Decoding cost of investment products

When you are investing for long term, it is important to focus on the cost of a financial product because what may look like a small amount could add up to a lot over many years. The cost of a financial product implies charges that we bear when we hand over our investments to a professional fund manager. A product can carry a fund management charge, an administration charge, an expense charge, and a commission paid out to your agent or distributor.

There was a time when these charges were high especially in the first year of investment of a Unit-Linked Insurance Plan (ULIP). In recent years, the Insurance Regulatory and Development Authority of India (IRDAI) has slashed these charges. A ULIP can now charge only a 1.35% fund management charge. Also, some of the new age products do not have any premium allocation charge or policy administration charge anymore. In fact, some companies like Edelweiss Tokyo with their wealth plus plan have even decided to put some money into your investment account on your behalf. So when it comes to charges, the new-age ULIPs compare favorably to any other financial product.

So Nivesh Kar Befikar!