Making an investment is important but making the right investment decision is crucial. No matter the amount of money you save and invest, unless you make the right investment choice, you will not be able to grow your money. The equity market is well known for its volatility and this is what keeps the investors away from the stock market. It deprives them of the high returns in the long run and it is something that cannot be predicted.
Various factors are responsible for volatility in the market, which cannot be controlled. It is always difficult for a retail investor to time the entry and exit in the market. However, if you are tired of the market swings and do not have the risk appetite to tolerate the volatility, it is best to opt for Unit-Linked Insurance Plans [ULIPs].
You can deal with fluctuations in the market by finding the best ULIP plan for yourself. ULIPs allow you to achieve multiple financial goals with one investment product. There are a number of benefits of investing in ULIPs as compared to the stock market. The same is elaborated below.
Dual benefit
When you invest in a ULIP, you enjoy a dual coverage. ULIP will give you an insurance cover and provide you with the best investment options. The premium amount you pay on your ULIP investment will be divided into two. Some part of it will go for your insurance cover and the balance will be invested into the fund chosen by you. The stock market does not provide an insurance cover to you.
Lock-in period
ULIP has a lock-in period of five years and this will ensure that you remain invested for that particular duration. It will bring financial discipline and will allow your money to grow. You can avoid the bullish and bearish period of the stock market and do not have to worry about when to buy and sell securities. When you remain invested for a long period of time you can gain from the equity market.
Minimum risk
When you invest in the stock market, you have to tolerate the risk of market volatility. The ups and downs in the market movement will have an impact on your returns whereas if you invest in a ULIP, you can beat inflation and meet your long-term goals. You can invest your money into different types of funds, which will help reduce the risk.
Wider choice
Investing in the stock market means that you need to conduct research on the securities and choose the one that meets your long-term financial goals. When you make a ULIP investment, you only need to choose the fund keeping your goals in mind. You can choose from equity, debt, or a mix of funds. In addition, you have the freedom to switch between funds. If you think that a particular fund is not performing well, you can make your shift to a different fund.
Tax benefits
There is a tax benefit of making an investment in ULIP. You can claim a deduction for the amount invested into a ULIP under Section 80C. The maximum amount of tax deductible is Rs. 1.5 Lakh.
There are various reasons as to why investing in ULIP scores over investing in the stock market. ULIP returns have shown strong consistency over the past few years. This shows that investing in ULIP for the long-term will reap results and minimize your risk. Consider your investment goals and choose a fund that helps generate maximum returns on your investment.