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Wednesday, April 25, 2012

ULIP Plan Cost Vs Mutual Fund Cost

ULIP Plan Cost Vs Mutual Fund Cost

Some insurance advisers recommend ULIP based plans for meeting the long term goals of the investors and some financial advisers recommend mutual fund with a term plan as a solution to meet long term goals of the customers. Each one believe one is superior to other solution. Insurance companies offering ULIP plans have several layers of costs and it is not easy to comprehend total cost of the plan. But it is not difficult to read the expenses of a mutual fund. Even a novice investor can see the costs that he is paying in mutual fund as fund expenses. I don't understand why IRDA can't impose a rule on all insurance companies to use one simple fixed ratio as an expense. I made a small attempt to compare mutual fund costs against ULIP plan costs and see how they stand up against each other. Plan-A: I picked a typical ULIP plan (type 1) that has Policy Admin fee, Premium Allocation charge, mortality charge, fund management charges etc., I assumed an investor who is Male 35 years old, investing for 15 years by paying a premium of 1 Lakh per year. His life will be insured for 10 Lakhs.

Plan name: IDBI Dream Builder Plan. Premium allocation charge: 3.2%, policy admin charges: Rs.6K for first 5 years and 3150 for next 10 years. ( No body can complain I chose a cheaper plan !!) Fund Management Fees : 1.35% of fund value. Plan-B: I am picking a mutual fund with fee of 2%. No entry load and no exit load. No taxes in either case. 10(10D) benefits and long term capital gains being zero neutralize each other. To make the comparison apples to apples, we need a term plan to go with this mutual fund. So, investor will separately buy a term insurance for 10 Lakhs from Kotak paying annual premium of Rs.2,466. [ We dont want LIC policy, who charges Rs.3,481 for same 10 Lakhs] Further if I want to show mutual fund+term insurance in bad light, LIC figures would be appropriate !

Let us look at tables one by one.

Table-A : Cost details of ULIP plan.

Table-B : Cost details of mutual fund + term plan

Table-C: Comparison of costs

Year on Year Cost Comparison graph Summary: After 15years, closing balance in ULIP plan is Rs.30,01,015. Giving a net yield of 8.27% IRR. After 15 years, closing balance in Mutual fund+term plan is Rs.28,65,471. Net yield of 7.73%. 2% lost in FMC and 0.27% lost in insurance premium payments. For first 5 years, the cost of ULIP is very high compared to mutual fund+term solution, then ULIP charges drops very low, and ULIP plan balances increases very quickly and catches up with mutual fund return and beats it. While it is easy to see the very high ULIP costs in first 5 years, the FMC of 2% is eating into investor returns. For example, in year 12, the total cost of the ULIP plan is Rs.28,600 while the mutual fund+term insurance cost you, Rs.40,000. But in year 2, the total cost of the ULIP plan is Rs.11,500 while the MF+Term cost only Rs.6,500. This kind of disparity is what confuses even smart investors. Conclusions - advantages of ULIP plan: In 15 years and longer period ULIP plan beats MF+term solution on cost. So, if long term cost is the only comparison, ULIP plan delivers. On goal based investing, the insurance amount should reduce proportionately as the assets of the investors go up. This is best achieved by Type-1 ULIP Plans. This is a disadvantage in MF+term plan. The benefits of 10(10D) - Insurance proceeds are fully tax exempt - has stayed for long time in our tax regulations, compared to 0% tax on long term capital gains of equity based mutual funds. Even first proposal of DTC was to eliminate the LTCG tax exemption. So, there is some uncertainty in LTCG tax laws of equity mutual funds compared to ULIP plans.

I ignored 80C benefits. If an investor is eligible for the 80C benefits, it will reduce the cost still further. Some one may say ELSS is eligible for 80C benefits too. But if you choose 80C, you lose the flexibility to jump to another fund when the performance is bad. It is very difficult to convince a ULIP buyer or mutual fund buyer to sell his holdings after 5 years. If you dont agree, you should try to talk to some one. Indian markets have returned well in 5 years time. ULIP plans discourages short term trading mentality and allow the investor to stick to the plan at least for 5 years ( threatening with high penalty is good enough for many investors not to discontinue their savings). By 5 years time, the investor would realize the long term benefits and may continue investing further. Many investors who pick mutual funds want quick profit or they sell and move on to another fund. It is losers' game.

Conclusions - advantages for MF+Term plan: 10th year is the break even year when ULIP plan takes over the mutual fund. So, an investor needs to stay in ULIP Plan for very long time to beat mutual fund+term solution. It is very difficult to find investors who will stay with market link plan that long. With frequent trading mentality, many investors quit their holdings much sooner. With this wrong mindset, they are guaranteed to lose in ULIP Plans. When you choose a ULIP Plan, you are marrying to the funds that are packaged with it, if performance of the funds are not good, you got no choice.You can sulk !

