Hi i have purchased sbi smart priviledge plan. I have taken for a single premium of 8 lakhs. Its been 6 months and i dont see any growth in my fund. In fact my amount is only decreasing. I really dont have much knowledge in stock market and all....

Hi i have purchased sbi smart priviledge plan. I have taken for a single premium of 8 lakhs. Its been 6 months and i dont see any growth in my fund. In fact my amount is only decreasing. I really dont have much knowledge in stock market and all. Am very much worried about my money. If anyone have taken same plan pls share your experience in this

Ans: This SBI Life Smart Privilege Plan review delves into the plan's features to help you decide if it aligns with your financial goals. While it promises a blend of insurance and investment benefits, there are several drawbacks to consider before you invest.

Disadvantages of SBI Life Smart Privilege Plan:

Lower Returns: ULIPs typically underperform compared to pure investment options like mutual funds. Insurance and administrative charges eat into your returns. The review calculates that even with an 8% CAGR in underlying funds, the plan's Internal Rate of Return (IRR) is only 6.74%.

Multiple Charges: The plan comes with a variety of charges, including premium allocation charges (up to 5 years), policy administration charges, fund management charges, surrender charges (if you exit early), partial withdrawal charges, premium redirection charges, and mortality charges. These fees reduce your overall returns significantly.

Limited Liquidity: You're locked in for at least 5 years. There are surrender charges if you withdraw your money before the policy term ends, further restricting access to your invested amount.

Market Dependence: Unlike traditional life insurance, your returns depend on market performance and your chosen fund within the plan. This introduces investment risk.

No Loan Facility: Unlike some ULIPs, SBI Life Smart Privilege Plan doesn't allow you to take loans against your policy.

Lack of Transparency: The underlying funds in this plan are less transparent compared to those offered by mutual funds. This makes it difficult to assess the risks involved.

Alternatives to Consider:

PPF + Term Insurance: This combination offers guaranteed returns with PPF and pure life coverage with a term insurance plan. The review suggests a PPF investment with a term insurance plan might yield a better return (around ?1.63 Cr) compared to SBI Life Smart Privilege Plan (around ?1.57 Cr) for the same investment over 15 years.

ELSS Mutual Fund + Term Insurance: This option provides potentially higher returns with an ELSS Mutual Fund, but carries investment risk. However, the review estimates a potential return of ?2.5 Cr with an ELSS Mutual Fund compared to ?1.57 Cr with SBI Life Smart Privilege Plan (for the same investment over 15 years).

Before You Invest:

Investment Goals: Align your investment with your short-term or long-term financial goals.
Risk Tolerance: Consider your comfort level with market fluctuations.
Financial Advisor: Consult a financial advisor for personalized investment advice based on your needs and risk tolerance.
Conclusion:

The SBI Life Smart Privilege Plan might seem attractive, but the review highlights several disadvantages, particularly lower returns compared to alternatives. Consider exploring options like PPF or ELSS Mutual Funds with term insurance for potentially better returns and flexibility. Always consult a financial advisor before making any investment decisions.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

Asked on - May 14, 2024 | Answered on May 14, 2024

Sir what do I do now. As I have already invested my hard earned money into it. Do I surrender.

Ans: Better to surrender after consulting your financial planner.

Ans: I appreciate your clarity and proactiveness in seeking guidance. Let’s work step by step to ensure you make the most of your policy payout and build a stronger future.

Your Existing Policy and Current Value

You invested Rs.?6?lakhs over five years into an insurance?cum?investment policy ending this month. The policy’s current value is Rs.?1.05?crore. You held this plan for nine years. That shows patience and perseverance. Now your money is ready to be deployed into more productive avenues.

Critique of Insurance?cum?Investment Plans

Insurance?cum?investment plans combine life cover with an investment component. While these promise security, they come with high internal costs like entry load, fund management charges, and commission payouts. These charges reduce net returns, often making them underperform compared to clearer instruments like mutual funds.

These plans also tie you to long-term contracts and limit flexibility. You cannot choose customized asset allocation, nor rebalance based on needs. Investment returns stay average because charges eat into performance. There is no ongoing advisory guidance to adjust strategy as your life evolves.

As a result, such plans often serve insurance in disguise of investment, delivering modest growth and locking you in. On the other hand, direct equity or direct mutual fund plans require personal effort and may carry hidden pitfalls, especially without professional support.

Surrender vs. Continue Till Maturity

You stand at a pivotal decision point. One option is to continue the policy till maturity and receive the guaranteed payout. This gives you security but leaves your money tied up in a low-return product.

