Could you please suggest which way go for MFs Vs ULIPs
I think you are the right people to help me out, thanks in advance!
Hoping to get the positive reply.
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Could you please suggest which way go for MFs Vs ULIPs
I think you are the right people to help me out, thanks in advance!
Hoping to get the positive reply.
My two cents-
MF the purpose is to invest and grow the money by taking risk in the market and ULIP core purpose is to insure and subsequently invest. Further charges in MF is much lesser that those in ULIPs. Something like MF charges 2.5% ULIPs charge 20-23% as charges. Hence If you are young Please go with Term Insurance and Invest in MF. If you have all options exhausted then invest in ULIPs. ULIPs have lock in period higher that MFs. Further with no garentee on return I feel one could be better off in MF that in ULIPs. Further Most ULIPs dont have track record in India where as MF have track record and undergone bear phases. Only thing good is person will be disiplined to invest for 15 years. Lastly, MF disclosure of holdings and Strategy is more transprent than ULIPs. Where one can max know NAV or Type of stock invested in not the indepth knowhow.
There is no disclosure norm in ULIPS, I have not seen any of the ULIP products of LIC disclosing its portfolio thats a drawback whereas most of the MF's disclose their portfolio on a monthly basis, you can see where your money is being invested.
Some Points -
1. As the name suggests ULIP’s are unit linked insurance plan means investment cum insurance cover. These r like mutual fund + Insurance
MF’s are only for the purpose of investment
2. All the ULIP’s comes under sec.80c i.e, it has tax deduction but not all the MF’s will not get tax deduction only tax saving mf’s are.
3. ULIP’s wil take some amount as charges (some only for first year and other for minimum 3yrs). In mf’s they only charge as entry load and exit load and its very minimal.
4. ULIP’s and mf’s are both have 3yrs lock in period but investor has to invest minimum 3yrs in ULIP’s and in Tax saving mutual fund investor can invest for only one year.
5. In ULIP’s investor have switch over options, you can use it according to your risk taking appetite and MF’s they don’t have.
6. ULIP's has to be invested at least for 3yrs min and you'll get sum assurance for a given term according to policy conditions, but in MF’ s you’ll not get any sum assurance(now a days some MF are giving insurance freely )
7. Both r managed by fund managers, so they'll take care of your investments and generate returns(based on market risk)
Hope now it's clear to you :cool:
The advantages of investing in a Mutual Fund are:
- Professional Management
- Diversification
- Convenient Administration
- Return Potential
- Low Costs
- Liquidity
- Transparency
- Flexibility
- Choice of schemes
- Tax benefits
- Well regulated
In case of MFs there are only 3 types of charges applicable -
1. Entry Load - It can be avoided if u invest directly to ur MF bypassing ur MF agent.
2. Exit Load - It can also be avoided by remaining invested for certain time period in that particular plan.
3. Fund Management Charge - It`s charged as a %age of total assets under the plan. Normally it varies from 0.25% to 2.5% depending upon type of funds (Debt to Eq.) as well as expertise of fund co. for a same set of MF plans, lower FMC Plan is always advisable for investment.
In case of ULIP following 4 types of charges are applicable.
1. Prem. allocation Charge - It may vary from as low as 1% to as high as 65-70% of your first year prem. & reduced year after year or may remain same at a constant level say 4% or 5%.
2. Mortality Charges - It`s the basic cost of insurance & again it varies among Insurance Cos.
3. Policy admin charges - Some ULIPs charge as low as 20 Rs. per month where as some charge as high as 200-300 Rs. per month. Again not constant among Insurance Cos.
4. Fund Management charges - From 0.5% to 2.5% depending upon the type of Fund (debt to Equity).
ULIP Policies have lot of dissadvantages -
1- Very high charges
2- Policy is not explained fully that is why so many are unhappy with it afterwards
3- It is not really insurance as only insured sum or policy value is paid in case of death and not both.
ULIP plans -
1. Invest for 12 - 15 yrs .
2. Go for monthly paying mode in maximum equity exposer
3. If ur motive is life insurance(1st), investment & tax benefit.
4. Can't take out before 3 yrs.
5. Expert agent / advisor needed for proper switching to gain 58% p.a.
Mutual fund-
1. Term for 3+ yrs.
2. Motive is investment and tax saving.
3. SIP is best way to invest / else when market is down 1500 points .
4. Can redeem after 3 year (without any exit load)
5. Proper market watch required to buy right MF
Happy Investing
Shiv Kumar
Go for mutual fund and term policy.
Please see this differentiation -
http://www.policywala.com/picture.ph...1&pictureid=16
Absar - Please put the source, If you are putting any info from other sites or source. Please take care of this next time otherwise I would ban you.
This is a good info for all, thanks for this.
Good Info on SIP -
http://www.policywala.com/attachment...2&d=1318068390
If one has to invest for saving tax and also insurance then ULIPS are the best bet. If can time the market, you can make the most money of it by switching at right moments. So look for the ulip which has min admin charges over the years.
Next if some one is looking for tax saving and not insurance then ELSS are the best. These have the minimum admin charges too.
ULIP = distributor's friend
MF = investor's friend
ULIP will expire after age 60 or 65 where as whole life plan will cover till 100 yrs.
MF no insurance coverage.
According to me you should keep insurance and mutual funds different, so I am not in favor of investments in ULIP.
ELSS is preferable if you want to save taxes go for - Magnum Taxgain,Birla Tax relief'96, HDFC taxsaver and PRU taxsaver and Principle TaxSaver are best option.
