Being a market-linked product, there are times when ULIPs cannot manage the market downfall. This, in turn, can affect either your ULIP returns and your overall ULIP performance. At times, when you are unaware of a certain fund-switching feature, you fail to get the best out of your ULIP Plan.
The risk of investment in a ULIP Plan completely depends upon your fund choices. Hence, it is important to constantly keep a tab on the performance of your fund options. Monitoring your ULIP performance will further mitigate any uncertainties or risks that might hamper your financial stability in the future. Hence, go through these 4 main reasons to continuously monitor your ULIP performance:
Reasons why you should constantly monitor your ULIP performance:
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1. To avoid future risks
Since the entire risk of investment is borne by the policyholder himself, it needs to be checked upon on a regular basis. The investment decision taken by the investor is based on his fund allocation and risk appetite.
ULIPs have multiple segregated fund options to choose from. Funds that are aggressive are invested in equities in order to maximize capital appreciation. Funds that are conservative are an investment in either bonds or money markets that maximize capital preservation. Hence, it is advisable to select only the type of funds which matches the risk appetite of an investor.
2. To avail switching options
When an investor decides to invest in ULIP fund, it is completely his/her choice based on market value, risk appetite, and time horizon. It is also possible for the investor to switch his/her investment from one fund to another.
When you invest in ULIPs, you can easily switch from one segregated fund to another with the help of a Switch Application Form. Ideally, you can make switches at least 4 times to the maximum (unlimited) per year, depending on your chosen plan. Before you consider the switching option, keep the past performance of the funds, the market outlook, your very own situation in mind.
3. To access dynamic strategies
Having a ULIP Plan which is dynamic in nature is worth all your penny. This is because you not only get to maximize your returns but also minimize the risks, at the same time.
Once you have invested in a ULIP Policy, review the updates from the funds as well as adjust the allocations between the funds. For instance, there can be a rise in the equity markets as well as a financial commitment that might decrease your risk appetite. In that case, your allocation of funds can be tweaked either towards Income or Balanced Funds based on circumstances.
4. To meet long term objectives
An investment like ULIP is a long term investment. This is because ULIPs offer its investors with a lock-in period of 5 years. This lock-in period ensures that all your goals are covered in the due course.
When you decide to invest in a ULIP, do not think of it as a short investment and surrender it in a rush. Monitor the markets carefully and only then pick on the right opportunities. For instance, during the time of a market crash, purchase more units at a lower Net Asset Value (NAV). As and when the market recovers, your fund value will increase which in turn would lead to a rise in your returns.
By keeping these reasons in mind, monitoring your ULIP performance will simply come naturally to you. You’ll eventually get used to it once you start keeping a tab on analytics and statistics that would further make things uncomplicated for you. Act smart when it comes to your investments and take monitoring of your top performing ULIP funds seriously for better results.