Those who aware about Unit Linked Insurance Products might have heard about fund switching. Fund switching is a facility providing by insurers to its subscribers to switch any previously selected fund or funds between different funds associated to a ULIP product, depends on the requirement. Unlike any traditional insurance policies, ULIPs performances directly related to stock market by investing subscribers money to stocks through various associated funds. With this feature, ULIP products offering a great opportunity to its subscribers to intelligently manage their investments between various funds to maximize wealth considering various factors. In this article, I have intended to reveal a secret of intelligent fund switching to tap maximum profit from Unit Linked Plans.
While applying to ULIP, a subscriber will be presented with options to select one or more combination of funds to invest her money. Upon her fund selection, company would invest her money by buying the units of selected funds to her accounts. For example, if you are selecting a fund that investing 100% of the money to stocks, and the price per unit at the time of selection is 17, and your invested amount is 2000, you are going to get 117.64 units. Suppose the fund value was 10 per units, you suppose to receive 200 units.
With this scenario, now we will move further to know how increase and decrease in stock prices will affect to your investment capital. We will take a look with our first scenario of 117.64 units purchased when the unit price was 17. When the per unit price move to 23, the total amount in her account to be increased to 2705.72 (117.64 units x 23 = 2705.72). She is getting an increase of 705.72 in her wealth. In the same time the total investing value of a person who bought the units at the price of 10 will be 4600 (200 units x 23). An increase of 2600 to her invested capital.
What happens if the situation coming to reverse gear? Let us see what will happen. Suppose the price per unite coming down to 12, the total investment value of the first person with 117.64 units, will be shrinking to 1411.68. In the similar time, the person who have 200 units with a buying price of 10 per units, should still have a total investment value of 2400. That is 400 profit.
Considering the above two scenarios, the golden ULIP fund selection rule for each and every ULIP investors is, select equity oriented funds when the stock market is down. Through doing such, you are getting more units with less price and zoom your wealth when the fund value raising by stock market up trend.
Prior to the selection of any associated equity funds as the part of her ULIP product, a ULIP subscriber must know how stock market up trends and down trends influencing to her funds and what are the necessary actions required to maximize the profit from such trends. Once comfortable with it, a person can move to the next part to know how one can switch fund intelligently to maximize wealth.
With my personal experience, it is simple to zoom wealth with various associated fund if you pay little attention. Now you know stock market is the major influencing factor to equity funds associated to your ULIP. You also aware why I am saying to select equity funds when the market is down. This theory can be applied in the future to zoom your wealth. To do such, you should know the happening up trends and down trends of market as well as the price per unit of your funds. Stock market information can be received from local channels and unit value can be received by contacting the customer care of your insurance company.
Now wait for the next stock market new heights. Of course it is not happening frequently and need to wait for long time. Once you find the stock market is its all time high, it is your time to act. Approach your insurance office and fill the necessary forms to switch your entire investments to well protected, guaranteed debt funds. Ensure your funds has been moved to debt funds. Sit free till the next market down turn. When you feel the market is down to the maximum, again approach to your insurance company and fill necessary form to switch back all your funds to the equity funds to get maximum benefit from the next stock market rally. Continue this process until the end of your policy term.
The switching method I have mentioned above, is a tested and succeeded method from personal life. You should not treat a ULIP product like any traditional plan to buy and forget. Instead, it required time to time monitoring and action.
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