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Finance

How to Track ULIP Fund Performance

A Unit Linked Insurance Plan (ULIP) is a combination of life insurance and investment. ULIP has many benefits, including tax exemptions, the flexibility of switching between funds, and more. Now that you know what is ULIP plan, it is time to consider buying one to secure your and your family’s monetary future.

However, if you want to minimize your risks and increase your wealth to its highest potential, merely investing in a ULIP is not enough. You have to be more hands-on and keep an eye on its performance throughout the plan’s tenure. There are multiple methods to lower risks and benefit more from a ULIP. These include:

  1. Choose the right funds

A ULIP is a long-term plan. The longer you keep your money in it, the higher your returns will be. However, it also requires you to opt for the appropriate funds that suit your risk appetite. For example, if your goal is to build a fortune while allowing some risk, equity-based funds will be more suitable for you. In the end, they offer a higher return, enabling you to meet significant financial goals. On the other hand, if you want to keep the risk to a minimum, ensure that a higher portion of the premium goes into bonds. You can also opt for a portfolio that combines both of these funds as per your preference.

  1. Make switches wisely

With time, it is expected that your understanding of the financial market and risk-taking ability will change. The ULIP performance depends mostly on the market and which fund you select for investment. ULIP offers a unique feature called fund switching to make things more flexible for investors. This allows you to shift between equity and debt funds, depending on your changing expectations. If you can switch funds timely, you can lower risks significantly depending on the market situation and earn more.

  1. Check the updates

The best way to know how your fund is faring and how it may perform in the near future is by staying updated with the market. You can easily find fund updates online and decide on investment strategies accordingly. This way, if you find out that a particular fund is in a volatile state or showing a possibility of growth, you can immediately reallocate the investments accordingly.

  1. Remain invested

ULIPs have a five-year lock-in period. It is suggested that you do not withdraw your funds during this time. However, you must consider staying invested even after that. The longer your ULIP remains active, the higher returns you will earn in the future. If the market crashes, you can buy more units at an affordable ULIP NAV (Net Asset Value). When the market stabilizes, you will gain more profits.

  1. Calculate your ULIP returns

If you want to calculate the point-to-point or absolute return from your ULIP, start by comparing the initial and current ULIP NAV using the below-mentioned formula:

  • Subtract the initial NAV from the current NAV

  • Divide the result by the initial NAV

  • Multiply the value by 100 to find the percentage

However, this return only indicates short-term performance. If you want to find the long-term result, calculate the Compounded Annual Growth Rate (CAGR). You can do that with this formula:

{[(current value of NAV/initial value of NAV) ^ (1/number of years)] – 1} * 100

Now that you know how to track the ULIP performance, turn it into a practice by analysing the market consistently, and control your risk-profit balance more efficiently.

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