MFs Vs ULIPs

[Manoj Kumar]

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.

[koolz]

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.

[Nilesh]

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.

[Pankaj]

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:

[Vivek]

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

[Expert]

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).

[BlackCaps]

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.

[shivkumar]

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

[Sanjay]

Go for mutual fund and term policy.

[Absar]

Please see this differentiation -
http://www.policywala.com/picture.php?albumid=1&pictureid=16

[PolicyWala]

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.

[CONFUSED]

Good Info on SIP -
http://www.policywala.com/attachment.php?attachmentid=512&d=1318068390

[Rahul]

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.

[Master]

ULIP = distributor's friend
MF = investor's friend

[policy]

ULIP will expire after age 60 or 65 where as whole life plan will cover till 100 yrs.
MF no insurance coverage.

[rohit]

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.

[Mukulz]

I believe it must for every people to keep their Investment and Insurance two different thing.

[Abhisar]

- 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.

[Absar]

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.

[Abbas]

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.

[Nilesh]

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).

[Mukulz]

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.

[LastWarrior]

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.

[koolz]

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).

[Naresh]

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.

[BlackCaps]

:EmoticonThumbsDown: ULIP's... No..

Go for a 'Diversified Mutual Fund', and 'Term Policy by LIC'.

[Expert]

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 (http://economictimes.indiatimes.com/Personal_Finance/Mutual_Funds/Analysis/Five_key_reasons_why_mutual_fund_schemes_score_ove r_insurance_ULIPs/articleshow/2190289.cms)

[best]

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.

[Mahesh]

Advantages to ULIP Plans -
1. Transparency
2. Tax free returns
3. Switch between various options
4. Tax Benefits

[PolicyWala]

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.

[anish09]

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.

[Rajat Gupta]

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.

[>take]

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.

which is the best investment option.
Pls keep insurance and investment separate. Both have there own importance in everybody life.

[anish09]

Pls keep insurance and investment separate. Both have there own importance in everybody life.
But what about retirement and child care plans? They are wealth creation plans.

[>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.

[Minal]

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.

[Malik]

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?

[Master]

ULIPS also provide valuable insurance cover at a cost lesser than Term insurance plans.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.

[jim]

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?

[Vivek]

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

[Madhura]

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?
Review your investments once in a year and dump non performing MFs, after every review.

[mayank]

Review your investments once in a year and dump non performing MFs, after every review.This streatgy would not work for ELSS funds. So always buy, MFs whom have good track record in past.

[nishant]

Mutual fund + term policies is definitely good combo. But suppose after five years if the client faces some problem in premium payment due to some financial trouble then ULIPs do not lapse but term plan does lapse, if the financial problem persists longer. And during this time if the client also gets health problem then he may not be able to reinstate the lapsed policy due to health reason (this may not be the case with ULIPs).

[sreesub]

I just cant see any reason to recommend ULIPs considering its horrible both as investment and protection. you barely get 5x(or at best 10x) as sum assured plus fees are so exorbitant that you lose money as investment. Unfortunately both myself and my wife had bought ULIP products without analyzing them and both have lost money despite being open for several years. I have thankfully made the call to close all of them and live with the loss instead of losing any more money.

[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]

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.

[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.

[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.