shared a very valid point on corporate FD but why Anonymous. Let me share extracts of recent article by Money Life on corporate FD

            Investors lapping up risky corporate fixed deposits 🙁

            Confident that companies are in for a period of calm after the volatility of 2008-09, investors are lapping up risky corporate fixed deposits. Are they underplaying the default risks?

            “Corporate fixed deposits (FDs) offer higher interest rate compared to bank deposits. Within that, many FDs offer even higher for higher risk. According to financial advisors, many companies are in the market offering FDs with higher returns which investors are keen to buy—disregarding the higher risk inevitably attached to them. But corporate FDs are unsecured loans and many periodically default, leaving investors in the lurch. There are many instances were companies have defaulted with cheques, delay in receipts payment and non-payment of maturity amount.

            Currently TV18, Ansal Properties and Infrastructure, Ind Swift Ltd, Jai Prakash Associates Ltd and Surya Roshni Ltd are offering an interest rate of 12% for a three-year FD, while Avon Corporation Ltd, Sejal Glass, Talbros Automotive Components Ltd and Damodar Threads Ltd are offering even higher rates for the same tenure.

            Companies tend to provide a higher commission to brokers in order to push their FDs. Some of this brokerage is shared with investors. For instance, “the FDs of Television18 are getting a good response because it is paying a commission of 3%,” says a distributor.” Cont…


            1. anonymous says:

              Anonymous by choice, do want everyone to know my identity/email .. just being skeptic
              Regarding FD, you are very true … Unitech is still giving close to 12% … I personally invested close to 2 Lakh during Mar-Sept 09… But as I grow old .. I learn and get new information… So stopping in FD now…
              For Investor FD has to be option… then only NBFC as they are managed/certified by RBI.

            2. Hemant @ Anonymous

              People have this sense that Corporate FD’s are as secure as Bank FD’s .. they dont understand credit risk and uninsured 1 lac part from RBI .. they feel, “Humare saath to koi problem nahi hoga” .. its like people think “Accidents are not for me” , LOL !!


  146. kavita kamat says:

    Hi Manish,

    superb article, all the people will be really benefitted by this, as all this schemes have started to come 1 after other. As for the Lic agents, as they mostly go to their relatives residence to get their LIC Policy; they again go there for selling such schemes. And Bechara Relatives can say anything nor he can ask him questions. as he is their RELATIVE AND NT AGENT OF LIC.

    thks so much

    hoping for more such good articles from u.


    1. Kavita

      This is a big problem in India .. people give relations so much importance that they take bad decisions for themselves .. this is un acceptable from financial planning point .. one has to understand that money is one big reason for bad relations , and doing favors to relatives will end up with bad relations

      What do you think ? I feel ladies in the family think a lot about relations then men 😉


  147. Girish says:

    All the plans for highest NAV etc. are making use of the market conditions and making false promises to the investors


    1. Girish

      Yes .. thats exactly what they are doing 🙂 .. what are your views on IRDA role in all this ?


  148. satish says:

    Mr. Manish u r g8………..

    and i like yor article on NAV plans. So now manish plz help me about a ulip plan (bajaj allianz assured gain & kotak super advantage plan ) i want to take it some one say it`s not good for long term bt noe tell me what will i do so plz send me a mail about it and also tell me all minus points about these ulip plans



    1. Satish

      I didnt understand your requirement !! .. tell in points what you want ?


      1. satish says:

        hai Mr. Manish

        i want to invest money 25 to 30 year(in regular mode) in a good plan dat’s y i m intersted in ulip(1. kotak super advantage plan and 2. bajaj assured gain ) but whoes plan i select fron in this two.

        1. Satish

          Have a look at :


  149. Investor says:

    Manish what will happen if the NAV goes to say 20 just before the completion of the 7th year.

    1. Investor

      In that case your NAV is 20 only , you will get money as per 20 .. Why is this confusion there ?


  150. khalid says:

    Nicely explained the inner things and the tricks a company use to attract investors. Thanks for eye opening article. Keep doing that, its a great service to aam investor.

    1. Khalid

      thanks for your comment .. Can you give your views on what can be the reason that all the 6-7 companies come with the same kind of product at the same time ?


      1. NKanani says:

        Well, not much do I know of the reason – a wild guess: One company did the ‘Innovation’ of first launch… All other companies’ big shots were pressurized to ‘DESIGN’ and launch their own ‘Unique’ products which are more lucrative than the other ‘Innovation’s… Tax saving time you know, can’t allow single company to loot all the customers!

        1. NKanani

          Hmm.. makes sense 🙂


  151. Vipin says:

    Since when i saw these adds of HIghest NAV i knew that some thing was fishy…. but now i know how are they making the money safe (Debt) … so as usual trying to play with emotions of Mango People(aam aadmi).

    IRDA should have stricter norms for the companies and should not be allowed to play with the emotions of Mango people.

    Vipin Rathi

    1. Vipin

      Yes , what do you think are the top reasons investors fall in trap of these products ? greed ? fear of loosing great product ? Belief in companies (SBI or LIC) ?


  152. Ramanji says:

    thanks manish,
    very well explained about this all nonsense Highest NAV plans,
    so now on who ever seeing this article is be aware of this plan,and educated, so they won’t go into any trap.

    1. Ramanji

      Yea .. also help in spreading the word , please forward the link to all the friends .. I am sure you have ?

      What are your views on Alternatives of these funds ? Do you think these funds should be called as equity instruments or Debt funds ?


      1. Ramanji says:

        yes manish,
        i am forwarding links to my friends,

        after seeing the articles, and motivation 4 of my friends started SIP ,for both purpose of the tax saving and discipline investment , (some are not started savings yet, some are already started but doing LIC endowment policies,ULIPs,now they understand what the wrong happen)

        for such long 7 years of term , in any rated mutual fund will get money more than guaranteed returns, i think more or less it is as equal as debt funds.

        no i don’t have taken this fund,just by seeing ads that time i am wondering how they will provide this, but now i know what the logic behind this, with the help of u 🙂


        1. Ramanji

          Mutual funds will not provide the guarantee , but over long term of 7 yrs, mutual funds will outperform these funds with very very high probability .


