How does ULIP NAV works as an investor point of view?

We all aspire for more money, high profits and good returns to live a lavish lifestyle. Our entire investment chain works along this three-tier module. During investment you nest your money in equity, debt fund or mix funds so that you extract maximum returns from the markets and secure your future. While markets are flooded with various investment channels such as equity stocks, mutual funds, gold, securities and bonds, ULIPs are one of the best form of investment channel that will not only help you gain good returns but will also shelter you with good insurance cover during this race of earning money in life. Many insurance companies come up with advertisement telling customers to invest in ULIPs that offer returns on the Net Asset Value (NAV) during the policy term known as “ULIP NAV”.

The article makes aware what ULIP NAV actually is and how does it work.

To get an idea of ULIP NAV you first need to understand the process of how a Unit Fund is created.  The money paid towards the premium is pooled together and a large corpus is created. It is then invested in the markets. To help divide the returns on investment, the fund manager divides the corpus amount into units with a certain face value. Each investor then has a share of units in the fund depending on how much money he or she pools in. The value of each unit is considered as the NAV. Once invested in the market, the total value of the fund can increase or decrease on a daily basis and hence accordingly the NAV also increases or decreases.

How it works

A ULIP NAV value is merely the book value of the ULIP investments minus expenses. It is neither inflated nor misrepresentative. This value represents the fair price of its assets if the mutual funds liquidate all its investments on that day. From investors point of view they need not be concerned about the price being too high or low. A higher or lower NAV holds no importance and should not be the basis for identifying the right ULIP fund for your investments.

Thus, ULIP NAV is dependent on the value of the fund. As the value of fund changes according to market conditions, the NAV value changes. At the end of every working day, the fund managers recalculate the NAV and post the value information on the company website to give customers an idea on how their chosen funds are performing in the markets. This way it helps you conveniently track the ULIP NAV funds you’ve invested your savings into.

However, most sales agent or advertising banners try to lure customers with the highest ULIP NAV and that makes them feel they will get highest possible return with zero risk. But as you know nothing comes for free, when experts analyze the concept of highest guarantee NAV following is the conclusion behind it: The returns will be somewhere between 6% and 15% in the long term. And when you deduct another 3% for cost you suddenly feel that the guarantee looks a bit weak.

It is advisable just sit with your financial planner and choose your funds well rather focusing on highest ULIP NAV. It will help you bear fruitful returns for to lead a better future life.