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Get Market-Linked Returns with Tax Benefits$




* T&C apply | BJAZ-WB-EC-04728/23


$Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116.

$Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116.

ULIP Portfolio Strategies Explained

Unit Linked Insurance Plans (ULIPs) allow interested investors to benefit from market-linked returns, thanks to the choice of funds they offer. But to truly make the most of a ULIP investment plan, you need to ensure that you make use of the right portfolio strategy. Merely tracking the ULIP performance or blindly investing in top performing ULIP funds is not enough.

As an investor, you also need to make sure that the strategy you adopt is aligned with the life goals and the financial plans you have in place. Only then can the investment component of a ULIP insurance plan actually give you the maximum benefits possible. But how does the investment component work, in the first place? Let’s find out the answer to this question first, before moving on to understand the different portfolio strategies in a ULIP.


How does the investment component in ULIP work?


As per the investment component in Unit Linked Insurance Plans (ULIPs), policyholders can invest in a portfolio that consists of a combination of different funds. This includes equity funds, debt funds, or even a mix of both. By choosing your funds and creating a portfolio smartly, you can minimize the risk associated with your investments, while simultaneously ensuring that you make the most of the ULIP performance.

By giving policyholders the option to invest in a variety of funds as per their choice, ULIPs allow for goal-based investing in a way that few other financial products do. Policyholders can choose a mix of investments according to their risk profile and risk appetite. For instance, a more risk-friendly policyholder may prefer to invest heavily in equity funds, while a more conservative person may choose to add more debt funds instead.

In addition to this, the investment component in a ULIP investment plan also gives policyholders to ensure that their investments are aligned with their changing risk tolerance levels. More specifically, the fund switching feature is of great help here. As people age, their risk tolerance tends to decrease. With the fund switching feature, policyholders can ensure that their ULIP investments keep up with their changing needs. It allows them to move their money from equity funds to debt funds, or vice versa, if needed.


List of ULIP portfolio strategies you can avail


Now that you know how the investment component in a Unit Linked Investment Plan works, it’s time to take a look at the ULIP portfolio strategies that you can use. Here are 4 of the most common strategies.


1. Trigger based portfolio strategy


This strategy makes it possible for you to take advantage of price movements in the equity market. Here are the key features of this portfolio strategy.

  • It works on the ‘buy low sell high’ principle.
  • Initially, your investment is distributed between equity and debt, generally in a 75:25 ratio.
  • And then, as the market moves, the trigger is activated when the trigger event occurs, and your fund manager will rebalance your portfolio accordingly.
  • Typically, a trigger event is a 15% upward price movement in the market price of your equity investments. It can also be changed if you need it to.
  • In case the trigger event occurs, the equity component of your portfolio increases.
  • You can then cash in on these returns, and reallocate the investments in the original proportion.


2. Wheel of life portfolio strategy


The wheel of life portfolio strategy is designed to help you tap into the high return generating potential of the equity market in the early stages of your investment journey, when your risk appetite tends to be higher. Here is how it works.

  • Initially, all of your investments - 100% of it - will be allocated to equity funds.
  • Within this equity segment, your investments may be distributed across different kinds of equity investments, such as mid cap funds, large cap funds, etc.
  • Then, as the investment tenure progresses and the term to maturity gets shorter, your exposure to equity is reduced.
  • Instead, your funds are redirected to more stable assets such as debt funds, bond funds and liquid funds.
  • And even within the equity segment that remains, stabler equity components like blue chip funds are prioritized.
  • This continues to happen until maturity, when the equity exposure is brought down to zero, and all your investments are allocated to debt.


3. Investor selectable portfolio strategy


As the name suggests, the investor selectable portfolio strategy gives the investor - aka the policyholder - the reins. So, if you opt for this strategy, you can choose your asset allocations yourself.

  • Since you have full control over how your money is allocated across asset classes, you can choose to invest it all in any one kind of fund, or you can distribute it across assets like equity, debt, and money market instruments.
  • Typically, there are different funds available to the investor here, with varying degrees of risk ranging from very high risk to very low risk.
  • Over the course of your investment period, you can switch your asset allocation as needed, based on your changing risk levels and the market movements.
  • Essentially, you get to take the front seat and control how your ULIP portfolio is constituted or modified during the investment period.


4. Auto transfer portfolio strategy


An auto transfer portfolio strategy gives you the opportunity to earn the returns you need by taking moderate levels of risk, through systematic asset diversification.

  • Initially, your premium is allocated to low-risk funds like the bond or liquid funds you will specify.
  • But at the start of each month, a specific proportion of your investments are switched to the other funds - which also you will specify, of course.
  • You can choose these funds based on risk appetite and life goals.


Which portfolio strategy should you choose?


Now that you know what these investment strategies are, how do you know what to choose? Well, take a look at what kind of investors benefit from each of these strategies, so you can make your decisions accordingly.


• Trigger based portfolio strategy


This strategy is useful for policyholders who are beginners to the markets, and who prefer professional assistance to manage their investments. It is also suitable for investors who want to keep an eye on the level of risk they take.


• Wheel of life portfolio strategy


This strategy is ideal for people who want to invest for their long-term life goals, such as buying a house or saving up for their children’s higher education.


Investor selectable portfolio strategy


The investor selectable portfolio strategy is better suited for individuals who have a good understanding of how the markets function, and who want to exercise a fair bit of control in how their investments are allocated and switched between ULIP funds.


• Auto transfer portfolio strategy


This strategy is suited for you if you want to improve your returns while also ensuring that you maintain a steady growth in your investments.




With so many strategies available, it is easily possible for you to make your decisions. If you are still unsure, you can always approach a financial advisor for some professional guidance and plan ahead to achieve your life goals.


#Survey conducted by brand equity – Nielsen in March 2020

~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

**Past performance is not indicative of future performance.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.