ULIPs are smart investment plans to achieve your long term financial goals and choosing the right one makes all the difference.
Monitoring your own market investments requires you to invest systematically with good research and time. You need to study market trends, historic data, stock performance and many more such factors on a daily basis. If you are an active investor then this may not be a tedious task for you, however, if you are like most investors looking to generate good returns on your investment in the long term along with tax benefits then ULIP is the investment plan of choice.
ULIPs can be considered as the most cost-effective avenues for entering the equity market and make sizeable returns over the long term. They are essentially life insurance plans which provide triple benefit of good returns,. tax savings and life cover. You can choose the type of fund you wish to invest in as per your risk appetite. All you need to do is make the most out of your ULIP.
Optimizing Asset Allocation
Optimizing your asset allocation accurately can determine the risk to return ratio on your portfolio. Asset allocation means to simply diversify your investments across different asset classes. Hence, proper optimization of your asset allocations, by investing in different asset classes, can save you from heavy losses that you may suffer by simply investing in a single asset class. With ULIPs in your investment plan, you can easily switch between different asset classes like debt, managed and equity, depending on the financial goals and risk appetite of an individual.
Choosing Between Debt and Equity Funds
Each asset has different characteristics of returns and risk. Equity schemes are known for their extremes that are high-risk high-returns, whereas debt funds offer lower risk and low return over a long term period. Debt funds make your investment less risky. You can also maintain a balance of both which is called Managed Funds. ULIPs usually have 40% equity exposure, which makes them a safer investment option.
Planning as per life stage
Your life stage and financial goals play an important part in defining your risk appetite. Your child’s education and retirement needs for example, will require long-term planning. As a thumb rule to such a situation, equities take up early to mid-tenure of a ULIP investment plan. It is safer to save the corpus you’ve built by switching over to debt funds as you near the time period where you will meet your financial goals.
ULIPs are excellent fund management tools that offer different investment strategies to multiply your returns over a significant amount of time. It offers triple benefits such as a tax saving, investment plan with controlled market risk and protection.