The other option is to surrender the policy now. Doing so will make your entire Rs.?1.05?crore available for reinvestment. With proper planning, this amount can be used more constructively—through diversified, actively managed mutual funds that adapt to market conditions and align with your goals.

Surrendering now gives you earlier access to your capital. With time on your side, redeployment into growth assets can compound significantly more over the years remaining to your goals. On the flip side, continuing till maturity avoids any surrender penalties, but leaves your money underutilized.

Clarifying Your Financial and Life Objectives

Before making deployment decisions, define your goals clearly:

Retirement security: At what age would you like financial independence? What is your desired corpus at that time?

Child’s future: If you have children, there may be education, wedding, or other needs. When and how much?

Lifestyle aspirations: Do you plan to buy a home? Start a business? Travel?

Each goal can be targeted with tailored investment buckets, so that you track progress separately. This avoids mixing corpus meant for different objectives.

Insurance Review: Are You Still Covered Adequately?

When you cancel your plan, review your insurance coverage:

Term insurance: Do you have enough life cover? Rule of thumb: 10–15 times your annual income, adjusted for current responsibilities.

Health insurance: This becomes critical as you age. Check if you have sufficient coverage, including for critical illnesses.

Avoid reinvesting in endowment or ULIP products: They blend insurance and investment loosely and do not offer much return. If existing, consult your CFP about surrendering and reallocating the value into more efficient mutual funds.

Insurance should protect, not lock up money.

Building a Smarter Investment Allocation

Once the Rs.?1.05?crore becomes available, allocate it across asset types:

Equity mutual funds (60%)
These funds invest in companies and give long-term growth. Use actively managed, regular mutual fund plans. They adapt to economic situations, while direct investment or index funds lack that flexibility. Your CFP and MFD will help select funds aligned to your risk appetite and goals.

Debt and fixed-income (30%)
Include products like PPF, NSC, corporate bond or low-duration debt funds. They balance equity’s volatility and provide stability.

Gold exposure (5%)
Maintain a small allocation to gold to absorb economic shocks. You may hold sovereign gold bonds or gold mutual funds rather than physical jewellery, to avoid purity and resale hassles.

Liquidity buffer (5%)
Keep a liquid fund or short-term deposit for emergencies or unforeseen needs.

Through regular investment and rebalancing, this allocation builds long-term wealth with risk control.

Equity Investment via Regular Plans

Why regular mutual fund plans guided by CFP and MFD are the preferred way:

Behavioural coaching: Emotions trigger poor decisions. Your CFP helps you stay calm during downturns.

Adaptive investments: Fund managers shift portfolio mix based on market cycles—something index funds cannot.

Customised selection: Your CFP picks funds based on your goals, risk appetite, and time horizon.

Periodic monitoring: You get regular reviews and can course-correct over time.

Direct funds leave ownership responsibility entirely on you. Mistakes in fund selection, timing, or non-rebalancing can hurt long-term returns. Regular plans with professional oversight mitigate these risks.

Taxation Awareness in Investments

Equity mutual fund gains:

Long-term capital gains (above ?1.25 lakh) taxed at 12.5%

Short-term capital gains taxed at 20%

Debt instruments:

Gains are taxed per your slab

Smart tax planning involves spreading fund sales over multiple financial years and ensuring proper documentation. Your CFP assists in timing and reporting to minimise your tax liability.

Liquidity & Short-Term Needs

Some of your corpus may be needed over the next year or two (e.g., for travel, medical emergencies, or house renovation). For such funds:

Use liquid mutual funds or ultra short-term debt funds

These offer stability and can be liquidated in 1–3 days

If you prefer FDs, choose small tenures and stagger them to match cash flow needs

Keep buffer aside (~5% of corpus) for peace of mind

Estate Planning and Wealth Transfer

A corpus of this size needs proper planning for family:

Create or update your Will, covering property, investments, insurance

Ensure nominations are updated across bank accounts, insurance, mutual funds

Inform your nominated family members or loved ones about account access

Store records securely (in safe deposit box or digital vault)

This ensures your wealth is transferred smoothly to your loved ones in future.

Implementation Plan (Quarter-by-Quarter)

Quarter 1

Finalise surrender decision or policy maturity timeline

Validate insurance adequacy, including term and health cover

Open accounts for fresh investments (bank, MFD, registrar)

Quarter 2

Redeploy capital into mutual fund and fixed-income portfolios

Set up SIPs for equity and debt instruments

Invest liquidity buffer in liquid funds or FDs

Quarter 3

Review progress and rebalance portfolios

Adjust fund selection, SIP amounts, or liquidity needs

Plan for any short-term expense (travel, home improvement)

Quarter 4 (Year-End)

Review yearly returns and tax implications

Adjust asset allocation based on performance and goal progress

Reassess your long-term goals and planning

After the first year, continue the cycle—this ensures your financial journey stays aligned with your evolving priorities.

