When it comes to wealth creation, choosing the right investment option is crucial. Among the many financial instruments available, Unit Linked Insurance Plans (ULIPs) and Mutual funds are two popular choices. While both offer growth opportunities, they should be assigned to different financial goals. Here’s a balanced comparison to help investors make an informed decision.
Understanding ULIPs and mutual funds
ULIPs are hybrid financial products that combine investment with insurance. A part of the premium paid is used for life insurance coverage, while the remaining portion is invested in equity or debt funds, as per the investor’s preference. ULIPs offer flexibility in fund switching and come with a lock-in period of five years.
Mutual funds pool money from multiple investors and invest in equity, debt, or hybrid instruments. They are managed by professional fund managers and provide liquidity with no mandatory lock-in (except for tax-saving Equity Linked Savings Schemes, which have a three-year lock-in).
