So, just what are mutual funds?

Mutual funds are large, diversified portfolios of securities selected by skilled securities analysts and managed by highly qualified investment professionals. The money used to purchase the securities is raised by selling shares of the mutual funds to investors. Shares of mutual funds are similar to shares of common stock in that they represent the ownership of a piece of the fund. However, the formation of mutual funds and the pricing of their shares is much different than that of a regular corporation. This an important part of what you'll learn about mutual funds and you'll learn even more in the following subsection. Understanding Mutual Fund Prices Mutual fund shares are bought and sold at their net asset value (NAV). As with any security, you can expect your funds' share prices to fluctuate after you purchase the shares. Unlike other types of securities, mutual fund share prices are determined solely by the market prices of their underlying assets. Your Response to Changes in NAV Due to their nature and the means by which mutual funds are priced, your perception of their prices and your response to fluctuations in their prices should be different than your perception of and response to the prices of individual stocks and bonds. This is attributable to the fact that the number of mutual fund shares varies with demand, thus ensuring that price is determined solely by NAV. This seemingly subtle difference is another important aspect that you'll learn about mutual funds. The Mutual Fund Prospectus The prospectus provides basic information about a fund, including the fund's objectives, what kinds of securities it can invest in and in what proportions, all the various fees charged to investors, past performance, and the fund's management. There's a lot to be learned about mutual funds in their prospectuses. No-Load Mutual Funds vs Load Mutual Funds For virtually every load mutual fund there is a no-load mutual fund that is equal in every way, or even better than, the corresponding load funds. If you are not receiving something of value in return for the load, then there is no good reason to pay the load.

A load is a sales commission and usually runs about 5% of the amount you pay for shares of a load mutual fund. However, only 95% of the money you pay is actually invested, so you automatically suffer a 5% loss right out of the starting gate. Mutual Funds vs Stocks & Bonds Owning a portfolio of stocks and bonds that is large enough to be appropriately diversified is beyond the means of most investors. But even the wealthiest investors can benefit from the diversification and cost efficiency of mutual funds. What you'll learn about mutual funds will make this perfectly clear. How are mutual funds bought and sold? Shares of mutual funds can be bought and sold directly through the companies that manage the funds, or through discount or full-service brokers. You should never be charged a transaction fee when you deal directly with a company that manages a fund. You may have to pay a small transaction fee if you trade through a discount broker. You will pay a full commission if you trade through a full-service broker. Automatic investments and withdrawals are an option available with many fund companies. However, these options require establishing an account with the fund company. Additional information can be found above under The Prospectus and Mutual Fund Prices. What are Exchange Traded Funds? ETF stands for Exchange Traded Fund, which is an investment company that owns a pool of securities that form the underlying value of the fund's shares and whose shares are traded like shares of common stock. The primary advantage of ETFs over regular mutual funds is that investors can exercise more control over the timing of capital gains and the incurrence of the associated tax liability. This advantage makes ETFs an appropriate alternative to regular mutual funds for some investors. What are closed-end funds? Closed-end funds are funds with a fixed number of shares that trade just like common stock. A closed-end fund's shares trade at whatever investors are willing to pay at any given time. So investors' perceptions of the aggregate value of a fund's assets determines price, rather than their net asset value (NAV).

Closed-end funds often trade at a discount or premium to their NAV, which can present opportunities to knowledgeable, active traders. No amateurs, please! Given the way they are structured and sold, closed-end funds bear more resemblance to conglomerate corporations or holding companies than mutual funds. Therefore, there will be no further discussion of them on this site. Are hedge funds mutual funds? No! Absolutely not! The only similarity is that hedge funds invest pools of money provided by passive investors. (Here, passive means that the investors do not participate in the investment decision-making process or management of the fund.) The original purpose of hedge funds was to provide a market-neutral investment vehicle for wealthy investors as a hedge against large market fluctuations, thus their name. However, due to the fact that they are subject to very little regulation and oversight, many no longer do any hedging and instead take advantage of the dirth of regulation to invest in whatever they want. Currently, true hedge funds are very few in number. Unlike hedge funds, mutual funds are subject to very stringent guidelines defined by securities laws and enforced by the SEC. These guidelines include, but are not limited to, investing within the usually narrow and conservative confines of the objectives and constraints stated in the funds' prospectuses, operating in a very transparent manner, and not investing in harebrained schemes that could reap high returns at great risk to investors' capital. Due to their inherent risks, in particular the lack of regulation, hedge funds are only available to high net worth individuals. Given that, and the fact that they bear little resemblance to mutual funds, there will be no further discussion of them on this site.

