3 Replies to “How are ULIP different from Mutual funds and shares?”

  1. ULIP is nothing but a Mutual fund + Life insurance policy combined as a single product and sold in the market.

    ULIPS are very long term investment instruments with a time horizon of atleast 10 years or more. given the current market status if you start investing now you may get more units which can give you better returns after a few years.

    But, if you are a risk averse investor, it is better to stay away from the market from the time being and start investing once we see some stability in the market. 🙂

    All the best.

  2. ULIPs give the advantage of Capital gains along with the Insurance cover. But as with any equity based fund, their performance depends on the performance of the Equity market

  3. ULIP is nothing but a money extraction exercise & product from insurance companies.

    if you a prudent investor and would like to maximize your real returns in long term, mutual funds or shares are the options to choose from. difference between them:

    1. shares – regular stocks. you can invest directly in them. brokerage charges range from 0.1% to 0.75% depending your investment amount. to keep shares, you need demat account available for around rs. 300 per annum maintenance charge. no other charges absolutely.
    risk here is that you need to decide which stocks to buy and which to avoid. however, brokers usually send tips to you which you can keep track of and decide basis your intelligence.

    2. mutual funds – entry load nil if you invest directly. if you invest through someone then it is around 2% (equity schemes). so if u invest 100rs. you pay 2rs to mutual fund company towards commission to broker. this wouldnt apply if you invest directly (which is a very easy process). annual fund maintenance charges – maximum 3%. no other charges, absolutely.

    3. ULIP – provides insurance cover (paltry amount) + investment. charges – max upto 70% of first year premium goes towards commission to broker (you cant invest directly here). then annual fund maintenance charge – 2 odd%, mortality charge – 1% or so, and few other charges which add upto around 1-2% again.
    for 2nd year premium until the last year premium you pay to insurance company, a substantial amount goes to broker as commission!!!! (which ranges from 5% to 25%).

    so in effect, you pay 20%-30% extra to get insurance cover. the premium for that amount of insurance cover will hardly be worth 2% if you get yourself a separate insurance cover for yourself.

    regular insurance cover (term life cover) – 10Lakhs cover – premium rs. 3500 (for a 30yrs old fellow).
    for this amount, i.e. 3500rs in ulip you will get a cover of hardly 1-2Lakhs or may be less.

    the whole point is:
    i have listed the charges for all types of investment options, you see the difference amongst them and decide which is the worst amongst them (and this is very easy!!).

    ULIP is absolute marketing gimmick, unregulated and nobody should fall in its trap. what they show is deceptive.

    returns wise::

    in the last 30 years – shares investment has given an average of 19% in india – the best amongst ALL investment options so far.

    mutual funds returns are averaging 15-17%, with going as much as 40-50% in the past 4-5 years.

    ulip – has given as low as 2% return (most of the times lower than fixed deposits!!)

    you can read for numerous articles on the web to clear your doubts on this.

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