Among the various financial instruments used by people for investing money in order to grow their wealth, ULIPs have been gaining a lot of popularity. one of the reasons that they are becoming so popular is because they provide dual benefits of investment and insurance in a single policy. You also got to enjoy ULIP tax benefits with the policy. If you’re planning on investing in a ULIP and you want to understand how you could get better returns, then read the tips given below to get a better understanding.
What is a ULIP plan?
ULIP is a type of life insurance policy in which you can enjoy the benefits of investing your money in the markets to increase your wealth. You can also enjoy the safety of a life insurance cover that will financially protect your family from different life risks. Investments done in ULIP are either in either equity or debt funds. The investments will be made based on what your risk appetite is and what is the life goal you want to accomplish. Not only do you get to enjoy tax benefits in a ULIP, but the returns are also good, especially when you invest in a long term ULIP policy.
How to get good returns?
If you have understood what a ULIP plan is and you want to know how you can ensure that the returns you get from your investments are good and substantial; then you can take advantage of the tips given below:
- Take advantage of switching
What is switching? Switching is an option provided to you in a ULIP, which allows you to reallocate your investments from one fund to another. For example, assume 60% of the money that you have invested in a ULIP is kept in equity funds and the remaining 40% is kept in debt funds. At a certain point of time, if you feel that your investments could get exposed to a certain market risk and you want to allocate more into debt funds; then you can do so with the help of the switching option. This ensures that the investments remain safe from market risk and your returns don’t get affected because of those risks. Do keep in mind that in ULIP, you only get a certain number of free switches before your insurer charges you for switching your investments.
- Go for balanced funds
In ULIP, you get to invest in either equity funds or debt funds. In equity funds, your money is invested in stocks of market-listed companies. Equity fund has a higher risk factor. There is a chance that your investments could also get impacted because of market fluctuations. Debt funds on the other hand, provide you with investment opportunities in government securities and bonds, corporate bonds, and other liquid markets. Compared to equity, debt funds have a lower risk factor. Many investors turn to invest more in equity funds due to a higher risk appetite. It is always advised that you should invest in both the funds. The main advantage that you get is that even if one is exposed to higher risk, you will get consistent returns from another fund without any impact to the investments.
- Pay attention to the market
One of the ways that you can ensure that you get good returns on your investments is by paying attention to the market activity. There is no guarantee that the market might go up or down. So, it is imperative of you that you pay attention to the market activity. This will give you a better idea as to when you should switch your investments from one fund to another and avoid having your investments impacted by market risks.
- Make timely premium payments
The money that is used for investments and providing life cover comes from the premium that you pay for your policy. If there is any kind of delay on your side in paying the premium on time; not only will investments get impacted, but so will the amount of life cover that is provided to you. You will also be fined a certain amount for late premium payment. Ensure that you plan your expenses in such a manner that you can pay the premium for a policy without any delays.
If you follow the steps, then you can ensure that you get good returns from the ULIP policy. You can take advantage of the ULIP calculator from your insurer’s website to understand how much you should invest to get good returns.
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