Economic turmoil, wars, supply chain issues, and political instability are a few of the reasons why the job market is facing a churn. In principle, such occurrences form part of the normal trade cycle. How do you prepare yourself and avoid facing the brunt of the financial downfall?
Planning for financial freedom is the first step toward this goal. Understanding your financial position, investment capacity, risk capacity and appetite, and investment mediums are some starter steps in this process. Beginners find it overwhelming and do not know where to start. Well, let’s break that down for you. There are multiple instruments that offer investment opportunities, including ULIPs, equity shares, mutual funds, debentures, fractional investments, and many more.
We consider ULIP today and how you can use it to reach financial freedom. ULIP stands for unit-linked insurance plan. It is a dual-purpose investment instrument, combining the higher returns of a mutual fund with the security of a term insurance plan. The benefit of ULIP is that you get to choose and decide on an instrument that helps you get dual benefits.
But how do you plan your ULIP?
Well, the initial step is to decide the basic premium amount you can pay for a policy. The annual premiums for a ULIP can depend on the coverage amount and the investment direction that you choose.
The investment portion of the ULIP intrigues most people. The investments can be in equities, debt, or a hybrid approach. When you have a ULIP plan in your hand, you can observe what contribution goes toward your insurance and life coverage, and what goes toward investments. Not only that, but your investment choices can be tailored. There are a couple of options, like:
Growth fund
These investments are aggressive in nature and provide better rewards. They have a higher risk-to-reward ratio.
Balanced fund
The investments here are made with the understanding of growing your capital without risking it a lot. The returns can be nominal to above average. They help with better portfolio diversification.
Bonds and other securities
These bonds have a diverse risk profile, but the intention is to ensure no capital erosion.
In the case of ULIPs, you also get other benefits that make your dream of financial freedom more attainable:
Diverse risk profile
The ULIP operates with a moderate risk profile and helps you protect your family as well.
Tax benefits:
If you are still paying tax under the old regime of the Income Tax Act of 1961, you get deductions for premiums paid.
The returns you earn from this policy are tax-free on maturity, a major benefit that attracts many people.
Managed investments
The investment portion of a ULIP is managed just like how a fundhouse would manage a mutual fund scheme. Hence, your money is with the right team of experts.
Having a ULIP in your portfolio will help you navigate your financial independence journey easily and make your journey better and stable.
*The information in this article does not necessarily reflect the views of The Global Hues. We make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information in this article.*
