ULIPs and mutual funds are two different investment options for individuals. Let’s understand their differences based on returns, risks, tax benefits, and flexibility.
ULIPs (Unit Linked Insurance Plans) combine insurance with market-linked investments, offering life cover plus returns based on chosen funds.
Mutual funds pool money to invest in assets like equities and debt. With no insurance component, their sole focus is on wealth generation.
In terms of returns, mutual funds often outperform ULIPs due to lower costs and no insurance deductions.
ULIPs offer tax benefits on premiums under section 80C and maturity under Section 10(10D). Mutual Funds offer tax savings only via ELSS funds
ULIPs allow fund switching between equity and debt 4-6 times a year, while mutual funds allow to switch or redeem anytime.
ULIPs charge for fund management, policy admin, and mortality, resulting in higher charges. On the other hand, mutual funds are more cost-efficient with lower expense ratios.
ULIPs lock funds for a longer duration, enforcing discipline. Mutual funds, except ELSS funds, have no lock-in period, which offers higher flexibility.
Mutual Funds focus entirely on market returns, exposing you to volatility. ULIPs reduce risk with life cover, adding financial security.
You can opt for ULIPs if you want a mix of protection and long-term investment for goals like retirement or children's education.
Mutual funds are ideal for risk-tolerant investors seeking pure wealth creation with higher liquidity and lower costs.
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