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Mutual fund or ULIP
1. Mutual Fund or ULIP:Which is better of Investment Prepared By: Patel Navneet M (44) Guided By: Assi. Prof. Mayur Parmar
2. Introduction Doing investment is the best option for any liquidity than keep it useless in storage. Rational people like to invest such liquidity at such place from where they can get maximum return form it as well as got assurance of maximum safety. There are many options to invest liquidities (especially Cash) from where return could be easily available, like FDs, Mutual Funds, ULIPs, properties etc...
3. Meaning Mutual Fund A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund. ULIP ULIP is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life insurance policy which provides a combination of risk cover and investment. The dynamics of the capital market have a direct bearing on the performance of the ULIPs.
4. Task/Body Mutual Fund Wecan make money from mutual fund in three ways: Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all of the income it receives over the year to fund owners in the form of a distribution. If the fund sells securities that have increased in price; the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.
5. Task/Body ULIP Most insurers offer a wide range of funds to suit oneโs investment objectives, risk profile and time horizons. Different funds have different risk profiles. The potential for returns also varies from fund to fund. Investment returns from ULIP may not be guaranteed. โIn unit linked products/policies, the investment risk in investment portfolio is borne by the policy holderโ. Depending upon the performance of the unit linked fund(s) chosen; the policy holder may achieve gains or losses on his/her investments. It should also be noted that the past returns of a fund are not necessarily indicative of the future performance of the fund.
6. Differences Mode of investment/ investment amounts Expenses Portfolio disclosure Flexibility in altering the asset allocation Tax benefits
7. Conclusion If we wish to take an aggressive exposure to equity market, Itโs good to buy Mutual Fund. ULIP wonโt be able to give us similar returns. If we think, we are not disciplined enough to make regular investments and need a whip to make us invest, we should invest in ULIP. If we want to take a low exposure to equity market and still get tax free returns, we should invest in ULIP but make sure that fund we are invested is conservative fund.