PREFACE MBA is a stepping-stone to the management carrier and to develop good manager it isn e c e s s a r y t h a t t h e t h e o r e t i c a l m u s t b e s u p p l e m e n t e d w i t h e x p o s u r e t o t h e r e a l environment.Theoretical knowledge just provides the base and its not sufficient to produce a goodmanager thats why practical knowledge is needed.Therefore the research product is an essential requirement for the student of MBA. Thisrese arch p r oj ect n ot on l y h el p s th e stu d en t to u ti l i ze hi s ski l l s p ro p erl y l ea r n fi el d real i ti es bu t al so p rovi d es a ch an ce to th e org an i za ti on to fi nd ou t tal en t am on g th e budding managers in the very beginning.In accordance with the requirement of MBA course I have summer training project onthe topic Comparitive Analysis of Mutual funds and Ulips. The main objective of theresearch project was to study the two instruments and make a detailed comparison of the two.For conducting the research project sample size of 50 customers of SBIMFand SBOP was selected. The information regarding the project research was collectedthrough the questionnaire formed by me which was filled by the customers there

INDUSTRY PROFILE The mutual fund industry is a lot like the film star of the finance business.Though it is perhaps the smallest segment of the industry, it is also the mostglamorous in that it is a young industry where there are changes in the rulesof the game everyday, and there are constant shifts and upheavals.The mutual fund is structured around a fairly simple concept, the mitigationof risk through the spreading of investments across multiple entities, which isachieved by the pooling of a number of small investments into a large bucket.Yet it has been the subject of perhaps the most elaborate and prolongedregulatory effort in the history of the country. A little history :The mutual fund industry started in India in a small way with the UTI Actcreating what was effectively a small savings division within the RBI. Over aperiod of 25 years this grew fairly successfully and gave investors a goodreturn, and therefore in 1989, as the next logical step, public sector banksand financial institutions were allowed to float mutual funds and their successemboldened the government to allow the private sector to foray into this area.The initial years of the industry also saw the emerging years of the Indianequity market, when a number of mistakes were made and hence the mutualfund schemes, which invested in lesser-known stocks and at very high levels,became loss leaders for retail investors. From those days to today the retailinvestor, for whom the mutual fund is actually intended, has not yet returnedto the industry in a big way. But to be fair, the industry too has focused on brining in the large investor, so that it can create a significant base corpus,which can make the retail investor feel more secure . The Indian MF industry has Rs 5.67 lakh crore of assets under management. As per data released by Association of Mutual Funds in India,the asset base of all mutual fund combined has risen by 7.32% in April, thefirst month of the current fiscal. As of now, there are 33 fund houses inthe country including 16 joint ventures and 3 whollyowned foreign assetmanagers.According to a recent McKinsey report, the total AUM of the Indian mutualfund industry could grow to $350-440 billion by 2012, expanding 33%annually. While the revenue and profit (PAT) pools of Indian AMCs are peggedat $542 million and $220 million respectively, it is at par with fund housesin developed economies. Operating profits for AMCs in India, as a percentageof average assets under management, were at 32 basis points in 2006-07,while the number was 12 bps in UK, 17 bps in Germany and 18 bps in the US,in the same time frame

