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4 Go-to Ways of Portfolio Management in ULIPs

4 Go-to Ways of Portfolio Management in ULIPs

ULIP investment portfolio

ULIPs, or Unit Linked Insurance Plans, are versatile wealth-building options from life insurers. ULIPs pack a punch when it comes to investing and allow investors to create and manage their multi-asset portfolios. ULIPs are one of the rare investment options which can fulfil all three objectives of investment through a single investment plan:

  • Wealth creation
  • Wealth preservation
  • Wealth distribution

Inbuilt portfolio management features of ULIPs help you achieve these three objectives, especially the wealth creation goal. But, why do you need a portfolio management strategy? How is it different than investing in a single instrument? Wouldn’t it be better if we can invest in one place and simply hold for a long time?

Why Portfolio Management?

Viren and Hema are colleagues working and earning almost the same amounts. Their savings and investments are also identical – 50:50 equity and debt investments. However, there is one key difference:

  • Hema keeps an eye on her investments and reallocates money to equity when markets are looking down and vice versa.
  • Viren on the other hands doesn’t like to spend much time with his investments. He simply invests 50% of his savings in equity and 50% in debt funds.

In steady equity markets, both portfolios of both Hema and Viren would look almost identical. But, when the markets see a downtrend and then regain upward movement, Hema’s portfolio will see better gains than Viren.

This is simply because Hema readjusted her portfolio to the changing risk scenario in the equity market. She moved some money to equity funds from her debt holdings and when the markets recover; her equity portfolio would register more gains.

After the gains she will again readjust the portfolio to bring the debt-equity ratio back to 50:50; i.e. transferring the gains from equity markets to safer debt investments. This is why you need portfolio management. In short, portfolio management will help you:

  • Maintain your portfolio risk as per your risk appetite
  • Take adequate advantage of market movements

Remember your rate of return on investment is a result of the risk in the investment. The higher the risk, the higher the return on investment. But, you need to keep your portfolio’s risk as close to your comfort level as possible.

If your portfolio risk is too low, your investment growth will suffer. If it’s too high, your peace of mind will suffer and so the chances of loss will increase.

Therefore, balancing your portfolio risk-return profile is the key to long-term success with investments. This is what portfolio management will help you achieve.

Portfolio Management in ULIPs

If investment management is not something you want to do full time, you need to consider automating most of your investment transactions. While you can easily automate investing by allowing auto-debit from your bank account, automating portfolio management could be difficult.

But, with ULIPs like Invest 4G plan from Canara HSBC OBC Life you can automate even the portfolio management. Invest 4G offers you four different portfolio management strategies to manage your asset allocation.

The best part is despite the automation you can have full control over your portfolio and intervene when you see the opportunity. You can also change the strategy within the policy duration.

But, once you choose a portfolio strategy, the plan will automatically manage and adjust your asset allocation regularly. This is why ULIPs can be your personal portfolio manager.

Portfolio management in ULIPs can help you tackle the market risk and exploit the market opportunities with minimum involvement.

Portfolio Management Strategies in Invest 4G Plan

Invest 4G ULIP plan from Canara HSBC OBC Life offers four different strategies to manage your portfolio:

Invest 4G Plan

Systematic Transfer Strategy –

Systematic transfer means a gradual flow of funds from one asset to another. In the case of Invest 4G plan, the money is moved from liquid fund to an equity fund.

Why Systematic Transfer?

The systematic transfer allows your lump sum investment into the plan to benefit from rupee cost averaging while getting into the equity funds. Rupee cost averaging means you receive more units when the markets are low and lesser units when markets are high. Thus, reduce your average cost of units in the fund.

How does it work?

When you invest your funds in the plan, your entire investment is saved in a liquid fund. Every month the plan will liquidate 12th part of total allocated units (in the beginning) and then use the funds to purchase equity fund units.

When to Use?

If you do not want to invest in monthly mode, you can use this strategy to create the rupee cost averaging for your equity allocation.

Return Protector Strategy –

Money is transferred from equity funds to debt fund. This transfer is not systematic but depends only on the gains of equity fund allocation. Once the fund value grows to a set threshold, the gain is moved to a debt fund.

Why Return Protector?

Return protector helps you collect your gains from the equity funds. But does not increase your risk when equity markets don’t perform well. This strategy will gradually reduce your equity fund allocation and thus, your portfolio risk.

How does it work?

You can fix a return percentage for your equity fund allocation between 5-10%. The moment your equity fund allocation gains 5% (the fixed return value) the profit will be booked and transferred to debt fund.

When to Use?

If you want your portfolio risk to go down as you age, this strategy is perfect.

Auto Fund Rebalancing Strategy –

This strategy works on a fixed asset allocation ratio. Once you fix the ratio of equity, debt and liquid assets in your overall portfolio the plan will adjust your allocation every three months to match the ratios.

Why Auto Rebalancing?

Auto rebalancing achieves the dual objective of keeping your portfolio risk stable while exploiting the market opportunities. Thus, you can consider this strategy the better of the three for wealth accumulation goals.

How does it work?

You fix the allocation ratio for debt, equity and liquid funds, say 50:30:20, or distribute only between equity and debt. The plan will revisit the allocation every three months and readjust the asset allocation to the decided ratios.

