Mrs. Shah was over the moon. Her son’s miniature model of the solar system won 1st place at the school’s Science Fair and the compliments were aplenty. When asked on how the model functioned so well, she answered confidently, “It’s all in the mix – the right mix of colors, the right kind of planning, coming together for the perfect result!” Investments are just the same, where the investment portfolio ranges across the investor’s risk appetite, investment goals, and the time period of investments.
Creating a diverse portfolio of a well-balanced asset mix ensures risk mitigation across asset classes. Unlike Gen X investors who favor low risk investments like fixed deposits and traditional endowment insurance plans, millennials today understand the need to have a diverse portfolio of investments across Equity, Debt and Gold. Investing in equity can be done in multiple ways – from stock market trading to mutual funds to market linked insurance plans.
Unit Linked Insurance Plans are suitable for all risk appetites. In fact, they are more suitable than mutual funds since shifting between funds is very easy. Most millennials these days are self-aware and take independent financial decisions. Hence, it presents a very good option for young investors. With the dual benefit of a life cover, and the chance to increase your money in the long run, ULIPs can help in building a substantial corpus to help you fulfil your dreams.
Here’s how unit linked insurance plans work. The premium you pay is split into two parts. One part of the premium forms the life cover, while the second part can be used to invest in an equity, debt or a hybrid fund. Due to this, unit linked insurance plans provide a good balance between insurance and investment. Today, ULIP benefits are much more attractive than how they were a few years ago. In modern day plans, fees like premium allocation charges, administration charges and fund managements charges have been reduced considerably.
ULIPs also offer the comfort of choosing where to invest. The investor can choose which fund to invest in, giving him or her a free-hand to decide their investment strategy with a Unit Linked Insurance Plan. With a unit linked insurance plan, partial withdrawals also help with emergency monetary requirements, although after a period of 5 years. Investors also have the flexibility to switch between funds, at zero cost, especially if the MARKETS turn volatile and liquid funds become the best bet. What’s more? These investments can be claimed as a deduction under Section 80C and Section 10D of the Income Tax Act, 1961. ULIPs are also exempt from LTCG or Long-term capital gains tax hence, making them an attractive and low cost investment avenue.
You can achieve your long-term goals of buying a house, funding your child’s education, and saving for your retirement through ULIPs. Consider your investment goals, your risk appetite, and your ability to pay premiums. You can then choose the type of fund that perfectly fits your needs. It will not only secure your life but also generate returns on the amount you invest. Be a smart millennial and allocate your assets in a fund that is perfect for your financial needs.
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