ULIP stands for unit linked insurance plan. It is a product offered by insurance companies that gives investors both insurance and investment under a single integrated plan. In ULIP's, a part of your premium is assigned to a common sum of money called funds which invests in equity, debts or a combination of both.The returns on investments depend upon the performance of the funds opted by an individual. There are different types of ULIPS, wealth generation, retirement plan, children education, health benefits etc.
Mutual funds can be described in four words- versatility, simplicity, diversity and accessibility. It is an investment option that enables investors to pool their money together into one managed investment. Mutual funds can invest in stocks, bonds, cash or a combination of those assets. In simpler terms, mutual funds are like containers. Each container holds certain types of stocks, bonds to combine for one mutual fund portfolio.
Let’s discuss the pros and cons of ULIP and MUTUAL FUNDS:
ULIP provides you with a benefit wherein you cancontrol where your money is invested
Protection benefits are given along with investment returns.
Flexibility of multiple fund options.
There are some additional benefits provided for critical illness, accidental death, disability etc.
It gives an option for staying invested for a long time.
Mutual funds are always less tax efficient than ULIPs, but the recent introduction of 10%LTCG tax from equity investments has given them more advent. However, it’s not necessary to select an investment product based on one criterion. Mutual funds outpoint ULIPs on other parameters like returns, transparency, liquidity and flexibility.
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