Planning to secure the financial future is one of the most vital decisions that a person makes in his or her life. As there are numerous investment instruments available in the market, selecting the right option is a daunting task. However, it is advisable to invest in financial products to grow your hard-earned money in the long run.
Today,there are various investment avenues for you to select from, including long term investments in best stocks. However, if you wish to grow your wealth exponentially during the long term, investing in a Unit-Linked Insurance Plan (ULIP) will prove to be valuable. It is a unique financial product that offers both insurance and investment components under a single plan. Therefore, it insures your life and aids in building a substantial corpus over a long period.
Advantages of ULIP as a long-term financial instrument
ULIPis an ideal long-term investment alternative because it:
- Has a mandatory lock-in period
One of the best offerings about ULIP is that it comes with a compulsory lock-in tenure of five years. It inculcates the habit of savings and financial discipline among policyholders. With this, you do not end up withdrawing funds to meet short-term liquidity needs. Moreover, this duration lets you have better control of investments in equity and debt funds. You can switch from equity to debt funds or vice-versa, considering the market’s performance. Doing this allows you to maximize the returns on your investment. Additionally, this facility helps you in safeguarding your investment from losses due to poor market conditions.
- Assists in retirement planning
Retired life consists of golden years when you can spend your time traveling and fulfilling your hobbies instead of worrying about working hard to meet monetary requirements. Therefore, it becomes necessary to invest early to generate enough corpus so that you can enjoy this phase of life. With time, your standard of living will improve. Therefore, it is essential to consider this aspect when doing investment planning for retirement. The basic thumb rule that you can follow is to generate a corpus equivalent to 75 or 85 percent of your annual income. So, invest wisely in the right ULIP fund based on your retirement goals. You can seek the help of a ULIP calculator to compare the returns offered by various ULIP funds and invest accordingly.
- Ensures you earn from the power of compounding
As an investor, you may have the desire to earn significant returns from the investment quickly. However, the best way to gain lucrative returns is by staying invested with a long-term perspective of 10-15 years. By doing this, you can reap the benefits of the power of compounding. In compounding, the amount that you earn is re-invested to grow your wealth over time. If you remain invested for a longer tenure, you can increase your wealththrough the power of compounding. The amount earned via compounding can lower the impact of inflation on your accumulated wealth as well. Besides this, compounding can shield your funds from the adverse effects of poor market conditions.
To sum it up
Investing in ULIPs will be one of the best financial decisions you will ever take in life. ULIPs offer higher returns than various investment instruments like bank fixed deposits and Public Provident Fund (PPF), among other options. If you are confused about which plans to invest in, you can search for top-performing ULIP funds to help you make a better decision.You can even take the assistance of a ULIP calculator to ascertain the approximate returns that you will earn in the future, considering the tenure of your investment.