How to Safely Invest in Equity When You Are a Risk-Averse Investor?

How to Safely Invest in Equity When You Are a Risk-Averse Investor?

Are you looking for a way to grow your wealth over the long term but are afraid of losing your hard-earned money in the stock market? If yes, then you are not alone. Many investors in India are risk-averse, meaning they prefer to avoid high-risk investments and opt for safer options that offer lower but more predictable returns.

However, avoiding equity investments altogether may not be the best strategy for achieving your financial goals. Equity investments, such as stocks and mutual funds, have the potential to generate higher returns than fixed-income investments, such as bank deposits and bonds, over the long term. Equity investments also help you beat inflation and create wealth for your future needs.

But how can you invest in equity without taking too much risk? Is there a way to balance the risks and rewards of equity investments? The answer is yes. There is an investment product that combines the benefits of insurance and equity: ULIP.

What is ULIP?

Wondering what is ULIP? It stands for Unit Linked Insurance Plan, which is a comprehensive life insurance product that combines life coverage with investment opportunities. When you opt for a ULIP, a portion of your premium is allocated to secure your life insurance needs, while the remainder is invested in a selection of market-linked funds tailored to your preferences. These funds encompass options like equities, fixed-income instruments, or a blend of both, aligning with your risk tolerance and investment goals.

ULIPs give you the flexibility to switch between different funds as per your changing needs and market conditions. You can withdraw partially from your ULIP after a certain lock-in period, subject to some charges and conditions. ULIPs also offer tax perks under the Income Tax Act’s Section 80C and 10(10D).

How to Safely Invest in Equity with ULIP?

ULIP investments are ideal for risk-averse investors who want to invest in equity but also want to protect their capital and enjoy life cover. Here are some tips on how to safely invest in equity with ULIP:

1. Assess Your Financial Goals and Choose the Right Fund

Choose a ULIP that suits your risk profile, investment horizon, and financial goals. Different types of ULIPs are available in the market, such as retirement plans, child plans, wealth creation plans, etc.

Before choosing one, you should compare the features, benefits, charges, and performance of different ULIPs.

2. Go for a Dynamic or Balanced Fund

Opt for a balanced or dynamic fund that invests in equity and debt instruments. This will help you spread your portfolio and minimise the volatility of your returns.

A balanced fund maintains a fixed proportion of equity and debt in its portfolio, while a dynamic fund adjusts its asset allocation based on market conditions.

3. Monitor and Review

Assess your fund’s performance and consider making fund adjustments when necessary. ULIPs offer the flexibility to switch funds with minimal tax consequences, though certain limits and charges may apply.

It is advisable to consistently evaluate your fund’s performance and make switches if your existing fund falls short of your expectations or if your risk tolerance undergoes a change.

Assessing a ULIP plan’s performance isn’t a one-time exercise, but it is a constant and continuous process.

4. Avoid Frequent Withdrawls and Stay Invested for a Longer Horizon

Commit to long-term investment and minimise frequent withdrawals. ULIPs are structured to support your extended financial objectives. It is advisable to remain invested for at least a decade or more. This allows you to harness the advantages of compounding and equity growth.

Refraining from frequent withdrawals in your ULIP is recommended, as this can potentially diminish your fund’s value and life insurance coverage.
5. Get Expert Guidance

If you require guidance, seek the assistance of a financial advisor. Investing in equities can be intricate, particularly if you are not well-informed about market dynamics and trends.


Investing in equity can be rewarding but also risky. If you are a risk-averse investor who wants to invest in equity but also to safeguard your capital and enjoy life cover, then ULIP is the right option. ULIPs offer you the best of both worlds – insurance and investment – with flexibility, diversification, tax benefits, and transparency.

However, remember, before investing in ULIPs, conduct thorough research and compare different ULIPs based on their features, benefits, charges, and performance. You should also choose a ULIP and fund that matches your risk profile, investment horizon, and financial goals. And most importantly, you should stay invested for the long term and avoid frequent withdrawals to maximise your returns.

Remember, investing in equity is not a gamble but a calculated decision that requires patience and discipline. With ULIPs, you can safely invest in equity and achieve your financial dreams.

Read More: Football Betting Strategies