Know different types of funds you can choose in a ULIP

There are different types of investment instruments in the market for the different investment needs of each individual. Some offer high returns at higher risk, while others offer lower but stable returns. There are also products that come with tax benefits. Moreover, one can also choose from schemes that offer insurance cover along with returns on the invested amount. The choice that each investor needs to make is to trade-off some benefits with others to arrive at a strategy that suits their needs and risk profile.

Studies have shown that young investors in India are increasingly becoming more open towards taking risk and hence market-linked investment products are gaining favour with them. At the same time, tax saving is one of the main reasons that they look towards investing their money. [1]What if there was a way one can invest in market-linked products having a high return potential, have a life insurance cover along with it, and get tax benefits on those investments? Unit-Linked Insurance Plans (or simply called ULIPs) are specifically designed to deliver just that.

When you invest in a ULIP the majority of your premium is invested in the market-linked instruments, after deduction of applicable charges. This is a long-term investment plan and an early start can help you invest for future financial goals. When you start early, you can also learn the value of disciplined saving, and plan for your life goals. Smart, disciplined, and regular investment from an early age is the best way to make your money work for you. Diversification is the key to intelligent investing and creating a diversified portfolio ensures that the risks are minimized while investing for the long-term.

There are different ULIP funds one can invest in. The funds can be chosen to gain investment exposure to equity, debt, or a combination of both.

Let us understand these in a bit more detail:

1. Equity funds – Higher Risk

In these funds, a major percentage of your premium is invested in equity funds. This means that you are indirectly investing in the equity of listed companies. Fund managers perform detailed research and identify the stocks to invest in, that makes part of the fund portfolio. Depending on the market value of the stocks these ULIP funds invest in, they are classified as small-cap, mid-cap, or large-cap funds. The primary aim of equity funds is to bring about capital appreciation. Equity funds are typically high-risk investment options, and accordingly, returns on these funds are expected to be on the higher side.

2. Fixed income funds & bond funds–Moderate to Low Risk

These ULIP funds invest in financial instruments that offer a fixed income. When you choose these funds, your premium is primarily invested in funds that invest in debt instruments like government securities and corporate bonds. Since these types of ULIP funds offer stable returns, they are considered preferred options for conservative investors with a low-risk appetite. If you are looking to add an element of stability to your investment portfolio, you can consider investing in fixed-income funds. Also known as bond funds these ULIPfunds could be a preferred option for long-term investment. Fixed income funds or bond funds are generally considered to have moderate to low risk. Accordingly, the returns from these ULIP funds can range from low to medium levels.

3. Cash/Liquid funds -Low Risk

Also often referred to as liquid funds, these ULIP funds invest a major portion of your premium in liquid investment options. Some such liquid investment alternatives include bank deposits, cash equivalent securities, money market instruments, or ultra-short-term debt-based securities with a high credit rating. These funds also come with low risk, making them a preferred option for conservative investors. The returns from such funds are also quite low when compared with other types of ULIP funds.

Bajaj Allianz Life Insurance offers different ULIP plans to help policyholders fulfil their investment objectives. For example, Bajaj Allianz Life Goal Assure, a Unit-linked Non-Participating Life Insurance Plan comes with features like the return of life cover charges#, the choice between eight different funds, and four investment portfolio strategies. In this ULIP policy, you can make unlimited free switches between the eight funds it offers based on your changing needs and changing market realities. The plan also offers loyalty additions$ and fund boosters% for paying premium regularly and staying invested. These features combined together may result in optimum returns for the policyholder over the investment period that can help you get your Life Goals Done.

The purpose of investing in ULIPs is to give your money the opportunity and the right conditions to grow, which would in turn help you achieve your life goals. The earlier you start, the more time you can give to your investments to reach their potential. An early start with ULIPscould gives you financial freedom and stability to pursue other interests and improve your quality of life.

Disclaimer: This content is by Bajaj Allianz Life. No TNIE Group journalist is involved in the creation of this content.


[1] investment_pattern_of_youth.pdf # Return of life cover charges = return of mortality charges (ROMC) which is payable on maturity, provided all due premiums have been paid.$Bajaj Allianz Life Goal Assure ULIP plan provides more value for staying invested by allocating a percentage of annualized premium from sixth year onwards. This feature is applicable only when annualized premium is more than `5 lakh and policy term is 10 years or more.%Payable only when the policy term is 10 years or more, Fund Booster will be added to the regular premium fund value to enhance your returns from your investments.