Risk aversion is quite natural, but it should not dissuade you from investing in market-linked instruments. Instead, you need to learn to take advantage of the changing market situations and earn returns while managing the associated risk. Do you know that even a falling market provides the opportunity to buy stocks at low and attractive valuations and offload them at a later stage? You need to identify such situations and plan your investments accordingly.

And if you do not wish to do it yourself, invest in a ULIP plan or mutual funds managed by professionals who have the expertise and the experience of handling market risks and earning good returns on their investments. Here, we talk about certain tips to handle market risks while aiming for fund growth.

Managing Risks is Important!

ULIP or Unit Linked Insurance Plans are excellent investment options that allow you to cover all types of risks, whether physical (relating to death, disability, or critical illness) or market risks. Providing you with an insurance cover with additional riders for disability or critical illness or accident and wealth creation through investment in varied funds, ULIP investments are quite beneficial. Not only this, but these schemes also come with a lock-in period of five years, thereby ensuring that you spend and save in a disciplined manner to pay your premiums on time. ULIP benefits also include tax exemptions on the premiums paid and the maturity amount. 

Below are some ways to manage investment risks:

• Identify Your Risk Appetite and Goals– Your risk appetite depends on several factors, including your age, your current income, and the goals that you wish to achieve. Older people who are nearing retirement are less likely to take risks than the younger generation who can afford to take risks since they have the time to achieve their goals. So, while choosing to invest in market-related instruments, you need to first identify your risk appetite and the goals that you wish to achieve. This will help you choose the right instrument or fund to invest in for your risk-reward preferences.
• Invest Accordingly– Once you are clear about how much risk you can bear, plan your asset allocation accordingly. If you wish to avoid risky investments, go for investments in fixed income instruments or debt funds only. However, if you are willing to take a moderate risk to earn stable returns, you can invest in balanced funds that invest in a combination of equity and debt products. These funds aim to balance the risks associated with equity with the stability offered by the debt instruments.
• Switch Funds to Suit Your Needs– If you are young, you can afford to take a higher risk and invest in equity or growth funds but switch to safer options like debt and balanced funds at a later stage. Or if your policy is about to mature or you are about to reach an important milestone in your life, move your funds to debt so that your maturity amount is secure from any kind of market risks. Similarly, if you foresee a decline in the equity values, you can switch your asset allocation to debt funds and switch them back once the markets pick up. ULIPs allow their investors to switch their allocations in response to changing risk appetite, goals, or the performance of a fund. Use this option to manage risks while taking some exposure to equity investments.
• Invest in Auto-Mode– In this case, you give the fund manager the power to manage your funds and invest them in a mix of equity and debt while keeping in mind your goals and expected returns. The asset allocation is changed from equity to debt based on the investor’s age and risk preferences.
• Enhance your Investment Corpus with an increase in Income– You can always enhance your investment levels by taking additional coverage and paying a top-up premium. So, ensure that you use your spare funds to increase your investments and returns to increase the amount of your corpus of funds.

To conclude, you can always manage the market risks associated with investments by choosing the right instruments and using the switching option. Different types of ULIP funds are available to cater to the risk-return requirements of different investors.