I'm unable to understand how the main content of my post got deleted. Dear Moderator, if u r reading these messages & keeping a close eye, please do needful to fix this problem, as it is also experienced by others too recently.

Coming to the post's content -
Question - From where the AMC (DWS in this case) is paying the prem. for Insurance cover?

Answer - DWS is paying the ins. prem. from the FMC (Fund Management Charges) recovered from the funds daily.

Now comes the question, how can DWS gives us free Ins.
Many of us already aware about Group Insurance Plans. DWS has taken the same from Metlife for Tax saver fund.

To explain the same, Let us assume there r 10000 investors in this Tax saving fund & the average age of investors of fund is 35 years.

If we check the prem. for a aged 35 individual policy, it is higher than the prem. charged for a group of 10000 people where average age of Gp. is 35. Why, because at the time of giving the policy, the ins. co. knows that it is next to impossible that all these 10000 people 'll die & there 'll be claim, Yes there 'll be claim from some higher age as well as lower age persons, in this case, the ins. co. is charging the prem. for average age, hence in some sense, DWS is paying higher prem. for Y'ger people to cross subsidies older people. As the risk of Ins. co. is less, the ins. co. is passing this benefit to DWS in the form of lower prem. than an individual policy.

The free ins. is provided only on the basic investment amount, hence as the fund perform better & there is increase in the over fund value of individual investor, the higher FMC 'll be recovered against the increased fund value.

The free insurance is capped upto max. 5L & as this free ins. is 5 times of investment, every individual can avail ins. upto 1L amount only. for investment above this amount there 'l be no Ins. but at the same time DWS is recovering FMC from the amount in excess of 1L also. Again this some what subsidizing the prem. of investors with less than 1L investment by the investors with more than 1L investment.

As the fund in question is an ELSS, due to lock in period, DWS is sure to get FMC at least for 3 years & during these 3 years, the investor can't do anything, no matter the fund performs or not. As there is surety of FMC as well as age of investors, DWS may get even lower prem. quote from Ins. co. (Metlife in this case) as per the age profile of investors of the fund.

I hope from all the above info, every body can understand how DWS is able to give free ins.

Thanks

Ashal
...

Dear Bhavani27, Thanks for sharing the info. I just want to say in reply of ur post's final words
Quote," The investor who finds the process of evaluating them difficult, must render the services of a competent financial planner and take a well-informed decision accordingly."

unquote - The problem is, where r these competent financial planners, barring some respected columnists here @ Moneycontrol (Gaurav Mashruvala, Amar Pandit, Novil Navalakhi, .......) & some others who r available in metro cities only & that too for some premier clients.

for a common investor, like me till date i'm yet to find a CFP (certified financial planner, certified by FPSB) in my city - AHMEDABAD. I checked some 2-3 months back & there was not a single CFP in AHMEDABAD.
if anybody here can help me to locate one in A'bad, i'll be greatful to him.

If this is the condition in a city like A'bad, Imagine the condition of the small investor all over INDIA.

Thanks

Ashal...

Dear friend, let me enter in this debate just to clear from where, the prem. of ins. co. is coming?

Here i\\`m taking the example of DWS Tax saver only, as it is the most simple product under MF+Insurance combo.

First the question, \\\\...

Dear Bhavani27, Thanks for ur kind words of encouragement. I hope in future also, u 'll be there to guide me & point my mistakes if any I make.

Thanks

Ashal...

Tax angle
Since most of these structures fall under the category of debt products, they are taxed as such. Most of these structures are long term. Under the present Income Tax rules, for a residential Indian, the gains are taxed at 10 per cent without indexation benefit, and 20 per cent with indexation benefit. Add to it the surcharge which is extra.
It would be prudent to explicitly check up with the product manufacturer in advance whether the indexation benefit would be available on the structure or not (as it is not available in case of some structures).
The risks
Although the sales pitch of these structures may imply that they offer a high return with no risks, that is not true. The major risk of purchasing such a complex product would be to not understand it completely, to not weigh its pros and cons, and cannot evaluate whether it fits into your portfolio. Since these are close-ended products, they carry a very high exit cost. Some products may not offer the exit option at all. So, purchase it only if you intend to stay with it for the entire tenure.
In the present scenario where the structures are highly complex, only the knowledgeable investors, who can decipher them and understand their implication on their portfolios should invest in these products. They may form a small part of your overall portfolio, but not a very significant part. Before moving to such an asset class, you may also explore other avenues that are more transparent and less complex.
...

