Investment in Mutual Funds or ULIP is always debatable question. Some investment guru believes ULIP is the better option while others are of the view point that mutual funds are better. But between this common people get confused.
So let’s understand the Features of Mutual Funds as well ULIP.
Mutual fund are pure investment product. Investor can choose scheme depending on the risk appetite of the investors. There are mutual fund scheme which invest in equity, money market ,corporate bonds, govt bonds etc. Mutual Funds are professionally managed by experienced fund managers.
Product Category– Mutual Funds are pure investment product
Tax Benefit– ELSS mutual fund provide tax exemption upto Rs 1.5 Lakh annually under sec 80C
Annual returns– Mutual funds returns are generally market linked. On an average equity mutual funds are known to provide an average return of 12%-14% over period of 3- 5 years.
Lock in period– Funds can be withdrawn anytime except any ELSS scheme which have lock in period of 3 years
Taxability-10% LTCG Tax applicable above gain of Rs 1 Lakh
Fees– Lower management fees in terms exit load/expense ratio as compare to ULIP
Flexibility-In mutual funds you have the option to choose between equity, debt & balanced. You can choose in the beginning only and cannot be switched/modified once started
To view past performance some top mutual funds Click Here
It is a scheme which provides the benefit of investment & insurance under a single integrated plan. A part of premium goes towards insurance while the remaining goes towards investment. Investor has the option to choose scheme from Debt or equity depending on the risk appetite.
Product Category– Insurance + Investment Product
Tax Benefit– Investment premium upto Rs 1.5 Lakh under sec 80c is exempted
Annual Returns-Returns are market linked and depend on the scheme chosen whether debt or equity
Lock in period-Minimum lock in period is 5 years. If policy is surrender in less than five years, you may have to pay surrender charges. Money will paid to the policy holder on completion of 5 years
Taxability– Maturity amount of ULIP are totally tax exempted.
Fees– Higher management fees in terms of premium allocation charges, policy administration fees etc
Flexibility– ULIP gives the freedom to switch between different funds( equity or debt) during the tenure of the investment scheme in order to maximize the return.
To view some of the ULIP Plans Click Here
ULIP or Mutual funds is completely a choice depending on one’s investment object.
Opt for Mutual Funds
– If investment horizon is short to medium term (Since no lock-in except ELSS).
– If you have medium to high risk taking appetite.
– If looking only for investment purpose to build your financial corpus.
Opt for ULIP
– If investment horizon is long term (Minimum Lock in 5 years).
– If you have low risk taking appetite (You have the option to switch between equity or debt funds).
– If looking for insurance cum investment product.
Also read: 6 Best Tax Saving Investments under Sec 80C
Also read: Type of Debt Saving Instruments in India
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