What Are Absolute Returns in ULIPs?

2024-08-02

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Financial providers in Indian carry a number of different responsibilities on their shoulders. However, in general, the top financial concerns for most Indian families center around two major points. The first is that of wealth creation, an effort to expand one’s finances and aspire for a better lifestyle. The second is that of securing a family’s finances, particularly in the unfortunate event of the death of their financial provider.

That is why investment instruments and insurance policies are considered a must for every Indian household. However, a third product aims to combine the benefits of both these features and that is the ULIP, or the United Linked Insurance Plan. In fact, the best ULIP in India do more than just address the two major concerns of Indian families. They also provide additional benefits that make it one of the most popular financial products in India today.

On availing the of your choice, you can essentially enjoy a two-in-one benefit wherein not only can you avail insurance cover but gain returns on market-linked investments as well. They are considered flexible, low-risk investments and typically come with a lock-in period of about 3 to 5 years. It is important to note that ULIPs are investment-based products. Hence ULIP portfolios typically differ from each other based on each individual investor’s risk appetite, duration of investment and financial goals.

Most importantly for a ULIP investor, it is essential to determine the return of investment of his or her particular ULIP. That is where the concept of Absolute Returns factors in.

Absolute Returns and Return of Investment on ULIPs

The first factor to consider when determining the return of investment for your ULIP is the various charges that are deducted for that ULIP scheme. These range from surrender charges, mortality charges, fund management charges to several other administrative charges specific to the insurer company.

The second factor that helps you estimate the Return of investment on your ULIP is the market performance. That is why it is essential that you do a thorough round of research to check the past performance of your investment and then find the best ULIP for your needs and risk appetite.

The last and most important factor that determines your return of investment from a ULIP is the way you opt to measure your ULIP returns. While some investors opt for the Compounded Annual Growth rate (CAGR) formula, the more preferred choice for most investors is the Absolute Returns rate.

What are Absolute Returns?

By definition, Absolute Returns refers to the returns from an asset, such as an investment, that is gained over a specific period of time. It is denoted in percentages, and denotes the appreciation or depreciation of the value of that investment. Absolute returns only concerns itself with positive returns and is not aligned with any traditional benchmarks. It stands in contrast to Relative Returns, in which the value of returns, both positive and negative, are considered with respect to a fixed benchmark.

In order to calculate the Absolute Returns for your ULIP investment, all you need is the current NAV (Net Asset Value) and the initial NAV of the ULIP scheme. The calculation of your ULIP returns through the Absolute Returns method requires three simple steps:

Subtract initial NAV from current NAV
Divide the resulting value by initial NAV
Multiply this number by 100 (this provides you with the percentage)

This calculation for Absolute Returns is also expressed by the formula [(Current NAV- Initial NAV)/ Initial NAV] x 100.

Following the Absolute Returns method is an effective way of Calculating your ULIP return on investment, particularly in the initial stages. It is also useful for investors who have made a relatively short-term ULIP investment.

Whether short-term or long-term, investment in a reliable ULIP is sure to reap rewards while ensuring the financial security of your family. To that end, it is important to align yourself with only the best ULIP in the country.

Canara HSBC offers a variety of ULIP schemes for a variety of investors. Based on your financial needs and your risk appetite, you can avail ULIP as diverse as the Invest 4G Plan, Titanium Plus Plan, the Smart Future Plan, and the Smart Goals Plan.

In particular, the Invest 4G ULIP from Canara HSBC is a popular ULIP scheme among investors with options ranging from 7 different funds as well as 4 portfolio strategies. You also get to enjoy additional benefits such as wealth boosters and loyalty additions. Moreover, the Invest 4G ULIP also provides you the freedom to take advantage of fluctuations in the financial markets by switching between funds of your choice.

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