Your financial roadmap must talk about robust planning for not just the ongoing COVID-19 pandemic but also some common unforeseen circumstances, like death, disease and disability.
The ongoing COVID-19 pandemic has significantly highlighted the need for money planning amongst people of all ages and all ‘walks of life’. For everyone, financial security of self and the loved ones is what matters the most considering the ongoing situation. The foremost step to take forward in your journey towards financial planning is having the right financial roadmap in place that has something real and tangible, and allows you to evaluate the road ahead.
Your financial roadmap must talk about robust planning for not just the ongoing COVID-19 pandemic but also some common unforeseen circumstances, like death, disease and disability. In addition, it must have the very important element of retirement planning.
To begin with, start taking stock of your current financial health and evaluate where your financial portfolio stands. Until you are not aware about your status, you cannot take the forward steps, as you will not know what steps to take. Before investing anywhere, it is first important to know whether you are in debt and need to build a portfolio or you are financially sound to start building your financial future stronger. Over the years, it has been observed that by following a disciplined approach towards investment, one can easily accumulate a decent corpus for a sound financial future. Building a financial future for your loved ones is also an important element of financial planning. This makes financial planning even more important and set financial goals early and plan your investments accordingly.
One of the most important investment instruments considering the current market conditions is Unit Linked Insurance Plans (ULIPs). The most preferred choice of young investors, ULIPs promise the right exposure to equity or debt or even both. The life insurance element under the ULIPs makes these products the first choice of investors with investment horizon ranging between 7 and 15 years. These plans can be great financial products to create decent wealth in the long run provided you pick the right choice of funds across various categories.
Apart from the insurance cover, ULIPs give investors the choice of parking their money in equity or debt instruments, depending on their risk appetite. As soon as you buy the policy, some part of your investment is placed in life insurance cover, while the remaining amount is invested in the market to grow and generate favourable returns. By investing in ULIPs, customers have the prerogative of switching their invested money from time to time between different asset classes. These plans also offer policyholders the option of switching their portfolios between debt and equity, giving them the option to switch as per the market performance.
One of the most important reasons why ULIPs have gained quick popularity amongst the investors is that over the last few years, insurers have brought down the mortality charges significantly and in fact, most insurers return the mortality charges along with the maturity amount to attract maximum investors. Investment pundits suggest that one must always invest in equities with a long-term horizon in the mind like kid’s education and marriage, and building surplus corpus for investment. Yet another impressive advantage of investing in ULIP is that it helps you earn inflation-beating returns in the long term.
Since the onset of the COVID-19 pandemic in India, the performance of ULIP products has remained remarkable. Over the longer-term investments – majorly between 7 years and 10 years – most equity ULIP funds have outperformed their benchmark index. By systematic investment in equity products, you can ensure compounded wealth in the long term. Not to forget, keeping patience and discipline while investing money is key to achieve life goals.
(By Vivek Jain, Head-Investments, Policybazaar.com)
Disclaimer: These are the personal views of the author. Please consult your financial advisor before making any investment.