A ULIP policy comprises of two beneficial components, which include life insurance and investment. Until the intervention of the Insurance Regulatory and Development Authority of India (IRDAI) in 2010, ULIP was an inferior product, mainly because of the excessive charges of 6-10%. The IRDAI had made numerous alterations, including capping of the costs, which led to the product’s popularity.

Let us first discuss what is ULIP and how it works, after which we will explain why it is a safe investment avenue.

ULIP is a type of life insurance policy with the added benefits of investments. The amount paid by policyholders towards the premium is divided into two parts. One portion secures the life cover, whereas the other segment is invested in equity, debt, or hybrid funds. ULIP offers numerous benefits due to which it has emerged as a prominent product for wealth creation.

Why ULIP is a secure investment alternative

Here is a list of five reasons that make ULIP a stable investment option:

1. Ideal for beginners

If you are a first-time investor, you can avail of the dual benefits of insurance and investment offered by ULIP. Such a plan helps you in securing your family’s monetary future. Moreover, you can invest in different types of funds, like equity, debt, and balanced funds, as per your risk-taking capacity. As a new, risk-averse investor, you can consider investing in debt and balanced funds to build a diversified portfolio and mitigate the risk.

2. Higher returns

Compared to any other insurance plan available in the market, the ULIP policy offers a better investment return, as you have the exposure to invest in equity funds. The premium that you pay is invested in different asset classes. For instance, if one of your asset classes is in loss, it can be covered by the profit earned in another asset category. It is one of the reasons why ULIPs can provide better returns. You can expect a minimum of 10-12% of returns from top performing ULIP funds if you stay invested for a long tenure. The returns that you earn on the plan’s maturity are tax-free, making ULIP an effective wealth-generation tool as compared to other investment instruments available in the market. Low-risk investments like fixed deposits also offer some tax benefits, but the income earned from it is taxable.

3. Lock-in period to encourage financial discipline

ULIP comes with a mandatory lock-in period of five years, which is one of the reasons that it inculcates a saving habit. The lock-in duration also depicts that you cannot break the policy midway, making ULIP a healthy and secured investment option. By investing in ULIP, you can get the tax benefits until the date of maturity, making it an attractive investment choice.

4. Flexibility

The possibility of switching from one plan to another makes ULIP an ideal investment option. Based on the volatility of the equity market and your risk-bearing appetite, you can shift from an equity fund to a debt fund to curb the losses that can occur due to the market’s poor performance. In ULIPs, you have the choice to invest in equity, debt, or hybrid funds, as per your risk-taking capacity and long-term financial objectives.

5. Dual tax benefits 

The premium that you pay towards the ULIP is permissible for a deduction under Section 80C of the Income Tax Act, 1961. Besides this, the income that you earn on maturity is tax-exempt, according to Section 10(10D) of the Act.

With ULIPs, you can meet various life goals, like children’s higher education and wedding, or buying a new residential property. Investing in top-performing ULIP funds for a long period will help you in transforming your ambitions into a reality and secure your family’s financial wellbeing through the life insurance component.

With the vision to offer affordable housing to all, the Indian government has launched a variety of housing schemes. These schemes work towards providing easy home loan schemes so that the economically-weaker sections of the society can achieve their dreams of purchasing a home of their own. These affordable housing schemes allow potential homebuyers to avail a home loan through a housing loan scheme or purchase their own house at a price that is lower than what is offered in the market. 

Let’s get to know some government housing schemes. 

Pradhan Mantri Awas Yojana (PMAY)

One of the significant government home loan schemes that were launched to provide housing for all citizens is the Pradhan Mantri Awas Yojana (PMAY). The PMAY is a welfare scheme which aims to provide affordable housing to the society’s economically weaker sections. This was introduced to raise the standard of living of all social classes. Through the PMAY-U the Government intends to achieve its mission of “housing for all” in urban areas by 2022.

The PMAY scheme is a government home loan scheme extended through the Credit Linked Subsidy Scheme (CLSS) which offers its beneficiaries subsidy on home loan interest rates. This subsidised government home loan scheme allows the urban poor to avail of housing finance at cheaper ROIs. Based on the annual household income, you can qualify as a beneficiary under the- Economically Weaker Sections (EWS), Lower Income Groups (LIG), and Middle-Income Groups (MIG 1 or MIG 2). 

You can avail of PMAY subsidy benefit under the following guidelines.

