Birla Sun Life Recurring Savings Plan is a product from Debt Mutual Fund Category. Last few years Debt Mutual Funds have delivered good returns to investors. Perceived as lower risk avenue, investors have been moving their assets to this category of investments. Seeing the interest from investors, AMCs too have been marketing their debt products and coming out with new options in this segment.
Birla Sun Life Mutual fund, which is known for launching innovative products, came out with Recurring Savings Plan few months back. This product is targeted to retails investors who wish to take opportunity in the debt mutual funds through small savings.
Here is a brief review of the product:
Basic Features
Birla Sun Life Recurring Savings Plan is an SIP product where through a fixed regular contribution in a periodic interval one invest in the designated schemes.
Entry Age: Min 18 and max 45 which means higher age group cannot invest in the product.
Investments– Min Rs 1000 and there is no limit on maximum amount.
Tenure– In Recurring Savings Plan the investment can be held for a specific period only. This period is calculated through this method- 55 years less completed age of investor. So if one invests at age 35 the maximum years SIP can be run is 20.
Load– The scheme do not have any entry load but charges an exit load for withdrawal within a specified time horizon. If redeemed in first year the load is 2%, if redeemed within 1-3 year then 1% load is applicable and after three years investors can withdraw without paying any load. The only exemption is death of investor where no exit load is applicable.
What’s on Offer
Generally, there is no age limit in mutual funds investment. But under this scheme the maximum limit has been kept due to additional feature of Life Insurance.
Any Investor who is investing in Recurring Savings Plan is provided an insurance cover in multiple of their investment. This is not an individual product but is provided through a group insurance scheme. The amount of coverage varies in first three year due to liquidity feature.
1. 1st Year- 10 times of monthly installments
2. 2nd year-50 times of monthly investment
3. 3rd Years and onwards- 100 times the monthly installments
Insurance Coverage
The maximum insurance coverage in Recurring Savings Plan goes up to Rs 20 lakh. This limit is applicable per investors across all schemes/folios. The insurance cover starts from the commencement of SIP with exclusion of first 45 days. Only accident deaths are covered in these days. The insurance cover stops if SIP is discontinued in first three years of investment. However, if SIP is continued after three years, the insurance coverage is equivalent to the units allotted at start of each policy years. Here also the maximum coverage goes up to 100 times of monthly installments.
Designated Schemes to Invest
This scheme was launched with an objective to let investors benefit from the opportunities in the debt market and so the two schemes designated are debt schemes.
1. Birla Sun Life Medium Term Plan– It’s a short term bond fund which invest majorly in corporate bonds, commercial paper, certificate of deposit and structured obligations. With current average maturity of .82 years, the fund is ideally suited for an investment with horizon of 6 months to a year. In rising interest rates the fund has been able to deliver higher risk adjusted returns in the range of 10-11% annualized.
2. Birla Sun Life MIP– Birla Sun Life Monthly Income Plans have been consistent performers. It has three MIP funds in it’s umbrella and the equity exposure in all three varies. This is a more conservative fund and its performance has been equivalent to benchmark. Overall it’s a medium term fund for investors with lower risk appetite.
Should you Invest
Birla Sun life MF initially came out same option in Equity Funds with name of Century SIP. Contrary to this in Recurring Savings Plan, debt funds have been selected. Both these funds have averaged return of 9-10% in last two years. However, the returns in Medium Term Fund will fall with fall in interest rates. Moreover, it’s a fund suited for short term investments. On other hand in MIP, Birla Sun Life MIP II 5 has been a more lucrative option for investors from return perspective. Life insurance is an added option which actually restricts the liquidity if it is made an important criterion.
Within debt mutual funds there are various categories like gilt funds, income funds, liquid funds and ultra-short term funds which are suited for different goals. A wrong selection of avenue can jeopardizes achievement of life goals in long term. It’s always advisable to keep insurance and investment separate as they meet different objectives. Taxation, Inflation and Time Horizon are various aspects which go very deeply in analyzing the viability of any investment option. One should evaluate his/her financial needs and then create a debt portfolio with taking above factors in consideration.
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This and All the other Articles/Videos on this blog are for general Information and educational purposes and not to be taken as an Investment Advice. Any Action taken by Readers on their Personal finances after reading our articles or listening to our videos will be purely at his/her own risk, with no responsibility on the Writer and the Investment Adviser. Registration Granted by SEBI, membership of BASL and Certification from National Institute of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide any assurance of returns to investors.