Most investors are initially hesitant when they start to invest in market-linked securities, even if it is a simple ULIP scheme. A significant part of their concerns is the fear of financial loss. This is because the market fluctuates variedly, creating a lot of confusion among investors. In such situations, there are high chances that an investor makes the wrong choice in terms of asset allocation. In some cases, they might choose investment-linked plans that are beyond their risk capacity and thus, suffer huge losses.
However, this does not mean that first-time investors should shy away from market-linked securities and invest only in options that offer safe but low returns. There are many market-linked investments options, like the best ULIPs in India, that extend support to all kinds of investors – first-time and seasoned. As an investor, you can either choose to opt for a self-managed portfolio or choose the insurer managed fund option as per your preference.
What are ULIPs, and how do ULIPs work?
ULIP full form is Unit Linked Insurance Plans. These policies are a combination of investment and insurance. When you invest in a ULIP insurance, a part of the premiums you pay for the plan are used to provide you with a secure life cover. The remainder of the premiums is invested in market securities, such as equity-based funds, debt-based funds, or a combination of both. The asset allocation in a portfolio is as per your risk tolerance and financial objective.
ULIPs provide you with an advantage to either opt for a self-managed portfolio or take the insurer managed option. In the first option, you are responsible for your asset security selection, management and returns. Whereas in the case of insurer managed ULIP plan, you pay a definite ULIP charge to the insurance company to manage the portfolio on your behalf. The insurance company hires a qualified fund manager to take care of your ULIP fund selection and management. These fund managers levy ULIP plan charges in return for providing fund management services. Each type of management option – self or insurer managed – has its pros and cons. It is important that you assess your requirements, knowledge, financial situation and accordingly make an informed choice.
What is an insurer managed portfolio?
In an insurer managed portfolio, you give the insurance company (or the ULIP fund manager) discretionary authority over your ULIP fund management. The insurer or the fund manager appointed by the insurer is solely responsible for understanding your risk tolerance and financial objective, and accordingly, selecting the right funds for your ULIP insurance. For instance, you specify that you are near your retirement and hence, your objective is to take less risk and get secure returns. The insurer, managing your ULIP policy, invests more in debt-based funds and less or completely avoid equity-based funds to cater to your needs.
When you opt for an insurer managed portfolio, you give up control over the purchase and sale of your securities. Instead, you give full control to your advisor. In such accounts, the manager of your portfolio receives high-level direction from you regarding your risk tolerance, financial goals, investment time horizon, and other factors. As per this direction, the fund manager ultimately chooses which securities to invest in, when to buy and sell assets, how to reinvest, when to switch between funds, when to opt for portfolio rebalancing, and more.
Due to these advantages, insurer managed ULIP plans are more convenient. You do not have to research investments, follow the market, or stress about any other investment activities.
What is a self-managed portfolio?
In a self-managed portfolio, you control your ULIP policy asset portfolio. You are responsible for buying and selling securities. You also assume the sole responsibility of managing the other aspects of your account. The only role of your fund manager in such a portfolio is to execute your request or aid if you need it. The ULIP fund manager will not offer holistic advice or continuously monitor your portfolio investments.
A self-managed portfolio is less expensive than an insurer managed one because you are taking on all the account management responsibilities. You are only required to pay the transaction fee for executing specific trades. Even though a self-managed portfolio gives you more control over the timing and pricing of your trade, you also end up investing a lot of time and effort.
Which portfolio is best for you?
The choice between insurer managed or self-managed portfolio depends on your preferences and attributes. If you think you are ready to work hard, invest time, and have the potential to read and study the market, you can opt for a self-managed portfolio. However, you must remember, it is important that in a self-managed portfolio, you keep your emotions aside, thrive on risk, adopt a long-term view, be patient and focused and not expect instant returns. You should take detailed care and personal interest in your investments, risks and returns.
That said, if you wish for professional expertise, you should opt for an insurer managed portfolio. You might not get a lot of control over your investments, but you get higher convenience, expert advice, consistent monitoring, and you save a lot of time. Moreover, since your portfolio is managed by market experts, there are high chances of getting better returns on investment.
Wealth Secure Plus ULIP by Edelweiss Tokio Life Insurance
The Edelweiss Tokio Life Wealth Secure Plus by Edelweiss Tokio Life Insurance is an ideal ULIP for all types of investor. The plan allows you to either manage your ULIP plan yourself or appoint an expert fund manager to do it on your behalf. The plan also offers other vital benefits and features, including:
- Life insurance cover until you are 100 years of age.
- The choice to extend the cover to your children and spouse.
- Affordable premiums beginning from ₹1,000.
- Option to take top-up premiums anytime during the policy term.
- Loyalty additions, wealth boosters and maturity additions to enhance your returns.
- Flexibility to choose payout mode and frequency - monthly, quarterly, half-yearly or yearly.
- Option to take partial or systematic withdrawals with a lock-in period of five years.
- Freedom to allot money in seven diverse funds to improve your returns.
- The choice to take the self-management fund option or insurer-management.
- ULIP taxation benefits on premiums paid, maturity proceeds, death benefits and withdrawals as per prevailing Income Tax norms.
The ULIP plan of Edelweiss Tokio Life gives you complete investment freedom and flexibility. Choose the Wealth Secure Plus ULIP scheme and take a step towards a secure future.
Siddhant Dubey - Writer & Photographer
Siddhant works as a freelance content writer who is interested in a wide range of spheres from photography and personal finance to cooking. He is also an aspiring photographer striving to showcase life around him through his vision.