  153. S S says:

    Why everyone is so obsessed with 7? Two of the advetisements I noticed gurantee high NAV for 7 yrs, whats different about it?

    1. SS

      You should look at this comment :

      Let me know what are you views about the reasoning given by me ?


      1. S S says:

        Somebody pointed out the charges levied by the companies, less time more charges for the customers to bear with (forgot whose comment it was), that seems logical.

  154. Jitendra Solanki says:


    It seems you are going to be the Hitler fo rinsurance industry now.

    Don’T worry you have supporters from MFs too.Here is one of them.He is just against ULIPs right form birth.

    Can Promises of Highest NAV Guarantee Deliver?
    Insurance companies have launched a spate of funds promising investors a guarantee of the highest NAV achieved. Can these schemes deliver what they are promising?Over the last few months, one after another, a number of insurance companies have launched ULIPs which promise to repay the investor on the basis of the highest NAV that the fund has achieved. The pitch is that these funds’ NAV effectively does not drop. Once a level is achieved, then the investor is assured of getting at least as much, no matter what happens to the market. It’s certainly a very attractive idea. From the way insurance companies are stampeding into launching such products, I’m sure investors must be putting down their money in good numbers-in just a couple of months, six insurance companies have launched such products. Any investor who is told of this concept will immediately start salivating at the thought. Imagine how rich you could have been had you been invested over the last ten years and had been able to lock your investments at the magical value that the markets achieved on the day when the Sensex touched 20,873!Any investor thinking about this product would say, “What a wonderful idea!” Why don’t all investment schemes-whether mutual funds or ULIPs or even portfolio management schemes offer this kind of a protection on all their products anyway. The answer to this obvious question is simple. There is no free lunch. These products don’t actually offer what you think they are offering. That is, they do not offer equity returns that never fall. Instead, they offer an investment system with a very long lock-in (seven to ten years) in which protection is achieved by progressively putting your gains in a fixed income assets which will give returns far more slowly than a pure equity option. The lock-in and the non-equity assets make this a very different kind of investment than the equity-gains-without-losses dream that these funds’ advertising seems to imply.However, even that’s not the real reason that these funds are useless. The real reason is that if you are willing to lock-in for seven to ten years, then practically any equity mutual fund would deliver this dream of equity-gains-without-losses. Seven years is a very long time. Over such a period practically any equity portfolio into which any kind of thought has gone would capture substantial gains. This is not mere conjecture. Since at least 1997 the minimum total return that the Sensex has generated over its worst seven is 12 per cent, which was over the seven year period from 6th July 1997 to 5th July 2004. The truth is that in a growing economy like India’s it’s extremely hard to lose money over a long period like seven years. If you are willing to lock in your money for seven years, then for all practical purposes, you have a guarantee of making a profit.Of course, this is not a guarantee that is signed in a contract and legally enforceable, but it’s the kind of guarantee that any thoughtful investor would be willing to believe in. Mind you, this is also not a guarantee that you will get the highest NAV achieved but again, that’s the kind of thing that can’t be attained if you want the gains of pure equity anyway.The most instructive thing in this whole business of guaranteed highest NAV products is the contrast between the illusions spun by those peddling complex financial products and the reality of simple, straightforward investing. It just reinforces one’s belief that financial products are being designed whose goal is nothing more than to create a marketing hype which can manipulate the psychology of the ordinary saver.– Dhirendra Kumar

    1. Jitendra

      Thanks for the writeup . Dhirendra Kumar is one good writer I would recommend everyone .

      WHat are your views on the products ,do you think low risk profile investors can invest in this funds ? or they have better alternatives like Debt oriented mutual funds and MIP’s ?


      1. Jitendra Solanki says:


        My view is- avoid such product.

        One they are too complicated to understand and thus too complicated to give an estimate of any kind of returns.
        Second if equity is an option to invest then i should have choice to do an allocation.A good ULIP plan with Fund options will be a far better choice then Highest NAV Product.Alternatively yes Debt MF or MIPs are better option.
        Atleast samajh me to aata hai.

        1. Jitendra

          you know what .. after this whole “Highest NAV” thing, suddenly I feel how simple , great and wonderful “normal ULIP” are ..


          1. Jitendra Gupta says:

            Thanks for thje information. I was about to invest 5 Lacs in this.

  155. yogesh says:

    Hi manish,

    I think in such plans companies may not take care of our money at all.becuase that is not there worry/objective.They will get there profit from premium allocation charges ..for them its more important rather than investor.
    As u mentioned thy can easily give highest nav which never means highest returns.


    1. Yogesh

      They also take Fund management charges which is used to run the management and other expenses .. premium allocation charges are mainly used for paying agents and for marketing costs 🙂

      Do you feel these products should be recommended to low risk investors , obviously the returns would be less , but it can suit them .. what are your views ?


      1. yogesh says:

        Hi Manish,

        I think there is no harm in suggesting such product to low risk investor if 9-10% returns are
        on over all money invested amount.My below reponse is completely based on assumption
        tht returns of 9-10% are on over all money.

        I think this product is atleast better than endorsement plans(6-7%) & fixed deposit (8%)as returns are more.
        In current condition if u can get 9-10% returms with low risk then its ok.
        We can have mix products in our protofolio some with 14%-15% & some with 9-10%.

        If some one have good amt with him to invest then he can go for these product as taking lot of MF are also not useful.

        Moreover I have obeserve that when market is going down & we shift money to debt then still NAV will increase.In crash market its best to have money in debt as in such cases debt keep increasing & not equity.

        Recently I Came to know abt one ULIP which has very low charges.I will share with all.


        1. Yogesh

          The point is you can get same returns with lesser cost . why pay to ULIP such high cost which you can get in Debt oriteted MF or MIP .


  156. Ashish Garg says:

    Well written article at the most relevant time.

    Kudos to Manish!

    1. Ashish

      Thanks .. I am glad it was well time for you .. but many investors have fallen in trap 🙁 . What do you think IRDA should do about all this ?