Major players in Indian mutual fund industry and their AUM Mutual Fund NameNo. of Schemes * As onCorpus ABN AMRO M F3 3 7 J u l y 3 1 , 20087803AIG GlobalM F5 4 J u l y 3 1 , 20083513 SBI Mutual Fund 1 7 7 J u l y 3 1 , 200829151.00Birla Mutual Fund 3 4 3 J u l y 3 1 , 200837497.00BOB Mutual Fund 2 2 J u l y 3 1 , 200856.00Canara Robeco Mutual Fund5 4 J u l y 3 1 , 20084576.00DBS Chola Mutual Fund8 0 J u l y 3 1 , 20081853.00Deutsche Mutual Fund 1 8 7 J u l y 3 1 , 200810792.00DSP Merrill Lynch Mutual Fund2 1 1 F e b 2 9 , 2 0 0 8 1 9 4 8 3 . 0 0 Escorts Mutual Fund2 6 F e b 2 9 , 2 0 0 8 1 7 7 . 0 0 Fidelity Mutual Fund3 9 M a r 3 1 , 2 0 0 8 7 4 6 4 . 0 0 Franklin Templeton Investments2 3 0 J u l y 3 1 , 200824441.00HDFC Mutual Fund 3 7 1 J u l y 3 1 , 200850,752.00HSBC Mutual Fund 2 2 1 J u l y 3 1 , 200816,385.00ICICI Prudential Mutual Fund4 3 1 J u l y 3 1 , 200855,161.00ING Mutual Fund 2 6 2 J u l y 3 1 , 20087091.00JPMorgan Mutual Fund9 J u l y 3 1 , 20083054.00Kotak Mahindra Mutual Fund1 8 5 J u l y 3 1 , 200818,782.00LIC Mutual Fund 1 1 2 J u l y 3 1 , 200817,499.00

Lotus India Mutual Fund2 1 6 J u l 3 1 , 20087831.00Morgan Stanley Mutual Fund 3 J u l y 3 1 , 20082,814.00PRINCIPAL Mutual Fund1 5 1 J u l y

3 1 , Fund 6 J 3 1 Fund 3 4 3 1 , Fund 4 5 3 1 , fund2 5 3 1 , Fund2 1 3 1 , Fund 3 8 3 1 , Fund 1 4 3 1 , Fund3 1 3 1 ,

200811,359.00Quantum Mutual u l y , 200866.00Reliance Mutual 5 J u l y 200884,564.00Sahara Mutual J u l y 2008175.00Mirae asset mutual 5 J u l y 20082546.00Sundaram Mutual 9 J u l y 200811,898.00Tata Mutual 9 J u l y 200820,443.00Taurus Mutual J u l y 2008289.00UTI Mutual 5 J u l y 200846,120.00

s c h em es fl oat ed b y th es e fu n d s w as n ot g ood . S om e sch em es h ad off er ed guaranteed returns and their parent organizations had to bail out these AMCs byp ayi ng l arg e am ou n ts of m on ey as a di ffer en ce b etw e en th e g u aran te ed an d actual returns. The service levels were also very bad. Most of these AMCs havenot been able to retain staff, float new schemes etc. TECHNOLOGICAL ENVIRONMENT IMPACT OF TECHNOLOGY Mutual fund, during the last one decade brought out several i n n o v a t i o n s i n t h e i r p rod u cts an d i s off eri n g val u e ad d ed s er v i c es to th ei r i n vestors. S om e of th e val u e added services that are being offered are: Electronic fund transfer facility. Investment and re-purchase facility through internet. Added features like accident insurance cover, med claim etc. Holding the investment in electronic form, doing away with the traditional form of unit certificates. Cheque writing facilities. Systematic withdrawal and deposit facility. ONLINE MUTUAL FUND TRADING The innovation the industry saw was in the field of distribution to make it more easily accessible to an ever increasing number of investors across the country. For the first time in India the mutual fund start using the automated trading, clearing and settlement system of stock exch an g es for s al e an d rep u rch ase of op en - en d ed d e- m ateri al i zed mutual fund units. Systematic Investment Plan (SIP) and Systematic Withdrawal Plan (SWP) were options introduced which have come in very handy for the investor to maximize their returns from their investments. SIP ensures that there is a regular investment that the investor makes on specified dates making his purchases to spread out reducing the effect of the short term volatility of markets. SWP was designed to ensure that investors who wanted a reg ul ar in com e or c as h fl ow from th ei r i n vestm en ts w ere ab l e to d o so wi th a p redefined automated form. Today the SW facility has come in handy for the investors to reduce their taxes .