What to watch out for
What needs to be examined here is whether capital is indeed protected under all circumstances.
Triggering of contingent condition. Investors need to be aware about the time value of money and the loss of purchasing power they would face, in case the contingent condition, signifying the downside risk of the underlying asset, is triggered. A contingent condition is a scenario specifying the downside level of the benchmark used, which when observed, would result in the investor being paid only the initial capital without any guaranteed coupon.
Observation dates. The observation dates would also give an indication to the investors about the risk-return scenario of the scheme. For example, some structures may specify that the contingent condition would be observed throughout the tenure of the structure. In others, the contingent condition would be observed towards the final valuation date. Going purely by probability, an investor would be better off in the latter type of product.
Initial cost. Initial cost is another important factor to be looked at since it determines overall yield: higher the initial cost, lower the overall yield. In case of some products, initial cost is as high as 4-6 per cent.
Coupon rate. The investor also needs to look at the coupon closely. In the case of a product that is for a period of over 365 days, one needs to calculate the annual return. For instance, in a 24-month structure a coupon of 17 per cent signifies an annualised yield of just 8.17 per cent, which is not sufficient to even neutralise inflation, presently at over 12 per cent.
Participation ratio. This signifies the participation level of an investor in case of appreciation in the underlying asset. Any knockout barrier, which restricts the maximum upside, also needs to be evaluated closely by the investor.
The ratings and the exit clause also need to be carefully understood.
Cost of unwinding derivative. In capital guaranteed structures, at most 15-20 per cent of assets are deployed in equity/derivative instruments while the balance is invested in Fixed Income products that are held till maturity. This provides capital protection in case the yield on the equity/derivative investment turns negative. In circumstances where the hedge has to be unwound midway for the derivative component, a cost is incurred.
...

Dear Radhika, plz. go thru the following post regrading Structured Products (Eq. linked debentures FMPs) sourced from Express money. Due to length of the article, it is posted in parts. Part - 1
"Not entirely risk free
Manufacturers’ contention that structured products offer high returns without any risk doesn’t withstand the test of a close scrutiny
With the bull run in stocks coming to an end in January 2008 and the markets becoming range bound, investors are in a dilemma regarding where to invest their money. Rising inflation and negative real rate of return have compounded their difficulties. Many investors, having burnt their fingers in equities, are now turning to debt products, especially Fixed Maturity Plans (FMPs). Product manufacturers, having understood investors’ dilemma, have been launching Structured Products in recent times. The concept is not new. But with investors being lured with the promise of capital guarantee alongside upside participation in the markets, there is a strong case for investors to understand the complex structure of these products, instead of being misled by manufacturers’ sales pitch.
After Sebi relaxed the norms regarding structured products in 2005, fund houses have launched a number of capital guarantee schemes. Currently, many broking houses and AMCs are launching these products under the Portfolio Manager’s licence. Birla Sun Life AMC, ICICI Prudential AMC, DSP Merrill Lynch, Reliance Securities are some of the major players whose products are available currently.
What is a structured product?
Suppose you have a positive view on the markets over the long run but are scared of taking a direct exposure and don’t want to risk your initial capital. What do you do? Enter structured products. These are complex financial instruments that are generally not available over the counter. They are mostly derivative based: the returns on these products depend on an underlying asset, such as stocks, indices, interest rates, etc.
How does it work
Suppose you have Rs 100 available to invest for two years in the markets. How do you invest this sum while ensuring capital guarantee even in a volatile market? The answer is: you don’t invest the entire sum in the market. You invest just Rs 15 in the markets and the balance Rs 85 in a Fixed Deposit that gives an 8.5 per cent annual return. So in two years, irrespective of market performance, you would have Rs 100 in your pocket. The balance 15 per cent invested in the market would potentially offer you an upside.
A capital guaranteed structured product works on the same principle, although the exact working of the structure may not be so simple, and investments may be made in indexes, stock derivatives, or even in commodities. Professional expertise may be used for hedging, arbitrage, etc. to optimise returns. ...

(Hope my this post does not get deleted halfway!) Dear Ashal, Thanks for your info. However just to confirm, yesterday i mailed the querry to DWS support team and I got the reply just now My Querry: ------------ Dear Customer Service Team, Thanks for your reply. However I would like to get one of my querry clarified before investing in your Tax saving fund. I observed that you are offering a free insurance with the scheme, however whether the insurance premium for the same is funded from the fund value or it is born completely by the AMC itself on its own? Plesae reply ASAP, as I need to take decision within couple of days. Regards, Anand ---------------- Reply From DWS... ---------------- Dear Sir, Please note that the cover is bourne by the AMC itself, till the time you are invested in the fund. The cover is 5 times the amount, upto Rs 5 lakhs, given by Metlife. Please also note that at the time of filling up our Common application form you will find a \\\\...