  157. Rajesh says:

    I have been receiving a number of calls during last 2-3 months from so-called insurance agents to discuss about these plans. My first question to them is: “Why did not the insurance companies introduce these products during the 2008-2009 when the entire financial market was facing deep trouble?”. They don’t have any answer:-)

    You would have noticed these products don’t have the regular funds as in the existing products. Instead they have introduced a new fund (e.g. Pinnacle fund for ICICI Pru, Wealth Plus fund for LIC, NAV protector fund for Aegon Religare and similar). I asked why they have introduced a new fund category for these products and can’t they give highest NAV guarantee for the existing funds (equity, balanced or debt categories). They are clueless. I told them to get answer to my questions from their supervisors or development managers and then call me. Interestingly, I never received the follow up call from any of them.

    They invest upto 85-90% of available amount in bond market and debt instruments and try to make false sense of guarantee of highest NAV of equity funds to the customers.

    They also try to fool people that such products are available for limited time period. If one misses this opportunity, it would a great loss to the customer:-)

    After a conversation, an agent told me it seems I am working in the insurance industry and I know in(s) and out(s) of their business:-)

    1. Rajesh

      Wow .. that was a compliment for all the readers 🙂 , you seem to be doing a great job 🙂

      Yes , the basic question which you asked is a critical one, why a new fund comes out of their company with every other event ? let us know when you get some call again from them 🙂

      What do you feel about agents attitude misselling towards the products, there are good agents who dont want to missell , but the situation dont allow them 🙂


      1. Rajesh says:


        I have not received any follow-up calls from any of the agent. I don’t think they will call me again. They have to face my not-so-comfortable set of questions again:)

        I see a number of agents trying to mis-sell insurance products in the name of investment for short term. I have also come across some good agents, but very few. You are right, the good agents don’t want to mis-sell, but they also don’t want to keep themselves far behind in the group of agents bringing high premiums for the insurance companies.

        Keep up the good work!!!


        1. Rajesh

          There has to be some way of seperating good agents from good agents .. wondering how this industry is making so much money on the fact that honest and responsible agents wont be profitable but a dishonest one will be


  158. PK says:

    Manish, I am naive to financial planning and so little confuse here. Please help me understand it correctly. If NAV goes from 10 to 17 they have to redeem all my accumulated units @17 (which souns good to me till now) but are you saying that

    1) I will accumulate less units in case market was high (nornally how SIP works)
    2) In case market is low, since some of my premium amount had already been invested in debt I will not get the benefits of buying more units in low market. So whatever percentage has bene allocated for Equity investment I will get proportionate units.

    So in over all effect due to lesser number of accumulated units the plan will yield moderate returns.

    Thank you so much for the valuable contribution you are making for us (Investors).

    1. PK

      So the main point here is that even though your NAV has gone from 10 to 17 , the things is thats not the best deal you are getting .. your NAV would be better if you go for pure mutual funds (equity) or regualr ULIP’s .

      I am not sure about how things will be taken care when people put money in these ULIP’s in between .

      Anyone has any ideas?


  159. Manish Jain says:


    Very well explained. I do have one question, say the NAV is as follows:

    Day 300 – 12.00
    Day 301 – 12.10
    Day 302 – 12.20
    Day 303 – 12.05

    How do they guarantee that you will get their highest NAV which was on day 302?

    1. Manish

      I am not sure on that , but looks like they are looking at a little wider window , the differnce between the NAV;s are so less that I feel they do not need to be that accurate. Also What will be the probability that the highest NAV falls in the top 5% tenure or say last 2-3 months . I am sure the top NAV will be somewhere in between , there is good chance that its well managable .

      Are you with me ?


      1. Manish Jain says:

        right, makes sense.

  160. srinivasu says:

    dear all !
    happy to be here once again.
    1.when customers lost their money in ulip polices last 2 years,there is NO option left for the sales/insurance co. to bring such guaranteed products.
    2.agents say now sir/madam ! your principle amount is safe.
    3.clients (!) believe lic gives guarantee bonus,so similar wording is needed for sales talk.
    4.policy holders never asked how much is the risk cover/charges,only ask how much in 3 years !
    5. this is a very busy tax saving ! month,less advt. for elss and too much for ulips by big perosanalities
    6.more sales incentives drive to find innocent rich, busy, financial illiterates.
    7.we have enough time/money for cellphones,vehicles, home loans, movies, but no home work for life insurance polices.
    8. most of the buyers take polices due to obligation only.
    9. very few can understand how mis selling goes in all banks.
    10.persons above 6o years taking pension polices read as GOLDEN YEARS ,fixed deposites as SINGLE PREMIUM policies.Even chief general manager of a big bank came all the way to close a non medical policy for a 70 year hni client.
    11. IRDA has limited man power to monitor or understand the complex ulips.

    1. srinivasu

      Thanks for your comments 🙂

      By 8th points , do you mean obligation in a sense , that people take policies because of pressure from relatives ?


  161. Sunil S Bhagat says:

    Well explained and highlighted!

    1. Sunil

      thanks for your comment , would love to hear your comments on what do you feel about investors who have already fallen in the trap , what should they do ?


  162. vishal punatar says:

    to mr. manish chauchan,

    a good article on highest NAV, can u also comment on the bond markets and investments in debt products at times when one is not interested in equity. How investments will do and their advantage in investing in debt products and bonds.

    1. Vishal

      Thanks for your comments, i would say you should subscribe to this blog and you will be reading about the topics of your interest in future, i will write some thing on bonds too .

      Do you have any specific bond product in mind ?


  163. rishabh parakh says:

    Dear All Readers,

    “Highest Comments-Guaranteed Prize”

    (Highest Comments From Your Side—Guaranteed Prize From Manish’s Side)

    No hidden cost or conditions apply, lets go for it:):):)

    what an idea sirji

    1. @ Dear All Readers

      BEWARE RISHABH is misselling 🙂 the gift idea; he is saying HIGHEST Comments & Manish has said “Best Comment”.

