Wealth: 'I switched funds in ULIPs, lost money'

SAVING HELPS: ULIPs have a lock-in period of three years. There are ways of not losing that money.

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Anil Rego, CEO of Right Horizons, explains, "According to insurance regulatory guidelines, if the request to switch funds is received before the cut-off time, which is 3 pm*, the NAV as on the same day is considered."

In Sandeep's case, because he made the switch at 1 pm on April 8, he was allotted the units at an NAV of Rs 23, the NAV declared on that very day.

Sandeep's mistakes:

1: He tried timing the market.

2. He did not read the policy document properly and hence was not aware of switching rules.

ULIP is a product that yields returns in the long-term. So, Sandeep should not have given in to 'panic-selling' due to short-term fluctuations. (Also read: Careful mistakes you make)

What he could do now: stay invested.

Tips:

1. Most companies offer three to four free fund switches in a year. Anything beyond will cost you.

2. Rego suggests a strategy for switching. "When the markets scale up, you can move from equity to debt, and when the markets are low you can switch from debt to equity. You could alternatively look at top-up facility as well."

The top-up option allows you to invest at irregular intervals. It's over and above the premium that you pay.

* According to IRDA guidelines, the new cut-off time for fund switches, new policies withdrawals and surrender requests is extended to 4.15 pm.