Thanks for your prompt response,Ashal. You are indeed right. We can only say that if you need to have a coronary bypass get it done only at a hospital where you have an experienced cardio-vasc surgeon. But if the hosptals in your town don\\`t have such a specialist the only option is not to undergo the surgery; in spite of all the post operation advantages. Having said that I am sure you might have done it already, but just in case you haven\\`t. I believe that Ahmedabad has quite a few FPSB approved training centers for CFPs. One opp Atlanta Bldg in Gulbai Tekra, another Opp Lions Hall in Mithakali Six Road, a third one opp Swaminarayan Temple, Vastrapur, and a fourth at Aniket Complex C G Road, Navrangpura. It might help if you can get some data on their past students, and if any of them practise in Ahmedabad. You could perhaps pose as a prospective new student trying to find the future carer prospects from past students in Ahmedaabad and thereabouts. SARVAM KRISHNAARPANAM...

28.08.2008. Many many thanks for your reply to my question. However ,SSDB, are listed on BSE and it is a long term capital gain, will it not be exempt from capital gain tax ,like other shares and securities ? Kindly reply and oblige. thanks, Biharilal Mehta. ...

I'm unable to understand how the main content of my post got deleted. Dear Moderator, if u r reading these messages & keeping a close eye, please do needful to fix this problem, as it is also experienced by others too recently. Coming to the post's content - Question - From where the AMC (DWS in this case) is paying the prem. for Insurance cover? Answer - DWS is paying the ins. prem. from the FMC (Fund Management Charges) recovered from the funds daily. Now comes the question, how can DWS gives us free Ins. Many of us already aware about Group Insurance Plans. DWS has taken the same from Metlife for Tax saver fund. To explain the same, Let us assume there r 10000 investors in this Tax saving fund & the average age of investors of fund is 35 years. If we check the prem. for a aged 35 individual policy, it is higher than the prem. charged for a group of 10000 people where average age of Gp. is 35. Why, because at the time of giving the policy, the ins. co. knows that it is next to impossible that all these 10000 people 'll die & there 'll be claim, Yes there 'll be claim from some higher age as well as lower age persons, in this case, the ins. co. is charging the prem. for average age, hence in some sense, DWS is paying higher prem. for Y'ger people to cross subsidies older people. As the risk of Ins. co. is less, the ins. co. is passing this benefit to DWS in the form of lower prem. than an individual policy. The free ins. is provided only on the basic investment amount, hence as the fund perform better & there is increase in the over fund value of individual investor, the higher FMC 'll be recovered against the increased fund value. The free insurance is capped upto max. 5L & as this free ins. is 5 times of investment, every individual can avail ins. upto 1L amount only. for investment above this amount there 'l be no Ins. but at the same time DWS is recovering FMC from the amount in excess of 1L also. Again this some what subsidizing the prem. of investors with less than 1L investment by the investors with more than 1L investment. As the fund in question is an ELSS, due to lock in period, DWS is sure to get FMC at least for 3 years & during these 3 years, the investor can't do anything, no matter the fund performs or not. As there is surety of FMC as well as age of investors, DWS may get even lower prem. quote from Ins. co. (Metlife in this case) as per the age profile of investors of the fund. I hope from all the above info, every body can understand how DWS is able to give free ins. Thanks Ashal ...

Dear Ashal Appreciate and thank you for your reply , your suggestion is very valuable and I 'll be considering same while Investing Please advise the best term policy and will CHILD plan will be much better than term policy. Please advise Thank You very much once again and God Bless all of us !! Best Regds saby...

Ashal, Thank you for those nice posts on strucutred products, i have kept it for my weekend read as its quite a heavy post which requires my full attention. BTW becoz of all these ULIPS insurance premia is going to fall by 40%, at least kotak insurance has reduced insurance premium by 40% for term cover... its because of some margin related waivers... will this translate to bigger maturities to insurance availed before this new regulation.. i mean for those who bought insurance cover before this order was passed will it mean we get more at the end of the cover?...

This is comman problem. This friend does not want to pay tax. He wants to save for the future. He wants to get decent income on his hard earned money. Here come tax problem. He wants to be sure before investing if the investment attracts tax or not. Now in what way the govt encourage genuine person like this one. On the other hand, we have traders,business people who show low sales figures and escape tax. How many of them give proper receipts? Farmers have escaped with the loan waiver. Businessman know ways to escape. This investor wants to invest/deposit in bank FDs. ...