How to Choose Between ULIP and MF?
When it comes to investing, there are a lot more questions asked rather than answered.
However, presented here is an overview of two of the most common investment options: A Unit Linked Insurance Plan [ULIP] and a Mutual Fund [MF].
Apart from providing risk cover, ulips provide the profits made on investments so that the investor earns significant ROI.
The sub-types include: for retirement planning, education, wealth generation, and health solutions.
MF Is a complete investment product, which could be stocks, shares, or gold.
The ROI received is based on the entire value of the investment.
Mutual Fund types include: Equity oriented, hybrid or balanced, debt funds and cash funds.
The value of your premium depends on the value of insurance cover you have chosen.
MF Involves a minimal payment, i.
e.
the only time you will be required to pay would be the time you choose to invest in a particular mutual fund.
There is small management fee involved which is usually not more than 2% of the value of your investment, to be paid annually.
MF Higher risk involved when compared to ulips.
You cannot withdraw your money until the lock-in period is over and it is always advisable (in case of a unit linked) to not withdraw till the maturity period.
MF There is usually no lock-in period involved.
You may buy or sell at any time.
However, there are certain types of MFs called closed funds which have a lock-in period of 3 years.
ULIP
It won't do any good to come to a compromise on this, the solution is to choose what suits them best not just by taking into account the present but by keeping in mind - the future.
However, presented here is an overview of two of the most common investment options: A Unit Linked Insurance Plan [ULIP] and a Mutual Fund [MF].
- What is it?
Apart from providing risk cover, ulips provide the profits made on investments so that the investor earns significant ROI.
The sub-types include: for retirement planning, education, wealth generation, and health solutions.
MF Is a complete investment product, which could be stocks, shares, or gold.
The ROI received is based on the entire value of the investment.
Mutual Fund types include: Equity oriented, hybrid or balanced, debt funds and cash funds.
- How much does it cost?
The value of your premium depends on the value of insurance cover you have chosen.
MF Involves a minimal payment, i.
e.
the only time you will be required to pay would be the time you choose to invest in a particular mutual fund.
There is small management fee involved which is usually not more than 2% of the value of your investment, to be paid annually.
- What is the risk involved?
MF Higher risk involved when compared to ulips.
- What is the duration involved (lock-in period)?
You cannot withdraw your money until the lock-in period is over and it is always advisable (in case of a unit linked) to not withdraw till the maturity period.
MF There is usually no lock-in period involved.
You may buy or sell at any time.
However, there are certain types of MFs called closed funds which have a lock-in period of 3 years.
- What are the features?
ULIP
- Provides risk cover when a claim is made.
- Relatively less risk involved.
- Returns are less when compared to mutual funds, however these are significant returns.
- Irrespective of the way the investment performs, there is assured returns in terms of insurance
- Tax benefits under Section 80D
- Do not provide insurance cover.
- Investments made under MF can be easily liquidated.
- MFs declare yearly dividends.
- Returns depend entirely on the performance of markets.
- Minimal charges involved
It won't do any good to come to a compromise on this, the solution is to choose what suits them best not just by taking into account the present but by keeping in mind - the future.
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