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Thread: MFs Vs ULIPs

  1. #1
    PolicyWala Newbie
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    Question MFs Vs ULIPs

    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.



  2. #2
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    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.

  3. #3
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    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.

  4. #4
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    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

  5. #5
    PW Expert
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    The advantages of investing in a Mutual Fund are:
    1. Professional Management
    2. Diversification
    3. Convenient Administration
    4. Return Potential
    5. Low Costs
    6. Liquidity
    7. Transparency
    8. Flexibility
    9. Choice of schemes
    10. Tax benefits
    11. Well regulated

  6. #6
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    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).

  7. #7
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    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.

  8. #8
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    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

  9. #9
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    Go for mutual fund and term policy.

  10. #10
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    Please see this differentiation -
    Last edited by Administrator; 02-01-2010 at 01:39 PM.


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