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      Alternative Investments To ULIPs

      • 5 min read
      • Last Modified Date: July 3, 2024
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      Alternative Investments To ULIPs

      ULIPs, or Unit Linked Insurance Plans (ULIPs) have always been popular with those investors looking for the 2 in 1 dual benefit of insurance and investment. But ULIPs also come with their own limitations and shortfalls, such as high charges, market risk, and a high lock-in period where you can’t liquidate. 

      In these circumstances and situations of financial uncertainty, many investors are on the hunt for alternative investment options to ULIPs. 

      In this article we’ll see what ULIPs are, explore a number of alternative investments to ULIPs, and explore their benefits and shortcomings.  

      What Are ULIPs? 

      ULIPs, or Unit Linked Insurance Plans combine life insurance with market-linked investments. In this way, investors get the double advantage of life insurance coverage as well as investment returns. 

      How ULIPs Work 

      ULIPs take some of the premium you invest in your life insurance and invest that portion in various financial instruments and assets. These include: equity shares, debt instruments, bonds, and so on. ULIPs also offer investors the flexibility to choose from these different fund options. 

      Key Features Of ULIPs 

      Insurance Premiums: ULIPs offer life insurance coverage for policyholders, including death benefits and maturity payouts.

      Market-Linked Investments: To generate returns, a portion of the premium is invested in market-linked instruments such as equity, debt, and bonds.

      Tax Benefits: ULIPs provide tax breaks under Section 80C of the Income Tax Act of 1961 for premium payments and Section 10(10D) for maturity payouts.

      ULIPs typically have a 5-year lock-in period during which policyholders are unable to withdraw funds.

      Top 5 Alternative Investments To ULIPs 

      1. Mutual Funds 

      Mutual funds are one of the most popular collective investment schemes and alternatives to ULIPs. They pool money from multiple investors which then goes into purchase securities like stocks, bonds, and so on. 

      If you’re looking to invest in mutual funds, it’s also wise to consider SIPs: SIPs are a method of investing in mutual funds where investors contribute a fixed amount regularly, usually monthly.

      Benefits:

      • Diversification: By investing in a variety of assets, mutual funds help mitigate risk.
      • Liquidity: Easily redeemable, providing quick access to funds.
      • Variety: A wide range of mutual funds is available, catering to different risk appetites and investment goals.

      Suitability:

      Mutual funds are suitable for investors seeking diversified exposure to the market with the flexibility of liquidity. They are ideal for both short-term and long-term investment goals.

      1. Real Estate

      Real estate has always been the backbone of alternative investments: You invest in real, tangible assets such as property and generate income through rent or capital appreciation. 

      India’s real estate market has continuously evolved in the last few years, with alternative real estate investments such as REITs and fractional ownership seeing huge growth and investment. 

      What Is Fractional Ownership of Real Estate? 

      Fractional ownership of real estate allows investors to pool in money and collectively invest in high value luxury properties, mostly commercial real estate. What this means is that investors can pay a lower cost and still own a portion of grade A commercial real estate. 

      As per a latest report by JLL India, the Indian fractional ownership market is expected to grow more than tenfold and exceed $5 billion by 2030. The fractional ownership sector has enormous potential, with a portfolio of over 328 million square feet of office assets valued at around $48 billion.

      This means more and more people are investing in fractional ownership of real estate due to its high returns and mitigated risk due to joint investment. 

      Benefits 

      • Lower Entry Cost: Allows investors to own a portion of high-value commercial properties with a lower investment.
      • Diversification: Investors can diversify across multiple properties and locations.
      • Passive Income: Generates regular rental income and potential capital appreciation.

      Suitability

      Real estate is ideal for long-term investors seeking both income and appreciation. Fractional ownership is ideal for those looking to invest in commercial properties without a large capital outlay. However, real estate investments are typically less liquid than other investments.

      Assetmonk currently offers a fractional ownership real estate product in Bangalore called AM Whitefields, which has an expected Internal Rate of Return (IRR) of 16% and a maturity period of 60 months.

      1. ETFs (Exchange Traded Funds) 

      ETFs, or investment funds traded on stock exchanges like stocks, hold assets such as stocks, commodities, or bonds and generally track an index.

      Benefits:

      Low Cost: ETFs typically have lower expense ratios compared to mutual funds.

      Liquidity: Can be bought and sold on the stock exchange during trading hours.

      Transparency: Holdings are usually disclosed daily, offering transparency.

      Suitability:

      ETFs, or exchange-traded funds, are a perfect investment option for those seeking low-cost and transparent investments that can be easily bought or sold. 

      1. Invest in EVs

      Investing in EVs is one of the fastest growing alternative investments in the country right now. The automobile industry is going through a huge shift, and investing in EV stocks and infrastructure is an excellent idea for investors looking to capitalize on the growing trend towards sustainable and green technologies. 

      Benefits:

      • Growth Potential: The EV market is expanding rapidly with increasing adoption and technological advancements.
      • Sustainability: Investing in EVs supports environmentally friendly initiatives.
      • Government Support: Many governments offer incentives and subsidies for the EV industry, boosting its growth.
      1. Structured Debt Backed By Real Estate

      Structured debt investments involve lending money to real estate developers or projects and securing the loan with the underlying real estate asset.

      Benefits:

      • Higher Returns: Compared to traditional debt instruments, they typically offer higher interest rates.

      • Collateral Security: Secured by real estate assets, lowering the risk of default.

      • Predictable Cash Flows: Regular interest payments ensure consistent income.

      Invest with Assetmonk 

      For any successful investment, finding the right balance between risk and reward is key. Factors such as your risk tolerance, investment goals, desire for stable monthly income or long term potential goals, all play a huge role. 

      The best way to do that is by strategically planning out your investment strategy, and  creating space for a number of diversified investments in your portfolio. Striking the right balance helps investors remain confident even in the face of market fluctuations. 

      Assetmonk, a new age alternative investment platform specialising in commercial real estate and fractional ownership of high end commercial properties, is always ready to guide investors on their journey towards building a well-rounded and prosperous portfolio. 

      Read More 

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      Crypto vs Fractional Ownership 

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