Unit Linked Insurance Plans (ULIPs) are a popular investment option combining the benefits of insurance and investment. One of the key metrics to evaluate the performance of a ULIP is its absolute return. Let’s explore what absolute returns are in the context of ULIPs, their significance, and how to calculate them.
Understanding Absolute Returns
Absolute return is the total return on an investment over a specific period, without considering the duration or comparing it to any benchmark. It is a straightforward measure reflecting the actual increase or decrease in the value of an investment.
How to Calculate Absolute Returns
Absolute returns can be calculated using the following formula:
Absolute Return= [(Current NAV-Initial NAV)/Initial NAV] ×100
For example, if you invested ₹1,00,000 in a ULIP and its current value is ₹1,20,000, the absolute return would be:
Absolute Return= [(1,20,000-1,00,000)/1,00,000] ×100
This puts your absolute returns at 20%.
Significance of Absolute Returns in ULIPs
Understanding absolute returns is crucial for evaluating the performance of your ULIP investment. Here are some reasons why:
Absolute returns provide a clear and simple picture of the performance of your ULIP plan.
They help investors gauge the effectiveness of their investment choices without the need for complex calculations or comparisons.
Knowing the absolute returns can aid in making informed decisions regarding portfolio adjustments and future investments.
Using a ULIP Returns Calculator
A ULIP returns calculator can be an invaluable tool for investors. It helps estimate the potential returns from a ULIP plan based on various factors such as premium amount, policy term, and expected rate of return. Here's how you can use a ULIP returns calculator:
Input Details: Enter the premium amount, policy term, and expected rate of return.
Calculate: The calculator will provide an estimate of the potential returns at the end of the policy term.
Analyse: Use the results to compare different ULIP plans and make informed investment decisions.
Absolute returns are a fundamental measure to understand the performance of a ULIP plan. By providing a clear picture of the actual returns on your investment, they simplify performance evaluation and aid in making informed decisions.
Understanding and calculating absolute returns is essential for any investor looking to maximise their ULIP returns and ensure their investment aligns with their long-term financial objectives.
Disclaimers:
Unit Linked Insurance Products are different from the traditional insurance products and are subject to risk factors. The Premium paid in unit-linked life insurance policies are subject to investment risks associated with capital markets and NAVs of the units may go up or down, based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. IndiaFirst Life Insurance Company Limited is only name of the Insurance Company and _________________ (UIN__________) is only the name of the Unit Linked Life Insurance contract and does not in any way indicate the quality of the contract, its future prospects, or returns. Please know the associated risks and the applicable charges from your Insurance Agent or the Intermediary or policy document issued by the Insurance Company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding the sale.
IndiaFirst Life Insurance Company Limited, IRDAI Regn No.143, CIN: U66010MH2008PLC183679, Address: 12th & 13th floor, North [C] Wing, Tower 4, Nesco IT Park, Nesco Center, Western Express Highway, Goregaon (East), Mumbai – 400 063. Toll free No – 1800 209 8700. Email Id:customer.first@indiafirstlife.com, Website :www.indiafirstlife.com, Fax No. +91226570600. Trade logo displayed above belongs to our promoter M/s Bank of Baroda and is used by IndiaFirst Life Insurance Co. Ltd. under license. Adv. Ref. No.:_________.
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