Investing is a curious exercise where everyone knows the logical conclusion but remain curious about the outcome. This is especially evident during difficult situations, pandemics and disasters. As investors, we want to benefit from all events. At times this short-term objective leads to bad investment decisions. However, with a unit-linked insurance plan, your money and your loved ones are safe.
So, what to do with your money during a pandemic?
The short answer is ‘nothing special’. If anything, you continue investing and try to minimise the risk of your investments so far as possible. However, you should remember that your investments need to stay connected with your goals more than the markets. That is, of course, unless you are investing directly in the markets and your aim is short-term profit.
If you are investing through mutual funds or ULIPs (Unit Linked Insurance Plans) you have fewer reasons to worry. In the short run, your equity portfolio might look devalued but in the long run, it is bound to recover. We have already seen the example of this in the market during COVID's introduction.
Minimise Your Portfolio Risk
You are likely to have multiple goals and, probably, even have multiple investments running at the same time. Given the fact that equity market volatility makes it useful over other investments, you need to continue your equity investments.
However, you also want your portfolio to benefit from the volatility. So, here are a few methods you can use:
Building Your Investment Portfolio
You need portfolio management for your investments to exploit market opportunities and safeguard your returns from the market. But, unless investment management is your primary concern in life, you will mostly find the exercise tedious. Also, you may not always find or act on the opportunities.
Instead, you can automate the portfolio management following the principles of wealth building:
Even when you are investing during the unprecedented pandemic of Covid-19, you should follow these principles for your investment.
Automating Your Portfolio
Portfolio management refers to the exercise of managing asset allocation in a portfolio. So, you can have any or all of the following assets in your portfolio:
There are two ways you can automate your portfolio management in these assets:
If you are starting small and want to invest continuously out of your monthly savings, you will find the second option more suitable. For now, there are only two solutions for regular investors to invest in a managed portfolio scheme:
Balanced Funds as Managed Portfolio
Balanced funds maintain dynamic equity and debt ratio which can range from 50:50 to 90:10 depending on the market situation. While the funds are managed by professionals with large teams, you have little control over the money.
For example, if you want to withdraw money from a balanced fund for your goal, you have no option other than to reduce your entire holding:
The money will be pulled out from both your equity and debt holdings. Whereas, ideally, you’d only like to withdraw from the debt part and keep equity untouched.
ULIP Investment Plan as Managed Portfolio
ULIP plans offer far more customization possibilities to you with multiple funds under a single investment option. Canara HSBC OBC Life’s online ULIP plan, Invest 4G has four unique asset management strategies apart from the option to invest in individual equity, debt and balanced funds.
Invest 4G plan offers the following four strategies, all with a different objective:
Apart from automated portfolio management, ULIPs also offer multiple other benefits unique in the investment world:
Is ULIP Investment Enough?
With so many features in one place, ULIPs may seem like a one-stop-shop for you. However, more than the instrument, you should ensure that your investments connect to at least one of your financial goals.
Further, you may like to invest in precious metals, especially gold. But you will not need active portfolio management for gold. Inflation hedge assets like gold and precious metal investments should be held on to for a long period. So, their role in a managed portfolio will be nil.
Since most portfolio management activity happens between high-risk equity and low-risk debt funds, ULIPs would be good enough for regular investment.
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