BusinessHow to track your ULIP performance?

How to track your ULIP performance?


Unit Linked Insurance Plan (ULIP) is a two-in-one product offering life cover and investment returns. The premiums that you pay when you buy a ULIP are partly used for life insurance and partly invested in the allocation of your choice. For the long haul, it is an ideal choice since it offers the opportunity for wealth creation along with securing your dependents. For long-term wealth creation along with an insurance plan, ULIP is an ideal choice. They are market-linked instruments that have the potential to offer high returns.

Strategies to maximize ULIP returns

To reap the maximum benefits from your ULIP, it is important to stay in it for the long haul. While the lock-in period is 5 years, it is advisable to stay longer than that if you want to earn substantial returns. To ensure that your ULIP is performing well, it is essential that you monitor your returns. Below are some strategies that help investors to maximize the returns of their ULIP:

Choose the correct fund

In order to reduce the risk and maximize the returns of your ULIP, it is important to align your funds. The funds you select directly impact your investment needs. For those who are looking to maximize their returns, there are equity funds. They offer high returns, but they also come with a high risk. While, if you are looking for preservation of capital, there are debt funds. They come with low risks, but the returns are comparatively low. Also, there are hybrid funds which offer a combination of debt and equity. You can use a ULIP calculator to compare the returns of different plans before narrowing your investment.

Switch funds anytime

The investment needs in your 20s are different from that in your 40s. Every stage of your life has different needs. ULIPs allow investors to switch between the fund allocation anytime they want. They allow you to switch from debt funds to equity funds and vice versa anytime. Being a market-linked product, it allows you to make the most of the market fluctuations. The ability to switch funds is one benefit of investing in a ULIP that is rare amongst financial instruments.

Follow updates

Being an investor, it is important that you track your investments regularly. It is important that, based on the market fluctuations, you can adjust your fund allocation. It is important to change your investment strategy to make the most of the market volatility. Exploring market opportunities allows you to maximize the returns of your ULIP along with maximizing your tax benefits. Use a ULIP calculator to estimate your returns before changing the allocation.

Avoid surrendering your ULIP

Since a ULIP has a lock-in period of five years and can yield high returns over the long haul, it is important not to give up on your ULIP early on in the plan. It is important to eye the market changes closely in order to maximize the benefits. For example, individuals invest in equity markets when the market has crashed. When the market recovers, the fund value offers higher returns.

Calculate the returns of your ULIP

To calculate the returns you earn from your ULIP, it is important to take two things into consideration: premiums and the time over which the premium is paid. Absolute returns are one way to calculate the returns from your ULIP investment, it is also known as a point-to-point return.  All you need to know is the initial NAV with the current NAV of your ULIP. Here are the steps for calculating the absolute return of your plan:

  • Subtract initial NAV from existing NAV
  • Divide the value by the first NAV
  • Multiply the figure obtained in step 2 by 100 to get the percentage value

Absolute return indicates the short-term performance of your plan. However, since the returns of your ULIP compound over time, absolute returns may fail to provide the true picture in the long haul. The compound annual growth rate (CAGR) of your investment reflects its annual growth over a period of time.

For calculating the CAGR of your ULIP, you need the start value and end value along with the number of years invested.

You can use the plan’s start value and end value and number of years to calculate the CAGR for a ULIP. However, CAGR fails to take into account the market volatility of the returns you get from a ULIP over a period of time.

Along with tax-savings, if you invest well, you can achieve the long-term goals of your plan. It is important that you track and monitor your funds for maximizing the returns over the years.

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