How to secure future with assured ULIP returns?

Just like there are insurance policies along with this there are market-linked insurance plan known as ULIPs. While buying UILP policies nowadays we come across an innovative product in market known as guaranteed plans. While purchasing policies there are lot of pros and cons to look out for. Let’s understand how any Guarantee product can be created by simple methods. 

To understand NAV first let’s look at how a Unit Fund is created. The money from all the investors is pooled together to form one large corpus which is later 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 is invested. Hence to start with, the value of each unit is considered as NAV i.e Net Asset Value.

The highest ULIPs NAV guarantee plan is based on the constant proportion portfolio insurance (CPPI) model. According to this method, the fund would get invested in fixed-income type of securities to maintain a certain minimum unit value. When the fund value exceeds this base value, the surplus is placed into stocks. With constant re-balancing of the portfolio, the aim of the fund manager is to not let the unit value fall below a certain base value. The process in highest NAV guarantee plans will be invested in equity, fixed income and money markets instruments.

For listed shares or debentures or bonds, valuation is done on the basis of the closing market price on the principal exchange where the security is traded. For unlisted and illiquid securities and thinly traded shares or debentures or bonds, the value has to be estimated. Different methodologies are been applied for this exercise. For shares, the valuation could be based on the book value per share or an estimated market price. For debentures and bonds, value is estimated on the basis of yields of comparable liquid securities after adjusting for illiquidity. Interest is payable on debentures or bonds on a periodic basis. Interest is accumulated on the basis of number of days the security is held. Accumulated interest on a particular day is equal to the daily interest rate multiplied by the number of days since the last interest payment date.

Some advantages of ULIPs NAV products are as follows:

•These products offer capital guarantee from day one which is a must for the mental peace of the consumers. During volatile conditions of the market investors are often worried but such assured returns give them a hope to sail successfully during the market tidal wave.

• When you invest at younger age it will be better to draw balanced returns from the market. Investors get ample time to experiment with the client funds and then produce decent returns at the end.

•Investors get the advantage of equity exposure in the beginning and over the time it can be shifted to secured funds.

•Fund switching ULIP NAV products helps you to work upon particularly stagnant funds so that they invest the money in some other high earning funds. You can accumulate your wealth through debt oriented once you book profits at the equity shooters in earlier stages.