1. Life Insurance Guide /
  2. ULIP /
  3. Market Volatility in ULIP

How to tide over market volatility with ULIPs

July 18, 2018

The fear of market volatility often keeps retail investors away from equity investment. It is this fear that deprives millions of investors from the benefit of tax-efficient and often double-digit returns that equities can offer in the long run.
Some retail investors who do get attracted by the stories of multi-bagger stocks (these are stocks which give you returns several times their cost) invest a lump sum amount in already-run stocks, get caught on the wrong side of the cycle and end up losing money. Predictably, these investors never return to equity markets.

Follow a Disciplined Investment Approach

Predicting the direction of equity markets, which moves up and down due to hundreds of factors, is a tough task, so much so that even the best of analysts might go wrong with their bets.

Therefore, it is futile to try to time the entry into and exit from the equity market. For retail investors to make real gains in the equity market, a disciplined approach to investment is vital. Regular investments over an extended period in equities without getting disturbed by the market ups and downs is the best way a retail investor should invest in equity markets.

This approach works well in the long run as it averages out losses due to market volatility over the long term. This method uses the concept of Rupee Cost Averaging, in which you invest a fixed amount at regular intervals.

To understand how regular investment help in minimising losses in a volatile market, let's consider you purchase Rs 5,000 worth of a stock on a fixed date every month for a year. (See the table)

No. of months Monthly investment (Rs) Unit cost/stock price (Rs) No. of units bought in the month Total number of units Value of investment (Rs)
1 5000 50 100 100 5000
2 5000 48 104.17 204.17 9800.00
3 5000 47 106.38 310.55 14595.83
4 5000 45 111.11 421.66 18974.73
5 5000 46 108.70 530.36 24396.39
6 5000 46.5 107.53 637.88 29661.57
7 5000 47 106.38 744.27 34980.51
8 5000 50 100.00 844.27 42213.31
9 5000 49 102.04 946.31 46369.05
10 5000 50 100 1046.31 52315.35
11 5000 49 102.04 1148.35 56269.05
12 5000 48 104.17 1252.51 60120.70
Total 60,000        

From the above table, at the end of 12th installment, the value of Rs 60,000 invested is Rs 60,121 despite the fact that stock price has fallen from Rs 50 in the first month to Rs 48 in the 12th month.

Imagine if all of the Rs 60,000 was used in the first month to buy 1200 shares at Rs 50. In the 12th month, the value of the investment would have Rs 57,600.

ULIPs: The Right Choice

ULIPs, as a product, is designed to inculcate the habit of disciplined long-term investment. It has a minimum lock-in period of five years, and hence the investor pays and remains invested for a longer term.

They also offer monthly, quarterly, half-yearly and annual payment modes for customers to choose from. However, a monthly option is best suited for retail investors as it fits into their monthly budget, and the volatility risk is lowered since the payments are spread across a longer period due to which any short term extreme market movement does not impact the overall portfolio.

ULIPs are not only an investment product but also provide a life insurance cover i.e., the proceeds are paid to a legal heir on account of death of the insured.

Above all, such sum received by a legal heir is tax exempt under the provisions of section 10(10D) of the Income-tax Act, 1961. Additionally, ULIPs also provides tax benefit in respect of contribution made to the plan and proceeds received by the insured subject to satisfaction of conditions under the relevant provisions of the Income-tax Act, 1961.

Popular Articles

Featured Articles
Goal Based Investment Planning For Family From Bajaj Allianz Life

Realise your Life Goals with a proper goal-based investment plan

Are you a young aspirant wanting to achieve something big in life? Like starting your own business or graduating from a premier institute or buying the bungalow of your dreams?.. Read more...

Monthly Investment Planning With ULIPs From Bajaj Allianz Life

Why monthly investments in ULIPs make sense?

The daily ups and downs in the stock markets can be incredibly unnerving for a retail customer and can dissuade them from investing in the markets. On March 1 this year, the..Read more...

Achieve your long-term goals with ULIPs

Achieve your long-term goals with ULIPs

For meeting your long term life goals, equity as an asset class is quite suitable. What is required is a disciplined approach over a period of time, and before you know it, your dreams.. Read more...

Investment Planning Guide For New Financial Year From Bajaj Allianz Life

How to plan your investments in the new financial year

We are just two months into the new financial year, and the time is still right to get your investment planning in place for the year ahead if not yet done. Taking stock of your past.. Read more...

Advantages of Investing Early

Advantages of investing early in ULIP plan

There goes a saying, 'The early bird catches the worm'. In literary sense, it means that a person will have an advantage if they do or start something early. In the world of investments it means that.. Read more...

Move a step closer to your Life Goals with prudent financial planning

Move a step closer to your Life Goals with prudent financial planning in online ULIP policy

The new calendar year has witnessed some volatility, especially for the broader markets (small/mid-cap space). In this scenario the retail investors have become... Read more...

Investing for the first time?

Investing for the first time? Here are some tips to help you make the right investment

If you are investing for the first time, the chances are that you will be bombarded with advice and tips from your friends and relatives, or you might be... Read more...

5 factors to help you choose the best ULIP plan

5 factors to help you choose the best ULIP plan

Investments are no longer just about saving for the rainy day. We want to invest to get best possible returns on our investments to achieve our life goals and aspirations.... Read more...

Top 5 myths associated with ULIP investments

Top 5 myths associated with ULIP investments

The perception of ULIPs as an expensive and a risky investment tool continue to persist. However, over the last few years, ULIP plans have emerged as a preferred investment vehicle... Read more...

All that you want to know about mortality charges in ULIP investment

All that you want to know about mortality charges in ULIP investment

Mortality Charge is the bone of contention in ULIPs because many consider it primarily an investment vehicle. However, the fact is that mortality charges... Read more...

What is a ULIP NAV?

What is a ULIP NAV?

A unique insurance-cum-investment tool, Unit Linked Insurance Plans (ULIPs), can help us meet our financial goals, while also providing insurance cover. These products are goal-oriented investments and their funds.... Read more...

What is a ULIP plan?

What is a ULIP plan?

It doesn't matter if your 20, 35 or 50. Whatever your age, you are sure to have certain life goals and dreams that you hope to fulfil. You may want to complete your MBA, or perhaps you want to make a down payment on your dream home.... Read more...

Avail Systematic Investment Plans for a more stable financial future

Avail Systematic Investment Plans for a more stable financial future

We all have various financial obligations like daily needs, school fees, and short trip with family or buying a fancy gadget where we require onetime payment for which money can be relatively collected easily... Read more...

    Contact Us

    Bajaj Allianz Life Insurance Company Ltd.
    Bajaj Allianz House, Airport Road, Yerawada, Pune - 411 006, Maharashtra

    Branch Locator

    Customer Care Timing :
    Monday to Saturday - 9.00AM to 7.00PM
    Customer Branch Visit Timings :
    9:00 AM to 3:30 PM on Weekdays

    Customer Care Toll free numbers :
    BSNL : 1800-233-7272 |
    TATA :
    1800-209-7272 |
    BHARTI :
    1800-103-7272 |
    RELIANCE :
    1800-3000-7272

    For online policy issuance / renewal :
    1800-209-4040

    Standard rate apply :
    (+91 020) 66026777

    Customer Service :
    customercare@bajajallianz.co.in

    Sales Enquiry :
    websaleslife@bajajallianz.co.in

    Cyber Cell :
    If you find any unauthorized or fraudulent sales material online, please mail us at :
    cyber.cell@bajajallianz.co.in

    BAJAJ ALLIANZ LIFE ONLINE INSURANCE PLANS

    Chat with us...