Capital Multiplier…Really?

by Vinaya HS on January 4, 2013

in Finance

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A colleague asked for my opinion about a certain Capital Multiplier Plan that he’d been investing in since a few years. I looked up the plan and the details turned out to be as scary as a horror show. A few samples –

[From the brochure]

This plan is best suited for you…

– If you are looking for an investment plan for your child and want a flexible money-back plan that gives you the power to decide the amount and time of withdrawals.

– If you are planning for your retirement and require a plan that allows you to withdraw any amount as per your need and at the same time invest your money prudently to get you bonuses on the balance in your account.

– If you think that from time to time you will have extra cash, which you would like to invest in an instrument which is safe and which will get you attractive returns.

Quite hilarious — an investment that can solve all financial problems in your life.

And how does the capital get multiplied?

There would be sales and administration expense charges of 3.5% and 1% respectively.

There you go. The capital multiplication isn’t meant for you at all.

Clever!

Perhaps “Capital Divider Plan” would be a more appropriate name? After all, your hard-earned capital is being divided amongst the insurance company and the insurance agent.

High charges. Low insurance cover. Overly complicated features. All toxic ingredients.




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