3 ways to gauge your ULIP returns over time


Being dual in nature, Unit Linked Insurance Plan (ULIP) offers investors a mix of insurance and investment under a single roof. Additionally, the introduction of Long Term Capital Gains Tax (LTCG) has permanently changed the game for a ULIP plan. The prime reason for the reformation of the old ULIPs is the provision of higher returns.

If you’re looking forward to earning higher ULIP returns, then see to it that you invest in the right type of ULIP fund. An investor is allowed to select either equity funds, debt funds or balanced funds. Selecting the right type of fund will help you not only to receive higher returns but also build wealth. Go through these 3 methods to gauge your ULIP returns that will benefit you for the longest period of time:


3 methods to gauge your ULIP returns:

   1. Absolute Returns

In order to calculate absolute returns of ULIPs, all you require is the current and initial Net Asset Value (NAV). The formula for calculating absolute returns is [(Current NAV- Initial NAV)/ Initial NAV] x 100.

This type of method is useful for analyzing ULIP performance for, particularly short performance i.e. 12 months. While you can use it during the course of the ULIPs, it is advisable to take advantage of it during the initial stage. Making use of it in the initial phase of the plan allows you to calculate simpler returns of the investment.

2. Simple Annualized Returns

Before you utilize Simple Annualized Returns method for gauging your ULIP returns, understand the working of absolute return is very important. The formula for calculating Simple Annualized Returns is [(1+ Absolute Rate of Return) ^ (365/ number of days)]-1.

This method helps you to calculate the average amount of investment earned in a year. In order to calculate it, you need to show the returns that you have invested so far during the course of your ULIP. However, this is applicable only if your annual returns were compounded.

3. Compounded Annual Growth Rate

Under Compounded Annual Growth Rate (CAGR), an investor might assume that his investment keeps compounding over the due course. The formula for calculating CAGR is {[(ending value of NAV/beginning value of NAV) ^(12/number of months)]- 1 per lakh invested}* 100.

Since CAGR is the annual growth rate, it does not consider the volatility in returns over a period of time. This type of method is only applicable for investment vehicles that vary between mutual funds to ULIPs. Therefore, invest in CAGR as per your risks and requirements. It will eventually help you to yield higher returns which will work in your favor.

A ULIP Investment is an ideal choice for those investors looking for achieving higher returns. These returns will not only protect your family but also allow your healthy participation in equity markets. However, these returns totally depend on the type of funds that you opt for. For that, it is your duty to take professional guidance of selecting the right type of fund for your investment.

For higher returns, invest in equity funds. While debt funds offer lower returns, the balanced funds offer you with the returns ranging from medium to high. So now that you know what fund to invest in for higher gains, when are you planning to invest in one? The best way to get guaranteed high returns is not only making a smarter choice of investment but also understanding the working of these funds carefully.


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