Equity markets are known for their high risks and high returns. Everyone enjoys the ride when they get excellent returns. However, the market volatility may instil fear in investors and compel them to look for other safe investments. To avoid losing returns on investments while still keeping their money at moderate risks, investors have placed their bets on the Unit Linked Insurance Policy (ULIP).
ULIP is a life insurance product that has an investment component to it. It ensures that the life of the policyholder is secure while earning returns on investments. Here is how the investment aspect of a ULIP plan helps you mitigate the risk involved in equity markets:
- Choose your own strategy
For the stock markets, there is nothing like safe investments with guaranteed returns. Depending on various domestic and global factors, the market may generate significantly high or low returns. It is the risk that the investor has to take. In a ULIP plan, one can choose their own investment strategies and allocate funds accordingly. If one is looking for an investment with low risk, they prefer debt funds. If one wants to invest in equity but is unwilling to risk all his investment, they choose balanced funds that comprise both debt and equity allocation. ULIP offers the liberty of choosing your own strategy and planning according to the goals for which you are investing.
- Flexibility to switch between funds
Usually, when you invest in equity or equity-related financial instruments, whether you book a profit or loss, you cannot switch your fund allocation anytime you want. One of the remarkable ULIP benefits is the freedom to switch your fund allocation anytime you want. Since ULIPs are directly linked to the market, switching allocation at the right time allows you to make the most of the market uncertainties. Equity markets keep fluctuating and you can adjust your allocation accordingly to maximize your returns. Several people also invest in equity markets in the initial years when their risk appetite is high and, later, switch their allocation to debt funds, nearing the time of maturity. The flexibility of switching funds is a rare feature of ULIP that has proven to be helpful to investors over the years.
- Managed by professionals
If you decide to invest in a ULIP plan, you will find that there are several ULIPs to choose from, both online and offline. It is important to search and look at the past performance of the ULIP that you are planning to buy. This is because apart from being life insurance, it is also an investment. Whichever fund you choose to invest in based on its performance, know that it is managed by professional fund managers. The job of a fund manager is to invest in funds that offer you your desired results. Here, instead of you having to track the stock market, they do it for you and invest accordingly. Having a professional handle your portfolio will relieve your stress regarding your returns on investments.
- Offers the benefit of compounding
Each individual has their own goals for which they have been saving and investing their hard-earned money. It can be for their child’s education, travelling, buying a house, or simply saving up for their retirement. Investing in equity markets is risky, but with high returns, you can fulfil your goals. However, if your portfolio is down, you may lose some of the principal money that you have invested. From the different types of ULIP, whichever fund you invest in, if you continue your ULIP for the long haul, you are likely to receive great returns because of the benefits of compounding. It is important to stay for the long haul and invest with discipline to gain the benefits from compounding. Compounding is when, eventually, over the years, you have not only earned interest in your principal amount but on its returns as well.
- Your money is in safe hands
The reason people hesitate to invest in equity is that they are afraid to succumb to market volatility and lose all their money. There are different types of ULIP you can choose from to achieve your financial goals. Professional fund managers manage equity-based funds and offer several long-term ULIP benefits. You can decide how you want to invest in your ULIP and keep your money as safe as you want.