Sahil Rawal is a digital & brand management specialist with over 10 years of experience in Financial Services Industry. Life insurance professional with expertise in digital marketing strategy, website content marketing and brand communication designed to increase brand awareness, drive engagement & sales.
Do you want to grow your money by investing in the share market but at the same time fear from the risk of a downturn?
Do you find it difficult to follow the stock market upwards and downturn movements and unable to time your investments?
Do you feel the need to diversify your investments, but yet don’t have enough money or bandwidth to invest in hundreds of companies?
Do you also want to ensure that even in your absence, your family is protected and your loved ones are taken care of? If answers to any of these questions are positive, it may comfort you to know that there is nothing wrong with feeling this way. You belong to the category of risk-averse investors.
Risk-averse investors generally look for more certainty regarding their investment returns and find long-term holdings hard. However, most of the fear can be countered by understanding the following two:
1. Your financial risk capacity
2. Equity Markets and investment options
Risk capacity for individual investors usually depends on a combination of their life stage, savings and financial needs. If you have suitable savings and assets, with enough income to take care of your current & future financial needs, your risk capacity increases.
For example, Ankita who is 30 years old and single, has sufficient financial liquidity, fewer expenses than his income with a stable corporate job, she is more likely to have a high-risk capacity. This is because a major market downturn may not have any material effect on her financial well-being.
Whereas Abhishek, who is also 30 years old, supports a family of four, has a relatively unstable job, and does not have sufficient liquidity is bound to have a low-risk capacity.
Therefore, before making any investment decision, it is vital that you understand your risk capacity. The good news is that there are investment vehicles that consider your risk-capacity and allow you to take advantage of long-term equity returns. One such investment options is Unit Linked Insurance Plans or ULIPs.
Before we understand the benefits of ULIPs, let us discuss the modes of investments that are best suited for equity:
1. Regular Monthly Installments Directly into An Equity Fund
For investors who want to invest small amounts at regular intervals, this option can be the most suitable one. This simple principle of ‘regular investment’ gets you into the habit of saving consistently and disciplined savings help you to build wealth over the long-term.
2. Systematic Transfer into Equity from A Debt Fund
Investors with lump-sum amounts who want to invest in equity fund schemes especially during volatile equity market conditions can choose this option. You can concurrently earn potential returns with lower risk using this strategy.
ULIPs offer multiple benefits to give potential growth to your money with the security of life insurance cover :
Select Funds According to Your Risk Capacity
You can choose from a list of funds based on your needs, time horizon and appetite for risk. You can choose from high-risk, medium-risk or low-risk funds, which have varying degrees of protection against market fluctuations by balancing the investment portfolio between equity and debt.
Switching Option - Allows You to Ride Out A Market Volatility
ULIPs allow you to switch between the funds linked to your plan. If one or more funds are not yielding profits or performing much lower than their peers, you can transfer units partially or fully into different fund options equity to debt and vice versa.
3. Life Cover and Additional Protection in ULIPs
ULIPs also offer life insurance cover. The insurance part of a Unit Linked Insurance Plan protects your family against the risks of your untimely death. It ensures that the dreams and goals you have set for your loved ones - like the education of your kid’s choice or a peaceful lifestyle post-retirement for your spouse – are met even in your absence. An assured death benefit is paid to your nominee in such a scenario. Usually, the death benefit is, the higher of the fund value or the life insurance cover in the plan.
Many ULIPs offer an additional protection element through riders or in-built benefits. For example, Max Life Online Savings Plan Variant 2 (UIN: 104L098V02), tailor-made for parents, offers a lump sum death benefit at the time of the demise of the insured person and additionally, continues to pay the fund’s premiums on the parent’s behalf so that the child’s future is secure. It even provides income to the family in the absence of policyholders to help maintain a sustainable lifestyle.
ULIPs allow tax savings, as per Section 80C - Income Tax Act. On the other hand, mutual funds, do not always help you reduce taxes- as only Equity-Linked Saving Schemes give you.
The best ULIP plan for family should provide them with valuable financial protection charges you minimally and strives towards meeting your investment needs.
Max Life’s ULIP plans offer multiple benefits such as assured death benefit, tax benefits, zero premium allocation and admin charges. All these features bundled together, help you enjoy a happy combination of potentially higher returns, low-risk, and greater stability.
Unit Linked Insurance Products (ULIPs) are different from the traditional insurance products and are subject to the risk factors. The premium paid in the Unit Linked Life Insurance Policies is subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. Max Life Insurance is only the name of the insurance company and Online Savings Plan is only the name of the unit-linked life insurance contract and does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges from your Insurance agent or the Intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these funds, their future prospects or returns.
Some benefits are guaranteed and some benefits are variable with returns based on the future performance of your Insurer carrying on life insurance business.
Assumed rates of return (4% and 8%) are not guaranteed and they are not the upper or lower limits of what you might get back, as the value of your policy is dependent on a number of factors including future investment performance.
THE LINKED INSURANCE PRODUCTS DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICYHOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF FIFTH YEAR.