ULIP Or SIP – Which is The Better Investment Option in India

All of us do not understand the importance of investments unless someone explains it to us why it is essential. Young professionals mostly spend most of what they earn, and save absolutely nothing. This is what most parents nag about every month, if their child makes and keeps nothing.

However, if you are now interested in investments, then you might be confused with the number of options available in the market. There are riskier investments with high returns and low risks with low yields. This is confusing to beginners. If you are confused, then this article shall solve some of your doubts.

A mutual fund is one of the best investment options in India. A mutual fund is composed of a pool of finances from various people and institutions. This pooled money is invested in different investment instruments. Mutual funds are managed by fund managers who have experience and expertise to make investment decisions so that a sound return on investment for the investors is ensured. There are other financial investment options such as unit-linked insurance plans in India. Similarly, mutual funds can also be classified in different types. It depends on the type of market, the risk involved in investment, and the duration of the scheme.

Unit Linked Insurance Plans or ULIPs are other financial instruments available in India, where there is insurance along with mutual fund investment. You can go for a unit-linked insurance plan in India depending on your knowledge, expectation of return, the need for life insurance, and guidance by experts. ULIPs are insurance policies that offer you an insurance cover apart from return on investment, depending on the instruments money is invested in. ULIPs float a scheme to attract investors to invest money in their scheme. This money in equity, debt, and bonds in a suitable proportion.

Unit linked insurance plan in India can be compared with mutual funds. Both of them are good investment options with the possibility of a high return on investment. The returns from ULIP are lowered as compared to mutual fund investments. The reason for this is that there is an assured return on investment, whether or not the investment is in profit. Return on investment in a mutual fund depends on the risk involved. There are mutual funds with greater equity exposure, and that’s why the possibility of high return is more. Mutual funds with debt exposure give lower returns but these are a bit safer compared to equity-based mutual funds.

The Lock-in period is another point of discussion while comparing ULIP and Mutual funds. ULIP is an insurance product and this is why it comes with a lock-in period during which the invested money cannot be liquidated. ULIPs have a lock-in period of 3 to 5 years lock-in depending on the type of scheme. Mutual funds don’t have a lock-in period.

Unit linked insurance plan in India come with a blend of risk cover and investment. There are underlying fees charged the amount of which is not transparent. In mutual funds unit-linked, you have got transparency about the charges.

There is a benefit of tax deduction in ULIP schemes, whereas there is no tax benefit in a mutual fund.

If you want insurance cover and return, you should opt for a ULIP. There is an equity-based tax benefit also. Otherwise, you should choose mutual funds for investment.

Before investing in any plan, remember a few things. Firstly, consider the amount you can invest after you have paid for your necessities. Take into consideration all your bills, rents and daily expenditures. There must be a small amount to be spent on your recreation and luxury. There must be a budget for you every month. After calculating all the expenditure, you must have some savings from which you can invest in different plans. Do not overburden yourself with more and more investments. Whenever you can and have an extra amount, invest it for the future.

Start investing earlier so that when your family grows or your needs extend, you can spend effortlessly. You never know when you might require a significant sum of money and for what. It is always better to have your investments backing you financially. When we are young, most of us have lesser responsibilities. So if you do not have to spend most of your earned money, then it is always better to save it for the future and there is nothing better than investments. Choose your investment plan wisely considering all risk factors. Discuss with a financial expert to know what kinds of investment shall work the best for you. Do not only focus on high returns. There are risks along with it which you have to understand as well. You can also do some research work online and compare different investment options on your own. See which one is suitable for the amount you are planning to invest and the type of return it gives you. There are many kinds of investment options that will provide you with a high return in the long run on a little amount of investment. Carefully compare and invest. Do not randomly invest in something just because your friends are doing so. The plan might be beneficial to them as much as it would not be of any help to you.

The insurance council in India is running the campaign under the label of ‘Sabse Pehle Life Insurance’, which let’s you understand the importance of why should you get it. Investments can be essential, but it is more crucial to have a blend of both – investments and insurance.