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financial planning

The Economic Times Wealth September 23-29, 2019 15

Estimating equity returns PAPER WORK


:: Ways to assign life
Look at the past return records to estimate gains from your investments. insurance policy
Interest in a life insurance policy can
be transferred from the policyholder
to a lender or a relative by assignment
of policy. Here the policyholder is
known as the assignor and the person,
in whose favour the policy has been
assigned is called assignee.

Types of assignment
There are two types of
assignment:
 Conditional assignment:
This is done when the insured
wishes to pass benefits of the policy
to a relative in case of early death
or certain conditions. The rights of
the policyholder are restored once
the conditions are fulfilled.
 Absolute assignment: This is done
as a part of consideration for a loan
in favour of the lender/bank/lending
institution. In such an assignment, the
insured loses his rights in the policy
and the absolute assignee can deal
with it independently.

Notice of assignment

GETTY IMAGES
The insured needs to
either endorse the policy
document or make a deed
of assignment and register the same
with the insurer. A form prescribed by
the insurers must be filled and signed.

N
Namita is a systematic amita should know that returns investments tends to beat the inflation num-
In case of conditional assignment,
from investments can only be bers. The ability of equity to earn a higher re-
investor in equity funds. reason also needs to be mentioned.
estimated. There is no guarantee turn comes from businesses being able to use
She earns a decent sal- in the investment world. She can borrowed funds from investors and creditors,
ary and lives well. She protect her investments from invest them in assets and earn a return that Documents needed
does not have any spe- high risks by using a sound process, and earn is higher. The business risk is compensated  Proof of income.
cific financial goals, but market returns on her investments. by the risk premium on equity investments  Self attested copy of
The easiest thing to do while trying to available only to equity investors. Namita photo ID and address proof.
is keen to ensure that estimate returns is to look at the past return will find that in the Indian scenario, the  Self attested copy of PAN card.
her money grows. For records and form expectations on this basis. average long-term return from investing sys-
investing regularly, she When it comes to equity, the returns can be vol- tematically has been about 14-16%. This will
finds it easy to use the SIP atile. But what Namita will notice is that if she come down only if inflation comes down. Fees and stamp duty
diversifies her investment, so that she holds a The return from equity will also be subject If the assignment is
route. However, she is con- basket of equity shares; invests over a period of to short-term ups and downs. Therefore, made by endorsement
cerned about the returns, time; and ensures that she stays invested for the Namita should not expect to earn a steady on the policy document,
not sure if they are good long term across market cycles, her return is return every year but expect the ups and it is exempt from the stamp duty.
enough. Is there a way she likely to be close to the long-term average. Using downs, which tend to average out over time. However, in case of a separate
SIPs, she is already following this process. Since her investment plan is designed to re- deed, stamp duty is payable.
can estimate her returns? The long-term average return from equity duce her risks, she should do well.

Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Acceptance
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta. If the insurance company
decides to register the
assignment, it will record the

smart things to know Secondary market participants assignment and inform the assignor.
On paying a fee, the assignee can
obtain an acknowledgement.

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Stock exchange
Right to reject

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is a platform Issuers are compa- Investors open
for listing nies that list their demat accounts The insurer has a right
securities, securities on the with members of to reject if it believes
discovering All stock market stock exchange the depositories, that the assignment

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their price, trades are after meeting Clearing Corporation called depository is not bona fide or against the
trading conducted through listed criteria and enables settlement participants interest of the policyholder or
securities the members of the signing the listing of funds or money to hold their public interest or for the purpose
and sharing exchange, called agreement with the and securities securities and of trading the insurance policy.
information. brokers for a fee or exchange. (HDFC between buyer and settle their
(BSE and NSE) ‘brokerage’. Bank, RIL) seller (NSCCL, ICCL). trades.

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