Reliance Salary Advantage Fund: Another trap

Yesterday, I saw the promotion of Reliance Salary advantage fund on one of the leading business news channels.

Here is the summary of the offer:

You get salary each month. They advice you to set aside your monthly expenses and other payments that you need to make (like EMI, etc.).
Put the remaining money in Reliance Salary advantage fund.
The money that you put is invested in so called low-risk instruments, which are again mutual funds of reliance like Reliance Liquid Fund.
Their past performance shows that they have managed to get around 6% returns on annual basis.




Although at the end of the table, they do mention that “Past performance may not sustained in future” :- ) Even for a mere 6% past performance annually that too from 1995, they cannot guarantee to sustain it, and they call it salary advantage fund.
You get an ATM cum debit card that you can use to withdraw money anytime. The condition is that in a month, only 1 transaction is free, that too only at HDFC bank ATM. They have not mentioned anything about the charges that you may have to pay for withdrawing money from other ATMs or making more than 1 withdrawal in a month.
Though it is said to be like a liquid bank account, you can withdraw only upto 50% of your invested money – not more than that.
Another disadvantage is that though it is like a bank account, it cannot be used to issue cheques or EMI payments.

One more ambiguity is that the reliance website claims that there are no entry/exit loads; while report on CNBC mentioned that there is a 2.25% entry load. God knows what the truth is. If there is an entry load, reduce it from 6%, you will end up only with 6-2.25% = 3.75% - even less than what is offered by bank account.

There is no mention of the dates for which the investment will be considered for earning interest (like minimum balance between 5th and last date of the month). Such basic things are expected from a newly launched instrument.

The promotion on CNBC sited a “salaried” person, wearing a tie and formal shirt, happily mentioning how satisfied he is with the Reliance salary advantage fund.
-He mentioned that he is assured of 6% returns, as the past performance of the fund has been almost 6%. He is assured based upon the past performance, but the company offering the service is not assured for the returns in the future (as mentioned on their website)
-What has the markets done in last 12 years? Were they limited only to 6% returns? Even the returns from bonds were more that 8%. Probably the salaried person doesn’t know OR he was paid to speak only a few limited sentences for promotion.
-He also mentioned that 6% is better than 3.5% or 4% of what the banks offer. How about the guarantee that the bank gives and uncertainty this fund has?

Now compare it with a bank account or Fixed deposit account. My bank offers me 6% interest rate just for a deposit of more than 3 months. The return is GUARANTEED. If I keep the money for just more than 1 year, I am assured a GUARANTEED return of 9.5% in my FD. Should I still go with reliance salary advantage or should I visit my bank branch or login to internet banking for opening an online FD account?

In essence, this scheme is nothing but another way of presenting a new instrument or service, which is actually not worth it. Somehow, I am now also loosing the trust on the business news channels, about the way they are presenting such things. The promotion appeared to be like a news item – while it was actually an ad. It’s all about promotion and money making business. Let’s be keen on learning about calculating the real numbers, instead of jumping in on any advertisement or advice from a promotional scheme.

This is the official website of reliance salary advantage fund. (Opens in a new window)

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