LEGAL AND POLITICAL ENVIRONMENT ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI) With the increase in mutual fund players in India, a need for mutual fund association inInd i a w as g en era ted to fu n cti on as a n on -p rofi t or g an i za ti on . A ssoci ati on of Mu tu al Funds in India (AMFI) was incorporated on 22 nd August 1995.AMFI is an apex body of all Asset Management Companies (AMC), which has beenregistered with SEBI. Till date all the AMCs are that have launched mutual fundschemes are its members. It functions under the supervision and guidelines of board of directors. AMFI has brought down the Indian Mutual Fund Industry to a professional andhealthy market with ethical lines enhancing and maintaining standards. It follows theprinciple of both protecting and promoting the interest of mutual funds as well as their unit holders . It has been a forum where mutual funds have been able to present their views, debateand participate in creating their own regulatory framework. The association was createdoriginally as a body that would lobby with the regulator to ensure that the fund viewpointwas heard. Today, it is usually the body that is consulted on matters long beforeregulations are framed, and it often initiates many regulatory changes that preventmalpractices that emerge from time to time.AMFI works through a number of committees, some of which are standing committeesto address areas where there is a need for constant vigil and improvements and other which are adhoc committees constituted to address specific issues. These committeesconsist of industry professionals from among the member mutual funds. There is now some thought that AMFI should become a self-regulatory organization since it hasworked so effectively as an industry body. OBJECTIVES: To define and maintain high professional and ethical standards in all areas of operation of mutual fund industryTo recommend and promote best business practices and code of conduct to befollowed by members and others engaged in the activities of mutual fund and assetmanagement including agencies connected or involved in the field of capital marketsand financial services.To interact with the Securities and Exchange Board of India (SEBI) and to representto SEBI on all matters concerning the mutual fund industry.To represent to the Government, Reserve Bank of India and other bodies on allmatters relating to the Mutual Fund Industry.To develop a cadre of well trained Agent distributors and to implement a programmeof training and certification for all intermediaries and other engaged in the industry.To undertake nation wide investor awareness programme so as to promote proper understanding of the concept and working of mutual funds.To

disseminate information on Mutual Fund Industry and to undertake studies andresearch directly and/or in association with other bodies.

MEMBERS OF AMFI: Bank Sponsored1.Joint Ventures - Predominantly Indian 1. Canara Robeco Asset Management Company Limited2 .S B I Fu nd s M an ag em e n t P ri vat e Li m i te d 2 .O t h er s 1.Baroda Pioneer Asset Management Company Limited2 .UTI A sse t M an ag e m en t C om p an y Ltd Institutions 1.LIC Mutual Fund Asset Management Company Limited Private Sector 1 . I n d i a n 1.Benchmark Asset Management Company Pvt. Ltd. 2. DBS Cholamandalam Asset Management Ltd. 3. Deutsche Asset Management (India) Pvt. Ltd.4 .Ed e lw ei ss A sset M an ag em en t Li mi ted 5 .Esc orts A sset M an ag em e n t Li m i ted 6.IDFC Asset Management Company Private Limited7.JM Financial Asset Management Private Limited 8. Kotak Mahindra Asset Management Company Limited(KMAMCL)9 .Qu a n tu m A s s et Man ag em en t C o. P ri vate Ltd . 10.Reliance Capital Asset Management Ltd.11.Sahara Asset Management Company Private Limited12.Tata Asset Management Limited13.Taurus Asset Management Company Limited 2.Foreign 1. AIG Global Asset Management Company (India) Pvt. Ltd.2 .FIL Fun d M an ag em en t P ri vate Lim i ted 3. Franklin Templeton Asset Management (India) Private Limited 4. Mirae Asset Global Investment Management (India) Pvt. Ltd. 3.Joint Ventures - Predominantly Indian 1.Birla Sun Life Asset Management Company Limited2 .DS P M erri l l Ly n ch Fu nd Man ag er s Lim i ted 3.H DF C A sset Man ag em en t C om p an y Li mi ted 4. ICICI Prudential Asset Mgmt.Company Limited

5. Sundaram BNP Paribas Asset Management Company Limited 4.Joint Ventures - Predominantly Foreign 1. ABN AMRO Asset Management (India) Pvt. Ltd. 2. Bharti AXA Investment Managers Private Limited 3. HSBC Asset Management (India) Private Ltd. 4. ING Investment Management (India) Pvt. Ltd.5 .JP M org a n A sset M an ag em en t In di a P vt . Ltd . 6.Lotus India Asset Management Co. Private Ltd. 7. Morgan Stanley Investment Management Pvt.Ltd. 8. Principal Pnb Asset Management Co. Pvt. Ltd.

