Should I stop investing in LIC Jeevan Anand for SIP with higher returns?

Ans: No need to switch, please continue

Ans: It’s good that you’ve maintained a Systematic Investment Plan (SIP) for six years. SIPs are a disciplined way to invest regularly without being impacted by market volatility. Your Rs 2000 monthly SIP over this period is a positive step toward building wealth, but let’s carefully evaluate whether continuing or stopping makes sense.

Benefits of Staying Invested
If your SIP is in well-performing funds, continuing can offer significant long-term advantages. Since you are investing for six years already, the compounding effect will start showing better results in the upcoming years.

Here are some reasons to continue:

Rupee Cost Averaging: SIPs ensure that you buy more units when markets are low and fewer units when markets are high. This helps in averaging your costs over time and minimizes the impact of market fluctuations.

Power of Compounding: Staying invested for the long term allows your money to grow exponentially as returns are generated on both your principal and your earlier returns.

Tax Efficiency: If your SIP is in an equity mutual fund, the long-term capital gains tax on profits is lower, and after holding for over one year, you will benefit from tax efficiency.

Long-Term Financial Discipline: Regular investments help build financial discipline, and a six-year SIP shows your commitment to building wealth in a systematic way.

So, if your SIP is aligned with your financial goals, it’s wise to stay invested for a longer period.

Factors to Consider Before Closing the SIP
Before deciding to close your SIP, here are a few factors to review:

Fund Performance: Has your mutual fund consistently underperformed compared to its peers or benchmark? If yes, you may want to switch to a better-performing actively managed fund, but not close the SIP entirely.

Current Financial Situation: Are you in a financial crunch or expecting significant expenses in the near future? If your financial situation has changed, pausing the SIP might be an option.

Market Conditions: If the markets are volatile or bearish, exiting now could lock in losses. SIPs are designed to handle such volatility over time, so exiting due to short-term downturns may not be ideal.

Reviewing these factors will provide you with a clearer direction on whether you should stay invested or pause.

Importance of Reviewing Fund Performance
As a Certified Financial Planner, I recommend that you periodically review the performance of your mutual funds. Here's why:

Consistent Underperformance: If your fund has underperformed its benchmark consistently for over 2 years, it may be time to switch. Moving to an actively managed fund could yield better results in the long run.

Fund Manager Changes: A change in the fund manager or investment strategy can impact the future performance of the fund. Make sure you stay updated on these changes.

Peer Comparison: Compare your mutual fund’s performance with similar funds in the same category. If it lags far behind, explore better-performing funds.

If you find underperformance, don’t immediately close your SIP. Instead, consider switching to a better-performing actively managed mutual fund.

Disadvantages of Index Funds and Direct Funds
You should also avoid switching to index funds or direct mutual fund plans. Here’s why:

Index Funds: While index funds mirror the performance of an index, they don’t beat the market. They merely track it. If the market underperforms, so will the index fund. Moreover, in a volatile market, actively managed funds tend to outperform index funds because professional fund managers make timely decisions based on market conditions.

Direct Funds: These funds lack the expertise and advice provided by a Certified Financial Planner (CFP). Although they might have lower fees, the absence of personalized guidance can lead to poor financial decisions, which can cost more in the long term.

Actively managed mutual funds, overseen by professional fund managers, provide an edge over these options by leveraging expertise to outperform the market.

Diversifying Your SIP Portfolio
If your current SIP is in a single fund or category of funds, it’s essential to diversify for better risk management and returns. Consider the following:

Large-Cap, Mid-Cap, and Small-Cap Funds: Diversifying across market capitalizations helps balance risk. Large-cap funds offer stability, while mid- and small-cap funds provide higher growth potential.

Sectoral or Thematic Funds: While these funds can offer higher returns, they are riskier as they are focused on specific sectors. It’s better to allocate only a small portion of your portfolio here.

