Market Linked Returns

Market Linked Returns are based on market conditions and are not guaranteed. These returns are based on the performance of selected indices such as S&P CNX Nifty or Crisil Bond Fund Index etc.

Market Linked Returns arise out of market linked investments. Market linked Investments can be in the form of bonds or debt securities or insurance products that can provide an enhanced income or growth through participation in the equity market or any other market related instruments. However, since the investments are done in market linked instruments the returns are prone to volatility in the markets. Although the returns are likely to be positive or negative in the short term, in the long term the probability of the returns exceeding the average returns is quite high.

When you invest for long term, the market volatility evens out and you are likely to receive higher returns than in guaranteed plans. All funds invest in the market only and no one can offer a guarantee higher than what’s delivered by the market without running the risk of insolvency. So while providing the guarantee, they go conservative and fix the guarantee at less than the market potential return. When you take inflation into account, an assured rate of return may not give much real return

The return you get on your savings in ULIPs are not guaranteed but benchmarked to market returns. Depending on debt or equity or a mix of both you may choose as your fund options - your returns may vary between 6-10% on a long term basis. You should note these are indicative and not assured returns. The actual returns depend on market conditions and you may check the benefit illustration for estimated returns.

For example: Let’s say an investor decides to invest Rs. 10,000 in a unit linked insurance plan which has a participation rate of 75% of the investable amount in the equity markets, i.e., Rs. Rs. 7,500. Let’s assume the benchmark index to be S&P CNX Nifty for the equity investable portion.

If the Nifty during the year gives a return of 10%, the investor would be deriving a return in proportion to the funds invested in the equity markets i.e. 10% of 75%, i.e., Rs. 750 in the year (20% of Rs. 7,500).