How ULIPs help you balance asset allocation

Akansha was nothing short of a culinary legend in her neighbourhood. No matter what the cuisine, she always knew how to mix the ingredients in just the perfect amount to get the right taste. “It’s all about understanding that ingredients are as important as the proportion to get the desired result,” Akansha would tell others who would throng her for recipes.

What Akansha had to say about the importance of ingredients and their proportion in a dish to maximise taste, also holds true for many other aspects of life including your investment portfolio.

Most of us are risk-averse and normally put our money where we find ourselves at minimum risk like bank FDs. However, an investment portfolio that’s dominated by a single asset class cannot deliver the same result as that of a well-balanced investment mix. That’s where ULIPs come into the picture.

Unit-Linked Insurance Plan (ULIP) is an innovative hybrid product that offers dual benefits of insurance as well as investment. In this case, the premium paid is divided into two parts—one to offer life coverage and the other goes towards investment in money market instruments. Now, to get the best results from your investments, you need to create an assortment of asset classes rather than going for a single one. Like Akansha said, in order to get a perfect recipe made of all sorts of market-linked instruments like equity, debt and gold, you need to make the asset allocation responsibly.

Now, what does asset allocation mean in simple terms? In case of ULIPs, asset allocation refers to the proportion of each asset in your portfolio that is influenced by your risk appetite, long-term financial goals and several other factors.

Therefore, this implies that those investors that have a bigger risk appetite and want to hold on to their equity investment for a long time are likely to get more attractive returns.

For such risk savvy investors, investing in ULIPs can be a great investment idea to maximize their returns. Moreover, like other life insurance policies, you can enjoy ULIP tax benefits of up to Rs. 1.5 lakhs on the premium paid under Section 80C of the Income Tax Act.  It is important to note here that right now ULIP plans are the only equity-linked investment plans that are tax-free. ULIPs are an innovative product in the sense that they promptly eliminate the hassles associated with middlemen from the entire trading process. Today, you have the option to choose from seamless and instantaneous online ULIP investment plans such as Bajaj Allianz Future Gain, which are offered with no allocation charges.

If you want to maximize your returns on your investment, but are running short of time or confidence, ULIP helps you balance your asset allocation for the best results with the help of experienced fund managers. ULIPs also offer the added advantage of allowing fund switching which can help manoeuvre through market volatility and mitigate risks during adverse market conditions. ULIPs Plan acts as a cost-effective risk management tool as it allows you unlimited free switching of funds unlike other insurance providers that are likely to charge you for this facility.

With fund switching, you can make your asset allocations based on the market conditions along with your own long-term financial goals and risk appetite.  You can review your portfolio and reallocate your assets as you wish without worrying about additional charges. Keen investors benefit from having a hands-on approach by getting policy statements on a regular basis. With this, you can easily keep track of your investments. With products like Bajaj Allianz ULIP Plans, available on Finserv MARKETS, you have access to assets that offer varying levels of risk and returns, customizable to suit your needs.

ULIPs have gained an impressive popularity among investors who want to monitor their corpus closely and track the growth over time. Now, an increasing number of young professionals are becoming financially literate, thus looking for instruments that can help them maximize their profits. Offering dual benefits to its investors, ULIPs have emerged as one of the most highly preferred avenues for investment.