      Misselling is every where. 🙁

      I think Miselling will the maximum used word of 2010. 🙂

      “Comment on this Article and Subscribe to JagoInvestor and 1 Lucky Winner will Win

      * TShirt OR Coffee MUG (Customised with your Picture or PunchLine)
      * Prize will be give to “Best Comment” (Decided by Me)
      * Valid Till 25th March , 2010”

      1. rishabh parakh says:


        it was not the mis selling but just promoting the good work of Manish by using the words genereally used by insurance cos to MISS sell their products i have tried to use those words to promote some good work,

        Hemant dont be to bsessed with the words generally all things cannot be read between the lines:)

    2. Rishabh

      I have changed the mode of choosing a winner , Now the winner would be choosen by a user poll .. some good comments can be choosen first and then a user poll can be added to choose the best comment .


      1. rishabh parakh says:

        thanks for accepting my idea

  164. allthecrap says:

    Correct me if I am wrong. But how can you (and what can you) shift to debt when market crashes? In previous cases market was up so you shifted to debt but in reduced NAV there is no surplus to shift, right?

    And as it all hypothetical, lets try this, what if market goes down for say first 4 years. you cant exactly shift to debt(as no surplus) if you shift you reduce the exposure in equity and don’t gain when market goes up. And in next 3 years you have to pay the highest NAV. Please explain.

    And as always nice write-up. Keep it going.

    1. shithappens says:

      If market goes down for first 4 years, you don’t move to debt. Just ride it out hoping it will pick up later. The NAV is down shit creek anyway. Also, nobody has promised that highest NAV would be more than 10! 🙂

      1. Shithappens

        In these funds you dont control where you money goes, you dont have choices , fund manger moves the money from equity to debt .


    2. @allthecrap & other readers

      I was waiting for this question. 🙂

      Yessssssssssss – CPPI Model(Highest NAV Guarantee Plans ) work this way only when market rises they buy more equity & when market falls they sell equity (Against the of Investment Rule – basic rule says buy when prices are down & sell when prices are high)

      Wait for a single day 10-15% Market fall & that will be your highest NAV. (If it comes in earlier days it’s your bad luck you can’t blame fund manager or company)

      LIC Website for wealth plus plan
      “Guaranteed NAV: In this product there is a guarantee of the highest NAV recorded on a daily basis, in the first 7 years of the policy, subject to a minimum of Rs. 10. “ 🙁

      Getting NAV of Rs 10 means you may not even get your investment amount back.(As there are long list of expenses)

      Jai ho insurance cos ki.

      1. Hemant

        Yes , this is a very good point. Guaranteeing the minimum of Rs 10 has no benefit .. over 7-8 yrs, if a person invests 10 and gets 10 , what is the point . even though the growth is 0 mathematically ,the real growth is negative .. the purchasing power is almost halved . so what is the point ..


    3. Allthecrap

      This is a valid question .. the thing is if market falls just after the policy goes live , then your NAV will drop from 10 to how much ? 8 ? or 7 ? In the worst case they will put that 7 or 8 in bonds and now you will get minimum of Rs 10 on maturity 🙂 . The policy document clearly mentions that if NAV falls below 10 , they can put all the money in debt . So on any given date , how much a market can fall ? not more than 20% 🙂 .

      Did you understand ? Or I am answering some other question ?


      1. allthecrap says:

        Kind of getting the idea but how long a manager can resist a booty in debt? wont he go out and try to gain from equity market? I don’t think any fund manager will do that.

        are you saying that manager will sell if market is in red? and buy when market is in green? just to keep NAV arnd market price? hard to get that logic.
        your answer was more tacky then conditions of this ULIP plan. I am an engineer dude, simplify. 🙂

        1. @ allthecrap

          Oh my mistake I said Fund Manager.

          Let me complicate it and explain it in engineering language. Fund Manager will have no role in when to buy & when to sell in this Product (They can select only securities). CPPI(Highest NAV Guarantee Plans) model are complicated mathematical algorithms, decisions are made by computers & not humans. Let me tell you computers have no brain to time the market (even human don’t have). Who will you blame HP or Microsoft for your spoiled future.

          In Simple language “इससे दूर रहो कर्रेंट लग जायेगा”

        2. Allthecrap

          Dude .. I am an engineer too 🙂 .

          So fund manger has to stick with debt once he gets into that , because as per the Strategy (CPPI), they cant move from debt to equity , because they have to provide the guarantee .. just imagine after they more from debt to equity , and market crashes beyond recovery .. how will they guarantee returns .. oops .. oouchh .. I mean NAV (not returns)


      2. Devil says:

        Guys the answer is right in front of us – Birla Sunlife Platinum Plus II. The launch date was 8th Sept 2008 on which NAV was 10. It went down all the way to 7.7 on 10th March 2009 and went upto 15.6 on 6th Jan 2010. Right now the NAV is around 15.2. The only reason why they are giving this Guarantee is because they have your funds for 7+3 years which is a long period. Markets will not go down for 10 years in an emerging market like India. At the end i will say only if you believe in your contry’s potential then you should invest in equity( if you ask me – in next 40 years we will see so much growth that all of us will say when we are older that yessss we were part of that golden era in which we saw India becoming a developed country from a third world country). Spare me for my emotions.

        1. @ Devil

          Don’t take it otherwise but do you really no how CPPI Model Works? If yes please share.

          1. Devil says:

            no buddy…i’ll pass

            1. @Devil

              I don’t want to disturb your beautiful dream of 10-11% returns from ICICI Pinnacle.

              Let me share it with others:
              “These products were too complex for the lay investor. Sebi has expressed its discomfiture with schemes that are based on equity-linked debentures (ELD) and constant proportion portfolio insurance (CPPI). A P Kurian, Sebi consciously does not approve a fund if it is too complicated for Indian investors.” March 2009

              Earlier there was a similar product by one of the mutual funds on CPPI model. This was 3 year product & matured in 2006 or 2007(one of the best times in Indian Equity Markets).

              Guess what they returned after 3 years????

              Rs10 Only.

              So don’t be surprised if you just get Rs 10 Only at the end of period.

              All insurance companies are saying “Guaranteed NAV: In this product there is a guarantee of the highest NAV recorded on a daily basis, in the first 7 years of the policy, subject to a minimum of Rs. 10.”

            2. Devil says:


              How much annualised return do you think will a product like Pinnacle generate over 10 years?

