If you are also the one who is thinking to invest in-between your income and expenditure, then you are not alone. There are many like you who want to multiply their corpus so that they will easily be able to meet their future financial goals. However, with a plethora of options available in the market, most of you may get confused in selecting the best investment plan. One recommended option is ULIPs or Unit Linked Insurance Plans.
ULIPs are one of the most cost-effective ways to enter into the equity market. The reason is ULIPs, not only offer dual benefits of insurance and investment, but they are very flexible and provide many fund options to invest money.
So, if you are thinking to invest in ULIP plan and want to maximise your returns from it, then you can do that by following the below simple steps:
- Modify Your Asset Allocation: The primary determinant to define the risk and return of your ULIP portfolio is asset allocation. ULIP basically gives you an opportunity to create your diversified investment portfolio by investing throughout various asset classes. Therefore, you can compensate your loss in a particular asset class by investing in the different asset class that is in profit. So, in order to maximize the returns of your ULIP plan, you should modify or optimize your asset allocation time to time. Most of the ULIP plan providers give the option of free switches among the funds. In this way, you can make free switches to optimize the return.
- As Per Your Life Stage Needs: Your investment requirement and risk appetite change with your age and your age’s requirement. For example, the investment needs and risk appetite of a senior citizen or a recently retired person are different than a 40-year young man, who has small kids. Therefore, as per the different stages of life, your financial obligations change and so does your investment options. So, in order to meet that it is recommended to keep changing or switching your fund options.
- Select an Option between Equity and Debt Funds: Every financial asset is different while we talk about risk appetite and return. As per one’s risk appetite and asset class’s performance, it is recommended to select between equity and debt funds. On one hand, where equity funds offer higher returns, they have a higher risk appetite. The other hand, debt funds offer lower returns but have a lower risk. So, if your risk appetite is lower, then selecting a debt fund is recommended whereas with higher risk appetite equity funds are most suited. However, the risk appetite also changes with life stage, so to optimize result you can switch the funds at different life stages.
- Opt for Plans that Offer Semi-Controlled Switching: Most of the ULIP plan providers offer semi-controlled fund management option. According to this option, you can initiate programmed switching every month. You can switch the monthly fixed amount from one ULIP fund (provided by your ULIP provider) to another fund on a date set by your insurer. However, most of the ULIP investors are unaware of this option so they do not use this facility and rely on the automatic switching offered by the insured. Sometimes, there are providers who do not offer this facility. Therefore, it is better to first be clear about the availability of this feature in your ULIP plan and if it is then utilized it in order to maximize your returns.
Final Words: When you invest in ULIP for the first time, few charges are deducted. However, they are deducted at the time of entry only and they include the policy administration charge, fund management charge, surrender charge, mortality charge, etc. Moreover, some of these taken charges are returned to you as loyalty addition. Since your money in ULIP plan is invested for a minimum of five years, thus you get a higher return on your investment. In this way, you can define ULIP as one of the good fund management systems as it offers multiple fund options and by following the above steps you can always maximize the returns. So, do not overthink about the investment options, just invest in ULIP.