Exit poll results and counting day trends for the 2019 General Elections gave an unprecedented boost to those who invested heavily in market-linked instruments. We have all heard stories about those who became overnight lakhpatis during the 2014 General Elections. And similar stories are expected in 2019 too.
In this piece, we discuss how ULIPs (which also invest in the same market-linked funds) have a unique advantage over mutual funds and shares when it comes to making huge profits when the markets boom.
Power to You – Endless Flexibility with ULIPs
Even though you may have a fund manager, fund switches can and should be made by you too. A ULIP, just like a mutual fund, invests in certain funds (that are determined by the fund manager and you at inception depending on your risk appetite). Unlike mutual funds, though, ULIPs allow fund switching without taxation or limitations. To earn from market fluctuations, it is important to remain aware of upcoming trends and be open to the idea of shifting your money. A ULIP allows you to shift funds when you feel strongly that the markets are going to go a particular way, something that your fund manager may not want to do if you have a conservative fund orientation.
Apart from this flexibility, ULIPs offer investor benefits that generally makes it a better investment tool too.
Know Different Fund Options Available
With a ULIP, customers can invest in stocks, mutual funds, and bonds depending on their risk appetite, just as with mutual funds. The funds offered are low-, medium-, or high-risk funds and some of the options are (this list is non-exhaustive):
- Cash Funds – Investments are made in money market funds for low returns with a low risk rating
- Income Funds – Investments are made in debt funds, corporate bonds, and associated instruments for a fixed income with a high risk rating
- Equity Funds – Investments in corporate stocks for high returns with a high risk rating (investments in equity funds receive high returns when the market is doing well)
- Balanced Funds – Combination of high-return, high-risk equity funds for moderate returns with a moderate risk rating
Fund Switching Advantages of ULIPs Compared to Mutual Funds
The Long Term Capital Gains (LTCG) tax levied on mutual funds is not applicable to ULIPs. This means switching between equity and debt fund options in ULIPs are not taxable, and you lose no money in the transition, unlike mutual funds.
Fund Switching Advantages of ULIPs Compared to Equity-linked Savings Scheme (ELSS)
ULIP investors can redeem the entire amount at the end of five years, unlike systematic investment plans (SIPs) in equity-linked savings scheme (ELSS). Units in ELSS have to undergo a three-year lock-in period to be redeemed, which makes switching funds a constraint as you will have to wait for 3 years before redeeming your money, by which time there is a good chance it will have dropped down again.
A ULIP has no lock-in period for the money, except for the initial period.
Unit-linked investment plans are wholesome insurance products that can benefit from the share market as well as help in meeting financial goals. Moreover, being insurance products, ULIPs provide significant life coverage to secure your family in the event of your untimely demise.
To speak to ULIPs experts, contact OneInsure at 86559-86559 or email@example.com.