Debt Funds: If you are looking for stability, you can allocate a part of your SIP to debt funds. They provide consistent returns, though lower than equity funds.

By diversifying your SIP, you spread your risk while maximizing returns. Ensure the new funds align with your long-term financial goals.

SIP Continuation and Goal Alignment
You should also reassess whether your SIP aligns with your financial goals. At 45, you may be approaching certain life milestones, such as retirement planning, children’s education, or creating an emergency corpus. Here’s how to align your SIP:

Retirement Corpus: If you’re aiming to build a retirement corpus, staying invested for 10-15 years is a good strategy. Equity mutual funds are known to outperform other asset classes over the long term, helping you achieve this goal.

Children’s Education: If you are saving for children’s education, your SIP should be allocated toward a balanced or equity-oriented fund that provides moderate to high returns in 5-10 years.

Emergency Fund: SIPs are not the best option for emergency funds. Instead, liquid mutual funds or fixed deposits are better suited for immediate liquidity needs.

Ensure your SIP is serving your financial objectives effectively.

Balancing SIP and Lumpsum Investments
Since you’re already investing through SIP, you might also want to explore balancing it with a lumpsum investment. SIPs are beneficial for regular investments, but a lumpsum investment at the right time can accelerate wealth creation. For example:

Market Timing: Investing a lumpsum during a market correction can help you buy more units at a lower cost, boosting returns when the market recovers.

Goal-Based Lumpsum Investment: If you have a specific financial goal, such as buying a house or funding your children’s education, you can invest a lumpsum in a suitable fund that matches the timeframe of your goal.

However, avoid relying entirely on lumpsum investments, as SIPs provide the advantage of disciplined investing over time.

Building a Comprehensive Investment Strategy
Instead of merely continuing or closing your SIP, consider creating a more comprehensive investment strategy. Here are some steps to follow:

Review Current Investments: Examine all your existing investments, including your SIP, savings, and other assets. Ensure they are well-diversified and aligned with your financial goals.

Risk Profile Assessment: Assess your risk tolerance based on your age, income, and responsibilities. If you have a high risk tolerance, equity funds can dominate your portfolio. If you are risk-averse, include more debt funds or hybrid funds.

Set Clear Financial Goals: Define short-, medium-, and long-term financial goals. These could include retirement, children’s education, or buying property. Each goal should have a corresponding investment strategy.

Regular Review and Rebalancing: Continuously review your portfolio’s performance and rebalance it every year. Ensure it remains in line with your risk profile and financial goals.

Finally
Continuing your SIP depends on how it aligns with your long-term goals and the fund’s performance. Staying invested for 10-15 years can unlock the full potential of compounding. However, ensure you periodically review the fund and consider diversifying into other categories if necessary. Avoid index funds or direct mutual fund plans, as actively managed funds offer better growth potential over time.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Instagram: https://www.instagram.com/holistic_investment_planners/

Ans: You have already invested a significant amount in LIC Jeevan Saral. The return so far has not been encouraging. It is good that you are now considering SIPs. Mutual funds offer better flexibility and potentially higher returns. Below is a detailed 360-degree approach to your situation.

Assessing Your LIC Jeevan Saral Investment
You have paid Rs. 40 lakh in premiums over 13 years.

The current surrender value is Rs. 52.5 lakh, giving you a 32-33% growth.

The return is very low compared to other investment options.

LIC Jeevan Saral is primarily an insurance product, not an investment product.

The maturity amount may not provide substantial growth from here.

Should You Continue with LIC Jeevan Saral?
At 57, your priority should be capital protection and steady returns.

The policy does not offer inflation-beating returns.

Surrendering now gives you the flexibility to reinvest in better options.

Mutual funds can provide higher growth with liquidity.

If possible, surrender and reinvest in mutual funds for better returns.

Why Mutual Funds for Your New SIP?
SIPs offer disciplined investing with rupee cost averaging.

Equity funds provide better returns over the long term.

Debt funds offer stability and lower risk.