Common Mistakes to Avoid

Even with a sound plan, avoid these pitfalls:

Reinvesting only in low-yield insurance products

Going into direct funds without guidance

Ignoring the importance of tax-efficient deployment

Forgetting liquidity for emergencies

Delaying or skipping insurance reviews

Not formalising estate planning and updates

A regular review process through your CFP keeps everything on track.

Final Insights

You’ve worked diligently to build a sizable corpus in a savings-led product. Now you deserve better returns and clarity. Releasing your capital sooner, with intent and planning, allows you to deploy money into instruments that grow in line with your ambition and risk profile.

By shifting to a diversified mix of actively managed equity and debt funds, you position yourself to enhance long-term growth while maintaining stability. With only 5% in gold and liquidity buffer, your portfolio remains robust yet flexible. Engaging a Certified Financial Planner for selection, review, and behavioural guidance ensures disciplined implementation.

As you move ahead, your investments will be purposeful and efficient, aligned with your goals, taxes, family protection, and legacy planning. Redeeming now is not just a financial step—it unlocks the potential to thread a more rewarding and secure financial path.

Best Regards,

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

Ans: You have explained your income, goals, current assets, and future plans with great clarity. Your early planning spirit is strong. This gives a very good base. You can reach a peaceful retirement with smart steps in the next few years.

» Your Current Position

You are 40 years old. You plan to retire in 3 to 5 years. You earn Rs 2.3 lakh per month. Your wife also works but will stop working soon. You have one daughter aged 10. Your current monthly cost is around Rs 1.1 lakh. This cost will reduce after retirement because you will shift to your parental flat.

Your investment base is already good. You have saved in bonds, stocks, mutual funds, PPF, FD, and SIP. Your wife also has her own savings and rental income from a flat. All these create a good starting point.

This early base helps you plan stronger. It also gives room for more shaping. You are on the right road.

» Your Family Goals

You need Rs 75 lakh for your daughter’s higher education and marriage.

You want Rs 75,000 per month for family living after retirement.

You want to retire in 3 to 5 years.

You will shift to your parental flat after retirement.

You will have rental income of Rs 10,000 from your wife’s flat.

These goals are clear. They give direction. They allow a strong plan.

» Your Present Investments

Your investments include:

Rs 50 lakh in REC bonds maturing in 2029.

Rs 42 lakh in stocks.

Rs 17 lakh in mutual funds.

Rs 16 lakh in fixed deposits.

Rs 15 lakh in PPF.

Rs 1.3 lakh as monthly SIP.

Your wife holds:

Rs 30 lakh corpus.

A flat worth Rs 40 lakh with rent of Rs 10,000 each month.

Your combined net worth is healthy. This gives good power to build your retirement fund in the coming years.

» Understanding Your Expense Need After Retirement

You expect Rs 75,000 per month after retirement. This includes all basic needs. You will not have rent. That reduces cost. This assumption looks fair today.

Your cost will rise with inflation. So you must plan for rising needs. A strong retirement corpus must support rising cost for 40 to 45 years because you are retiring early.

An early retirement needs a large buffer. So you need safety along with growth. Your plan must include growth assets and safety assets.

» How Much Monthly Income You Will Need Later

Rs 75,000 per month is Rs 9 lakh per year. In future years, this cost can rise. If we assume steady rise, your future cost will be much higher.

So the retirement corpus must be designed to:

Give monthly income.

Beat inflation.

Support you for 40 to 45 years.

Protect your family even in market down cycles.

Allow flexibility if your needs change.

A strong retirement fund must support both safety and long-term growth.

» How Much Corpus You Should Target

A safe target is a large and flexible corpus that can support long years without running out of money. For early retirement, the usual thumb rule suggests a very high number. This is because you need income for many decades.

You need a corpus big enough to produce rising income. You also need a cushion for unexpected health costs, lifestyle shocks, and inflation changes.

Your target retirement corpus should be in a strong range. For your needs of Rs 75,000 per month and for goals like daughter’s education and marriage, you should aim for a combined retirement readiness corpus in the higher bracket.

A safe range for your family would be a very large number crossing multiple crores. This large range gives you:

Income safety.

Inflation protection.

Peace during market cycles.

Comfort in long life.

Room for daughter’s future.

