Are Mutual Funds better than ULIP?
No, Mutual Funds are far better than ULIP. The investor chooses the Mutual Funds according to his risk appetite and can start from Rs. 500/- per month. Whereas in ULIP premium starts approx. at Rs. 5000/- and above per month.
Investment Risk :
There is a risk in investment in both Mutual Funds and also in ULIPs.
The objective of the investment is to get more returns. Mutual funds are a pure investment product that offers returns that can beat inflation. Whereas ULIPs are mainly an insurance product with the added advantage of investment in Mutual funds.
Expenses :
Mutual Funds Companies charge the fund to maintain their services and which is called the expense ratio. ULIP has many charges which would be adjusted by deducting the units from the policyholder’s account towards premium allocation charges, fund management charges, administration charges, mortality charges, etc.
Lock-in period
Only ELSS – Tax Saving Mutual funds, Retirement funds are having lock-in period. Most Mutual Funds can be sold at any point of time. Whereas in ULIP, the investments are locked for 5 years from the date of investments.
Taxation :