I believe it must for every people to keep their Investment and Insurance two different thing.
- Anyone thinking to invest in ULIP Plan than you must give ULIP at least 10-15 yrs because of high charges initially.
- Mutual Funds are very suitable for Short term investors. In it you have the flexibility of withdrawing money anytme.
MF is better than ULIP
- MF no front end charges now
- But you have to pay commission for ULIP
- Then no life insurance coverage for MF But ULIP have many coverages like critical illness, PA etc.
Primary Objective
MFs : Investments
ULIPs: Protection + Investments
Investment Duration
MFs : Works out for Medium term, Long Term Investors. Risky for Short Term investors.
ULIPs : Works out for Long Term Investors only.
ADVANTAGES ULIPS
•Can easily rebalance your risk between equity and debt without any tax implications.
•Best suited for medium risk taking individuals who wish to invest in equity and debt funds (at least 40% or higher exposure to debt). No additional tax burden for those investing mainly in debt unlike in MFs.
ADVANTAGE MFS
•Better returns than ULIPs.
•Lower charges than ULIPs.
•Very flexible and enables you to switch your investments from non performing MF's to better performing MFs
•Very Liquid can be redeemed at anytime.
•Best suited for medium to high risk taking individuals who wish to invest a significant portion in equity funds (at least 65% exposure in equities).
Liquidity
MFs: Very liquid. You can sell your MF units any time. Three years lockin in ELSS. Some MF's like those from Reliance have introduced redemptions at ATMs.
ULIPs: Limited liquidity. Need to stay invested for the minimum number of years specified before you can redeem.
ULIPs may be good in the long run, but understanding them is very very complex. In the absence of the agent (after the deal). In practical, its very painful to futher follow up of fund switching, premium reminder, change of address or job. A pure term plan plus diversified MFs will do all work.
MF Vs ULIPs
Investment should not be mixed with insurance.
Mutual fund is for 1-5 yrs investment, ULIP is investment plus insurance.
It is advisable to take Mutual fund plus term insurance(low cost) instead of ULIP(High cost).
Key features of ULIPs:
- Combination of investment + insurance.
- Long-term, systematic and goal-based investment.
- Automatic asset allocation/Diversification in several asset classes.
- Flexibility and transparency.
- Switching funds at no extra cost.
- Tax benefits under Section 80c of the Income Tax Act.
:EmoticonThumbsDown: ULIP's... No..
Go for a 'Diversified Mutual Fund', and 'Term Policy by LIC'.
Why ULIPs are not good over MFs?
1- Higher Agent Commissions
2- Costlier exit options
3- No Track record
4- Larger Commitments
Good article read here - ET.com
I think it will be wise to keep insurance, ie term insurance & SIP investments via MFs preferably dividend seperately bcos your charges for term insurance are much cheaper and if you take past 10 years records of good MFs the returns are much greater than your Ulips, whereas the charges in Ulips are much higher and mostly goes unknown as bundled.
Advantages to ULIP Plans -
1. Transparency
2. Tax free returns
3. Switch between various options
4. Tax Benefits
Mahesh - I agree with all the above advantages, but if you compare with the dis-advantages than going with term + MFs is the best option.Quote:
Originally Posted by Mahesh
Thumb rule - If you are investing for less than 15 year than you must go with mutual fund, and if you are investing for more than 15 years than you must go with a good ulip plan.
It’s a common confusion which is the best investment option. Mutual funds are cheaper, But only in the short run. Over a long period (may be 15 - 20 yrs) ULIP will give you a better return over Mutual funds as the fund management charges are lower than mutual funds. It’s a small factor but the FMC are taken on a daily basis by NAV adjustment and over a long period it will eat in to your fund value. Also there are other charges pertaining to MF such as marketing expenses, Custodian charges, Trustee fee, audit fee which are not visible to the investors. Also tax benefits are not available in mutual funds except for ELSS.
Quote:
Originally Posted by anish09
Pls keep insurance and investment separate. Both have there own importance in everybody life.Quote:
Originally Posted by Rajat Gupta
But what about retirement and child care plans? They are wealth creation plans.Quote:
Originally Posted by >take
The insurance element in child care plans are that if something happens to the insured, the child doesn't have to pay anything for premium and coverage goes on till the last. Which is not the case in any other investment product.
ULIPS also provide valuable insurance cover at a cost lesser than Term insurance plans. So a combination Term and Mutual funds is costlier than stand alone ULIP over the long run.
Can you please provide an explanation with example to explain your statement?Quote:
Originally Posted by Minal
You are 100% wrong here. ULIP has lots of upfront charges, please search on this forum and read more about ULIP. Don't make any comment without research.Quote:
Originally Posted by Minal
Most of you suggest to go for Term Insurance with combination of mutual fund. Please suggest me some good mutual fund for the SIP of atleast 15 yrs. What strategy should I adopt for such a long term?
Funda of ULIP plans
1. Min investments for 12 - 15 years .
2. Go for monthly paying mode in maximum equity exposer
3. If your motive is life insurance (1st), investment & tax benefit.
4. Can't take out before 3 yrs.
5. Expert agent / advisor needed for proper switching to gain 58% p.a.
Funda for mutual fund
1. Term for 2 - 3 yrs.
2. Motive is only investment.
3. SIP is best way to invest / else when market is down 1500 points .
4. Can redeem after 1 year with 10% gain (without any exit load)
5. Proper market watch required