STRUCTURE OF MUTUAL FUND There are many entities involved and the diagram below illustrates the structure of mutual funds: Structure of Mutual Funds SEBI The regulation of mutual funds operating in India falls under the preview of authorityof the Securities and Exchange Board of India (SEBI). Any person proposing to setup a mutual fund in India is required under the SEBI (Mutual Funds) Regulations, 1996to be registered with the SEBI.

Sponsor The sponsor should contribute at least 40% to the net worth of the AMC. However, if an y p erson h ol d s 40 % or m ore of th e n et w orth of an A M C sh al l b e d eem ed to b e a s p o n s o r a n d w i l l b e r e q u i r e d t o f u l f i l l t h e e l i g i b i l i t y c r i t e r i a i n t h e M u t u a l F u n d Regulations. The sponsor or any of its directors or the principal officer employed by themutual fund should not be guilty of fraud or guilty of any economic offence. Trustees The mutual fund is required to have an independent Board of Trustees, i.e. two thirdo f t h e t r u s t e e s s h o u l d b e i n d e p e n d e n t p e r s o n s w h o a r e n o t a s s o c i a t e d w i t h t h e sponsors in any manner. An AMC or any of its officers or employees are not eligible toact as a tru ste e of an y m utu al fun d . Th e tru stees are resp on si b l e for - in ter al i a ensuring that the AMC has all its systems in place, all key personnel, auditors, registrar etc. have been appointed prior to the launch of any scheme. Asset Management Company The sponsors or the trustees are required to appoint an AMC to manage the assetsof the mutual fund. Under the mutual fund regulations, the applicant must satisfy certaineligibility criteria in order to qualify to register with SEBI as an AMC.1.The sponsor must have at least 40% stake in the AMC.2.The chairman of the AMC is not a trustee of any mutual fund.3.The AMC should have and must at all times maintain a minimum net worth of Cr.100 million.4 . T h e d i r e c t o r o f t h e A M C s h o u l d b e a p e r s o n h a v i n g a d e q u a t e p r o f e s s i o n a l experience. 5. Th e b oard of d irect ors of su ch A MC h as at l east 50 % d i rectors w h o are n ot a s s o c i a t e o f o r a s s o c i a t e d i n a n y m a n n e r w i t h t h e s p o n s o r o r a n y o f i t s subsidiaries or the trustees. The Transfer Agents The transfer agent is contracted by the AMC and is responsible for maintaining ther e g i s t e r o f i n v e s t o r s / u n i t h o l d e r s a n d e v e r y day settlements of purchases and r ed em p ti on of un i ts. Th e rol e of a tran sfer ag en t is to col l ect d ata fr om di stri b u tors relating to daily purchases and redemption of units. Custodian Th e m utu al fu nd is req u i red, un d er th e Mu tu al Fu n d R eg ul ati on s, to ap p oi n t a c u s t o d i a n t o c a r r y o u t t h e c u s t o d i a l s e r v i c e s f o r t h e s c h e m e s o f t h e f u n d . O n l y i n s ti tu ti on s w i th sub stan ti a l or g an i zati on al stren g th , serv i ce cap ab i li ty i n term s of computerization and other infrastructure facilities are approved to act as custodians.The custodian must be totally delinked from the AMC and must be registered with SEBI . Unit Holders

They are the parties to whom the mutual fund is sold. They are ultimate beneficiaryof the income earned by the mutual funds .

