When it comes to achieving the financial goals you’ve set for yourself, the investment strategy you adopt matters just as much as the investment options you choose to invest in. Today, whether you wish to invest in market-linked products or in traditional saving instruments, you can invest small amounts regularly or what is commonly known as investing systematically.
Bajaj Allianz Life Insurance Company has gone one step further and introduced a unique investment approach called Systematic In, Systematic Out – or SISO, in short.
As the name indicates, you can make use of the SISO strategy to make systematic investments each month, and also to withdraw your returns systematically, on a monthly basis, rather than as a lump sum amount.
What is the SISO approach to investing in ULIPs?
Since ULIPs are market-linked, the possibility of market volatility increases the risk associated with ULIP investments. Investors who wish to invest in ULIP may find it tough to time the markets correctly.
The SISO approach eliminates the need to time the market and instead allows you to spread out your time of entry in the market, because you can invest in ULIP funds systematically, over the entire premium payment term. So, your investments aren’t adversely affected by short-term market fluctuations.
7 Reasons to Choose the SISO Approach for ULIPs
The Systematic In and Systematic Out approach also offers a host of other advantages to ULIP policyholders. Here are the top reasons to choose this new-age investment strategy.
1. Disciplined Investments:
The systematic approach requires you to pay your premiums regularly and periodically. In the long run, this pays off, because you get to enjoy the benefits of compounding.
2. Averaging of Purchase Costs:
If you make a one-time investment, your purchase price may not be low enough. The markets may dip after you invest, and that means you would have bought your units during a market high. But systematic investing helps average your purchase price. Here’s how.
||No. of units purchased (Premium ÷ NAV)|
|Average price per unit
(Rs. 60,000 ÷ 610 units)
As shown in the table above, had you invested a lump sum in the ULIP plan, your total purchase cost would have been higher. But systematic investing has brought down the overall purchase price.
This is known as rupee cost averaging, and it’s how SISO helps even investors with limited market knowledge to optimise their purchase costs without timing the market.
3. Averaging of Redemption Prices:
Just like the purchase costs, the redemption prices are also averaged out with the SISO approach. This means that if the markets perform well during the redemption phase, you may benefit from the market movements because your average redemption price also goes up.
4. Increased Time in the Market:
It’s an open secret that time in the market is more important than timing the market. By choosing to withdraw your payouts systematically at maturity of the policy, your remaining fund value continues to be invested in the funds of your choice, thereby earning you your desired returns even as you reap the rewards periodically.
5. Supplementary or Alternative Income:
Depending on when you start to withdraw your returns, the payouts can act as a reliable source of supplementary or alternative income. If you are still in your working years, the systematic payouts become an extra income that you may rely on to meet your life goals.
On the other hand, if you have retired, the regular payouts can substitute your salary and may help you meet your everyday expenses.
6. Extended Tax Benefits:
The premium you pay for your ULIP policy is eligible for tax deductions u/s 80C of the Income Tax Act, 1961, subject to provisions stated therein. Each year, you can claim a maximum of Rs. 1,50,000 as a deduction.
7. Optimal Money Management:
In case of the breadwinner’s demise, some families may find it challenging to manage large sums of money. But when the death benefits are broken into systematic instalments through the SISO approach, it becomes easier to manage the funds.
The SISO approach is not just suitable for ULIPs. It also works in case of other investment plans offered by Bajaj Allianz Life, like guaranteed income saving plans and annuity-based retirement solutions. All you may consider doing is selecting the suitable plan and choosing the SISO investment option.
You can also pick different investment plans and diversify your portfolio, because Bajaj Allianz Life has a range of investment products that are suitable for individuals in various life stages. Log on to https://apps.bajajallianzlife.com/siso/ to know more.