Unit-Linked Insurance Plan (ULIP) is one of the most sought-after long-term investment instruments available in the market today. This is because it is flexible, offers tax benefits, and provides attractive returns in the long run. If you wish to have an in-depth idea of what is ULIP policy, read on.
ULIP is a wealth creation avenue that offers dual benefits of insurance and investment in a single plan. If you want to grow your wealth significantly and save on taxes, ULIP can be an ideal investment tool.
ULIP plan returns are much higher than most of the financial products. Besides this, ULIP can help you earn lucrative returns from the equity market. With numerous choices available in ULIPs, you may be confused about which is the most suitable plan for you. So, you can seek the help of a ULIP calculator to analyze the features, tenure, types of funds, and premiums in various plans. By doing this, you can make a wise decision and invest your hard-earned money in ULIP funds that can meet your financial goals and risk-taking appetite. Here are some tips that you can follow to generate good returns from your ULIP investment.
- Have a proper asset allocation strategy
Asset allocation plays a pivotal role in determining the risk and reward ratio of a portfolio. Therefore, it becomes vital to diversify your portfolio and invest your funds in various asset classes. Here, the loss of a particular asset class can be covered by the profit earned from another asset class, which helps you reduce the risk and safeguard your investments. While investing in ULIPs you get the option of selecting from equity, debt, or a combination of both funds. You can determine the percent of investment in such funds as per your risk-bearing capacity and financial aspirations.
- Choose between equity and debt funds.
Investment in equity funds is suitable for investors who have a significant risk-taking appetite. Here, the risk is substantially high, but the returns are generous. Conversely, risk-averse investors can consider investing in debt funds. However, here, the returns are substantially low. Therefore, it is essential to strike the right balance between equity and debt funds. Debt funds can compensate for the loss from equity funds to a great extent. Select the ratio between equity and debt funds according to your current life stage, monetary objectives, and risk tolerance
- Be smart while using the ‘fund switching’ feature
One of the plus points of investing in ULIPs is that it provides you with the convenience of switching funds. Here, you can move your investments from equity to debt or vice- versa based on the market’s performance. So, if the market is bearish, you can safeguard your accumulated wealth by switching to debt funds. Whereas if the market is at the peak, you can transfer your investments from debt to equity, as this helps you to maximize the returns on investment.
- Stay updated with the market conditions
ULIP plan returns are subject to the performance of your investments in different market conditions. If you are updated with the market scenario, you can make an informed decision of switching from one fund to another and earn worthwhile returns on investment.
ULIPs have a long-term orientation. Therefore, it is advisable to monitor the performance of your investments across different asset classes to minimize the risk and capitalize on the returns. If you are not sure about which ULIP to invest your money in, you can use the ULIP calculator to ascertain the approximate return from various plans and make a sensible decision.
