This blog will cover the difference between Mutual fund & ULIP as two different financial products. Find the brief comparative analysis of ULIP & Mutual Fund below:
- It gives a life cover and also generate returns by investing
- It generally has a lock-in period of 5 years
- In case of death of policyholder, the family member is compensated with the amount of sum assured
- No long term gain is applicable
- Amount of upto INR 1.5 lakh can be claimed as deduction in year
- It is purely investment product with no life cover
- It is totally liquid and you can enter and exit as per your investment plan
- In case of death of policyholder, the mutual fund investment is transferred to the nominee
- Long term capital gains on gains of over 1 lakh
- Amount of upto INR 1.5 lakh can be claimed as deduction in year but only for ELSS
Now that you briefly know the comparison between ULIP & Mutual Fund. I will deep into various aspects of it so that you can understand these financial services in detail & make a better financial decision.
There are certain Pros & Cons of both the financial instruments.
Pros of ULIP
- The gains from ULIP are exempted from the tax at the time of maturity unlike gains from long-term capital investment on equity and equity-related investment
- The amount invested in ULIP is eligible for tax-saving under Section 80C subject to a maximum of INR 1.5 lakh annually
Cons of ULIP
- ULIPs are market-linked and hence are volatile in the short-term. So ULIP is not a good short term investment, while other traditional policies are not market-linked so less risky.
- As an individual investor you will have to stay invested in ULIP for 5 years even in the case of a financial crunch or if the investment is under performing.
Pros of Mutual Fund
- The advantage of mutual funds is that diversification is done automatically.
- Mutual funds offer…