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ULIP vs Mutual Funds: Differences and Benefits

One of the most raised concerns among salaried individuals is where should they invest their money? There are tonnes of options available, like ULIP plans, equity, debt instruments, real estate, mutual funds, and fixed deposits. You can select the one that is the best for you. But let’s find out what are a few differences as well as the benefits of ULIPs and mutual funds.

Having an efficient financial strategy is essential if you want to make sure your family’s future financial well-being is secure. From all the options you get, mutual funds and ULIPs (Unit-Linked Insurance Plans) are some of the most popular and effective investment tools available. They are the best bet for you if you are planning to generate long-term wealth.

Both of these plans and policies have their own pros and cons. Once you are sure about your future financial plans, it will become easier for you to choose from ULIPs and mutual funds. It is one of the most common concerns among salaried individuals to choose between these two options. The best thing you can do before picking one is to compare. Let’s find out the major differences between mutual funds and ULIPs.

Benefits and differences between Mutual funds and ULIPs:

Mutual funds ULIPs
Most mutual fund plans offer flexible withdrawal options. It means the investors can liquidate the funds anytime they want to. The lock-in period of a ULIP is 5 years which means it won’t be possible for the investors to liquidate their funds before five years.
You can also opt for short term periods based on your preference. The basic requirement of a ULIP is to pay the premiums for at least five years.
You can build a diversified portfolio to reduce the risk involved when planning to invest in market-linked funds. You can choose the investment plan based on your preference.
You are allowed to withdraw the accumulated amount whenever you want. Partial withdrawal from the investment after completion of the lock-in period is allowed.
Mutual funds only give you the option to invest in the market. ULIPs offer insurance as well as an investment option in just one package.
It offers long term as well as short term investment options that can help fulfil your financial goals. It is a long-term investment that helps you grow your wealth over time and, at the same time, provides protection to you as well as your loved ones.
The average return rate is 2.5%. The average return rate is 1.35%.
All accumulated funds are transferred to the nominee in case of the investor’s untimely demise. In case of the policyholder’s untimely death, the nominees are compensated with the sum insured.
When you choose mutual funds, you cannot switch between the funds as it provides zero flexibility. You get to decide what portion of the premium should be invested and what portion goes towards life insurance. You can also switch between debt and equity funds depending on the market performance.

These are some of the differences between mutual funds and ULIPs. Make sure you get in touch with a professional and choose a plan that ticks the boxes for you.

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