Plans allow systematic enhancement of wealth with insurance
The idea of multiplying our money is very fascinating as well as intriguing. Anyone who understands the concept of time value of money wouldn’t like to keep idle cash with him and would always be on a look out where money could be invested to draw highest returns at minimum risk. A popular investing theory called Modern portfolio theory (MPT) lay guidelines on how risk-averse investors can construct portfolios to optimize or maximize expected return on a given level of market risk. It’s a general industry rule that when expected returns are high the Risk on investment would also be high.
Having a diversified portfolio is always recommended to hedge risk by spreading it over large number of investments. So the loss suffered on some investments shall be compensated by the profits in others. An icing on the cake when we talk of a perfectly constructed investment portfolio is to include investments plans of life insurance companies. Such plans not only employ your money in growth funds they also provide you a life cover. Thus, these plans act as a two birds with a single arrow scheme.
Among life insurance plans, Endowments and ULIPS can be seen as attractive investment options. Endowments are also called traditional plans. The purposes people invest in these plans vary from person to person. Some invest in such plans to get security, some for growth and additional earnings. Based on certain factors people make a decision whether they want to go for ULIPS or endowments. ULIPS are comparatively more flexible and give the investor the opportunity to choose the stocks in which he wants his money to be invested. ULIPS provide a transparent cost structure and one knows how much of the Premium is invested in the underlying assets and how much are the allocation charges & fund management charges. Such cost disclosure is not present in case of endowment plans. Also the freedom to enhance life cover which is provided in ULIPS is absent in endowment plans, the sum Assured and premium remain fixed in endowment plans.
Since endowments or traditional plans are debt based investments, they are considered to be less risky and thus, more suitable for people who are 45 plus. Investors of ULIPS fall in lesser age bracket as the risk element is high as they are market linked plans and returns depend on the performance of the underlying asset. Under ULIPS you get the opportunity to switch between the fund options. No such option is available in case of endowments. When you are deciding your investment portfolio it is highly recommended that you take advice from a professional financial advisor.
he construct of your portfolio should be well balanced in order to optimize growth for a given amount of risk. When you have decided which investment plans to go for, you then should compare investment plans of various insurance companies to get the plan with most attractive features and that too at most competitive prices. There are over 20 life insurance companies operating at the present and each sells a differentiated life insurance product to remain competitive in the market. Do not just invest in the company’s product of whose advertisement you see most on the TV. DO a little in depth research as its affects are going to be for a long Term in your life. These days online comparison of insurance plans on various web aggregator websites is very popular. Online plans are cheaper as no middlemen in the form of agents are involved. Youngsters these days feel safer in online transactions than offline ones. Based on your comfort level with the computer you may decide whether to g for online purchase or offline mode.