ULIPs help you to manage your risk return profile. With the double advantage of security & investment, ULIPs lately have become the most popular insurance product from the obtainable range of life insurance policies. With a higher rate of return, ULIP gives hard competition to traditional insurance products like endowment designs & money back designs. The basic reason for opting for policies other than term insurance is ensuring highest maturity value for invested sum besides mortality benefits.
When speaking about maturity value, what is most important is the Internal Rate of Return (IRR) on investment. It is the annualized compounded rate of return where the net present value of the cost of investment will equal the net present value of the benefits from investment. The owner with highest IRR will be most desirable. But to keep away from the feature being exploited by insurance agents, the IRDA has fixed 6% & 10% as the assumed rate of return for projecting future benefits.
According to the latest ULIP rankings by Outlook Money Birla Sun Life’s Classic Life Premier, ING Vysya Life’s High Life & Aviva’s Freedom Life Plan are among the Top 10 Type 1 ULIPs. But investing in a nice ULIP insurance owner is only the first step to clever financial investment planning. After investing, you need to effectively manage your ULIP for optimum returns. Ignoring or forgetting about a ULIP after investment may finish up in losses although you might have invested in the best ULIP plan obtainable. Thus the trick is to select a nice ULIP & make it perform.
Although there's fund managers to regularly monitor & deliver above benchmark returns on your ULIP investments, still you can considerably improve its performance by taking advantage of the Switching Mechanism.The switching facility offered by insurance firms permits the insured to take advantage of the market movements in order to make profits. Depending on market sentiments, the investor can switch from one fund to another without incurring tax liabilities. Usually the life insurance India companies offer different types of fund options according to your risk appetite. A conservative fund may have 100% investments in debt instruments to preserve value; balanced debt fund might have 60: 40 ratio of debt: equity; growth fund could have the debt/ equity ratio at 40:60 to enhance the worth of your investments; whereas the prime equity fund will usually allot anything from 90% to 100% of investments in equity & related instruments for people with high risk preference.
The general rule for Debt-Equity Portfolio Management in ULIPs is that you ought to go conservative by increasing your investments in debt when the markets are at their highest, very unstable & likely to start falling any time. Vice versa when the markets are very low & depressed. You will even be able to accumulate some nice stocks in your portfolio at cheaper value due to low market sentiments by increasing your equity exposure at this time. When confused about what to do, bend towards debt to be on the safe side.
On a closing note, ULIPs are great financial planning & retirement planning product, they need some timely management. Buy them for long term & not for tax saving purposes. Monitor the market movements & take advantage of the switching facility to optimize your returns. In case you can’t do all this, it is better to opt for PPF & Mutual Money to be on the safe side.
When speaking about maturity value, what is most important is the Internal Rate of Return (IRR) on investment. It is the annualized compounded rate of return where the net present value of the cost of investment will equal the net present value of the benefits from investment. The owner with highest IRR will be most desirable. But to keep away from the feature being exploited by insurance agents, the IRDA has fixed 6% & 10% as the assumed rate of return for projecting future benefits.
According to the latest ULIP rankings by Outlook Money Birla Sun Life’s Classic Life Premier, ING Vysya Life’s High Life & Aviva’s Freedom Life Plan are among the Top 10 Type 1 ULIPs. But investing in a nice ULIP insurance owner is only the first step to clever financial investment planning. After investing, you need to effectively manage your ULIP for optimum returns. Ignoring or forgetting about a ULIP after investment may finish up in losses although you might have invested in the best ULIP plan obtainable. Thus the trick is to select a nice ULIP & make it perform.
Although there's fund managers to regularly monitor & deliver above benchmark returns on your ULIP investments, still you can considerably improve its performance by taking advantage of the Switching Mechanism.The switching facility offered by insurance firms permits the insured to take advantage of the market movements in order to make profits. Depending on market sentiments, the investor can switch from one fund to another without incurring tax liabilities. Usually the life insurance India companies offer different types of fund options according to your risk appetite. A conservative fund may have 100% investments in debt instruments to preserve value; balanced debt fund might have 60: 40 ratio of debt: equity; growth fund could have the debt/ equity ratio at 40:60 to enhance the worth of your investments; whereas the prime equity fund will usually allot anything from 90% to 100% of investments in equity & related instruments for people with high risk preference.
The general rule for Debt-Equity Portfolio Management in ULIPs is that you ought to go conservative by increasing your investments in debt when the markets are at their highest, very unstable & likely to start falling any time. Vice versa when the markets are very low & depressed. You will even be able to accumulate some nice stocks in your portfolio at cheaper value due to low market sentiments by increasing your equity exposure at this time. When confused about what to do, bend towards debt to be on the safe side.
On a closing note, ULIPs are great financial planning & retirement planning product, they need some timely management. Buy them for long term & not for tax saving purposes. Monitor the market movements & take advantage of the switching facility to optimize your returns. In case you can’t do all this, it is better to opt for PPF & Mutual Money to be on the safe side.
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