If you have invested in a Unit-linked Insurance Plan, you, as an investor or insured person, must carefully monitor your investment portfolio (ULIP). To maximise return on investment, it's critical to manage the ULIP policy actively.
Benefits under Unit-linked Insurance Plan:
- Insurance protection
- Wealth creation
- Tax advantages
ULIP policies also allow investors to switch funds at no extra cost to maximise profits.
Therefore, it is always advised to keep a keen eye on the amount invested if you are aware of how to manage the policy. You can always leave the fund-switching to the ULIP fund manager if you are not up to the task.
One can maximise returns and build a sizable corpus over time with careful planning and vigilant monitoring, allowing them to achieve their long-term financial goals.
How to maximise returns from ULIP:
A ULIP consists of two parts: investment and insurance. The investment element is a feature shared by all ULIP plans. The policy's premium is invested in a variety of market-linked funds, including liquid funds, debt funds, hybrid funds, and equity funds. Depending on risk tolerance, the investor has complete discretion over which funds to invest in.
1. If you have a long time horizon and are willing to take some risk, equity funds are thought to be a respectable choice.
2. If a potential investor has a lower risk tolerance, ULIPs allow them to invest in debt funds.
3. As an alternative, ULIPs also allow investing in both debt and equity funds for a portfolio that is more well-rounded.
On the basis of the performance the returns are generated here.
ULIP types of funds:
1. Equity funds: These are high-risk investments that deal primarily in corporate stocks and equities. Because the focus is on the fund's growth and these funds have the highest returns, this is the product to choose if you can accept a higher level of risk.
2. Debt funds: Debt funds are referred to as bonds and income funds and it carries a moderate amount of risk with a medium reward such as corporate bonds, government bonds, and securities.
3. Liquid funds: The low-risk investments in ULIPs, which are frequently referred to as Cash Funds to Money Market Funds, are primarily made in short-term market instruments like bank deposits, commercial papers, and treasury bills. These are designed for those who don't want to put their money at risk by investing in bonds or stocks of any kind.
4. Balanced/Hybrid funds: This ULIP fund has a medium to high risk profile because it combines equity instruments like company stocks and shares with fixed income securities like bonds.
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