ULIPs are one of the popular insurance products, as they offer the added advantage of wealth creation. They are capable of providing the best returns that any market-linked plan can provide. These unit-linked insurance schemes offer investors an opportunity to create long-term wealth through investment in a plethora of instruments like equities, debt, bonds or a combination of products. The returns expected from these investments depend on several factors, like the asset allocation chosen by the investor, the period of investment, and the overall movement of the markets. Read on to know more about the factors determining ULIP returns in 10 years.
Risk and Returns Associated with ULIPS
What is a ULIP policy? It is not a policy that offers any guaranteed returns. Instead, it is a unit-linked plan that offers investors an opportunity to grow their funds through market-driven investments. What drives the returns and risks of ULIP investments, are the choices made, the timely switching of asset allocation from one fund to another, and staying invested for a long term. So, investors looking to generate good returns from ULIPs have to stay invested for the long term and remain disciplined. The amount of wealth that an investor can create by investing in a ULIP for 10 years will depend on:
- The amount invested
- The frequency of premiums (this is decided when you buy ULIP online or offline)
- The instrument (debt or equity) in which funds are invested (while equity investments are largely driven by the changes in the markets, debt investments offer more stable returns.)
- The chosen investment strategy
- The performance of the fund or instrument in which one is invested.
Investors have a choice of investing in equities, whether small-cap or mid-cap or large-cap or government bonds or money market instruments or any other similar option. All these options come with different risk and return profiles, which determine the final returns from the investments in them. Some of the funds are high-risk options that offer high growth, while others carry low risk with stable returns. To ensure that maximum possible returns are generated through ULIP investments without taking undue risk, investors need to allocate their funds in a balanced manner.
