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Traditional Savings vs. Planned Risks - What to Choose?

January 02, 2019
While choosing an investment plan, one of the most important things to remember is to have a diverse portfolio that allows you sufficient coverage together with the growth options. In India, the range of investment options is quite wide and full of choices-so much so that often you may be left wondering about the best possible course of action. The key is to have a clear idea about your own preferences based on your specific requirements and then to choose accordingly. A diverse investment portfolio means having a mixture of securities and funds that allow certain degree of market leverage. Now, market leverage is not something that the safer, fixed interest plans have to offer. This is because any fixed interest and non-market linked plan does not offer any flexibility of investment, thereby capping the possible returns over a period of time.

Often, you may wonder whether sticking to the idea of traditional savings plans is a good choice or whether you should opt for planned risks. This is an understandable dilemma in a market like India, where the scope of effective networking and market research often shows contrasting results. Some experts may put things n favor of playing it safe and investing in cash or monetary instruments or even traditional gold or jewelry-based savings, as these instruments offer better protection against the factor of inflation and are untouched by market volatility. However, if we decode it a little bit, we can find that the pros and cons of having an investment portfolio that is a 100% traditional vary from one case to another. For instance, a fixed interest cash-based investment offers stable returns but the returns are quite low when compared to other unit linked investment options.

Comparison of such traditional plans with a more market-driven option brings us to the importance of a balanced portfolio. ULIPs - Unit Linked Insurance Plans are such plans that offer market leverage to the policy holder, when it comes to returns on investment. ULIPs are instruments that offer combined benefits of insurance and investment and come with a lock in period of 5 years. ULIPs are highly beneficial when it comes to flexibility and returns over a period of time. The investment instrument is a set of fund options, varying from fixed interest monetary instruments, debt, equity and hybrid (i.e. A combination of debt and equity instruments). The policy holder can switch between the given funds options depending on the market performance of any particular fund option. The number of such free switches is capped at an upper limit, varying from one insurance company to another. This means that if the investor has invested in one fund option and that particular fund option is not projected to yield the expected returns. The investor is allowed to make a switch to any other fund option that is expected to yield the projected returns over time. This not only allows the investor to have market leverage over the returns, but also means that there is a balance between the traditional and the planned risk instruments.

HDFC Life presents HDFC Click 2 Invest ULIP - an online plan that offers market-linked returns over a period of time and allows your funds to grow in a healthy manner. For details, click on the mentioned link: https://www.hdfclife.com/savings-investment-plans/click-2-invest-ulip-plan.

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ARN: EC/06/2017/9792

Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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