Finance

Know how to manage your ULIP and enhance your returns

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Returns and investments always go hand in hand. In fact, the primary reason for investing is to gain high returns on investments. While certain investment tools might offer fixed returns, other instruments would provide you with market-linked returns. The dynamics of market-linked products are to protect you from market volatility. A Unit Linked Insurance Plan (ULIP) is one such product, which can help you to enhance your returns.

Before knowing how to manage your ULIP performance, let’s begin by understanding what a ULIP plan is in detail:

What is a ULIP plan?

A ULIP plan is an affordable and flexible option for investment. A ULIP investment allows you to select from equity funds and debt funds based on your risk appetite and financial goals. In addition to this, it gives you the flexibility to switch between funds if you’re unsatisfied with the returns. Since a ULIP plan is a market-linked product, you should constantly keep a tab on the ULIP performance to secure your funds from market highs and lows.

With a brief understanding of a ULIP plan, let’s take a look at the top three ways that will help you to enhance your ULIP returns:

  1. Make use of the transparent ULIP structure

A ULIP investment offers you with transparency, where it clearly mentions all the charges and commissions. When you invest in a ULIP policy, you would receive a daily report on your fund performance. These reports are either done on a quarterly basis or every year. With these updated reports, you can easily keep an eye on your investments and make the required changes accordingly.

Under a ULIP plan, you can select from the following types of funds mentioned below based on your risk appetite:

TYPE OF FUND NATURE OF INVESTMENT THE RISK INVOLVEMENT
Equity funds Your money is invested in company stocks with the primary aim of capital appreciation Medium to high
Debt funds Your money is channeled towards corporate bonds and other fixed- income instruments Medium
Cash funds Your money is put in secured options like banks and money markets. Low
  1. Switch between ULIP funds

The safe way to protect yourself from the market fluctuation is to avail the switching features of a ULIP policy. Under a ULIP policy, you have the freedom to switch between ULIP funds to maximize your returns by diversifying your financial portfolio. For instance, if you predict a market downfall, you can shift to debt funds from equity funds. That way, you can protect your finances while approaching the milestones of your life like your wedding, your child’s higher education, and so forth.

In case you don’t have any knowledge about market performance, you can seek professional help. A fund manager will look after your ULIP funds and shift between these funds after considering the overall market scenario. Many insurance companies might either allow you to make free switches or charge switching fees.

  1. Redirect all future premiums

At the time of inception of a ULIP policy, you can redirect your future premiums to different funds by keeping your current units intact. When the market is not at its best, you can divert your future premiums to less-risk fund options. Once your fund is completed developed, you can then redirect it back to where it initially was to receive high returns.

As highlighted above, a ULIP plan is a long-term investment, which requires commitment and discipline to stay invested. It has a lock-in period of five years. With a proper understanding of the market and the right knowledge of funds, you can grow your invested capital to accomplish your life goals.

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