Investments are good sources of income when done right. They will account for your financial requirements when you are in ultimate need of funds with the right periodic tracking. Hence, monitoring the performance of an investment is equally crucial as selecting one. Of late, ULIPs have become a reliable and reasonable investment option for many people. Moreover, they offer great benefits in the long run. Here is a detail on how you can track the performance of your ULIP policy.
What is ULIP?
A Unit Linked Insurance Plan (ULIP) is an insurance product that offers dual benefits. First, it ensures a life cover which provides a sum assured to the nominee in case of your unexpected death. Second, a portion of the premium is invested in securities for market-linked returns. There is a five-year lock-in period, after which partial withdrawal is allowed.
How are ULIP Returns Calculated?
ULIP returns are calculated based on the Net Asset Value. Two different methods are used to calculate it:
- Absolute Returns: In this method, the rate of return is calculated by subtracting the initial NAV from the current NAV and dividing the derived value by the initial NAV. The resultant is further multiplied by 100 to find the percentage. Absolute returns are relevant when the investment is for one year. Hence, ULIP returns are predominantly based on the CAGR method.
- Compounded Annual Growth Rate: The rate of return here is derived as current NAV divided by initial NAV {[(the current NAV/initial NAV) ^ (1/no. of years of investment)]-1} *100.
The ULIP calculator online can be used to derive the value with precision. However, as the returns are market-linked and the market volatility factor is not included in the CAGR calculation, it cannot be taken for the real returns but is definitely a good approximation.
How to Check ULIP Performance?
Tracking the performance of ULIP insurance can be streamlined based on the following steps:
- Select the fund based on your risk appetite: As a primary step in the investment process, you must choose the fund based on your risk tolerance level. Choose equity funds if you can afford to take high risks, debt funds if you have a conservative approach or hybrid funds if you are looking for a balance between risk and returns. Monitor the value of the invested stock and the fund online for the updated value. TATA AIA ULIP plan online offers top-performing ULIP funds and a detailed and self-explanatory record of the fund value for your benefit.
- Stay updated: As the returns are market-linked in a ULIP policy, you have to keep track of the political and economic activities in the world to assess the impact on the fund value. For this reason, it is best advised that you invest in funds that invest in securities that you can understand.
- Switch between the funds: Whenever an event affects the stock price that you cannot afford to lose, you can choose to switch between the funds. If you become risk-averse, you can choose to invest in debt funds and vice versa based on your preference. Going further, you can again keep reviewing the fund value online on your insurer’s website and make the necessary switches as the situation demands.
Do not take hasty decisions and surrender the ULIP plan, as market-linked returns are always higher in the longer term.
Conclusion
ULIP plan is one of the best products for insurance and investment purposes. You can choose the appropriate fund, keep track of the value online and switch between the funds as and when required. As an important rule, you have to monitor the global economy and the major events that affect the fund value. So stay updated, make effective switches, keep monitoring the value and ensure the highest returns!