Planning to buy ULIPs? Follow these investment strategies to maximize gains

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Updated: Aug 26, 2019 2:51 PM

The premium may be allocated as per the investor's choice, according to the fixed portfolio strategy. Subsequently, either through online or offline the policyholder can choose to change the allocation pro-actively by making a switch.

Unit-linked insurance plans , tax savings, tax saver, ulips, pure term insurance plan,systematic transfer plan,Life Cycle based Portfolio StrategyFind out the strategies offered by Ulips, for the benefit of the policyholder

Want to get your life covered as well as invest for your long-term financial goals? If yes, then Ulip can help you. In fact, Unit Linked Insurance Plans (Ulips) are one such investment instrument which suits investors who do not have the inclination to keep investment and insurance separate, but yet want to save for their long-term goals. Industry experts say investors who do not have financial discipline can opt for Ulips. However, if they also need to have an adequate life cover, then they should also opt for a pure term insurance plan.

Ulips generally offer several fund options across equity and debt asset classes, along with strategies to make optimum use of them. After deduction of initial charges, if any, the premiums paid are put into different asset classes or fund options. According to the fixed portfolio strategy, the premium may be allocated either in large-cap, mid-cap or small-cap equity fund. It can also be allocated in the debt funds of a Ulip as per the investor’s choice. Subsequently, either through online or offline the policyholder can choose to change the allocation pro-actively by making a switch.

Find out the strategies offered by Ulips, for the benefit of the policyholder:

  • Automatic Transfer Strategy (ATS): Automatic Transfer Strategy/Automatic Transfer Plan (ATP) in Ulips is similar to Systematic Transfer Plan (STP) in mutual funds. Under ATS, you can park the premium initially in the debt fund and then you can systematically transfer each month a certain fixed amount into any of the chosen equity funds. One of the advantages is that it not only helps in accumulating units at a lower cost through rupee-cost averaging, it also doesn’t expose the entire premium to the stock market. While opting for a Ulip plan, find out from your insurer whether the plan you are opting for offers it. This feature can be added both at the commencement of the policy or later on. Depending on some insurers, this feature can also be opted by logging in to the investor’s account online.


  • Life Cycle based Portfolio Strategy: To create an ideal balance between equity and debt, based on an individual’s age, the Life Cycle based Portfolio Strategy is needed. Depending on the investor’s age, the asset allocation in equity and debt funds keep changing. For instance, if you have opted for a fund at the age of 40, as you age, the allocation in equity funds automatically keeps coming down while allocation in less volatile debt funds keeps increasing. Investors who are not sure about the right asset allocation across funds should opt for this strategy.
  • Trigger Portfolio Strategy: With the Trigger Portfolio Strategy, Ulip investors can take advantage of substantial market swings and invest in the ‘buying low and selling high’ principle. The premium, under this strategy, will initially be distributed between Income fund (a debt-oriented fund) and equity-oriented fund in a certain proportion, such as 70: 30 per cent. After which if the fund allocation gets altered due to market movements, the policyholder can re-balance the funds in the portfolio based on a pre-defined trigger event. Such as a 12 per cent increase or decrease in the NAV of the equity since the previous re-balancing will trigger the change in allocation.
  • Target Asset Allocation Strategy: In determining the final return of an investor’s portfolio, asset allocation plays an important role. Hence, it is important to allocate your premium between funds as per your goal horizon and risk appetite. Under the feature of Target Asset Allocation Strategy, policyholders need to give the mandate to allocate their premium in a fixed proportion between equity and debt to be maintained throughout the policy term. You can then maintain the allocation with quarterly re-balancing, once allocated. The re-balancing of units is normally done on the last day of each policy quarter. As a policyholder, you can either avail this option at the inception of the policy or at any time later during the policy term.

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