ULIPs or Unit-Linked Insurance Policies are single integrated plans that provide investors with a combination of insurance and investment. ULIPs are a good investment to create a versatile portfolio for yourself and save tax. The smart thing to do is to spread your risk and invest across different classes of asset instead of putting all your eggs in one basket. And the most important thing in the process is asset allocation to ensure that your return balances any loss made on any class of asset, with substantial profits made by another asset class. This way you can ensure that the overall risk of your investments is significantly lower.
ULIPs offer a certain leeway and flexibility to switch between funds and enable you to manage your portfolio asset allocation in an effective manner.
There are certain important points that you can remember when you want to take full advantage of your Unit Linked Insurance Policy. Here are some of the key ways by which you can get good returns out of your ULIP plan:
- Balancing your Debts and Equities:
There needs to be a balance between your debt and equity ratio, which heavily depends on your age and the life stage requirements. There is a simple thumb rule to follow for the same. If for instance, your total investment is 100, simply deduct your age, invest that money in debt, and invest the remaining money into equity.
- Recognizing your needs:
Your requirements will change and differ as you age. It is important to recognize those needs and leave room for intuition. It is a good idea to switch from riskier debt funds to the less risky ones as you become older, to get great ULIP returns on your ULIP investment.
- Making use of the switching option:
If you find it difficult to stay alert and actively monitor and manage your portfolio and fund movement, you can make use of the ULIPs-provided programmed switching option.
- Understanding the overall economic context:
It is also important to look at the overall economic situation and observe the scenario. If you observe that the equity markets are expensive and much overvalued, you could make a switch from equity funds, only to shift back if the market gets better. There are also auto-trigger options made available by some of the insurance funds that enable you to switch automatically depending on the recent trends of the underlying assets in your fund.
