Research before you commit

Recently, i got a call from one of the branch managers of HDFC life, wanting to talk to me about my ULIP. He had all the information , how long i have invested, what my present value of my ulip is and wanted to "handle" my portfolio for me.

I was a little taken aback. I mean, HDFC already handles my portfolio so what was this guy talking about? He gave me a lot of gyan, on the high charges of ULIPs, the mortatily rates that i was paying for, spent 30 mins just trying to understand what he was wanting to say. I finally lost it, and asked him what the point was!

He wanted me to take out money from my present ULIP and invest in a pension fund whose rules were going to change as of 1st september. His logic,

1. The fund rules were going to change and i would not be able to take out money until retirment if i wanted to.

2. There were no mortalilty charges as compared to the ULIP.

3, He would manage my switches basis the way the market was going.- but only IF i invested with him!

Intitial reaction was wow! Great stuff. But then i remembered that, i really did not want to invest in a pension fund , had never found usefullness of such a system.

So i asked him to send me some material, which i could go through. On further research i understood that if i take out money before the end of the period in a pension fund , the entire returns would be taxable! Totally different from the ULIP story ( which would remain non taxable , even post the new Direct Tax Code).

The mortality charges were not that much, since it gave me a lot more security that HDFC would continue to invest my premium if something happened to me!

But i did understand one thing, i could actually make around 24 free switches in my ULIP as compared to what i thought was only 4 a year!- so something at least came out with me spending all that time with the branch manager on the phone.

But the moral of the story is, dont jump and commit to any financial plan, before you have done your research. Nothing changes over a week, especially when you are investing for the long term.Take your time, think rationally!

Happy Investing.