ULIPs Are Back With A Bang
Written on Friday, May 13, 2016
By Kushagra Nigam
ULIP's are goal based financial solutions which combine insurance protection and wealth creation. In ULIP's your investment is divided in two portions, one for insurance protection and other for wealth creation. The portion for wealth creation is further invested in equity, debt or balanced funds as preferred by you or as per your risk appetite. The value of your investment changes with the performance of fund opted by you.
ULIPs are dynamic plans which offer flexibility to customize the plan i.e. changing the life cover, premium amount etc. Features like transparency, flexibility, liquidity & goal based savings have made ULIP's as preferred investment option today.
Why should one invest in ULIPs?
1. Protection of your goal from day one-Gives you advantage of protection + investment
2. Gives opportunity to do disciplined savings for a long term goal
3. Investments done by an expert, an investor can beat inflation on long term
4. Investor has the option to invest in multiple funds in one ULIP, he also have an option to switch funds.
5. Fund Value can be accessed without terminating the policy through partial withdrawals
6. Lock in period of 5 yrs ensures that the fund gets time to grow and also that the fund manager and the freedom to invest in value stocks which are for longer period and have a chance of better returns
7. Get tax benefits under Sec 80C and Sec 10(10D)
Get the advantage of Rupee Cost Averaging and Power of Compounding through ULIPs
1. Rupee Cost Averaging
Get more units when the NAV is falling and less units when the markets are rising, Systematic Investments helps you reduce your average cost of purchase, thus no need to time the market
Annual Investment – Rs. 3,00,000
Average NAV @ Rs 11.60 = 25,862 units
NAV for investments through Systematic Investments @ 11.562 = 25,952 units
Your Average Cost of Purchase by investing in SIP is lower resulting in to higher number of units purchased
*Average NAV is sum of NAVs in 1 year divided by no. of months.
2. Power of Compounding
Four investors start investing in share market Sensex Index on the 1st business day of each month at different periods of time. Portfolio was reviewed Dec 31st 2013.
Mr. A’s investment value is 781% of Mr. B
Delayed investments results into less amount of wealth creation even after investing higher amount every month!
Start Early to Earn More
-Also the probability of loss gets reduced with the increase in time horizon.
3. Mantra to invest in ULIPs