One effective way to achieve a well-diversified portfolio is to consider insurance-cum-investment products that are designed for every kind of investor.
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All insurance-cum-investment products come with their own set of advantages, and hence it is essential to align them with your life objectives and risk appetite when selecting your option.
Every investor is unique, whether in terms of investment goals, risk tolerance, or desired outcomes. While some may be comfortable with a high-risk-high-return strategy to build a corpus, others may take a conservative approach to secure their investments. Yet, despite the contrast, it is safe to state that the ultimate objective of all remains the same – achieving financial security and long-term wealth creation.
In today’s world of uncertainties, financial stability is of paramount importance. It is often advised not to put all your eggs in one basket or in simple terms, to diversify your investment portfolio. One effective way to achieve a well-diversified portfolio is to consider insurance-cum-investment products that are designed for every kind of investor. Here’s comprehending what products one should choose as per one’s investing habits:
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ULIPs for active investors
Active investing involves a more hands-on approach. If you actively manage your portfolio and are constantly on the lookout for investments that maximise your profits, then the insurance-cum-investment product you should opt for is ULIP or Unit Linked Insurance Plan. These funds deliver the dual benefit of insurance and investment. While a portion of the premium paid is invested in a life cover to offer a monetary in case of an unfortunate event, and the remaining is invested in the two different asset classes – equity and debt to aid wealth creation. Further, ULIP also empowers active investors with the freedom to manage their portfolios by switching between these funds based on market conditions and investment goals, and it, therefore, requires navigating the market fluctuations effortlessly.
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Another reason that makes ULIPs appealing to active investors is the added advantage of the flexibility of partial withdrawal and thus, the ease of liquidity at different phases. With umpteen benefits, however, it is essential to know that the ULIP comes with a five-year lock-in period, and partial withdrawals are only viable after this timeframe. Indian markets have been known to provide up to 12-15% returns under favourable market conditions. So, if you are willing to monitor market conditions regularly to meet your long-term goal, ULIP is your plan.
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Guaranteed return plans for passive investors
If you fall into the category of passive investors, you are in for the long haul. You wouldn’t want to necessarily navigate the market on a day-to-day basis and would prefer a long-term investment strategy instead. Your choice of investment-cum-insurance product will align with guaranteed return plans that will provide a fixed and high rate of return along with life insurance. Additionally, as they shield the investment and returns from volatile markets and economic upheavals, guaranteed return plans are ideal when investing to meet specific life goals like a child’s higher education, marriage, etc. What makes them attractive for passive investors is the fact that they can generate tax-free returns as high as 7.5% which is rare for other traditional investment alternatives. So, if you are seeking long-term gains from your investment but do not want to actively manage your portfolio, guaranteed return plans are your best and safest bet.
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Capital guarantee plans for moderate investors
Capital guarantee plans should be on your radar if, as an investor, you prefer a balance between risk and reward. As these plans are a blend of ULIPs and guaranteed return plans, they allow the investor to benefit from market gains but with the surety of protecting the principal investment amount. This makes them typically suitable for people with a moderate appetite for risk, as a considerable 50–60% is invested in a guaranteed return plan. The rest can be invested in equity or debt funds. Capital guarantee plans also provide a life cover of ten times the annual premium. The safety element combined with upside of the market is what makes these plans a great choice for moderate investors.
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To conclude, all these insurance-cum-investment products come with their own set of advantages, and hence it is essential to align them with your life objectives and risk appetite when selecting your option. But, regardless of the plan, always compare the features and benefits of various ULIPs, Guaranteed return plans, and Capital guarantee plans available online by different companies. Also, as a rule of thumb, read the terms, conditions and fine print for an informed decision.