            3. @ Devil & all readers

              I don’t want to predict returns but I will try to explain this product in my language. (Give me a day’s time as I am busy in one important project)

              But I would like to share why these product are 7 to 10 Years. (Many readers have raised this query)

              Simple “on July 23, the Insurance Regulatory and Development Authority (Irda) came out with a regulation requiring unit linked insurance plans (Ulips) to cap the difference between gross and net yields at 3% for policies of terms 10 years or less, and at 2.25% for terms over that.”


              So lower tenure means more charges on investors 🙁 & more commission for Agent 🙂 .

              So even if NAV rises by 10% in this period you will only get 7%. So now you know how smart these Insurance companies are. 🙂

              तो आपने क्या सोचा वोह आपके भले के लिए ये पोलिस लायें हैं.

            4. Devil

              I have clearly talking about the returns part in the article itself .. you can expect them to be in range to 9-12% . after a good crash , these funds should be as good as debt oriented funds and after one more crash a pure debt one ..

              Even in a pure rising markets , you wont get pure equity returns the money will get shifted from equity to debt because of the fear of markets crashing 🙂


            5. vikas says:

              but isnt return from such schemes is tax free, thus returns r better than fd/debt funds.

            6. Vikas

              There are many angles to it .. One thing is even after factoring in taxes , these funds wont be too beneficial , and Its not recommended that you put all your money in dect as alternate , better would be equity funds or atleast break into debt + equity , so equity part would be tax free ..

              Another thing is New tax code , if it comes next year then ULIP or mutual funds , all returns are taxable ..


            7. Hemant

              please share those mutual funds names and some more info if you can ?


  165. Marshal says:

    good cracking manish, very simply to understand, at least online community will learn from this, am just worried about others.

    1. Marshal

      Yes , the online community can read about this but even that is limited, as this blog has reach to just 40,000 unique visitors per month , rest of the readers on web do not know about this , now its responsibility of readers like you to spread the word 🙂

      regarding the offline community , what do you think we should do ? Any ideas ?

      Do you have any idea how things can be published in Hindi ?


      1. Marshal says:

        i have forwarded to all my friends, and they all thanked it. sorry am taking partial credit 🙂
        for hindi publication you need some close friends in media.. unfortunately i don’t have 🙁


        1. Marshal

          Thanks for that .. Let some time pass , and we will get some coverage in media soon ..


  166. NPR says:

    Good Article. Lucidly explained the concepts. I was wondering, how can this be possible.. especially on Market based products. Thanks for taking time and putting down your thoughts in this blog.

    1. NPR

      Thanks for your comment , I have given my views on Anoop’s comment on why the tenure is 7 yrs .

      What do you feel should be IRDA role in all this ? Do you feel they are doing their job in a right way ?


      1. NPR says:

        I think IRDA is playing a role similar to FICCI or CII or Assocham for its member companies (a.k.a. insurance companies). It is less of a regulator and more of a spokesman. Whereas SEBI is doing the opposite.

        And your comments on why 7-year , looks a well thought out one. Though I am too sure, this is the reason for the 7-year itch :(- You know, I am less certain of giving that benefit of doubt – that they had put their brains to work and came out with a well thought out plan — before designing these policies.

        1. NKanani says:

          Looking in the FAQ section of IRDA website, we will find only one section – on ULIP – dated 22-Oct-07. The FAQ if read carefully mentions that ULIPs can have hidden charges/costs which people should verify before taking them.

          I would suggest IRDA should add more such FAQ sections for Term Insurance / Endowment Policies / Pension Plans / etc.

        2. NPR

          IRDA is made for regulations .. just acting like a spokesperson is not enough .. however i think they are doing some work on regulation part too.. they tried to control the costs for ULIP’s in recent times .
          You are right that companies came up with those plans after putting in lot of thought and efforts . they are reaping the benefits too .. already LIC Wealth plus has collected 2000+ crores..


  167. Anoop says:

    Well I could not understand the reason behind 7 years highest NAV given by most of the plans. What is the reason behind that? Like LIC the plan is 10 years but the highest NAV is guaranteed only for 7 years. Why the full term of the plan…

    Does any one have answer to this question??


    1. NPR says:

      Anoop, the purpose of this article is — to give you details as how these plans work — and why you should stay away from it. LIC plan could be a slight variation (as Religare plan which Guarantees 80% NAV) — but the point is “stay away”. Ignore All kinds of ULIPs (including the Garanteed Plans). Go for “Term Plans” and with the rest of the money, invest in “Mutual Funds” (this very blog has good MF recommendations). That’s the lesson.

    2. Anoop

      This is an interesting question .. First I thought that they took this number “7” randomly to make investors think “Why 7” and discuss about it and in way market it 🙂

      But after some thought I think I know why 🙂 .. The stock markets in India has been running in a 8 yrs cycle from last some decades … so after this recent crash , another big crash is expect to be after 7-8 yrs now , so they want to make sure they are giving investors “highest NAV in 7 yrs” which will be the maximum point in coming 10-11 yrs assuming markets do crash after 7-8 yr and then stay below that point for some years .

      Read some things on this below


      8 Year cycle Trend: The Sensex is following an eight year cycle trend. The break of the channel lines in 1992 saw the index correcting over 53%. After eight years in 2000, the index once again fell into the grip of bearish cycle and corrected over 57%.

      In 2008, the faced the similar fate. Breaking the long term rising channel, the index once again echoed the similar trend and has shed more than 63.7% of its weights from the top


  168. sriram says:


    Thanks for the great explanation. I have a question. Won’t this be a decent mutual fund product (non-insurance)? I would never buy a ULIP but if a pure mutual fund product were to offer this strategy, I would consider it. Yes, the returns may pale in comparison to a pure equity product but there is an aspect of “securing the gains” (if any) here. What do you think? Am I mis-informed?


    1. Sriram

      As I explained in the article , you can match this product with debt oriented mutual funds with some part in equity , but then if you want to buy this one , why not go with simple Mutual funds which is more simpler and less costly . choose from

      Do you feel these funds are more supirior to Debt oriented mutual funds in other ways ?


    2. @sriram


      You have raised a very important point. “Am I mis-informed?”

      Very few people know that there is a term called “Information Risk” in investment Market. People think that there is just one risk in investment market & that is “Equities are risky”. 🙁

      Information risk is the risk that the information on a particular investment may not be accurate (this may be brought about by deliberate misstatements by those promoting the product of just a plain bias).

      And we know that who is creating this risk in case of Highest NAV Gurantee Plans.

      It’s an institutional Fraud.

      1. Hemant

        So I would say whole of India is under “Information Risk” .. from Insurance , Investments , Direct Investing , credti card everyting .. So now I can coin a term called

        “IGNORANCE RISK” which is also a big issue in India .. Mostly people mess up with things and still believe that they are in great situation because of “Ignorance Risk” 🙂 .. have a look at 40-50k per month earners and sitting on Insurance of 15-20 lacs max ..

        What do others think ?


        1. @ Manish

          Take copywrite of term “Ignorance Risk”.

          I think a complete book can be written on “Ignorance Risk in Investment World”.

          If not book why not an article. 🙂

          1. Hemant

            Yes , I will write on it 🙂


        2. srinivasu says:

          .dear all !
          customers ignorance is agents (sellers) profit.
          if sebi vs irda legal issue becomes more and more public debate
          in print and electronic media, then only innocent clients can understand what is really happening in ULIPS ?

  169. C M Vyas says:

    Dear Manish,

    Good to read your article. But I have certain points to make.

    Indians tend to invest during the Jan- Mar period to save tax: That is because they have “declared” they will invest in tax saving schemes and now don’t know what to do. They do not want to pay tax now! The solution to this crisis is to have a planned approach to ALL investment options. Take a straw poll and you will find 90% people don’t bother to PLAN THEIR INVESTMENTS! My advice No 1: make investment a talking point as a matter of routine with someone you trust and who will advise you.

    All insurance schemes have their strong and weak points, good and bad points, advantages and disadvantages. You have to select the one best suited to your investment needs. You need to assess them. So follow my advice no 1. I do not mean advisers of specific Insurance Cos but people who do financial planning diligently. Not just CFPs. Again trust plays an important part here. The easiest way to identify such people are those who give a lot of time to you and who do not push you towards specific products. Secondly, they will explain the schemes fully. Advice no 2: Give importance to learning about investments. You will be able to understand who is a good adviser.

    Personally, I feel that the highest NAV is just a marketing terminology, but the underlying benefits should not be lost sight of. Let us not assume it is a scam! If you want insurance, with least medical hassles, which gives better than inflation and better than Fixed interest returns(12-15%pa), safety of capital, which does not require you to invest directly in the stock market and lose your shirt and gets you your Sec 80C benefits for three years in one shot, you should go in for this. The only other investment that can “guarantee” high returns and can be safe is to buy land!! Would you want to? Advice No 3: Don’t expect every product to meet you every need.

    Disclaimer:: I am an investment adviser for the salaried persons only. I do have an interest in creating a sense of trust among people who have to and want to invest. Insurance, Shares, FDs, MFs etc.

    1. C M Vyas

      Nice points .. you said “The only other investment that can “guarantee” high returns and can be safe is to buy land” .. I guess you meant this for long term , If you are talking about short term , then its not true .. for long term , Equity is also one option 🙂

      What do you say ?


      1. C M Vyas says:

        Yes Manish, I do mean land for a long term only. I compared Guarantee NAV product with land purchase only due to the long term. Otherwise, the point of difference is the heavy amount required for land investment. So it is not comparable.

        As far as Equity is concerned, it requires a lot of time and dedication to get good returns and I don’t think it is comparable with Insurance when we are recommending investment options for salaried people. If some trustworthy and knowledgeable person is there, then why not?

        My argument in favor of these schemes is that it gives a 30% return by way of tax savings for 3 years almost immediately on payment (tax saving season!), or Rs 15000 X 3 years =Rs 45000 in all for a Pru ICICI Pinnacle with Rs 50000 pa premium amount for 3 years. In addition even if it returns an average of 12-15 % for the next 7 years, it is OK.

        Seven years later, after the highest NAV is determined from the first 7 year performance, the Co can change the investment style from safety (for guaranteeing highest NAV) to a more aggressive investment style ( say full equity) depending upon the market conditions obtaining then. So at the end of 10 years, when the repayment is due, the Guarantee NAV acts as the minimum base return and the aggressive investment style of years 8 to 10 act as “higher return” period.

        Pru ICICI Pinnacle will most likely be investing in protector/ preserver versions of investment for first 7 years and which has returned 12-15% since inception as I indicated in my mail.

        Just think about that. I don’t see anything wrong in that.

        1. C M Vyas

          You should not be putting the tax saving part of 30% , as its available on ELSS (tax mutual funds) also . So the tax point goes away . lets discuss the other points.

          Next thing is 12-15% return is not expected from these guaranteed funds over 7 yrs term, the returns should be much lesser like 9-10% , now even if you say these are ok returns , the point is COST !! .

          You can get the same 9-10% return from a debt oriented funds or MIP’s with much lesser cost , the mutual funds are free now days .. why pay for ULIP;s cost ?

          You said Pinnacle will be investing in protector/preserver version of investment , how ever all the guaranteed funds like these do not offer different type of funds , the choice of investment is solely with them .. check once to make sure .. let me know .


          1. sukumaran says:

            you should read subra’s view on rent vs. buy on his site
            and then decide on real estate. According to subra real estate in one location gives about 5-9% p.a. returns. This means it keeps pace with inflation, THAT is all and real returns are ZERO.

            1. sukumaran

              I have read Subra .. His views are correct from long term view in mind and I agree to it . However In short term and given current situation real estate can give good returns in medium to short term , however that would be with risk .


          2. Venkat says:

            Manish ,are Tax Mutual Funds offering 10 10 D benefit ?

            I Would like to do investment of 60,000 which will give 80 C and 10(10 D) benefits? Please suggest me how to plan my investment?

            I Can take little or moderate not interested in FD and PPF

            1. 10 10 D is mainly on insurance benefits .. in mutual funds there is nothing like that . however long term profits from mutual fund is not taxable !

      2. Arpan says:

        Any given point of time the mantra should me the TIME – IN and not Timing 🙂

  170. krish says:

    Nice detailed article Manish…
    In particular, I liked the point “any Insurance Company can come up with a new Plan , link it with market and start providing “Guaranteed products” . You have to understand that “equity markets” and “guarantees” are a very risky idea together , so please stay away”.

    Moving forward, I will be more careful if I see the word “Guaranteed Returns” from any Agent or in Ads.

    Thanks 2 you !!!

    1. Krish

      Ya .. Stock market and guarantee are two opposite words 🙂 . What are your views about Guaranteed products returns , how much returns do you think will excite retail customers ? 10% , 11% ?


  171. Karsudha says:

    Excellent post. The moment I saw the advertisements about the Highest NAV I know that they are going to use the Debt route but am not aware of the “innovation” behind the scenes. Thanks for the clear explanation.

    1. Karsudha

      Great that you got a feel that they are going to use Debt somewhere , the very basic fact that they are guaranteeing the NAV means less risk , less risk means compromise with returns , which in turn means use of Debt at some point 🙂


  172. ronak says:

    East or west .. .. Manish is the best…

    Excellent post…

    1. Ronak

      Thansk , what are your views on companies attitude towards Investors money growth , do you think companies think about actually bringing some good plans for Customers rather than their own benefit ?


      1. ronak says:

        All company want 2 b superior one form other .. Goal is 2 attract more costumer … agent miss guide the costumer .. They convince like they are well wisher for them .. At last
        Highest NAV Guaranteed Plans
        Are taken because agent miss guide them …
        and customer does not use there brain how it works . They image they do best ..


        1. thanks for your comments 🙂


  173. Nikhil says:

    Dear Manish

    Wow..Excellent post…Very Clear thought..
    Can you prepare this Calculation in excel sheet..


    1. Nikhil

      Is that a question or request ? Which calculation ? Why ?


  174. Rakesh says:

    Excellent post. Very well explained, an eye opener. A very nice marketing gimmick by these companies.


    1. Rakesh

      Thanks , what do you feel about IRDA role in all this ? To what extent should they be blamed ?


  175. sowmini says:


    That was an excellent blog…as u said whenever i visit SBI the first thing the people in the counters ask me is ..mam can you pls not invest in Smart ulip than PPF…this is such a waste of investment…ulip is for young people like you…dont stick on to Old stuff like ppf…..i now know why they stress so much on this Ulip….


    1. Sowmini

      I am glad you didnt fall into trap 🙂 . Ask them next time about a CPPI strategy and why the whole allocation can move to debt at certain point , why the return from these funds can be in range of 8-11% . I am sure they will process your PPF investments facter than speed of light 🙂

      What do you think ? Do you feel the reason why they ask you to invest in Smart ULIP is their igonorance or they want to trap people in the product ?


      1. sowmini says:

        I feel they are also under sales everyone they meet in the bank they start selling them this product and if at all they understand that you are an NRI or in the higher income bracket then thats it….they convince you that 50k investment per year is nothing for us !!!


        1. Sowmini

          Yes , they must be under sales pressure for sure . every where in the country the sales pressure is so high that misselling is rampant .

          Any ways .. good to have your views here , it adds value


  176. Ajay says:

    Excellent and detailed explanation Manish….
    I liked the Why you should be pissed off section….

    Is innovation in Finance space limited to End of the year ? Why dont these products come through out the year? Why ? The answer is simple… Thorughout the year they are busy coming up with such plans to grab all the money they can and close their year with fat profits 🙂

    This article helps for individuals to decide if they want to go for or not go for such “schemes” and the funniest part is that google ad sense displays the Reliance Highest NAV plan in the same page 🙂

    Keep up the good work Manish.

    1. @ Ajay

      Google Ad sense knows that something on Highest NAV is written here but who will tell them that Manish is tearing their clothes.

      Check this Reliance Ad. “All is Well”

      But it’s not at all well.

    2. Ajay

      Yeah .. google adsense just puts ads based on keywords , they cant figure out if the article is positive or negative for them 🙂 .. hehe ..

      What do you feel about regulators role in this whole thing ? Do you feel IRDA should be blamed for all this ?


      1. reena says:

        Hi Manish,

        I m working as insurance advisor & read your articles regularly. They help us a lot. But sometimes I feel you write lot of in favour of private insurance comapnies. The highest NAV plan were launched by these people first.Why only chir phad of Wealth plus & not ICICI or othres.
        At least LIC people work for all. A private company advisor always look for high premium & cream customer. Be open to all. The plan is good for people who don’t know MF or Equities & sold by all of us showing fact. If agent is not listening carefully in meeting it’s his mistake. We follow training & use our own logic.

        One more help needed Why LIC term plan premium is higher as compared to all private players?

        1. Reena

          Its not against LIC , even pvt companies come with it , but i took Wealth plus as example as it reaches maximum people .

          Term plan premium for LIC is higher because of thier underwriting process , their mortality tables is old , and hence the charges also


  177. Ganesh says:

    It’s like a rubber ball, isn’t it? You try to shoo away such “plans” and the insurance companies come back with vengeance introducing a new plan! So many people have fallen prey to these “guaranteed plans”, and insurance companies knew that the first line of resistance of hapless investors (are are they insurestors? ;-)) is market volatility. So danggg.. they come up with guaranteed NAVs and fancy graphs and all that crap!! Jago investor, jagoo..

    I wrote a short post on this some time back. It’s perhaps too simplified, but here is the link:

    1. Ganesh

      Ya , in a way you can say its rubber ball 🙂 . Good analogy

      As I said its more of like a planned scam , where they take advantage of things like bad markets , hence traslating to fear in public, also they know its tax time, they they make it complex enough . everything is related .

      What do you feel about these plans betterment , If these companies have to really come up with some good product how should they design the product , can you suggest some changes in these products which will improve their performance ans still keep the risk low ? Lets be creative!!


      1. Ganesh says:

        “Scam” would be an understatement. Really. They definitely leverage the fear in investors.. if the risks involved in equities is the fear, they come up with fancy debt oriented funds and guaranteed NAVs!! For me it is nothing but “wolf in sheep’s clothing”. If they are debt oriented, they should really call a spade a spade. Confusing the hell out of poor investors is unethical (if i can say so).

