A new ULIP investment strategy to keep pace with changing times

When it comes to achieving the financial goals you have set for yourself, the investment strategy you adopt matters just as much as the investment options in which you choose to invest. Today, whether you want to invest in market-linked products or in traditional savings instruments, you can invest small amounts regularly or what is commonly referred to as systematic investing.

Bajaj Allianz Life Insurance Company has gone further and introduced a unique investment approach called Systematic entry, systematic exit – or SISO, in short.

As the name suggests, you can use the SISO strategy to make systematic investments each month, and also withdraw your returns systematically, on a monthly basis, rather than as a lump sum.

What is SISO’s approach to investing in ULIPs?
Since ULIPs are market-linked, the possibility of market volatility increases the risk associated with ULIP investments. Investors who want to invest in ULIP may find it difficult to time the markets properly.

The SISO approach eliminates the need to time the market and instead allows you to stagger your time to market because you can invest in ULIP funds systematically, over the entire premium payment term. Thus, your investments are not negatively affected by short-term market fluctuations.

7 reasons to choose the SISO approach for ULIPs
The Systematic entry and systematic exit approach also offers a host of other benefits for ULIP policyholders. Here are the main reasons to choose this new era investment strategy.

1. Disciplined investments:
The systematic approach requires you to pay your premiums regularly and periodically. In the long run, this pays off because you enjoy the benefits of compounding.

2. Calculation of the average purchase cost:
If you make a one-time investment, your purchase price may not be low enough. Markets can dip after you invest, which means you would have bought your shares at a market top. But systematic investing allows you to average your purchase price. Here’s how.

Month Premium amount
NAV
Number of units purchased (Premium ÷ NAV)
1 Rs. 10,000 99 101
2 Rs. 10,000 99 101
3 Rs. 10,000 99 101
4 Rs. 10,000 98 102
5 Rs. 10,000 98.5 102
6 Rs. 10,000 97 103
Total
Rs. 60,000

610
Average unit price
(Rs. 60,000 ÷ 610 units)

Rs. 98.41

As the table above shows, if you had invested a lump sum in the ULIP plan, your total purchase cost would have been higher. But the systematic investment lowered the overall purchase price.

This is called Rupee Cost Averaging, and it is how SISO helps even investors with limited market knowledge to optimize their buying costs without timing the market.

3. Calculation of the average redemption price:
Just like the purchase costs, the redemption prices are also averaged with the SISO approach. This means that if the markets perform well during the redemption phase, you can benefit from market movements as your average redemption price also increases.

4. Increased time on market:
It’s an open secret that time in market is more important than market timing. By choosing to withdraw your payments systematically when the policy matures, the remaining value of your fund continues to be invested in the funds of your choice, allowing you to obtain the returns you want even if you periodically reap the benefits. .

5. Additional or alternative income:
Depending on when you start withdrawing your returns, installments can be a reliable source of additional or alternative income. If you’re still in your working years, systematic payments become extra income you can count on to achieve your life goals.

On the other hand, if you are retired, the regular payments can replace your salary and help you meet your daily expenses.

6. Extended tax benefits:
The premium you pay for your ULIP policy is eligible for tax deductions under Section 80C of the Income Tax Act 1961, subject to the provisions set out therein. Every year, you can claim a maximum of Rs. 1,50,000 in deduction.

7. Optimal money management:
In the event of the death of the breadwinner, some families may find it difficult to manage large sums of money. But when death benefits are broken down into systematic payments using the SISO approach, it becomes easier to manage the funds.

Conclusion
The SISO approach is not only suitable for ULIPs. This also works for other investment plans offered by Bajaj Allianz Life, such as guaranteed income savings plans and annuity-based retirement solutions. All you can consider doing is selecting the appropriate plan and choosing the SISO investment option.

You can also choose different investment plans and diversify your portfolio, as Bajaj Allianz Life offers a range of investment products suitable for people at different stages of their lives. Login to https://apps.bajajallianzlife.com/siso/ find out more.

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