Here’s How Risk-Averse Investors Should Invest in ULIPs

Many people in India rely on their savings to build a corpus for the future. However, in the purview of rising inflation, your savings may not be enough to help you enjoy the life you desire post-retirement. Hence, it is pivotal that you grow your savings by investing in different instruments. 

Suppose you are sceptical about the market volatility and are looking for risk-free or low-risk investment options. In that case, you can start your investment journey with ULIPs or Unit Linked Insurance Plans. ULIP is an innovative financial product that gives you more than investment opportunities; it also offers life insurance protection. Thus, it helps you secure your family’s financial future. 

Also, the ULIP policy allows you to invest in different funds options and choose the portion of investments in different funds to suit your needs. This write-up discusses a few tips to invest in ULIPs for risk-averse investors. 

Start slow

When you buy ULIP, the insurance company gives you the flexibility to decide how much you want to invest in different kinds of funds. The equity-related funds are considered high-risk funds, but they also offer high returns in the long run. In contrast, debt funds carry lower risk and offer stable and lower returns than equity. 

As a risk-averse investor, you can invest a significant portion of money in balanced funds, which allows you to enjoy the best of both equity and debt markets. You can start with investing more in debt funds, and then as you slowly understand the risk potential and the market movements, you can switch your investments to equity funds. 

Know about the market movements

The money market is fluid, and it tends to fluctuate every day. So, it would help if you learned to predict the ups and downs of the market to maximise the returns. When you expect the market to go up, it is advisable to put more money in equity funds. This approach will allow you to get higher returns. 

But, if you expect the market to dip, move your money from equities to debt funds. This method is effective because debt funds do not heavily rely on the market and are considered low-risk funds. This way, you can reduce your loss potential and get low but steady returns. 

Choose automatic switching

If you cannot actively monitor and manage your investments in ULIPs, you can opt for the automatic switching facility. Depending on the market prediction, your fund manager will make the fund switches on your behalf. The fund manager will make investment decisions according to policy terms, financial goals, and risk-taking capacity. 

Stay invested for long

Many experts worldwide have corroborated that the key to getting handsome returns from market-linked investment instruments like ULIP is to stay invested for a more extended period. Hence it is better to start investing early to have a longer period to let your money grow. Historically, ULIPs have offered returns in the range of 10-12% for investments ranging from 10-15 years. 

Also, never take hasty decisions. When your funds are performing well, you may feel tempted to withdraw the funds. However, you must avoid such mistakes and stay invested for an extended term until the policy matures. 

Final Word

When you start investing in ULIP, you must have a fixed goal in mind and allocate your assets accordingly. If you are not confident about making market movement predictions, you can seek help from your fund manager. More importantly, keep the above tips in mind and make the most out of your investment.