A mix of both can balance risk and returns.

Selecting the Right Type of Mutual Funds
Since you are new to mutual funds, a well-diversified portfolio is important.

Equity Mutual Funds – For long-term growth.

Large-cap funds for stability and moderate growth.

Flexi-cap funds for diversification across market segments.

Dividend yield funds for regular income.

Hybrid Mutual Funds – For balance between growth and stability.

Aggressive hybrid funds with a mix of equity and debt.

Balanced advantage funds to manage risk dynamically.

Debt Mutual Funds – For stability and liquidity.

Short-duration funds for capital protection.

Corporate bond funds for steady income.

Suggested SIP Allocation
Rs. 4,000 in large-cap or flexi-cap fund.

Rs. 3,000 in hybrid fund for stability.

Rs. 3,000 in short-duration debt fund.

Managing Market Risks
Stay invested for at least 5-7 years for equity SIPs.

Monitor performance every 6-12 months.

Rebalance if needed based on market conditions.

Final Insights
LIC Jeevan Saral is not an ideal investment. Surrendering can free funds for better growth.

SIPs in mutual funds provide better wealth creation and liquidity.

A mix of equity, hybrid, and debt funds will balance growth and stability.

Continue investing systematically for the next 10-15 years.

Mutual funds will help you build a stronger financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

Ans: Understanding Your Current LIC Policies

You have been paying Rs. 4,200 per month for 4 LIC policies.

These are investment-cum-insurance policies.

Most such policies offer low returns of 4% to 5% p.a.

They also come with long lock-in periods and low transparency.

Insurance is often bundled with investment in such plans.

This combination does not work well for long-term wealth creation.

Since you've been paying for 7 years, policy surrender may be viable now.

You must check surrender value for each policy before taking a step.

Ask your LIC agent or visit the branch to get this surrender value.

If the value is acceptable, you can consider surrendering and reinvesting.

Ensure no policy is term insurance. Only surrender investment-linked ones.

Do not discontinue policies that are pure term insurance.

Why Investment-Cum-Insurance Is Not Efficient

Returns are often lower than inflation-adjusted growth.

You remain underinsured in most such policies.

You get neither enough insurance nor enough return.

You lose out on compounding benefits of equity investments.

Lock-ins make liquidity difficult when you need funds.

Bonus and loyalty additions are neither guaranteed nor high.

What You Can Do Instead

Separate insurance and investments.

Take a term insurance plan of adequate cover.

For investment, consider equity mutual funds for long-term growth.

You can start with Rs. 4,200 per month as SIP.

This disciplined habit can create a large corpus in long run.

Over time, increase SIP amount as income increases.

Why Mutual Funds Are Better Option for Growth

Mutual funds offer better long-term returns than LIC plans.

You can start with small amounts like Rs. 500 or Rs. 1,000 per scheme.

You get professional fund management for your investment.

Funds are regulated, diversified and transparent.

You can invest through MFDs who are trained and certified.

Look for MFDs who also hold CFP credentials.

They offer ongoing guidance, reviews, and rebalancing.

Why You Must Choose Regular Plans Over Direct Plans

Direct plans lack personal advisory support.

No one helps you review your funds periodically.

Mistakes go unnoticed for long periods.

Switching or stopping is often delayed due to inaction.

Regular plans through CFP/MFDs provide handholding.

You gain behavioural coaching during market ups and downs.

They align investments with your goals.

Direct plans may seem cheaper but costlier in long run due to poor choices.

Avoid being penny-wise and rupee-foolish.

Why Actively Managed Funds Are Better Than Index Funds

Index funds mirror the market; they don’t beat it.

No chance of alpha or extra returns in index funds.

In falling markets, index funds fall as much as the market.

No downside protection in index investing.

Index funds may have low cost, but cost alone doesn’t build wealth.

Actively managed funds use research to select better performing stocks.

They can underweight poor sectors and overweight better ones.

