When Rajiv Johari (name changed) approached us, he was paying an annual premium of Rs 10.80 lakh with a sum-assured of Rs 55 lakh only with investments spanned across endowment, money-back, whole-life policies and Ulips. We used our proprietary DRAWN process to turn-around his portfolio.
Dream:
Johari, a successful businessman with very limited needs, specifically mentioned four goals that he was saving for. Two were medium-term goals (niece's marriage and a bigger house both in five years hence) and two long-term goals (his 11year old son's education, and retirement in 25 years from now).
Reality check:
Most of Johari's investments were in traditional insurance policies and some were in high-cost Ulip schemes. We did a study of his existing investments and presented him with the poor return he could get in future. However, after talking to his agent, who sold him some story , he was confused and disturbed. We suggested that he get the same verified putting in a person whom he trusts. He got his chartered accountant involved. Our advice was endorsed by his chartered accountant and then he understood the gravity of the situation.
Available resources:
Johari had invested a sizeable amount of premium over the period of time, hence we ensured that his exist ing resources get prudently used and his further investments went into more productive assets.
Way forward:
On doing an in depth analysis of his insurance, we segregated the portfolio into three action plans: We continued with some of the policies; got few policies paid-up and surrendered the high cost ULIPs. We used the surrendered amount and invested them in mutual funds. Now his annual contribution is getting invested through systematic investment plans in some mutual fund schemes.
We invested in balanced schemes to fund his medium term goals while his long term aspirations are being funded utilizing the equity schemes. The equity fund allocation is further diversified across market capitalization by picking good and consistent performing funds across large, mid-cap and small-cap space.
BOTTOMLINE
Annual premium reduced from Rs 10.80 lakh to Rs 49,000 only.
Increased sum assured from Rs 55 lakhs to Rs 2 crore (based on human life value).
Johari would now retire richer by approximately Rs 9 crore (expected amount increased to over Rs 15 crore to over Rs 6.25 crore).
Navigation:
Time in the market is more important than timing the market. Hence we encourage long-term investing backed by fundamentals and not trading. We track the broad long-term trend in equity and fixed income market and manage the asset allocation based on an algorithm model.
1.ICICI Prudential Tax Plan
2.Reliance Tax Saver (ELSS) Fund
3.HDFC TaxSaver
4.DSP BlackRock Tax Saver Fund
5.Religare Tax Plan
6.Franklin India TaxShield
7.Canara Robeco Equity Tax Saver
8.IDFC Tax Advantage (ELSS) Fund
9.Axis Tax Saver Fund
10.BNP Paribas Long Term Equity Fund
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