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Saturday, June 27, 2015

PAUS, Mideval history, pre-islamic middle east, religion - A saga of Wikipedia addiction

I came across the word "PAUS" today in an email and I did not know what it meant. The email did not have much context either. As usual I googled for "define: PAUS" and the smart boy Google showed me the Wikipedia link for some Norwegian patrician family from Oslo named PAUS. I was very sure that the "PAUS" word I had come across had nothing to do with a medieval family from Oslo. Nevertheless being a big Wikipedia addict, I bravely caressed my laptop touchpad, moved the mouse pointer to the Wikipedia link and clicked on it.. ! And the Saga begins.. !

The Paus family has some semi-interesting history, not very intriguing or aything, but still there is something to read. The one piece of information that got my attention, apart from the awesome estates they own, is one of their coat of arms : They call it "Crane in its vigilance". Intrigued by the "vigilance" word I click on that link to see if I will get to read some nice history or myth about some super vigilant crane. I was wondering if it had anything to do with this Crane :


The link took me to this page...!!! It was such a "Duh" movement..! :(

But Wikipedia being Wikipedia, never ceases to amaze me. After glancing over the page reading a little here and there about the bird I came across this section about Cranes in Mythology and Symbolism. Here I found that in pre-islamic Arabia the three chief goddesses were referred to as the "the three exalted cranes". Being a religion history buff I immediately opened the three Wikipedia pages to the three goddesses. I did not read all of it but merely glanced over. I found this very interesting modern depiction of the three goddesses.

                                                                                 Source : Wikipedia

What immediately caught my attention was that the temples of all three goddesses were raided and idols destroyed when Muhammad and his army seized Mecca at the very beginning of the Islamic period. It was also mentioned that a lot about these idols is written in the "Book of Idols". Apparently this book was instrumental in molding the Islamic belief that idol worship is sin. Anyways, religious beliefs apart, the page on this book mentioned about the "founding of Kabba" and I did not know that. As you would have guessed, next I started reading about Kabba.

Contrary to what I though Kabba existed much before Muhammad. There were apparently 360 idols before Muhammad seized Mecca and destroyed them. Amongst several other things, one very interesting incident from history caught my attention. It was the attack on Kabba and the stealth of the black stone by a sect of people called Qarmatians. After this the ruling caliph had to get the stone back by paying a ransom. One can imagine how much of a tremor this would have created in the Muslim world back then. Now I had to know who these Qarmatians were and why they attacked Kabba. Turns out that Qarmatians are a sect of Shia Muslims itself. Their history is pretty interesting. Apparently the basis of forming this sect was their belief that one of their imam was the Mahdi. Who or what is a Mahdi you ask? Exactly the question that came to my mind and I opened the page on Mahdi.

So Mahdi is this prophesied redeemer of Islam who would come back to earth, sent by god himself, and who would cleanse the world and uphold Islam. Pretty standard fare. Almost every religion has such prophecy I believe. Well so far 4 prominent people have claimed to be the Mahdi (very surely amongst several other not-so-prominent ones). Guess what? Out of the 4, 2 have been from India.. !! 50% share man... wohooo..! We really are a country of god-men, religion no bar.. ! :)

One of the two men was "Mirza Ghulam Ahmad" founder of the Ahmadiyya movement in India. This one instantly rang a bell in my head. I had heard and read a little about the Ahmadiyya sect. I immediately started reading about this person. His life history was somewhat interesting not very much though. He had some pretty radical thoughts about interpretation of Islam and Jihad. Like any other god-man he had debates with several religious people, wrote a bunch of books. Apart from that the Wikipedia page on him did not offer anything interesting enough to click and go to a new page.

And at that point this particular Wikipedia journey came to and end.

However, after all this I still did not know what the "PAUS" in the email meant. Surely my work has nothing to do with a medieval Norwegian family.. ! So I went back to the email to try and get more context. Digging through some of the older emails from the same person I finally found what he was referring to.

Here comes the grand ending : ;-)

After all this it was revealed to me (probably by divine grace) that, the sender of the email was referring to nothing but this :


YES.. !! He was referring to PAVS (P - A - V - S).. Pavs as in Vada Pav, Misal Pav, Samosa Pav, Pav Bhaji, etc etc.. !

