ULIP stands for unit linked insurance plan. It is among many other long-term investment options available in the market. Other investment options include real estate, gold, and bonds. But equity is the only investment option which provides you the regular income in the form of Dividend. There is also the capital appreciation. With capital appreciation the price of equity increase on any corporate event. Corporate events may be bonus issue or splitting the shares or etc.
Challenges in ULIP investment
Equity is quite challenging investment option. And so is choosing ULIP investments for your portfolio. Because to reap the good return on equity one needs to give time to market. Key to gain profit in equity is to keep update yourself. Update about whatever currently happening in the economy. Then within the particular company in which you want to invest. Besides, tracking news is not enough. You need to identify the impact of the event on the share price is.
In other words, predicting the behavior of share price is the crux of the equity market. Once you understand the behavior of stock prices It will help you to take the right decision. Right decisions relating to when to enter and when to exit the market. Further, you can also easily decide upon which stock you should choose.
In a similar way, you need to look into the ULIP investment portfolio before you pick one for yourself. You need to scan their portfolios. Also checking on the stocks in which they have major investment is a good idea. Doing this will give you a sense of quality investment that the ULIP fund manager is maintaining. Obviously, you need to do this after you become satisfied with the insurance part that the ULIP provides.
Why do you need to keep track on ULIP investment portfolio?
Tracking and predicting the market is not everyone’s cup of tea, it requires a lot of effort and time, and every one of us wants maximum returns on our investment. So Unit-linked Insurance Plan is the best investment option for those who want to invest in equity but they don’t have enough time to track the market and enough knowledge to trade in equity directly. ULIP’s (Unit Linked Insurance Plan) is the secure way to invest in equity. If you invest through ULIP you will enjoy the benefits of equity returns along with comparatively lower risk and significant security.
Brief about ULIP
Unit linked insurance plan is an investment product offered by insurance companies, it is quite different from regular insurance plans. The premium you pay is utilized by a fund manager to invest in a pool of different investment avenues like inequity, Government securities, and money market instruments.
Factors to consider while investing in ULIP
1. ULIP charges
There are certain factors which you should keep in mind before going to invest in ULIP, such as Administration Charges, Premium Allocation Charges, Fund Switching Charges, Mortality Charges and a Policy Surrender or withdrawal charges.
2. ULIP risks
Since the returns from Unit Linked Plan is directly linked to the performance of the market. Hence the returns are subject to market risk. But as it is the pool of fund so the fund selected in the plan are negatively co-related. Suppose you fund to contain the pharma stock, Automobile stock, government securities. When there is a downtrend in the stock market than at the same time pharma sectors performs well. In the same way in the fund, if equity shoe negative trend bonds perform well and subside the risk of loss. ULIP has considerably low risk than if you invest directly only in the stock market or only in the bond market.
3. Tax Saving with ULIP
If you go for the long-term plan this will also provide the shield to your tax liability under the section 80C of Income Tax. Maximum Rs. 1, 50,000 is allowed for deduction. The deduction is allowed up to 10% of the assured sum or premium, whichever is lower. To avail the tax benefit you have to go for minimum 2 years of the plan.
ULIP is the best option to earn the maximum benefit from the stock market with considerably low risk. Salaried people can go for this plan to attain the various financial objectives.