        I am so glad that at least people who follow Jago Inestor can counter these insurance companies (i am not against agents, who are making a living out of selling insurance policies) and their fancy “plans”.

  178. @ Manish

    Talk to some security agency, you need it badly. 🙁

    अभी lic वालों से पीछा छूटा भी नहीं था अब तुम ने बाकी सब से भी पंगा ले लिया.

    To Whosoever it may concern

    “ I don’t know Manish Chauhan” 🙂


    1. Ajay says:

      @Hemant… Good one… I just finished reading one of the comments that says our author has “may be hidden association with private insurance companies.” and could not stop laughing after reading your comment 🙂

    2. Hemant

      वो LIC वाला article तो आप ने ही लिखा है .. मेरे से कोई LIC का अगेंट पुछा तो मैं तो आपका और आशीष का पता दे दूंगा !!


  179. Avinash Josyula says:

    Very clear insight on the article. Especially the explanation involved with the market surges.

    1. Avinash

      Thanks for comments , Do you think they should have adopted some better strategy on “market going up” .. looks like they dont use market upmoves atall ?

      Do you think that there is a better way ?


  180. dr. kishan says:

    excellent article manish. very well and simply explained. now i understand that because of the guarantee the money in debt is fixed and not usable for the upswing in market and thus the return is lower than investing in plain diversified mutual funds. once again u prove that investing in mutual funds with adequate diversification and their continuous supervison is better than these plans. thanks for such a nice presentation.

    1. Dr Kishan

      Definately , Always understand that mutual funds are the simplest way to invest in Stock market for a layman investor , any thing which is build on that with extra advantage means it will be more costly and more complicated . There might be little work involved with mutual funds , but thats the best way to invest .

      What do you feel about Regulators ? Should they not interfere in between ? Do you think its some where a big institutional scam where no one says to the companies who come up with these products ? Looking for your views ?


      1. dr. kishan says:

        i think there should be transparency in such policies, which should be ensured by regulators. the basic scheme of the investment should be known to all the agents and should be made known to the consumer. i think rather than banning these products the reality should be made understandable to the general public and thean let the public decide.
        dr kishan

        1. Dr Kishan

          I agree with you totally .. But the thing is its tough to train the agents given their understanding levels . they can answer back smart questions smartly 🙂


  181. rajivahuja says:

    What a scam by the insurance cos.I am glad u came out with the truth behind the plan.

    1. Mohan says:

      Absolutely! I second that. It is just the investors who blindly go by the deceiving ads by these companies and get fooled. Very good article indeed Manish!

      1. Mohan

        I think the issue bigger than the ads is that investors believe and assume things, like when they say “Highest NAV” , the investors will think that NAV means normal NAV and it is calculated the same way as other ULIP’s . they have no idea that company can control the NAV fully .. they never look the policy document for 100% clarity .

        What do you think about Regulations ? Should’nt there be explicit rules in investors interest on this ? So if you meet IRDA chairman somewhere in next few days , what would you tell him ?


        1. raja says:

          hi manish,

          i feel that a longterm bull run has started.can u name some 4/5 star rated funds in equity diversified largecap and some midcaps which give the option to swap or transfer to any other defensive(debt based) in the same fund house (like hdfc top200offers) in case of some thing worse happens (like another recession in west and wars).

          can u please tip of such mfs.iam planning to take part very agressively say3-5 years.iam eagerly waiting for ur reply.


          1. Raja

            Have a look at


        2. Neel Patel says:

          Awesome post Manish..!!
          Now I get that returns from highest NAV guarantee plans are due to well combination of investing in Debt & Equity
          I like to share it with other people it & tweet about it…

          1. Neel

            Thanks A lot 🙂


        3. Ravi Shankar S says:


          Nice article… I did the same kind of research, when an HDFC guy contacted me with a similar plan with guarenteed 15Rs return for 10 Rs investment irrespective of the NAV reaches 15 or not… I showed him the power of compounding in a simple debt instrument and he had no answer to my points.. Also I thought him what a term insurance can do and investment in SIP can return…. Thanks to your insights…


          1. Ravi

            Nice to hear that 🙂 . please keep sharing your insights with other readers here 🙂


          2. Prashat says:

            Hi Manish,

            Today I also got same plan from HDFC guy… I had same thought,,,but I dont have much knowldge @ NAV he explaind me its %…so I dident belive in hi,….Thanks 🙂

          3. Jayavardhan says:

            Ravi, can you please suggest me some good Term insurance policies.. thanks in advance.. Jay!

      2. Dr Minesh Vadsmiya says:

        I disagree..
        Well..these companies are here to earn money and they are coming with such ideas every year.. They have to come with such plans to “loot” people..
        However investor should be well aware and rather not to be greedy..
        There is a proverb in gujarati …”Lobhiya hoy tya dhutara bhuke na mare”

        And thanks manish for such great articles..

        1. Minesh

          Thanks , well I would say a big part is played by Investors greediness 🙂 . If we control our greediness and go logically , a lot of damage can be controlled, but the problem is a big number of people in india are not on internet and cant read stuff like these .


        2. Girish says:

          All such companies are trying to make fool of the investors


          1. Girish

            Thanks for your comment


          2. Chandra says:

            You are 100% correct, all these compnies eating peoples money.
            Wise people always dont invent in this tipe of cheating
            better to invest in Lands & Gold

            1. Thanks for comment

    2. Rajiv

      Thanks for the comment , So at first you thought that those plans are really offering “Highest returns” ? Do you think IRDA should ban guaranteed products based on markets ?


    3. Amol M says:

      LIC collected Rs. 3000 crore under Wealth Plus….

      1. Amol

        People will obviously buy it .. 99.99% people dont have reach to this blog . Only a handful of readers come to know about the actual picture .


      2. Arpan says:

        Hi Manish,

        It seems government of India i.e. Ministry of Finance is okey with the changes in regulation for the insurance industry. Please take a note here that LIC of India, whom we trust the most has looted India more than the others. Still we have strong notions about LIC.

        1. Arpan

          I have the same view about LIC and its tough to change this mentality of people , they are so obsessed with “security” and “Assurity” , that they dont concentrate on “Value”


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