9 Replies to “What is the main advantage to investing money towards ULIP instead of MF/IPO?”

  1. Happy new year frd.
    Ulips are same like mfs but they provide insurance cover as u like just by adding riders like accidental cover etc.

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  3. Let me elaborate on both the advantages & disadvantages when compared to Mutual funds

    1. It is a long term investment option
    2. You get an insurance coverage along with the investment
    3. Your investment is invested in the stock markets hence the possibilities of very good returns are high

    1. Fund management charges, allocation charges and other charges on a ULIP eat out nearly 30% of your investment in the first year and more than 10% of it in the subsequent 2 years. So you must stay invested atleast for 5 years for your investment to earn any profit for you.
    2. If your investment horizon is less than 5 years then it is better to stay away from ULIPs
    3. The charges for providing insurance are higher than what you would be charged for a simple pure term insurance policy.

    So think twice before you invest in a ULIP.

    mail me at [email protected] if you need any more details.

  4. Never invest in a ULIP instead for insurance go for a term policy and for investment go for a long term mutual fund because
    Fund management charges, allocation charges and other charges on a ULIP eat out nearly 30% of your investment in the first year and more than 10% of it in the subsequent 2 years

    2. The charges for providing insurance are higher than what you would be charged for a simple pure term insurance policy.

  5. The advantages of ULIPS are

    1) Provides life insurance cover
    2) Can switch between debt , equities and balanced portfolios. Most schemes allow 2-3 free switches in an year
    3) After Five years you withdraw all the money back . ( ELSS schemes have a 3 year lock in period for each investment)
    4) Tax benefit under 80C . For mutual funds you have to take ELSS schemes

    The disadvantages
    1) High allocation charges ( some charge as much as 40% ). That means only 60% of your money is invested.
    2) Low insurance cover
    3) Sometimes hidden charges

    ULIPS are good if your investment horizon is over 10-15 years. You will make a sizeable corpus once the initial charges are over .

    If you can manage well , a term plan + mutual fund is more straight forward option. There are few ulips that have very low allocation charges so make sure you hunt well . Also check the performace of fund house.

  6. ULIP do provide the add on benefit of insurance along with mutual fund, but as an investor you must understand that if you would mix insurance and investment, you are likely to be charged extra.

    The ULIP products look good on the surface and you feel you are being offered a great product, but actually in a ULIP plan, most of your money goes into charges, fees and distributor’s cost and only the remaning is being invested.

    Rather than taking ULIP, take a simple insurance plan, term insurance and for your investment need invest in a good mutual fund scheme with a strong track record and less expesne ratio. This way you will pay less and be rewarded more.

    It is diffcult for a normal investor to understand all the terms and conditions attached to the ULIP schemes and they are easily fooled by the insurance agent or the broker. But the reality is far from the rosy picture they give you of the scheme.
    So be cautious.

  7. ULIP has no advantage over MF.It is entirely an wastage of money. For complete details u can watch my site girdher.com and click on ULIP on right hand site

  8. There is only 1 advantages that I could find & also I could find how this advantage is not benificial.

    ULIP gives an option to switch between low & high risk investment. In ideal condition, one can switch to low risk funds in downword market & to high risk fund in upward market.

    But then who will tell me that I should switch to high risk fund today as downside is over & it will definitely a upword tomorrow.(or vice versa). No one can predict for sure about future from today. almost 95% of the people having ULIPs never excercise the switch option & most people keep money in Highest risk fund.

    ULIP is combination of investment+investment & same can be achieved by MF+Term insurance with very less charges.

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