For example, after three months your allocation changes to 55:28:17. The plan will liquidate the gains in equity funds and distribute it to debt and liquid funds.

When to Use?

This strategy is great when you have 10+ years to stay invested and build your corpus. It works better for wealth creation goals and long-term financial goals.

Safety Switch Strategy –

This strategy simply helps you save your accumulated corpus from market volatility in the final 4 years of your policy. The plan will gradually move your entire holding to liquid funds systematically over 4 years.

Why Safety Switch?

The safety switch option protects your accumulated corpus from market fluctuations as you close in on your financial goal. You can use this strategy with the other three strategies to ensure your gains on the high-risk allocations remain safe near the maturity.

How does it work?

In the last four policy years, the plan rebalances the portfolio at the beginning of each year. The rebalancing ensures that liquid funds allocation matches the scheduled weightage of 30%, 60%, 90% and then 100% for the last 4 policy years.

When to Use?

You can use this strategy with any of the other three strategies. If you use this strategy, in the last four policy years, only this strategy will be active.

Speak to an insurance specialist now!


In order to understand ULIP NAV, you first need to understand how ULIPs work. In ULIPs, a portion of premium from different investors is accumulated to create one investment corpus. This money is invested in several different market instruments. So to divide the returns properly among all the investors, the fund manager divides the net asset value in to small units with a specific face value. NAV is the per market share value of a fund. To better understand the definition of NAV, take a look at the formula below -

Net Asset Value = [Assets-(Liabilities + Expenses)] / Outstanding Units

It's not risky to invest in ULIP if you chose a safer path. Risk factor in ULIPs depends on the investment option you choose. If you are not okay with sharp movements, then choosing a low risk investment is a better idea. For people with high risk appetite, it's good to choose equity funds while risk-averse investors can go for debt funds.

You can opt for settlement option if you want to take your fund value in periodic installments. With the settlement option, you can get your maturity amount in installment as per the frequency chosen by you over a maximum period of 5 years. You can choose complete withdrawal of fund value at any point of time. Although, you will not get any life cover during this period.

ULIPs are life insurance products that provide paths to invest. And just like other investment option, there's no guaranteed investment return in a ULIP. Although, if you like taking risks and want to earn more returns on your investment, then opt for equity funds.

At the time of maturity of ULIP policy, you will get the fund value on your prevailing NAV. Fund value is the number of units of policy multiplied by NAV (net asset value).

Value of the fund = Total units of policy x NAV (Net Asset Value)

Well, discontinuing your premium payment will disrupt your savings as well as financial goals. In such case, you can approach your insurance company and ask for the revival of discontinued policy within the stipulated timelines. Also, you will have to pay all the unpaid premiums.

ULIP plan is a combination of investment and insurance. Thus, one must hold this plan for a duration of at least 10 years so as to get investment benefits out of it. As an early exit will have its own consequences. ULIPs have a lock-in-period of 5 years. Thus, you may surrender your policy before the completion of 5 years, but you will be paid only after the end of 5 years.

Generally, minimum lock-in period for ULIP is 5 consecutive policy years. During this time period, if the policyholder discontinues or surrenders the policy, then he/she will not able to receive any payouts. Withdrawals are only allowed at the end of the lock-in period. In addition to this, if you surrender your policy before the lock-in period ends, then you will have to pay surrender charges as well. Also, it is advisable not to exit your plan after the completion of 5 years of lock-in period, because if you stay invested for a longer duration it will help you reap better benefits.

The amount that you pay towards the Unit Linked Insurance Policy is eligible for tax deduction as per Section 80C of the Income Tax Act, 1961. This means that the premium amount paid will be deducted under section 80C from your taxable income up to a maximum limit, which is currently ₹1.5 Lakhs. However, the aggregate amount of deductions under section 80C, section 80CCC and 80CCD (1) shall not, in any case, exceed ₹1.5 Lakhs. Also, upon the maturity of the policy, the payout amount you receive will be exempt from income tax, subject to the applicable provisions of Section 10(10D) of the Income Tax Act, 1961.

Here’re the following major benefits of buying ULIP

1. Tax Benefits – It helps you to reduce tax liabilities. This means you are liable to enjoy tax benefits on the premiums paid towards the policy as per Section 80C of the Income Tax Act.

2. Long-term growth– One of the major benefits of buying a ULIP plan is that it offers long-term benefits. ULIPs come with a lock-in period of 5 years which will keep you invested for a longer period.

3. Dual benefits – ULIPs not only offer life coverage but also come with a wide range of investment funds that will help you earn great returns. This includes balanced funds, debt funds or equity funds. You can invest in any of them depending on your need and risk appetite.

4. Flexibility – It gives you the flexibility to switch between funds basis your risk appetite. You could select multiple funds and different investment strategies.

5. Partial withdrawal option – It allows you to make partial withdrawal in case of any uncalled medical emergency or contingency after completion of lock-in period.

ULIP is a perfect investment option if you are looking for long term wealth creation. It could be buying your own house, a new car, going on a long vacation, or your child’s higher education or marriage, ULIP helps you to meet all your long-term financial goals. Moreover, it comes with a lock-in period of 5 years which keep you invested for a longer period and helps you earn better returns. The lock-in period is calculated from the date when the policy is issued.

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