Mutual Funds or ULIPs: Which one is a better deal?Tuesday, January 13, 2009 1:00 am
With innumerable investment and saving options in the market, itâ€™s become quite easy to have your pick! However, one must be cautious. Everyone likes to see their hard earned money grow and quickly. But there are no quick gains. An investment has to be long term in order to be truly beneficial. As you make up your mind to invest, make sure you are ready to keep patience. Besides, risk factor is always there to accompany your investment. So, you should be absolutely clear in your mind, what you want. Whether itâ€™s Life Insurance Policy, National Savings Certificate or Mutual Funds, all the investment plans have their pros and cons that you need to weigh before you proceed. Unit Linked Insurance Plans are also gaining popularity these days for their investor-friendly profile.
Mutual Funds as an investment plan have the potential to reward you richly in the long run. However, fluctuating market graphs would give you sleepless nights. So, itâ€™s not really an inviting prospect in the present scenario. Of course, you canâ€™t write it off completely. But one has to take it easy and not rush into any investment plan without educating oneself about it thoroughly. Unit Linked Insurance Plans have come like a ray of sunshine on a gloomy day! Not that it ensures you 100% returns but it certainly does sound promising.
As far as Mutual Funds are concerned, they will remain a lucrative option as long as you invest wisely. Invest in diversified funds. All the sectors in the market canâ€™t be losers at the same time. If one is not doing well, you can rely on the other. As mentioned earlier, long term investment is the key to rewarding returns. Market is likely to go through many changes during a year or so. Systematic Investment Plan should be the ideal way to invest in mutual funds, which keeps you aside from marketâ€™s volatility. Even if market is not in the positive zone, you can still stay invested. Brushing everything aside, Mutual Funds are a good investment option for the tax-saving benefits.
Unit Linked Insurance Plans are an investment plan along with an insurance coverage, so that sets it apart, indeed. It gives you freedom to invest in equity or debt fund and also have up to four switches in a year. You can go for a long-term or short-term investment depending on the market conditions. Even if markets are low, one can keep the plan alive to enjoy the life coverage. Like other investment plans, this one also comes with tax-saving benefits. The returns from ULIPs are 100% tax free, which allows you to use it as an endowment policy also. A typical insurance scheme does not have an option to increase your sum assured at a later date, however with ULIPs, you can increase your risk cover at any stage in your policy period. ULIPs also allow you to withdraw funds as and when required as long as you are making minimum payments.
Both Mutual Funds and ULIPs have high liquidity with freedom to use your money the way you want. Nonetheless, one must plan the investment with utmost care and vigilance. Itâ€™s better not to have any returns then loosing everything. So, the smarter option is to go for long-term and diversified investments.
ULIPs certainly have an edge over Mutual Funds for their life insurance aspect. Mutual Funds, however are long established and renowned with more coveted returns as long as market is hunky-dory. ULIPs are comparatively safer and welcoming as far as returns are concerned.
Itâ€™s up to you, what you are looking for as an investor. Are you looking for high returns and willing to wait for as long as 2-3 years or you simply want a stable investment policy that will keep your life insured too?
In the current context, ULIPs would be a better deal for small investors.