InvestorQ : What types of funds do ULIPs offer?
Anushri Vasa made post

What types of funds do ULIPs offer?

Answer
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Sadaf Khan answered.
2 years ago


Most of us work very hard at our workplaces to earn our salaries. After saving for months, sometimes years at end, we are able to invest that money for future use. However, investing should be done in a manner that best suits our financial needs and in a way we’re most comfortable.

If you are mobilising your money, its only fair you do it wholeheartedly and with a lot of conviction.

ULIPs offer a wide range of fund options that policyholders can invest in. These funds can be categorised into low-risk funds, medium-risk funds and high-risk funds. The different types of funds offered are mentioned below:

Cash funds: Cash funds are also known as money market funds and are in simple terms mutual funds that provide a safe and easily accessible avenue to invest. These funds are generally low-risk and low return in nature.

Balanced funds: As the name suggests, balanced funds combine high-risk equity and low-risk fixed interest instruments. By virtue of fixed interest component, the funds combine safety with capital appreciation (through the equity fund component). These funds maintain a balance of stock and bond options, resulting in guaranteed returns, with the bonds offsetting the potential risks of equity investments. These funds are categorised as medium-risks.

Fixed income and bond funds: These funds are generally invested in corporate bonds, debt funds, government securities and allied fixed income instruments. With their mix of secured and unsecured investments, these funds provide policyholders with a moderate percentage in terms of returns.

Equity funds: Equity funds are mutual funds that invest in stocks of various companies. The aim of equities is to generate capital appreciation. As investments made in stocks are subject to market risks, this makes investing in these funds high-risk investments.