Many times it has been observed that, people do take the point of savings and investing quite but at times ignore some points that are quite vital for generating good returns in your portfolio. This generally happens when investors are carried away by the benefits provided by some assets and invest more than what is required. Ulips can be a good example.
With the advent of SEBIs regulation of banning entry fees in order to encourage a huge market to invest in the market, has hampered the distributors and agents’ willingness to distribute these assets since they do not benefit them much. Selling insurance policies, Ulips etc can bring in more amount as commission thereby funding them thickly. But, for you as an investor, although investing in insurance policies is not prohibited, the choice and the number of Ulips one should opt for must be chosen with a lot of contemplation. Investing a lot of your funds into Ulips, can hamper the growth of your returns adversely. Ulips are basically Unit linked insurance policies that invest a portion of your funds in the market. If the market soars, you will be benefited greatly. Otherwise, it can take away your sleep at nights. Borrowing any loan or a personal loan etc may be the only choice by which you can fund your requirements; the reason for which you started to invest is hampered.
Always consider investments and insurance as two separate assets. The main purpose of insurance is to give you ample life cover in case of any accidents or mishaps. And in case of any such unforeseen event, your family is benefited with the sum assured. Investments on the other hand, are pursued in order to build wealth during the course of time, say 10-12 years. These investments are generally done so that you will be able to finance your child’s education needs, fund for your daughter’s marriage, go on a foreign vacation etc., all this without having to depend on any kind of loans.
In such a scenario, having Ulips may not cater to either of the goals – Protection and Investment. If your portfolio is having Ulips, it is better if you analyze and assess their performance so far, along with their costs and surrender charges, based on which you should consider redeeming them. Once that is done, opt for a pure life cover that is able to adequately protect you in the wake of any unforeseen circumstances. Also, do consider buying health insurance not only for yourself but also for your family. A health protection plan that provides a cover for critical illness and general health cover should do the job. This is necessary these days with the cost of health soaring due to rise in prices.
Another thing that you need to bear in mind is that, keep reviewing and reassessing your portfolio every year. Look out for those funds that have been under performers consistently for more than 2-3 years and try to opt out of them if your fund manager is likely to believe that that particular fund may continue to be under performers in the near future as well. Try to religiously invest in your Mutual Funds. Opting for SIPs can be very fruitful.
Also, once your portfolio is stabilized with the stocks of good performers, try to diversify your investments into various categories like investing in gold only through ETFs as it is more safe and convenient to transact with them, investing in diversified funds etc are good ideas. All this can be accepted if you do not bear any debt on your portfolio, and have increased your risk appetite without risking any of your assets much.