FREQUENTLY USED TERMS Advisor Is employed by a mutual fund organization to give professional advice onthe funds investments and to supervise the management of its asset. Diversification The policy of spreading investments among a range of differentsecurities to reduce the risk. Net Asset Value (NAV) Net Asset Value is the market value of the assets of thescheme minus its liabilities. The per unit NAV is the net asset value of the schemedivided by the number of units outstanding on the Valuation Date. Sales Price - Is th e p ri ce you p ay wh en you in vest i n a sch e m e. A l so cal l ed Off e r Price. It may include a sales load. Repurchase Price Is th e p ri ce at w hi ch a cl ose- en d ed sch em e rep u rch ases i ts units and it may include a back-end load. This is also called Bid Price. Redemption Price - Is th e p ri ce at w h i ch op en - en d ed sch em es rep u rch ase th ei r units and close-ended schemes redeem their units on maturity. Such prices are NAVrelated. Sales Load Is a charge collected by a scheme when it sells the units. Also calledFront-end load. Schemes that do not charge a load are called No Load schemes.

ULIPS PLATFORMS OF LIFE INSURANCEUNIT LINKED INSURANCE PLANS Wor l d over , i n s uran ce com e in di ffer en t form s an d sh ap es . al t h ou g h th e g en eri c names may find similar ,the difference in product features makes one wonder about thebasis on which these products are designed .With insurance market opened up , Indiancustomer has suddenly found himself in a market place where he is bombarded with al ot of j ar g o n as w el l as marketi n g g im mi cks wi th a very li ttl e kn ow l ed g e

of wh at is h a p p e n i n g . T h i s m o d u l e i s a i m e d a t c l a r i f y i n g t h e s e u n d e r l y i n g c o n c e p t s a n d simplifying the different products available in the market.We h ave man y prod u cts li ke En d owm en t , Wh o l e li fe , M on ey b ack etc. A l l th ese products are based on following basic platforms or structures viz. Traditional Life Universal Life or Unit Linked Policies 3.1 TRADITIONAL LIFE AN OVERVIEW The basic and widely used form of design is known as Traditional Life Platform. It isbased on the concept of sharing . Each of the policy holder contributes his contribution(premium) into the common large fund is managed by the company on behalf of thepolicy holders. There are various unit linked insurance plans available in the market. However, the keyones are pension, children, group and capital guarantee plans. The pension plans come with two variations with and without life cover and aremeant for people who want to generate returns for their sunset years.The children plans, on the other hand, are aimed at taking care of their educational andother needs..Apart from unit-linked plans for individuals, group unit linked plans are also available inthe market. The Group linked plans are basically designed for employers who want tooffer certain benefits for their employees such as gratuity, superannuation and leaveencashment.The other important category of ULIPs is capital guarantee plans. The plan promisesthe policyholder that at least the premium paid will be returned at maturity. But theguaranteed amount is payable only when the policy's maturity value is below the totalpremium paid by the individual till maturity. However, the guarantee is not provided onthe actual premium paid but only on that portion of the premium that is net of expenses(mortality, sales and marketing, administration). How ULIPs work ULIPs work on the lines of mutual funds. The premium paid by the client (less anycharge) is used to buy units in various funds (aggressive, balanced or conservative)floated by the insurance companies. Units are bought according to the plan chosen bythe policyholder. On every additional premium, more units are allotted to his fund. Thepolicyholder can also switch among the funds as and when he desires. While somecompanies allow any number of free switches to the policyholder, some restrict thenumber to just three or four. If the number is exceeded, a certain charge is levied. Individuals can also make additional investments (besides premium) from time to timeto increase the savings component in their plan. This facility is termed "topup". Themoney parked in a ULIP plan is returned either on the insured's death or in the event of maturity of the policy. In case of the insured person's untimely death, the amount thatthe beneficiary is paid is the higher of the sum assured

(insurance cover) or the value of the units (investments). However, some schemes pay the sum assured plus theprevailing value of the investments. ULIP - KEY FEATURES Premiums paid can be single, regular or variable. The payment period too can beregular or variable. The risk cover can be increased or decreased. As in all insurance policies, the risk charge (mortality rate) varies with age. The maturity benefit is not typically a fixed amount and the maturity period can beadvanced or extended. Investments can be made in gilt funds, balanced funds, money market funds,growth funds or bonds. The policyholder can switch between schemes, for instance, balanced to debt or gilt to equity, etc. The maturity benefit is the net asset value of the units. The costs in ULIP are higher because there is a life insurance component in it aswell, in addition to the investment component. Insurance companies have the discretion to decide on their investment portfolios. Being transparent the policyholder gets the entire episode on the performance of his fund. ULIP products are exempted from tax and they provide life insurance. Provides capital appreciation. Investor gets an option to choose among debt, balanced and equity funds. USP of ULIPS Insurance cover plus savings ULIPs serve the purpose of providing life insurance combined with savings at market-linked returns. To that extent, ULIPS can be termed as a two-in-one plan in terms of giving an individual the twin benefits of life insurance plus savings. Multiple investment options ULIPS offer a lot more variety than traditional life insurance plans. So there are multipleoptions at the individuals disposal. ULIPS generally come in three broad variants: Aggressive ULIPS (which can typically invest 80%-100% in equities, balance indebt)

