How to Maximize your Gains from ULIP?

Written by : Knowledge Centre Team

2021-11-03

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ULIP is one of the most popular financial products in the market. This long-term investment plan has an edge above other plans due to its dual benefit structure. It not only provides you with the safety of your family by providing life security but also gives you the opportunity to create wealth by investing. In a way, it gives you the best of both worlds, insurance and investing that too in a single plan.

The expectation of a good return is present in every investor’s mind. The same is the case with ULIP. You also will certainly look for ways that will get you the best possible returns. You can maximize your returns with few simple yet smart steps. Here are the few things you should do so as to maximize your returns:

1. Start Investing as Early as Possible

In investment, there goes a saying that the best time to start investing was yesterday, the next best is today. The earlier you start investing the better are the chances that your investment will grow. When you invest early you allow your money more time and potential to grow. Early investment will also lead to compounding returns.

For example, if you start investing say, Rs 10,000 every year starting from your early 20’s your investment will be considerably more than the person who invests double your amount but started 5 years later than you did.

That is the time value of money increases over a period of time. So regular investments from an early age can result in good benefits later on. Another important benefit of investing early other than the maximization of returns is that it also builds a habit of savings and financial independence.

2. Try Maximizing the Amount of Investment

The simplest way to maximize your returns is to invest the maximum amount you can. This means to save as much as you can and put the maximum part of it for investment.

a) Maximize your investment

The more the amount is invested the more will be benefited from it. This is where regular savings play a part. If you manage your expenses well then you can invest more and thus, have a good chance of getting a better return.

b) Increase your savings

Investing small amounts regularly will gradually increase your sum and also helps you save.

3. Invest in equity funds

Equities are generally a very good investment, provided you can manage the investment risk.

The investment in equity funds is generally risky as they are more volatile than other investments and performance are directly linked with the market. But they can also offer higher returns if you can stay long enough.

You can minimize your risk in the equity investment in the following ways:

Invest for long-term
Invest in small amounts regularly
Diversify

Plans like Invest 4G from Canara HSBC Life Insurance provide you with some good options to help you manage equity investment risk efficiently:

a) Auto Fund Rebalancing

Suppose you have a portfolio that contains Debt and Equity in an equal amount. But due to market volatility, this ratio can change and will also increase/decrease the risk, leading you to rebalance again. Rebalancing yourself will be tedious and time consuming for you.

The Auto Fund rebalancing counters this as in this the ULIP will rebalance your portfolio once every three months according to your chosen rebalancing ratio. For example, you have chosen the ratio of 50:50 and due to the nature of the market, that ratio has changed to 60:40.

Now this will increase your portfolio risk. Now at this point, the platform will automatically execute the buying and selling of securities to reach back to the desired 50:50.

b) Systematic Transfer Option

If paying the premiums regularly seems tedious to you, then this is the option best suited for you. Under the systematic transfer option, it automatically creates SIP to your chosen equity fund.

c) Return Protection

This option helps you to protect the gains you have made from equity markets. You have to select the desired threshold and every time your fund passes this value your profits will be booked.

For example, you have set the limit to 10% and have invested Rs 1 lakh and your fund grows to 1,10,000. Then in this case the scheme will liquidate the funds and the gain will be transferred to a debt fund.

4. Switch your Funds to Protect your Gains Before Maturity

Auto rebalancing funds keep your investment portfolio risk constant but do not lower it. To do this the above strategy of rebalancing must be used with this one to avoid the market risk. Almost all of the ULIPs offered in the market allow you to switch your funds.

Invest 4G ULIP allows an overriding portfolio management option called ‘Safety Switch’. This option systematically transfers equity fund value to a debt or liquid fund to reduce the risk of market volatility on your maturity value.

The switch automatically activates four years before the maturity of the policy. By the time your policy matures your equity fund balance would be zero as the funds are safe in liquid or debt funds.

5. ULIPs Help Maximize Gains for Safe Investors

If you think that you cannot deal with the risks associated with investing in equity funds, don’t worry there is another option to ensure growth. If you want to stay away from the volatility and don’t want hassles you can get good returns by investing in low-risk debt instruments and staying invested for a longer period of time.

If you carry on with the policy, long enough, you are entitled to certain benefits. ULIPs such as the Invest 4G offers you benefits like wealth booster and loyalty additions after a certain period to honour your time in their policy. These are often a percentage of the fund value that you receive as a bonus, that is without additional investment.

a) Wealth Booster

Invest 4g wealth booster benefits long-term investors, especially those staying for more than 10 years.

b) Loyalty Addition

In this program, you get additions to your existing fund under the policy if you stay invested for more than five years.

6. Avoid Partial Withdrawals from your ULIP Fund

ULIP offers you an option to partially withdraw funds. The amount must be invested for a minimum of 5 years that is the lock-in period before you can withdraw. But if you want the best from your investment, it is advised that you try to avoid withdrawal unless you really need the funds. This is because your withdrawals delve into your funds and thus decrease your sum assured.

Learn why you shouldn’t exit ULIPs after the end of lock-in period.

ULIPs can help in maximizing your returns when used carefully. Plans such as Invest 4G and Platinum Plus provide all these features which you can take benefit from and help to maximize your gains.

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