ULIPs, or Unit Linked Insurance Plans, are unique life insurance plans. They give you two benefits: life insurance protection and a chance to grow your money through investments. ULIPs can also help you save income tax, as per the Income Tax Act, 1961, Sections 80C and 10(10D).
For investing in ULIPs, you must understand the charges, fees, and choices linked to ULIPs and how they impact your returns. Here, we will talk about how you can track the investments made via ULIPs.
Why is it Important to Track the Performance of ULIPs?
Tracking the performance of ULIPs is vital for several reasons. Some of them are:
Matching Your Risk Profile
You choose investment funds at the time of buying the ULIP based on your risk tolerance and financial goals. But your tolerance and goals may change over time. For example, you may want to switch from a high-risk equity fund to a low-risk debt fund as you approach retirement. Tracking the performance of your ULIP funds will help you identify the need for switching funds whenever necessary.
Returns and Costs Evaluation
As an investor, you expect returns from your investments. However, the actual return may vary depending on the market performance and the fund management. You may also incur various fees for your ULIP, such as premium allocation, policy administration, fund management, and mortality charges. These fees may reduce your net returns. Tracking the performance of your funds using the ULIP calculator will help you assess the returns and costs of your ULIP and compare them with other investment options.
Exploring Market Opportunities
ULIPs allow you to switch between funds based on the market conditions and your preferences. You can switch from one fund to another without tax implications, subject to certain limits. This helps you to capitalise on market opportunities and avoid losses.
How to Track the Performance of ULIPs?
There are various ways to track the performance of ULIPs. Some of them are:
Check the NAV
The NAV is the value of one unit of your ULIP fund. It is calculated by dividing the total value of the fund’s assets by the number of units. The NAV reflects the performance of your ULIP fund, as it changes with market movements and fund management. You can check the NAV of your ULIP funds on the website of your insurance company or on other online platforms that provide ULIP fund performance data. You can also compare this figure with benchmark indices, such as Nifty or Sensex, to find out the relative performance of your funds.
Returns are calculated as the percentage change in the NAV of your ULIP funds over a period. These returns can be calculated for different periods, such as daily, weekly, monthly, quarterly, yearly, etc. They reflect the growth or decline of your ULIP fund value over time.
Check Rolling Returns
The rolling returns of your ULIP funds are the average returns of your ULIP funds over multiple time blocks. You can calculate it for different time blocks, such as three years, five years, ten years, or more. This return reflects the consistency and stability of your ULIP fund performance over time.
What Factors to Consider While Tracking the Performance of ULIPs?
While tracking the performance of ULIPs, you need to consider the following things:
- As discussed before, understand the charges associated with your ULIP. Some of your money goes into paying these charges. Lower charges mean more of your money is working for you. Keep an eye on these costs.
- Make sure you pay your premiums on time. If you miss payments, it can impact your ULIP’s performance and even lead to policy lapse. Regular payments keep your coverage intact.
- Some ULIPs allow you to switch between different investment funds. This can be a helpful feature if one of the funds isn’t performing as expected. Use this option wisely based on market conditions.
- Understand what your ULIP will provide when it matures. This includes the sum assured and any bonuses. Knowing what to expect at maturity is essential for financial planning.
- The fund portfolio composition of your ULIP is the allocation of your ULIP fund in various asset classes, such as equity, debt, or hybrid. The fund portfolio composition of your ULIP affects your risk and return profile, based on varied risk and return levels. You need to check the fund portfolio composition of your ULIP and see if it matches your risk appetite.
ULIPs are a unique insurance product that combines life coverage with investment gains and tax benefits under specific conditions. Regularly monitoring ULIP performance is crucial for aligning your risk profile and investment goals, managing costs, seizing market opportunities, and preventing losses. Make sure you track the performance of your ULIPs to get the best possible returns along with life protection.