Balanced Funds in ULIPs

Unit Linked Insurance Plans (ULIPs) are a type of insurance product available in the Indian market. With ULIP plans, you get dual benefits – investment as well as insurance. A part of your premiums is used for life insurance coverage and the remaining portion is invested in funds of your choice.

You either get to choose to invest in equity funds, debt funds, or a combination of the two. This combination is known as balanced funds. Let us understand more about them.

What Is A Balanced Fund?

A balanced fund in ULIPs work as a combination of equity and debt funds. Here, the money is divided between these two funds in a pre-determined proportion. The primary objective of a balanced fund is to diversify your investments to stocks and fixed income securities.

In simple words, your money will be invested in multiple investment instruments to lower the risk. So, if you feel that you are not earning desired returns on your investments, you can choose to switch your money in fixed income securities. The idea is to have an investment to fall back on in case the equity-oriented funds do not perform well in the market.

A balanced fund is appropriate for investors with a medium-risk appetite. If you are among the people who want to build their wealth over time, along with certain measures of safety taken into consideration, then balanced funds are the right investment strategy for you.

How Does A Balanced Fund Work?

Like we mentioned above, a balanced fund comes with a pre-determined proportion on equity and debt funds distribution. For instance, the balanced fund in ULIP plans could be 50:50 in equity to debt allocation with an option to go 10 percent over the pre-set limits depending on the market performance.

In other words, it means that if there are any market fluctuations and the fund manager anticipates losses; they can shift your investments in debt funds up to a maximum of 60% of the total assets. Hence, you (the investor) can sit back and allow your fund manager to control your investments across different asset classes and build your wealth.

In the absence of balanced funds, you will have to not only keep track of market fluctuations but also make necessary switches from equity to debt and vice versa. It will thus consume your time, efforts, and research capabilities.

Illustration

To understand balanced fund better, consider the following example.

Mr Aamir plans to invest INR 1 Lakh. Since he falls into the category of low-risk appetite, he is not willing to invest in high-risk investment instruments. Hence, his investment portfolio may look something like this – wherein Debt Funds are 70%, and Equity Funds are 30%

Investments

Investment %

Average Return %

Investment Value

Average Return

Corporate Bonds

50%

2.50%

INR 50,000

INR 1250

Government Bonds

20%

4.00%

INR 20,000

INR 800

Equity

30%

8.17%

INR 30,000

INR 2451


Who Is It Suitable For?

Balanced funds are ideal for people with a limited risk appetite as they can manage the loss incurred to some extent. When it comes to investors with a high-risk appetite, they are well-versed with managing equity-oriented investments and take advantage of its growth potential.

So, if you are an investor who wants to control the risk incurred as well as invest in long-term ULIP benefits, then balanced funds can be a useful investment instrument for you.

ULIP Calculator

A ULIP calculator is a tool that is specially designed to help you and other investors to calculate the premium amount and check the ULIP returns. Based on the input – the premium amount and policy tenure – the calculator will calculate the returns offered by the plan you have chosen.

A Final Thought

Those planning to invest in the long-term to buy a house, child’s education, dream wedding, and so on but do not have the high-risk appetite can choose to invest in balanced funds. At any time shortly, you can switch the funds from debt to equity and vice versa depending on the market performance.

If you want to invest in balanced funds offered under unit linked insurance plans, get in touch with us at Finserv MARKETS. With Bajaj Allianz Life’s exclusive plans available on Finserv MARKETS, you can take advantage of dual-benefits, build your wealth over time, enjoy ULIP tax-benefits, protect yourself and loved ones, and more.

So, don’t wait. Invest in unit linked insurance plans with us, right away.

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