He had misspelled it. He had put in a "U" in place of "V" and that made me wade through Wikipedia for about 45 minutes and then another 30 minutes writing this blog post.. !!

All hail the PAU.. !

There you go. That's the root of this entire saga. In honor of this epic saga, I am going to eat Pav... oh sorry PAU BHAJI today.

Happy PAUing to you too...! :-) 

Monday, March 30, 2015

Layman's analysis of an ULIP : Bajaj Allianz Future Gain

Recently a friend of mine asked me whether he should choose to invest in a Mutual Fund or this ULIP named Bajaj Allianz Future Gain. The ULIP salesman have apparently been pestering him a lot to invest in that scheme while I had strongly suggested him to not go with any ULIP at all. In my books ULIPs have a blanket ban. My friend Prabhakar Kudva and Dhirendra Kumar of valueresearchonline.com have given me enough information to realize that combining investment and insurance is not a good idea and ULIPs in India are definitely very bad investment options for almost all.

valueresearchonline.com had been a regular critic of ULIPs back  in 2000s when ULIPs had a free run without any check. In those days ULIPs charged insane charges like 25% to 30% and have literally scammed investors. After a lot of noise was made about this, IRDA finally woke up and put in some nominal rules to regulate this kind of practice. It however left a huge holes in the policy for these insurance companies to exploit. Insurance companies are not so closely watched as the Mutual Fund companies are watched by SEBI and transparency requirements are also lower for insurance companies. As a result ULIPs become very risky options for investors because of the exploitation possibility.

Anyways that was the history. Despite all this gyaan, my friend however wanted me to take a specific look at this particular ULIP - Bajaj Allianz Future Gain.

So I tried to do a quantitative analysis of the same to demonstrate how bad an investment option it is.

NOTE : Professionally I am an engineer and finance is just a hobby for me. So calculations below are as per my understanding and hence should not be taken as serious financial advise.

Bajan Allianz Future Gain plan facts (Source : http://www.bajajallianz.com/Corp/content/endowment/future-gain-web.pdf)

Minimum premium : 25,000/- Yearly
Minimum sum assured : 2,50,000/- (10 * annual premium)
Minimum Policy term : 10 years
Minimum Premium paying term : 5 years
Lock in period : 5 years

Premium allocation charge :
1st year : 5.5.% of Annual premium = 1,375/-
2nd - 5th year : 3.75% of Annual premium = 937.5/- per year. (3,750/- for 4 years)

Average yearly charge = (1375 + 3750) / 5 = 1025

Yearly charges so far = 1,025/-

Policy administration charge :
33.33/- per month increasing at 5% p.a. every month
Assuming this 5% is compunded every month at the end of 5 years this value will be 42.77.
So for the sake of simplification let us take the average of starting and ending value as the monthly dedudction

Average monthly dedudction = (33.33 + 42.77) / 2 = 38.05 =~ 38/-

Yearly policy administration charges = 38 * 12 = 456/-

Yearly charges so far = 1,481/

Mortality charge :
For a person aged 30, charge = 1.34 per thousand sum at risk (Deducted at monthly anniversary a.k.a every month)

Sum at risk = Maximum of [death benefit – regular premium fund value - top up premium fund value, zero]
Death benefit = 2,50,500/-
Regular Premium Fund value will keep changing depending the fund performance.

At beginning for first year = (First premium - charges) = 25,000 - 1481 = 23,519
So sum at risk = 2,50,000 - 23,519 = 226481/-
Mortality charge = 227 * 1.34 = 304

Yearly charges so far = 1,785/-

NOTE : The mortality charges will decrease as you pay more premium and also as the fund gains more value. But to keep things simple taking an average value is acceptable for this calculation and to illustrate the point that ULIPs are not really good options.

So for a yearly premium of 1,785/- you get a life cover of 2,50,000/- for 5 years (assuming you do not want to pay a premium after the mandatory 5 years)

Now consider the Anmol Jeevan - II (822) term plan from LIC.
For a yearly premium of 1,617/- you get a life cover of 7,00,000/- for 5 years (Source : https://www.licindia.in/premium_calculator.htm)

So wouldn't it make sense to separate out investment and insurance? For insurance take a plain term plan and for investment choose a decent ELSS scheme. This way your investment will perform much better and you will also have a much better insurance life cover.