Strong backup for health.

You are already on the way due to your existing assets. You will reach close to this range with systematic building over the next 3 to 5 years.

» Why You Need This Larger Corpus

You will retire early. That means more years of living from your corpus. Your corpus must not fall early. It must grow even after retirement. It must give monthly income and long-term family protection.

This is only possible when the corpus is strong and well-structured. A weak corpus creates stress. A strong corpus creates freedom.

Also, your daughter’s future cost must be kept aside. This must be parked in a separate fund. This must not touch your retirement money.

A strong corpus makes these two worlds separate and safe.

» Your Existing Assets and Their Strength

You already have good diversification:

Bonds give safety.

Stocks give growth.

Mutual funds give managed growth.

FD gives stability.

PPF gives tax-free long-term savings.

This blend is already a good start. But you need to make the blend more structured for early retirement.

Your Rs 1.3 lakh monthly SIP is also strong. It builds your future fast. You should continue.

Your wife’s rental income is small but steady. This adds strength.

Your combined financial base can reach your retirement target if you refine your allocation now.

» Your Daughter’s Future Fund Need

You need Rs 75 lakh for your daughter’s education and marriage. You should keep this goal separate from your retirement goal.

Your current SIP and future allocations should create a dedicated fund for this goal. A long-term fund can grow well when managed actively.

Do not mix this fund with your retirement needs. Mixing leads to shortage in old age. Always keep this corpus ring-fenced.

» A Strong Asset Mix For Your Retirement Path

A balanced mix is needed. You need growth assets to beat inflation. You also need stable assets for income.

You must avoid index funds because they do not give flexibility. Index funds follow a fixed index. They cannot make active changes in different markets. They cannot move to better stocks when markets change. They force you to stay in weak sectors for long. They also do not help you in down cycles because they cannot protect you by shifting to safer options. This can hurt retirement planning.

Actively managed funds are better because:

They give active asset selection.

They give scope for better returns.

They give flexibility to change sectors.

They give downside management.

They give access to a skilled fund manager.

They support long-term planning more safely.

Direct plans also carry risk. Direct plans do not give guidance. They do not give behavioural support. They do not give market timing help. They do not give portfolio shaping. They leave all the judgement to you. One mistake can cost years of wealth.

Regular plans with guidance from a Certified Financial Planner help you shape decisions. They help you remain disciplined. They help you avoid panic. They help you decide allocation changes at the right time. This saves wealth in long-term.

» How Your Investment Journey Should Grow in the Next 3–5 Years

Continue your SIP.

Increase SIP when your income rises.

Shift part of your stock holding into planned long-term mutual funds to reduce concentration risk.

Build a defined daughter’s education fund.

Keep a part of your REC bond maturity amount for long-term.

Avoid locking too much into fixed deposits for long periods.

Build a safety fund for one year of expenses.

This will create a full structure.

» Your Rental Income Role

Your rental income of Rs 10,000 per month is small but steady. Over time it will rise. This income will support your monthly cash flow after retirement.

You can use this for utilities or health insurance premiums. This gives a cushion.

» Your Emergency Buffer

You should keep at least one year of essential cost in a safe place. This can be in a liquid account or short-term fund. This protects you in shocks.

Since you plan early retirement, a strong buffer is important. It gives peace even in low months.

» A Structured Retirement Approach

A complete retirement plan for you should include:

A clear monthly income plan after retirement.

A corpus that can grow and protect.

A rising income system that matches inflation.

A separate daughter’s future fund.

A health cover plan for your family.

A tax-efficient withdrawal plan.

A market cycle plan to protect you in tough times.

This holistic approach keeps your family strong for decades.

» What You Should Build by Retirement Year

Your aim should be to reach a strong multi-crore range in investments before retirement. You already hold a large amount. You will add more in the next 3 to 5 years through SIP, stock growth, bond maturity, and disciplined saving.

Once you reach your target range, you can start the shifting process:

Move a part to stable assets.

Keep a part in long-term growth assets.

Create a monthly income strategy.

Keep a reserve bucket.

Keep a child future bucket.

Keep a long-term growth bucket.

This structure protects you in all market conditions.

» Final Insights

Your financial journey is already strong. You have a good income. You have saved well. You have multiple asset types. You have a clear timeline. And you have clear goals. This foundation is solid.

In the next 3 to 5 years, your focus should be on growing your combined corpus to a strong multi-crore range, keeping a separate fund for your daughter, reducing risk in unplanned assets, and building a stable long-term structure.

With the present path and a disciplined structure, you can retire peacefully and support your family with confidence for many decades.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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