Being an adult is not easy as one has to shoulder a lot of responsibilities; something that youngsters these find quite challenging to do. With the cost of living rising every day, the challenge of adulthood is only getter tougher. This is the reasons why youngsters today are driven towards kick-starting their investments early in life. There is growing awareness in this context and a lot of the young professionals are looking to make smart investments.
One such investment avenue which has gained significant popularity and has time and again proven to be an effective investment instrument is, the ULIP or Unit Linked Insurance Plans.
In this article, we have detailed information regarding ULIPs and how they prove to be effective for long term wealth goals of young professionals:
What is ULIP
The integrated plan combines the security of an insurance policy and the dynamism of a mutual fund. Since most young professionals will take a while to save money and build a personal fund for themselves, ULIP Plans ensure that your money is saved for the two most important things: your life and your future. Given the high demand for the plan, ULIP has gone through many reforms to benefit the investor.
Let’s illustrate the situation with an example:
Ms. Neha Arora is a 26-year-old IT professional, earning a 6 figure income and has a long term goal to build her own house by the time she turns 35. She also wishes to protect herself and her family in case of emergency / unfortunate incident arising in the future. She thinks about going down the mutual fund road, but before she does so, she comes to know of ULIPs. She finds out that ULIPs can help her achieve two objectives through one product. Her goal is to accumulate 15 – 20 Lakhs in the next 10 years to be able to pay the down payment for her house. She uses a ULIP calculator and provides all the necessary risk profile information and checks that investing INR 1,00,000 on a yearly basis for the next 10 years can get her a return on maturity of up to INR 18,00,000! What’s more? Ms. Bandana also gets a life insurance cover of INR 10,00,000 to protect her from any unforeseen emergencies!
The important aspect to note here is the advantage of time, where young professionals can invest in ULIPs for long-term depending on their risk profile and achieve their goals. They can reap the maximum benefits as well as instil an investment discipline in them at a time when they have minimal responsibilities. It is important to note that all ULIP investments come with a 5-year lock-in period.
Who can invest?
Young professionals who are inclined to make long term, goal-oriented investments are the best fit for ULIP. Traditional saving methods like fixed deposit and PPF are best for people who would like to avoid the risk and are comfortable with low returns. Traditional plans give fixed returns but with ULIP, you are assured of additional benefits like a life insurance cover, guaranteed bonus and better returns for an investment. This is definitely a good option for young investors who would be more open to taking risks to get enriching benefits. With ULIPs there are many advantages of staying invested for a longer period.
Since young professionals are always looking for ways to avail tax benefits, ULIP policyholders are offered income tax deduction under Section 80C, of the Income Tax Act, 1961. What’s more? ULIPs fall out of LTCG or Long-Term Capital Gains tax which, implies that your returns will be not be taxed like mutual funds. An additional benefit is that the maturity amount from ULIPs is tax-free as well!
With young Indians opting to go digital, it is now easy to check ULIP plans online and make premium payments as well. With a few simple clicks, you can make the smart choice. With online-only models, some of the leading insurance companies have waived off the premium allocation charges as well. Switching between short term and long terms investments is also possible for smart young investors who are able to understand market conditions. Since most ULIPs can be bought online, they are good for investors who are tech-savvy and comfortable with online monetary transactions. Also, ULIP returns are linked to the market performance, so you should be able to deal with market changes and fluctuations. It is therefore recommended that investors in the lower age bracket opt for ULIPs as their preferred investment product.
So start investing early and get yourself a ULIP plan with Finserv MARKETS today! Click here to know more.
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