MFs Vs ULIPs

[ReVoLuTiOn]

Sreesub - You have to put your money at least 10 years +, if you want to analyze the return. It's like long term mutual fund, they invest in the shares which are low at price but has lots of potential in future.

[Absar]

The advantage a ULIP has is that it also blends insurance into the same plan. The insurance you buy could be a standard term cover or a critical illness rider is at the same rate as which you would buy it independently. But the advantage is that here it is embedded into the same policy, and that gives additional flexibility to increase the risk cover periodically as you grow older or earn more.

ULIPs also allow you to switch from debt to equity within the same scheme, at no extra charge. So if you want to get the benefits of long term investment and risk cover in one single product, ULIP is the product for you. So it is not an issue, of whether a mutual fund is better or a ULIP. It is about your need. Both can co-exist in your basket of needs. So identify your needs with a financial planner and then pick the product suitable for you.

[Absar]

Tips for Ulip Plans
1 Do not exit before the Ulip matures.
2 If you need to withdraw, do it partially, and only if there's an emergency.
3 Take 100 per cent equity exposure when the maturity is over five years away.
4 Review you life cover needs and increase the cover, if required.
5 Use top-up facility to deploy surplus funds.

[VarunD]

Term Insurance Plans are always better than the ULIPs, Endowment Plans and Money Back Policies. In my opinion, you should split your life insurance cover between 2-3 Insurance Companies.

[Naresh]

There is no single rule that is always true. This is one among that. Why I say don't invest in ULIP is because most investors choose ULIPs for wrong reason.

The wrong reasons that the agents use to sell ULIPs are -
1. You can stop your premium payments just after 3 years.
2. You can withdraw most part of your premiums soon after 3 years without any charge and without discontinuing the life cover.
3. You will get better returns in ULIPs than MFs - they may show the returns at various periods (less that 3 years only of course).
(This is because the expenses are taken by cutting down your units not your NAVs, so your NAVs will grow higher whereas your portfolio value would have actually came down.)
4. ULIPs will get more returns without any risk because ULIPs will invest in very large company stocks only (which has declared dividends continuously in the past 6years.)

[Aman]

As per you ULIPS arent a good bet? having just a basic term plan better...and invest rather in MFs for wealth creation?

Not really. There are some advantages of ULIPs too. Although the expense charges are initially high for the first 3 years, the expenses are reduced to as low as 0.80%, which is many times lesser when compared to a MF. But, also, the additional top-up you can invest has an entry load of as low as 1% as against the 2.25% entry load in Equity Funds. Also after the first 3 years, you can take out the money you invested leaving behind just your 1 years premium. Although you will be in loss if you do that, because of the initial expenses, this can be applied to the top-ups and also after 10years of investment.

Say, you are starting investment in 2006. In 2010, if you get a lump sum of money (say bonus or lottery or anything). You can invest them in equity with an entry load of just 1%, through ULIPs. Which is far less. Also, due to some emergency, u want to take out the same amount within say 3 months. You can take out from ULIPs without any exit load, which is not possible in equity funds.