 Balanced ULIPS (can typically invest around 40%-60% in equities) Conservative ULIPS (can typically invest upto 20% in equities)Although this is how the ULIP options are generally designed, the exact debt/equityal l oca ti on s m ay vary across in su ran ce com p an i es. In d i vi d u al s can op t for a vari an t based on their risk profile. Flexibility The flexibility with which individuals can switch between the ULIP variants to capitaliseon investment opportunities across the equity and debt markets is what distinguishes itfrom other instruments. Some insurance companies allow a certain number of freesw i tch es. Sw i tch i ng al so h el p s i n di vi du al s on an oth er fron t. Th ey can sh i ft from an

Aggressive to a Balanced or a Conservative ULIP as they approach retirement. This is areflection of the change in their risk appetite as they grow older. COMPARISONBETWEEN ULIPSAND MUTUALFUNDS COMPARISON BETWEEN ULIPS AND MUTUAL FUNDS : Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutualfunds in terms of their structure and functioning. As is the case with mutual funds,investors in ULIPs are allotted units by the insurance company and a net asset value(NAV) is declared for the same on a daily basis.Similarly ULIP investors have the option of investing across various schemes similar tothe ones found in the mutual funds domain, i.e. diversified equity funds, balanced fundsand debt funds to name a few. Generally speaking, ULIPs can be termed as mutualfund schemes with an insurance component.However it should not be construed that barring the insurance element there is nothingdifferentiating mutual funds from ULIPs. Points of difference between the two: 1. Mode of investment/ investment amounts M u tu al fun d i n vesto rs h ave th e op t i on of ei th er m ak i ng lu mp sum i n v es t m en ts or investing using the systematic investment plan (SIP) route which entails commitmentsover longer time horizons. The minimum investment amounts are laid out by the fundhouse.ULIP in vest ors al so h av e th e ch oi ce of in vesti n g in a lu mp sum (si ng l e p remi um ) or using the conventional route, i.e. making premium payments on an annual, half-yearly,quarterly or monthly basis. In ULIPs, determining the premium paid is often the startingpoint for the investment activity.

This is in stark contrast to conventional insurance plans where the sum assured is thestarting point and premiums to be paid are determined thereafter.ULIP investors also have the flexibility to alter the premium amounts during the policy'st e n u r e . F o r e x a m p l e a n i n d i v i d u a l w i t h a c c e s s t o s u r p l u s f u n d s c a n e n h a n c e t h e contribution thereby ensuring that his surplus funds are gainfully invested; converselyan individual faced with a liquidity crunch has the option of paying a lower amount (thedifference being adjusted in the accumulated value of his ULIP). The freedom to modifypremium payments at one's convenience clearly gives ULIP investors an edge over their mutual fund counterparts. 2. Expenses In mutual fund investments, expenses charged for v a r i o u s a c t i v i t i e s l i k e f u n d management, sales and marketing, administration among others are subject to pre-determined upper limits as prescribed by the Securities and Exchange Board of India.For example equityoriented funds can charge their investors a maximum of 2.5% per annum on a recurring basis for all their expenses; any expense above the prescribedlimit is borne by the fund house and not the investors.Similarly funds also charge their investors entry and exit loads (in most cases, either isapplicable). Entry loads are charged at the timing of making an investment while the exitload is charged at the time of sale.Insurance companies have a free hand in levying expenses on their ULIP products withno upper limits being prescribed by the regulator, i.e. the Insurance Regulatory andDevelopment Authority. This explains the complex and at times 'unwieldy' expensestructures on ULIP offerings.