Which fund options should I opt for while buying a unit-linked insurance plan (Ulip) in the present volatile market scenario?
Ram Sehgal, Chandigarh
A Ulip usually offers various funds to suit the needs of investors with different risk appetites. The performance of a fund depends basically on the underlying securities, so the returns hinge to a great extent on the funds chosen. Your risk appetite should guide you while choosing funds. There are usually four kinds of funds: only equity (high risk); only debt (low risk); balanced fund, which has a mix of equity and debt (medium risk); and any other specified combination. Any of the funds available could be doing well at any particular time. Remember that the track record is not an indicator of future performance. For getting maximum returns, you need to constantly compare the performance and returns of the various funds offered. As the performance of funds may not remain constant, companies give the option of switching funds. One or two switches a year are generally free in every policy.