As a beneficiary, you can use this housing loan scheme to complete the purchasing of your home. This housing scheme makes female ownership or co-ownership mandatory under the EWS and LIG categories and an optional clause under MIG-1 and MIG-2 categories. Furthermore, the houses that are built under the PMAY use eco-friendly technology and materials to lower the environmental pollution. 

Along with PMAY, there are other housing schemes introduced to assist people in purchasing their own houses. Some of them are given below.

Delhi Development Authority Housing Scheme

The Delhi Development Authority (DDA) has been bringing out housing schemes to provide housing to all, especially the economically weaker sections at an incredibly reasonable rate. Along with the income-based categorization for the apartments, the DDA housing scheme also reserves apartments for war widows, specially-abled, SC/ST individuals and ex-servicemen.

The Maharashtra Housing and Area Development Authority Scheme

The MHADA provide affordable houses through a lottery scheme. The MHADA offers affordable housing options in different cities of Maharashtra for people who do not have homes of their own. In this scheme, the houses are allotted based on income.

When searching to apply for a home loan under govt housing loan scheme like PMAY, head to Tata Capital. Before applying for a loan, always use a home loan EMI calculator to calculate your home loan EMI. 

There are so many mutual fund categories that sometimes it might get a bit confusing while making an investment decision. This is why most mutual fund experts ask aspiring investors to first determine their financial goal. One single unit of a mutual fund is a combination of multiple stocks and other money market instruments. Mutual funds give investors an opportunity to invest in multiple markets which otherwise would not have been possible. Mutual funds are a pool of professionally managed funds that offer active risk management.

What fund houses do is that they collect money from investors sharing a common investment objective and invest this pool of funds across various asset classes. Depending on its scheme and nature a mutual fund may invest in equity, debt, corporate bonds, government securities, certificates of deposits, call money, etc. There are two ways to make an investment in mutual funds. Investors can make a one time lump sum investment in a mutual fund scheme. This is the traditional way to invest in mutual funds and investors are allotted units in large quantities in quantum with the investment amount. On the other hand, since you invest in one go, you are exposing your entire investment amount to the market’s volatile nature. The other way to invest in mutual funds is through a systematic investment plan. SIP is an easy and hassle free way to invest small fixed amounts at regular intervals till your investment objective is achieved. If you do not know how much you need to invest regularly to achieve your life’s monetary goals, you can use SIP return calculator which is easily available online. Not only will this calculator help you understand how much money you need to invest, it will also give you an estimate of your potential capital gains through these investments.

If you are someone who is seeking capital appreciation through long term investment in a market linked scheme and carry a moderately high risk appetite, then you can consider investing in hybrid mutual funds.

What are hybrid funds?

While equity mutual funds invest predominantly in stocks and equity related instruments and debt funds predominantly invest in fixed income securities that generate regular income, hybrid funds are a mutual fund product category that invest in both equity and debt related instruments. Since these two funds invest in two of the most popular asset classes, they are referred to as balanced funds. The equity element of a hybrid fund gives the portfolio an aggressive touch and an opportunity to seek capital appreciation while the debt element offers cushion when the markets become volatile.

Now whether a hybrid fund will invest more in equity or debt may totally depend on the nature of the scheme and its investment objective. For example, an aggressive hybrid fund carries a portfolio where it allocates a minimum of 65 to 80 percent of its total assets to equity related instruments. On the other hand, a conservative hybrid fund is more debt oriented. Hence this fund invests more in debt securities and the rest in equity.

Hybrid funds are being considered by several individuals especially because of the kind of a balanced portfolio that they carry. However, investors should remember that investments made in mutual funds do not guarantee any returns. This is why one should always determine their risk appetite before investing in any type of scheme. Also, investors are expected to do a little background check about the fund. Check the fund’s past performance, whether it is performing better than its peers. They also need to check if the fund’s expense ratio isn’t too high as it can affect their long term capital gains at the time of redemption. If they feel that they need further assistance in making an investment decision, they can always consult a financial advisor.

Planning for your sunset years is essential. Retirement planning and financial planning go hand in hand. When you are making a financial plan and prioritizing your short term and long term goals, retirement planning should top the list of your long term goals. That’s because when you are young, you do not need that much money to survive. But when you retire, you are living on a fixed budget. Your only source of income will mostly be from a pension scheme and whatever money you accumulated through Employee Provident Fund (EPF). But will this much money actually be enough for you to remain financially independent during your post retirement life?

