ULIP

With the new rules introduced in 2010 ULIP has become much more customer friendly. Its online avatar is a low cost version that allows investors to invest along with a detailed research.CEO of Edelweiss Tokyo Life Insurance, Deepak Mittal said, “Don’t buy a Ulip only because of its low charges. The performance of the fund should also be taken into consideration.” This saying is exactly true.

As per the Morningstar, Ulip is going good for few recent years and Ulip funds have grown up to 28 percent last year. Ulip facilitates the investors to switch from equity to debts and vice versa, based on the reading of the market. Online access has made the process simple without any tax implication on such switches.

Public Provident Fund

The annual investment limit in the Public Provident Fund got a hike after the deduction of Budget 2014 under section 80C. In regards to safety, taxability and costs, the PPF scores a high rank, but the returns and liquidity are not so attractive. The interest rate on small savings schemes like PPF is linked to the government bond yield and it may come down in the future years.

In these funds the money isn’t locked for the period of 15 year scheme and one can partially withdraw from the sixth year or take a loan. For loan the interest rate is 2 percent higher than the current PPF interest rate. In addition, for 2014-15, the rate will be 10.7 percent. Those who have invested in the PPF 10-12 years ago the lock in period will be only 3-5 years. After the scheme matures one can extend the PPF account for blocks of five years. An account of this can be opened in a post office or any designated bank branches. Some banks even give online access to the PPF account.

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