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How to optimize your ULIP performance?

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How to optimize your ULIP performance
November 07, 2023

In this policy, the investment risks in the investment portfolio is borne by the policyholder   

Unit Linked Insurance Plans (ULIP) are designed to take care of both your insurance and investment needs. Thus, the premium is divided into two components, where one forms the life cover while the other is invested in market-related funds. However, to make the most of your investment, it is essential to monitor and optimize your ULIP fund performance by making strategic financial moves and using tools like a ULIP Calculator. 

Typically, a ULIP plan lets you invest a part of your premium into your choice of funds based on your financial planning and risk tolerance. The portfolio therefore can have only equities to generate high returns, only bonds to ensure the safety of the capital or a mix of both for a balanced growth of wealth. With time, if your financial needs or risk appetite changes, you can always restructure your portfolio.

  • So how do you optimize your ULIP performance?

Optimizing the gains from your ULIP policy requires critical thinking and taking the right steps at the right time. Here’s a guide to it.

Right asset allocation

Choose your portfolio and put your money in the assets that fit well with your needs and risk tolerance. To save a lump sum for your child’s marriage, it’s wise to have a higher share of bonds, which would protect your capital. Again, if you prefer going the high-risk, high-gain way, your portfolio should be equity-heavy.

Timely fund switch

It’s important to monitor your fund’s performance and the market situation. If your one or more of your funds are performing badly, it’s better to take the fund switch. Besides, if the market shows an indication of future growth in the coming times, reallocating your money to a higher share of equities is profitable.

Aligning to changes

With age, you can grow risk-averse or your liabilities can increase. Suppose, you had chosen an equity-only portfolio when you started young and preferred to take risks. Now, after marriage and starting a family, you might need a portfolio with more bonds to save capital for buying a house. Here, a fund switch will be helpful.

Trusting economic indicators

The market often hints at an upcoming change. Keep a close eye on those economic indicators. A rise in crude oil prices or huge political turbulence can often lead to a shake-up in market prices. It’s important to identify the hints and reallocate your portfolio.

Relying on the power of compounding

ULIPs perform better when you stay invested for a long term. The longer you continue with your policy after the 5-year lock-in period, compound interests will grow. Equities also perform better in the long run.

Starting early

Starting the ULIP journey at a young age brings early bird rewards. Low in liabilities and with high-risk appetite, it’s easier to pick an equity-heavy portfolio and keep it intact for a longer period. This can maximize the gain from the ULIP plans.

Increasing the investment

If you are looking to grow your wealth through ULIPs, it’s important to keep a sizeable chunk of money as the investment component and keep your portfolio diversified. This will ensure an optimized gain. 

Safer towards maturity

It’s important to focus on the maturity value as you head towards the end of your policy. To increase the fund value, it’s essential to ensure safe and steady returns. Here, switching to a bonds-only portfolio as you near maturity is a wiser bet. A ULIP Calculator can always help you with the decisions here.  

The investment component plays a crucial role in determining ULIP fund performance. But don’t forget the insurance part too. It is this twin advantage that makes ULIPs a smart choice for investors. 

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ARN - ED/10/23/5927

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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The Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year 

For more details on risk factors, associated terms and conditions and exclusions please read sales brochure carefully before concluding a sale. Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are 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. HDFC Life Insurance Company Limited is only the name of the Insurance Company, The name of the company, name of the contract 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 plans, their future prospects and returns.

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