How ULIP is the Right Investment Option for Long-Term Wealth Creation
Being a savvy investor or managing your fund has its own merits and demerits. Even though there are a lot of investors who depend on the market experts for managing their funds, but having a good knowledge of the market can always help you to gain lucrative returns on investment.
If we talk about the remunerative options of investment then ULIP plans are certainly considered as a profitable investment option by most individuals. However, before getting into the details of how can you make most of the ULIP plans let’s first talk about what is ULIP.
ULIPs are one of the most worthwhile ways to start investing in the equity market. Moreover, apart from this, ULIP plans also offer a combined benefit of investment cum insurance to the individuals. With a wide range of fund options to invest in ULIPs works as a great long-term investment instrument to achieve the financial objective of life.
To gain maximum returns on investment by investing in the best ULIP plans, all you need to do is to follow a few simple steps:
- Optimizing Asset Allocation- Allocation of assets can be primarily described as evaluating your returns and risk portfolios. By allocating the assets across different funds you can create a diverse portfolio and can balance out the risk. One of the major benefits of optimizing your assets is that if a specific asset is going in loss then it can get compensated by another asset class profit. Thus, the overall risk of investment gets minimized. Moreover, by choosing the option of free switches between various funds an individual can easily manage their fund. Free switches help the insured to make changes in their investment between different asset classes like cash, debit, and equity depending on the risk factor and financial goals of an individual.
- Choosing Between Equity and Debt Funds- As per the risk appetite of an individual and considering the performance of the funds the insured must choose between equity and debt funds. Different fund options have different features of risk and returns for instance: you can gain higher returns by investing in an equity scheme, but the risk factor will also be high. On the other hand debt funds offers the lowest return and lower risk in a long-term period. However, debt fund investment creates a strong portfolio and ensures a stable return by minimizing the risk. By evaluating your risk factor and your short-term and long-term financial requirements requirement you must select between the debt and equity ratio.
- Life Stage Requirements- An individual’s risk appetite depends on the various stages of life. By making smart investment choices and by gaining higher returns one can balance the investment profit and loss. The financial obligations of life gradually increase when an individual reaches his/her retirement age. So the risk appetite of an individual also decreases. To have a safe investment, you must switch to funds that are less risky like debt funds as compared to an equity fund.
- Look for Semi-Controlled Switching Options – Many insurance buyers often fail to monitor the fun performance actively or manage the funds of their portfolio. So to provide the best to the investors ULIP Plan offers the option of semi-controlled fund management. Under this option, the funds are set to switches automatically as per the instructions provided by the insurer. You can also use the semi-controlled switching option to start programmed switches monthly. On a pre-determined date, as decided by the insurance company, the policyholder can switch a fixed amount per month to another fund of their choice. The insured can decide the fund option from which the pre-decided amount is to be switched and the fund to which it will be switched to.
Whenever an investor invests in a ULIP Plan, a few pre-decided charges are deducted. These charges are- policy administration charge, fund management charge, surrender charge, mortality charge, etc.
As loyalty additions, some of the aforementioned charges are paid back to the policyholder. Since a ULIP comes with a lock-in period of 5 years, it offers a higher ROI over a long period.
At the end of the policy tenure, the maturity benefit is paid to the insured in the form of fund value.
Since ULIP is a protection plan, it offers a death benefit in case the policyholder passes away during the policy tenure. The following death benefit is paid to the policy nominee:
A higher value of the assured sum or the fund value
Over to You
As per investment experts, ULIP is an excellent fund management option that helps policyholders to accomplish their investment goals. To do so, it offers different investment strategies that help to generate maximum return on investment. The versatile features of ULIP offer myriad benefits such as high return, tax saving, life cover, switching between funds, investment flexibility, etc. Hands down, ULIP is regarded as one of the lucrative investment options to accomplish the long-term investment goals of the policyholders.
Written By: PolicyBazaar - Updated: 15 February 2021