Here’s why we feel retirement planning is essential to attain financial freedom:

Savings is more important than wealth

If you feel that you are wealthy enough at this point of time in your life and do not have to worry about the future, you may have to reconsider that opinion. Financial freedom is far more important than wealth. That’s because there are no restrictions when it comes to spending money. Today you have a crore in your bank account, tomorrow you may only have a few lakhs and a week later, a few thousands. Wealth is only temporary and if you really want to attain financial stability and freedom, you may have to start saving more often. If your outflows are superseding your inflow or your income, then we have some serious problems to address.

You need to take care of your and your family’s health expenses

Of course you children will be all grown up and independent by the time you retire. You might not have to take care of them, but you have to take care of your as well as your spouse’s expenses. And the biggest expense during old age is healthcare. Healthcare related expenses have been on the rise. So just imagine how much an occasional visit to the hospital would cost twenty years from now. If your employer doesn’t offer reimbursement for its retired employees and if you do not have a solid health plan, you need to have a wealthy retirement corpus to take care of all your medical expenses. For this, attaining financial stability is of utmost importance.

Continue with the same standard of living

At this point of time, you and your family might have gotten used to a specific standard of living. You can afford to live this way and enjoy the luxuries of life because you are earning and have a decent job. But have you thought about what you are going to do when you retire? With no salary incoming, how are you planning to manage to continue to live the way you do now? You have to get used to living on a fixed budget. Is your family willing to do that? If you want to make sure that you continue living the way you do even after you retire, you need to make sure that you build a wealthy retirement corpus.

Now that you realize the importance of financial freedom, have you thought of how you are going to achieve it? One way to go is investing in solution oriented mutual funds. Mutual funds can be one of the ways to systematically invest. Thanks to a powerful investment tool like Systematic Investment Plan (SIP), one can now invest small fixed amounts at systematic intervals and continue doing so till their investment objective is achieved. If you do not know how much money you need to invest regularly in order to attain financial freedom, you can take the help of an online SIP calculator. However, mutual fund investments do not guarantee returns. So investors are expected to determine their risk appetite before making the final investment decision.

Mutual fund investments are subject to market risks, read all scheme related documents carefully

The coronavirus pandemic has taken the world by surprise and dismay. Numerous people have lost their lives as well as their jobs because of this pandemic. That’s because the novel coronavirus has not just affected the physical health of the nations, but has also had an adverse effect on the global economy. Since the last three to four months, there has been a strict lockdown in the nation. Businesses, industries, offices, schools everything was shut. This caused an adverse effect on the mutual fund industry as well. For many months, the portfolio of several investors were constantly under threat.

Several incurred losses and out of fear of losing even further, many investors withdrew their mutual fund investments. Now what these people did, was it a good idea? Or should they have remained invested in mutual funds even though their portfolio had incurred losses? To understand this, we need to first find out what mutual funds are and how they work.

What are mutual funds?

Mutual funds are a pool of professionally managed funds that invest in Indian as well as foreign economies. Mutual funds carry a diversified portfolio. A single mutual fund unit is a combination of multiple company stocks. SEBI, the regulator of mutual funds in India describes them as, “a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in the offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced.”

What fund houses do is that they collect money from investors sharing a common investment objective and invest this pool of funds across the various money market instruments like equity, stock, bonds, call money, government securities, company fixed deposits, debentures, etc. Mutual fund investors are allotted units in quantum with the investment amount and depending on the fund’s existing NAV. The performance of a mutual fund depends on the performance of its underlying assets and the sectors and industries in which it invests.

Should investors continue investing in mutual funds even during the COVID-19 pandemic?

Some mutual funds like equity funds are designed for long term investments. Some funds like ELSS come with a predetermined lock period of three years. This means that investors cannot redeem their ELSS fund units before the lock-in period. In this scenario if you prematurely withdraw from your mutual fund investments, it is you who is going to be at loss. That’s because investors will have to pay a penalty for redeeming their ELSS units. Plus if you withdraw your other ELSS investments in a rush, imagine the additional tax that you will have to pay on all those withdrawals.

Also, equity mutual funds do not tend to get affected by the daily market upheavals. They are made for the long run and hence, one should not worry is their portfolio is temporarily affected. In fact, this is an opportunity for investors to invest more and buy more units since most of the NAVs have gone down. This is the best opportunity to benefit from rupee cost averaging. Historically, mutual fund investments like equity funds have given better results when one remained invested in them for five years or more.

In fact, investors should continue investing in mutual funds via SIP without worrying about the ongoing pandemic. They can even make the use of an online SIP calculator to get a rough estimate of their accumulated wealth from their current monthly investment. The main thing for investors to remember is to not panic. Continue systematic investments and you might be able to get closer to your ultimate financial goal.