Investing in ULIPs

Every morning when Rahul opened his email, he would get an email from his bank on Affordable Car Loans and Easy Car Loans. To purchase his dream car was one of his important goals in life. His plan was to wait until the car manufacturers would offer the best deals.

This would generally be during the festive season of October- November when he knew he was sure he would get discounts, extended warranties and of course, free gifts.

5 years ago, he had decided that opting for a car loan was not an option. So he did the next best thing. He decided to invest so that he can enough funds to purchase it without depending on debts.

After talking to his financial planner, he started investing in ULIPs. He understood the benefits of ULIPs and considered it as an option which would help him earn higher returns and also save taxes up-to INR 150,000 under Section 80C every year. The maturity amount received will also be tax-free under Section 10(10D). There is a minimum 5 year lock-in period which instils a disciplinary attitude towards saving. An investor can reap the benefits of investing in long-term equity funds that will consecutively reduce the impact of market volatility. ULIPS also offer huge flexibility in terms of switching between debts to equity instruments.

This year, when Rahul spotted an ad for his dream car in the newspaper, he knew that he had made the right decision to save in ULIPs, as he had accumulated enough funds to purchase his new car, without taking a loan.

Just like Rahul, dreams and aspirations are a part of everyone’s life and the only way they can turn into reality is by saving and investing your funds in the right tools so that when the time comes, you will have enough savings to make your dream come true.

With time on your side, if you put in place a well-thought-out financial plan and follow a disciplined savings habit, you can achieve your long sought-after goal.

As young investors, you should be aware of the two pillars of sound investing;

1. The Power of Compounding- The biggest benefit of starting early is the power of compounding which provides the foundation for time value for money. Even if you invest a small amount for several years consistently, it will grow into a large corpus.
2. Balanced Investment Portfolio: The other basic rule is to have a balanced investment portfolio. This simply means that you need a mix of financial plans that can fulfill different needs so that the future of you and your loved ones is always secure and stable. This strategy attempts to balance risk versus rewards by adjusting and rebalancing each asset in an investment portfolio according to investor’s risk-taking ability.

This is how Rahul Sharma learned it the smart way. What about you?