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How to build an automated investment plan that manages itself?

How to build an automated investment plan that manages itself?

The world has been moving towards automation for over two decades now. The world of investments has been no different, except that automation has been the mantra of success with investments.

You may need to put some effort into figuring out the right investment. But once you do, ensure that your money can manage itself and works hard without your regular intervention.

Unit linked insurance plans or ULIPs are one such investment option where you can easily build your automated investment plan.

Here are five ULIP features which help you fully automate your investment plan:

Long-Term Investment

ULIPs are best suited for long-term investment ranging from 5 years to more than 30 years. You can even choose a whole life plan with ULIPs like Invest 4G from Canara HSBC Life. The lifetime plan allows you to continue with the same ULIP plan till the age of 100.

Due to the extended investment horizon, you can use the ULIP plans for various important life goals like child’s education, marriage, your retirement. ULIPs are also the best plans to build huge wealth over time with minimal investment effort.

The long-term nature of ULIP investments helps you to continue without the need for withdrawing and reinvesting for your long-term goals. Thus, the first level of automation is that you can continue investing for a long time without additional effort.

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Use ECS to Automate Investments

ECS mandate can save you a lot of efforts, signatures and missed due dates for your ULIP investment. Whenever you start your ULIP investment or any other, make sure you can fill the ECS form to allow auto-debit of your account for each month’s instalment.

Also, to ensure that the mandate doesn’t bounce due to low balance, you should keep your investment date close to the salary date. This also corresponds well with the golden rule of wealth building – ‘save first spend later’.

Use an Automated Portfolio Management Strategy

ULIP plans offer multiple units linked funds to invest your money as per your risk appetite. If you are an aggressive investor you may have a few choices to invest in equity funds. For safer investors, debt funds provide the option for steady growth.

As an aggressive investor, you have a few options to manage your investment risk in the long run without much effort. For example, Canara HSBC Life’s ULIP plan, Invest 4G comes with four portfolio management strategies:

  • Systematic transfer
  • Return protector
  • Auto fund rebalancing
  • Safety switch option

Systematic transfer helps you to create and SIP to equity funds of your choice while you invest a lump sum amount. This strategy helps you benefit from the rupee cost averaging even while investing only once or once every year.

Return protector option will book the returns from equity funds, once they reach the decided threshold, and saves them in a debt fund. This strategy reduces your overall portfolio risk over time.

Auto fund rebalancing helps you maintain your portfolio risk throughout the investment tenure. You can decide the debt-equity ratio of your portfolio in the beginning and the plan will automatically rebalance to keep the same ratio.

You can use the safety switch strategy with this one to minimize your portfolio risk in the final few years of the policy. The safety switch option systematically moves your equity holdings to safer funds in the last four policy years.

Also Read - Investment plan for 5 years

Enable Milestone Withdrawals

Milestone withdrawals allow you to use the single ULIP investment plan to achieve more than one financial goal. The policy will automatically pay a percentage of total corpus value at specified times.

However, you may need to hold the policy for up to 10 years to exercise this option. But, if you are using ULIPs to achieve your long-term goals, this will not be a problem.

Milestone withdrawal option automates your goal-related withdrawal needs.

Use a Systematic Withdrawal Mandate

If you are using ULIP plans to build your retirement corpus you will not need to withdraw and invest the corpus in an annuity plan for regular income. Instead, you can use the systematic withdrawal option to create a regular tax-free income stream from the ULIP itself.

You can use any one of the systematic withdrawal or milestone withdrawal option at a given time. However, if you have started the ULIPs with a specific purpose in mind you will not need to mix them up:

ULIP for Financial Goals

  • Max Investment Age or maturity age of the plan: 60 years
  • Withdrawal mode: Milestone or partial withdrawals

The plan matures when you reach the age of 60 or before, with your final financial goal.

ULIP for Retirement

  • Max maturity age: 100 years
  • Max investment age: 60 years
  • Withdrawal mode: Systematic Monthly

Since you cannot change the maturity period of your ULIP plan after purchase, you should keep the retirement ULIP as a separate investment plan.

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