Right Time To Invest In ULIPs

The markets have been quite tricky in the last quarter. October 2018 started with a positive note for the stock market as both BSE Sensex and NSE Nifty posted a positive growth of 0.83% and 0.71% respectively. While Sensex closed at 36, 526.14 points, Nifty closed at 11, 008.30 points after the first trading day of October 2018 . However, the rest of the month was brutal as the stock markets were on a roller coaster ride with more plunges than gains. On October 30, 2018, Sensex closed at 34,067.40 points and Nifty at 10,198.40 points. While the share market had a dismal run this month, investors can look at the positive side. With the stock markets down, it is a prime time to invest and what better investment avenue than ULIPs.

ULIPs give you the benefit of market-linked returns along with an insurance coverage and are a good investment avenue. Moreover, the recent market low makes it an ideal time to invest in ULIPs as the NAVs would be down. You would, therefore, be able to buy more units with your investments which would, with future growth, give you good returns.

If you are wondering what makes ULIPs the ideal investment choice for reaping the benefits of a bear market, here are some reasons for you to consider –

* Inbuilt insurance cover 

When you choose ULIPs you get two benefits in one. You can not only invest in the capital market, you can also enjoy life insurance coverage. ULIPs come with an inbuilt insurance cover where the sum insured depends on your invested premium. This cover guarantees financial security in case of your premature demise.

* Tax advantages 

ULIPs give you three distinct tax benefits –

1. The money you invest in the plan is tax-free under Section 80C up to a maximum of INR 1.5 lakhs
2. The policy benefits which you receive are completely tax-free under Section 10 (10D)
3. If you switch your investments from one fund to another, no tax is levied on the switched amount.

While all the three benefits are good, it is the last one which gives ULIPs an edge over other investment products. ULIPs are an EEE product which makes it more appealing.

ULIPs allow tax-free switching where you can move from equity fund to debt fund and back to equity fund as per your investment strategy without worrying about the underlying tax implication. This tax-free switching benefit becomes relevant in this recent market scenario where equity is highly volatile. You can choose to invest in a debt fund when you buy ULIPs in the present scenario. Thereafter, when the market stabilises and equity investments once again show positive returns, you can switch your investments from debt fund to equity fund and not pay any tax on such switch. 

* Get positive returns by staying invested 

ULIPs generally come with a medium to long term investment horizon, the minimum tenure being 5 years. The stock markets have a habit of rising up even after the worst of falls. 

If recent years should be considered, even after a major crash in 2011 and again in 2015, the returns have picked up in the later years. Therefore, this market slump is temporary. The market would rise again and give you positive returns in the long run. Given the investment horizon of ULIPs, you are sure to gain from a rising market once the slump is over.

So, yes. This is a very good time to start investing in ULIPs and leverage the market downtime so that you can make the most of it when it picks up. Being invested is the key to a successful investor!

So, when the markets are down, you should invest in ULIPs to get the benefit of higher unit allocation. Choose debt funds to protect your investments against market fluctuations and then switch to equity once the market regains its momentum. ULIPs have the above-mentioned benefits too which make them an ideal investment choice. So, choose your preferred ULIP and invest.