Mutual Funds vs ULIP
ULIP - Unit Linked Insurance Plans:
- High Loads (Ranging from 4% to 60%, ULIP companies will charge you around 20%-60%, depending on the company, in the first year and less in the subsequent years).
- We can claim tax reduction on the amount invested subject to the laws (currently upto 1 Lakh under 80C).
- Capital is protected as it is the insurance policy.
- Risk is medium as the amount invested is safe, we may get the additional return based on the performance of the fund.
- Amount is locked for atleast 3 years to 5 years and we will be charged upto 100% of the amount if we exit.
- Flexibility in changing the funds, balanced, debt etc (they allow you to change the amount between funds upto some number of times) .
- Low entry loads of 1% to 2.25% and/or the low fund maintenance costs of no more than 6% (according to the SEBI rules).
- High risk in the equity oriented funds and at the same time high returns are possible depending on the market conditions.
- Amount is locked for 3 years.
- We cannot move our money to other funds even with the same AMC as the amount is locked .
- We can check the portfolio of the funds regularly and keep updated with the growth of the fund.
- We can save tax with some tax saver funds but the returns are not as high as the other mutual funds.
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