ULIPS VS. MUTUAL FUNDS: WHERE SHOULD YOU INVEST

As long as the financial market is concerned, we have come a long way. Today, there are thousands of financial products available in the market to choose from. Two of the most important and widely popular products are Unit linked Investment Plans (ULIPs) and Mutual Funds (MFs). Depending on your financial goals, needs and limitations you must choose the right product that can help you to secure your financial future.

A Mutual fund scheme invests the money of a person in different assets after accumulating the money to earn a return. A Unit linked investment plan, on the other hand, provides life cover like a traditional insurance product with the option of investing a certain portion of the premium in different funds of the policyholder’s choice.

The differences

Additional protection in ULIPs

The biggest difference between the two can be understood by the fact that ULIPs provide a life cover to the policyholder, which the Mutual funds don’t. When you buy a ULIP, your family is promised a sum assured as a death benefit, if due to unfortunate circumstances you die in the near future. This makes the ULIPs the best investment product in the market.

The additional protection benefit of the ULIPs makes them best suited for individuals who are saving for some special needs and think that these needs will go unfulfilled if they are not around to earn in the future. For example saving for child’s education or their retirement.

Charges

The charges which you have to incur for fund management in a ULIP are far lower than Mutual funds. Being only 1.35% when compared to 2.50% of mutual funds. Apart from this, the IRDAI has made it mandatory that the total effective cost on ULIPs should be up to 2.35% only. This means that the cost of ULIPs can never exceed the total cost of Mutual funds. And lower cost always means higher profits on your investments.

Tax savings

ULIPs are said to be the best tax saving instruments available in the market as they allow deductions under section 80(C) and 10(10D) of the income tax act. In addition to this, whatever money is invested in a ULIP is deducted from your taxable income. Mutual funds, on the contrary, don’t allow such deductions and you have to pay more tax on your investments.

So where should you invest?

If you want to achieve long-term financial goals of wealth creation and secure your financial future, you should consider buying a ULIP. Whether it is for your child’s education or any other financial reason, having a ULIP by your side is always an advantage. A ULIP plan gives you the dual benefit of investment and insurance, and you don’t have to buy a separate insurance plan for you and your family.

Do consider buying the ULIP plan of Edelweiss Tokio Life wealth plus as it provides you with every facility an ideal ULIP should provide with the added benefit of Tax saving under section 80(C) and 10(10D).

Swati Tumar - Travel & Finance Writer   

Swati is a Writer in the day and an illustrator at night. Among her interests, she is quite fond of art and all things creative. She often indulges herself in creating doodles, illustrations, and other forms of content. She identifies herself as an avid traveler and shameless foodie.