This gives you better returns over long periods.

A competent fund manager backed by a research team adds value.

Choose active funds through a CFP-guided MFD.

Taxation of Mutual Funds

Mutual funds now have updated tax rules from FY 2024-25.

For equity funds:

LTCG above Rs. 1.25 lakhs taxed at 12.5%.

STCG taxed at 20%.

For debt funds:

Both STCG and LTCG taxed as per your slab.

Capital gains taxed only on redemption, not during investment.

SIPs give you tax efficiency with compounding.

Things to Consider Before Surrendering LIC Policies

Check surrender value and whether loan has been taken on policies.

Ensure no loan is pending before surrender.

Ask for written calculation of surrender benefits.

Be prepared for possible surrender charges.

Some policies give loyalty additions only after 10 years or more.

Evaluate whether waiting longer gives more benefit or not.

Consult with a CFP-backed MFD before taking final call.

Review policies one-by-one, not all together.

Create an action plan with dates and steps.

Ideal Way to Build Wealth with Mutual Funds

Invest based on your goals: retirement, child education, etc.

Have a mix of large-cap, mid-cap, and hybrid funds.

Start with goal mapping with a certified financial planner.

Align SIPs with time horizon and risk capacity.

Avoid investing based on past returns alone.

Rebalance portfolio every year to control risk.

Keep SIP going even in market corrections.

That is when wealth-building actually happens.

Insurance Planning Separately

You should not ignore risk management while investing.

Check your life insurance needs first.

Take a term plan based on your income and responsibilities.

Ensure your family is financially protected in your absence.

Keep this insurance separate from your mutual funds.

Don’t bundle investment with insurance again.

Liquidity and Emergency Planning

LIC policies are illiquid. They lock your funds for decades.

Mutual funds give better liquidity.

You can pause or stop SIPs in emergencies.

You can redeem units partly as needed.

Maintain an emergency fund for 6 months of expenses.

Keep this in a liquid mutual fund or savings account.

Avoid using SIP money for short-term needs.

Role of MFDs with CFP Credential

They understand goal-based planning.

They help you map your life goals and match investments.

They handhold during market volatility and tough times.

You get unbiased advice with financial discipline.

Regular reviews help stay on track.

They protect you from emotional decisions and wrong choices.

Behavioural Advantages of Guided Investing

People often stop SIPs in market corrections.

Guided investing avoids panic-based decisions.

A disciplined investor stays for long term and wins.

Emotion is the biggest enemy of returns.

Certified financial planners help maintain focus and consistency.

Action Plan for You

Step 1: Identify which LIC policies are investment-linked.

Step 2: Get their surrender value in writing.

Step 3: Review with a CFP-backed mutual fund distributor.

Step 4: Surrender one policy at a time, if needed.

Step 5: Start SIPs in selected mutual fund schemes.

Step 6: Invest Rs. 4,200 per month for now.

Step 7: Increase SIP amount gradually every year.

Step 8: Track and review once a year with expert help.

Financial Goals You Can Plan With SIP

Retirement corpus for comfortable future.

Children’s higher education or marriage.

Building down payment for a future home.

Creating a travel or lifestyle fund.

Becoming financially independent earlier.

Mistakes to Avoid

Surrendering without understanding surrender value loss.

Repeating the same mistake of investment-cum-insurance.

Investing in direct plans without guidance.

Chasing past returns while selecting funds.

Having too many funds without purpose.

Avoiding equity due to fear of volatility.

Finally

You have taken a smart decision by evaluating your LIC policies.

Rs. 4,200 per month, when invested wisely, can grow significantly.

Mutual funds offer flexibility, growth, and diversification.

Invest through a certified financial planner with MFD license.

Avoid investing directly without guidance.

Keep your insurance and investments separate.

Reassess your financial goals and create a roadmap.

Follow that roadmap with discipline and guidance.

Wealth creation is a journey. It needs right tools and guidance.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment