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  • Five Reasons to Choose ULIPs Over Direct Equity

    Published on September 19, 2019

    The stock market is profoundly unpredictable. The fear of market fluctuation keeps risk-averse investors away as well as deprives them of potentially huge returns in the long haul. It’s hard to anticipate various elements. Due to volatility, it gets difficult for risk-averse investors to time their exit as well as entry in the market. Therefore, if you don’t have the risk-appetite for enduring the market instability and are tired of the market swings, it is best for you to choose Unit-Linked Insurance Plans, i.e. ULIP.

    If you find the best ULIP plan for yourself, it becomes easy for you to deal with the market volatility. Additionally, ULIP plans offer many benefits as compared to a direct stock market investment.

    Given below are five benefits of investing in ULIP plans:

    1. Wider investment choice

    It offers the option to switch between investment funds to match your risk appetite as well as adapt to changing market conditions. Also, it provides the facility to withdraw from your fund, subject to charges and conditions, if any. While making a ULIP investment, you will be required to select the fund options that will match your risk appetite. Investors have a choice to make from multiple fund options, i.e. equity, debt etc. For instance, an aggressive investor can opt for an equity fund to gain enormous returns.

    1. Fund Switching Feature

    It is important to spread the investment over different asset classes at the maturity of the insurance policy. It minimizes your risk and protects your investment capital. As you near your retirement age, it is better to shift your funds from equity to debt, which are safer investment avenues. Thus, it helps to avoid unexpected losses in case of a market crash. You get an option to switch between equity funds to debt funds or vice versa at any point.

    1. Single Product with Dual Benefits

    The multifaceted ULIPs provide investors with the best investment options as well as offers financial security to their family with the help of a life cover.

    The overall premium invested is divided into two parts, one is used in funds, and the other is used for providing you with life coverage.

    1. Tax Saving Ability- Triple EEE Benefit

    ULIPs fall under the EEE (Exempt-Exempt-Exempt) category. This means investors are eligible for ULIP tax benefits during three phases, which are as follows:

    1. Investment stage – In this stage, the paid premium is eligible for tax deductions, given under Section 80C (Maximum Rs. 1.5 lakhs per annum)
    2. Earnings stage – The returns that are generated are exempted from tax.
    3. Withdrawal stage – The maturity amount is completed free from tax under Section 10 (10D).
    1. Goal-based Investing

    ULIPs generate higher returns over a long-term investment frame, i.e. 10-15 years. If you invest for a longer duration, you will get compensation on ULIP charges and market fluctuations. Investment holds the highest portion of the premium, which empowers you for funding your long-term goals, such as wealth creation, saving for your child’s education, retirement planning etc.

    With life cover, ULIPs provide you with the advantage to know that your financial goals are safe in your absence as well.

    Thus, ULIPs score over direct stock market investments. You need to think about your investment goals and pick the best ULIP plan that will generate maximum returns on your investment.