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Portfolio Creation Strategies Offered By ULIP Plans

Published On Feb 08, 2022

The investing component of a ULIP allows policyholders to match their investments to their shifting risk tolerance levels. This is especially true if the option to exchange funds is accessible. With age, people's risk tolerance declines. The fund switching option allows policyholders to keep up with the changing needs of their ULIP investments. They may transfer from equity to debt funds if necessary.

Portfolio Creation Strategies Offered By ULIP Plans

ULIP Plans Offer Portfolio Creation Strategies

Now that you know how a Unit Linked Investing Plan's investment component works, it's time to look at the many ULIP portfolio strategies available. Here are a few of the more prevalent ones. Understanding how a ULIP portfolio works can assist you in determining the optimal tactics.  

1. Trigger-based Portfolio Management:

You will profit from price changes in the stock market if you use this method. The following are some of the characteristics of this portfolio strategy. 

  • This idea states that you should purchase low and sell high. When you invest, equity and debt are allocated in a 75:25 ratio.
  • In addition, when the trigger event happens, your fund manager will change your portfolio in accordance with market movements.
  • Price fluctuations of 15% or more in your stock assets are considered trigger events.
  • If the trigger event happens, the equity component of your portfolio will grow.
  • You can reinvest in the original percentage after these returns.

2. Lifecycle of a Portfolio:

Wheel of life portfolio strategies are meant to assist you take advantage of the potential for high returns in the stock market when you are more risk-tolerant at the start of your investment career.

  • You will first put all of your money into equities funds.
  • Different sorts of equity investments, such as midcap funds, large-cap funds, and so on, might be included in the equity portion of your portfolio.
  • Your equity exposure lowers as the investment term lengthens and the maturity date approaches.
  • Your funds are instead moved to more stable assets such as debt funds, bond funds, and liquid funds.
  • Within the remaining equity category, reliable equity components such as blue-chip funds are preferred.
  • All of your assets are assigned to debt at maturity, and you have no equity exposure.

3. A Portfolio Strategy can be Chosen by Investors:

As the name indicates, investor selectable portfolio designs provide policyholders discretion over their investments. You would be able to choose your asset allocation using this technique.

  • You can put all of your money into one fund or invest it in a mix of stock, debt, and money market securities. You have total control over the distribution of your assets across asset types.
  • An investor has a number of possibilities here, ranging from extremely high risk to extremely low risk, all with variable degrees of risk.
  • You can alter your asset allocation as needed during your investment period based on your shifting risk levels and market movements.
  • You construct or modify the ULIP portfolio during the investing period, so you have complete control.

Take Away

A ULIP investment plan's investment component also allows policyholders to adjust their investments with their evolving risk tolerance levels. The fund switching option, in particular, comes very in here. People's risk tolerance decreases as they become older. Policyholders can use the fund switching tool to make sure their ULIP investments keep up with their changing demands. It enables them to transfer money from equity to debt funds, or vice versa, if necessary.

Also read-Should You Go For Endowment Plan Or ULIP? 

What Is ULIP Calculator?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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