Being an investor, every penny that you make is an important aspect of your investment. However, due to the growing effects of inflation, every penny that you save is no longer the penny that you earn. Therefore, an investment in a Unit Linked Insurance Plan (ULIP) is necessary in order to combat inflation in the best possible way. Due to the dual benefits of protection and growth, ULIP investment tones down the effects of inflation on your investments. So if you’re wondering how to combat inflation with a sound investment in ULIP, keep reading to find out more. Take a look:
What are the effects of inflation ?
- Loss of the value of cash
One of the major drawbacks of inflation directly impacts the value of your accumulated cash. Due to the rapidly growing rate of inflation, the purchasing power decreases over the due course. In the past decade, the average annual rate of inflation was 8.5%. The best way to avert the effects of inflation on your savings is by investing in that investment plan which allows the growth of money during the tenure of the plan. One such plan is the ULIP Plan which provides the growth of funds for the longest run.
2. A rise in the cost of future needs
Your long term future plans like your retirement are affected the most because of inflation. For instance, if your monthly expenses are Rs 40,000, the annual rate of inflation for the next 30 years is 6% which eventually means it rises to Rs 2.30 Lakhs on your retirement. Therefore, stash only the necessary amount at home in order to provide for the times of an emergency. The rest of the cash can be invested in a Plan like ULIPs which allows high growth of funds.
Why invest in a ULIP Plan in order to beat inflation?
- Protects you and your family from inflation
In order to ensure that you stock up less cash in your houses, buy a long term investment solution like a ULIP Policy. When you invest in a ULIP Policy, the insurance companies offer you a life coverage as well as allow your participation in the equity markets. Due to the participation in the equity market, the growth of your money is typically high. If you think the accumulated amount is close to reaching your financial goals which are 2-3 years away, you can utilize the switching options for ULIP funds.
2. Tackles the power of equity
One of the major ULIP benefits offered to an investor is the involvement in the equity markets. Since a majority of investors do not have the right expertise to invest in equities, ULIPs provide them with the opportunity to participate in the equity markets. Additionally, investment in the equity funds of the ULIP Policy generates higher returns. In a period of 10-15 years, these equity funds may provide at least 12-15% of the compounded returns to their investors.
3. Serves you in times of retirement
Keeping the essence of long term investments in mind, a maximum number of investors opt for ULIPs even during the retirement phase. Since ULIPs provides higher returns as well as tackles inflation, it becomes a go-to investment option in order to keep them covered during retirement. Moreover, a ULIP Policy not only secures your future but also maintains your regular standard of living without disrupting the cash flow.
Now that you know how to combat inflation with a sound investment in ULIP, what are you waiting for? Whether you’re building an emergency fund or planning an early retirement, ULIPs ensures the fulfillment of your financial goals without letting inflation come in the way. However, see to it that you invest in the right type of fund based on past ULIP performance. Since the ULIP meaning stands for Unit Linked Insurance Plan, it is a combination of insurance as well as an investment under a single roof.