A ULIP or Unit Linked Insurance Plan provides a way for securing your life financially and investing in your future goals all in a single plan. A ULIP plan splits your premium amount into two parts. One part goes towards providing you with an insurance cover, and the other part is invested in the money market.
The latter part, which is invested, is dynamic and offers a range of choices for you to plan your expected returns. What this means is that you can choose your investment avenues as per your future goals, switch between funds whenever you want, and strategize your overall portfolio to reap maximum returns.
While planning to invest in a ULIP plan, everyone has concerns about the return on investment (ROI). Everyone often chooses to believe that premium would strictly be invested in equity, which is more fluctuating and unsafe as it is prone to market risks. Due to this, people usually postpone investing in ULIP. However, that’s not the case!
Do ULIP Plans Invest only in Equity Funds?
Well, this is a myth! The fact is that ULIPs invest in a wide range of funds taking your policy term and risk appetite into consideration. With a ULIP plan, you can invest in equity funds, debt funds, bonds, balanced funds, etc.
You can also invest in a combination of equity and debt funds as per your preference, goals, and risk-taking ability. Because at the day’s end, the overall use of the investment part is that you get to create wealth over time to realise your dreams and goals, and you can now do so by investing in a way that maximizes returns!
But what people fail to understand is that to maximise returns, it’s not necessary to take a lot of risks always. You can choose ULIP to diversify your investments across various funds and can seek assistance from your fund manager.
ULIPs also allow you to switch funds in your ULIP plans. This means you can change the type of funds you invest in as per the current market situation, so you always get to be in charge of your investments and reap maximum benefits.
What is fund switching in ULIPs?
You can switch between equity and debt funds in ULIPs. The money markets fluctuate every single day. Thanks to ULIP’s ability to allow you to switch funds, you can make the most of your investments in a strategic way so that your portfolio gets to reap maximum returns from current market trends. Depending on your risk-taking ability, you can choose what portion of your investments you want to invest in debt funds (less volatile) and equity funds (more volatile).
While fixed returns from debt funds may seem a safe investment option, you must also know that the return on investment is significantly low compared to equity funds. Thus, make sure you never completely give up on equity funds.
You can divide the percentage of investment in equity and debt funds depending on your financial goals. You can invest about 15%-25% in equity funds and the majority in debt funds if you want to play it safe and earn benefits from equity funds.
Now that you know how to switch funds to maximise your returns, don’t postpone investing in ULIPs!
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