Portfolio Creation Strategies Offered by ULIP Policies

Wealth creation through an insurance policy may seem like an unlikely idea to some. However, there are plans such as ULIPs that provide a perfect merger of insurance plus investment. Whether you are looking to invest in high-risk, high-reward equity funds or low-risk, low-reward debt funds, ULIPs offer investment opportunities for every type of investor. Alongside, you get life coverage which ensures that the future of your loved ones is taken care of, in financial terms. With a ULIP policy, one can create a variety of portfolio strategies depending on their financial goals and objectives, whether they are short-term or long-term. Let’s take a look at some financial strategies offered by ULIP policies.

Let us understand how ULIPs work

When you provide your premium payment to the insurance company, they diversify your money in two ways. A major chunk of your insurance premium is meant to build the life cover, while the other portion goes towards investment. As mentioned earlier, one can invest in equity funds or debt funds. One can also opt for a combination of both funds. You should consider your risk appetite before choosing any one type of asset class. Investing in a ULIP for wealth generation purposes can be immensely beneficial if it is done with the right knowledge and approach.

ULIP portfolio strategies

  • Trigger-based fund adjustment

In this kind of portfolio strategy, you originally invest your funds into equity and debt in a particular ratio, let’s say, 70: 30 respectively. This strategy aims to buy low and sell high. You can then set a trigger event that will lead to your fund manager readjusting your funds appropriately. For instance, you can set a trigger event of 20% price fluctuations in your equity investment. Once the trigger event occurs and your investment sees a rise of 20%, the portfolio manager readjusts your investment to maximise your ULIP benefits.

  • Portfolio based purely on debt funds

If you are an individual who is more concerned with stable returns than higher returns, then a ULIP portfolio strategy based purely on debt funds may be the right option for you. There are various types of debt funds, such as government bonds, corporate bonds, treasury bills, dynamic bond funds, and so on. Some debt funds do hold a certain element of volatility but, in the long term, are usually stable.

  • Portfolio based on equity funds only

This is the ideal option for an investor who is willing to undertake risks related to market volatility for higher returns. Within equity funds, you can choose to invest in mid-cap funds, low-cap funds, and high-cap funds. The name of each type of fund is synonymous with the risk they hold.

  • Wheel of life strategy

Within this type of ULIP policy portfolio strategy, you initially invest all your money into equity funds. The entirety of the investment portion of your premium is invested into equity funds of your choice. As the tenure of your policy passes and the maturity date comes nearer, the funds are gradually switched into debt funds. Certain kinds of equity funds that are more stable and less volatile may also be chosen. Upon reaching maturity, the entire investment amount has beenswitched to in debt funds.

This kind of strategy is ideal for young policyholders who may have lesser responsibilities at the start of the policy. However, as the years go by and you shoulder more responsibilities; you would want more stability,and thus, the gradual exposure to debt funds.

  • Automated regular transfer portfolio

One of the best ULIP benefits is that you get to switch funds as per your changing risk appetite. In this strategy, you get to choose a particular duration, after which the investment will automatically be transferred to or adjusted with other asset classes. You also get to select the kinds of funds you wish to get your investment amount transferred to. This approach helps build stable returns over a course of time as you get to experience the benefits of both types of funds.

These are some portfolio strategies you can consider when buying a ULIP for wealth generation purposes. Also, ensure to read the terms and conditions before signing a ULIP policy.


Natraj Studied bachelor's degree in finance and business from Telangana University, Nizamabad. A Writer based In India, He has a degree in Charted Accounts and has very knowledgeable in credit repair and Banking Sectors. So, I decided to start a blog and share my knowledge to the visitors.

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