The stock markets can be a highly volatile place to invest your hard-earned money. Due to the high chances of volatility, stock markets can have two outcomes of investments. While it can allow you to garner high returns when the market is doing well, you can also lose your money at the time of downfall. Many of you might fear the impacts of the market downfalls and avoid active participation in the stock markets.
Although capital markets can be scary, there are chances that you can grow your minimal savings into a substantial corpus in the future. As an investor, you should look for the right investment vehicles, which can let you generate wealth as well as let you obtain returns based on your risk appetite. Today, a Unit Linked Insurance Plan (ULIP) can be the smarter investment choice to secure your money from market volatility.
Before you invest in a ULIP policy, let’s understand what a ULIP plan is in detail to make informed decisions in the future:
A ULIP plan is a dual-benefit product, which can provide you with a mix of investment and insurance altogether at once. When you buy a ULIP policy, you can participate in the equity market while you get to protect your family financially in the long run. That way, you can ensure that the financial requirements of your loved ones are not affected due to your involvement in the capital markets.
Although a ULIP plan is a market-linked product, you can ensure you get to safeguard your invested capital from the market downfall. If you are looking forward to getting into a rigorous investing habit, you should know how ULIP works to protect your investment from the fluctuations. Let’s take a look below:
- Provides you with different types of fund options
A ULIP policy is a flexible investment option, which can allow you to select the available ULIP funds based on your risk appetite and investment goals. Typically, you can choose between the two main types of funds offered by a ULIP policy that are given below:
- Equity Funds
Equity funds are high-risk funds that can help you generate relatively high returns. However, you should invest in equity funds only if you can bear the risks of the market. Ideally, you should invest in equity funds when you are young. At a young age, you can afford to take risks since you might have fewer financial responsibilities of your family.
- Debt Funds
Unlike equity funds, debt funds are less risky. However, investment in a debt fund can garner relatively low returns than equity funds. As a policyholder, you should opt for debts funds when you grow old since you might not be able to tolerate the risks due to more financial responsibilities.
- Allows you to switch between funds
A ULIP policy can ensure maximum flexibility. Under a ULIP policy, you are free to shift from one fund to another if you avail the switching feature. Typically, you can use the switching feature under two conditions mentioned below:
- The switching option can help you to secure your ULIP funds from the risks of the market. For instance, you can switch to debt funds when the market is down and opt for equity funds when the market bounces back.
- You can use the switching feature if you are unsatisfied with the ULIP returns from the selected fund option. For instance, if you might have chosen debt funds due to the fear of the market fluctuation and realized later that the returns are not as expected, you can switch to equity funds.
To conclude, market downfalls can be your worst nightmare if you don’t know to manage it effectively. While you might be unable to predict the market downfall, you can ensure the protection of your funds during this period with a ULIP plan. A ULIP policy can allow you to diversify your investment portfolio as well as let you build a substantial corpus.