Author's conclusion: If you are mutual fund adviser, just don't blame ULIP costs, when you know the mutual funds and term insurance is not a cheaper solution either. Study closely how the mutual fund costs gather expenses very quickly as years go by. You have to beat ULIP plans on other accounts. I believe, still, a well educated investor may do better with mutual fund+term solution. The flexibility is unbeatable. But it requires lot of discipline in equity market. A novice or investor with less financial knowledge may do well with a good type 1 ULIP plan that has low overall cost. Life stage plan or trigger portfolio is good enough. If you are insurance adviser, please don't sell endowment or traditional plans. At least you will find some space in haven for selling ULIP plans along with some mutual fund advisers. There is absolutely no reason no situation to sell Indian endowment plans to any one in this world. For God sake, you don't buy them either. Posted by RRK at 7:11 PM Email ThisBlogThis!Share to TwitterShare to Facebook Labels: ULIP cost comparison

25 comments:

Srikanth MeenakshiApril 25, 2012 9:41 PM RRK, Thanks for the math and the detailed analysis. There are two observations that I would make about this analysis: 1. You have (as you should have) assumed equal performance between the ULIP fund and the mutual fund portfolio. A best of breed mutual fund portfolio with schemes from different fund houses that is reviewed periodically and adjusted has a better chance of outperforming a static set of funds from a single institution with only asset rebalance review possible. 2. You have assumed a static cost of 2% through out for the MF portfolio. Two reasons that this is likely to be a high number - 1. A blended portfolio with equity and debt schemes will likely have an expense ratio less than 2% given that even today, you have good equity funds at 1.5% - 2% and good debt funds at 1% and lower. 2. the expense ratio of good mutual funds will come down over the long term given the AUM based maximum fee structure imposed by SEBI. So, as a fund's AUM grows, the expense ratio will drop over the long term. In my opinion, considering these factors, a blended, long-term expense ratio of a mutual fund portfolio over the long term would be closer to 1.5% than 2%. That would make the MF+term solution fully better on all counts. Thanks, Srikanth Reply

RRKApril 26, 2012 9:02 AM 1) The objective of the article is to compare costs of mutual fund structure and ULIP plan structure. There are several other factors that need to be considered before recommending one over the other to the clients. Comparing other merits is not the objective of the article.

2) I think 2% E/R is fair. I checked the list of Hybrid funds (equity) in VRO. Link here. http://valueresearchonline.com/funds/h2_typecomp.asp?type=1&objective=23 There are 27 funds in this page, only 2 of them below 2%. Had I taken an average of these funds, it will be around 2.1-2.2% 3) I will not comment on what will happen in future. Today Mr.Sinor is talking about bringing back the entry load, If it happens, it is going to increase the Expenses for mutual fund investors. I want to know your opinion on how many mutual fund advisers will stop selling the mutual funds if they entry load comes back. Being champion of low cost options for the investors, they should stop selling mutual funds too, because they will become expensive like ULIP plans. What do you think ? Reply

Srikanth MeenakshiApril 26, 2012 9:40 AM RRK, Fair point about the potential for entry load coming back. However, even if that happens, it is unlikely to go back to pre January 2008 when it was forced on all investors. There would still very likely be avenues where investors can get in without paying entry load. However, I agree that this is all speculation - on both sides of the cost line. My point was made based on existing rules with regards to AUM based expense ratio determination. Regarding your final question about distributors, like I said, it is likely that there will be choices for loadless distribution. Even if not, given the liquidity, flexibility and performance features of mutual funds, there would still be reason for selling mutual funds to investors. Regards, Srikanth Reply

Srikanth MeenakshiApril 26, 2012 9:55 AM Following on, I think comparison with hybrid funds is not fully fair. If I construct a simple long-term MF portfolio today for a client, I would probably do a 70-30 equity-debt portfolio with these funds: DSP BR Top 100 50%, HDFC Top 200 20% and BSL Dynamic Bod 30%. Simple portfolio, the allocation between the first two funds can interchange or vary a bit, but essentially this would be a reasonable portfolio for this purpose. The blended expense ratio for this portfolio is 1.54% (50% of 1.85 + 20% of 1.77 + 30% 0.88). Believe me, I created the portfolio first, and then looked up the expense ratio to calculate the overall value... Srikanth Reply Replies

RRKApril 27, 2012 12:01 AM Dear Srikanth, As I mentioned I have a taken a typical ULIP plan Vs typical hybrid mutual fund for comparison. If I had to make it biased I would have taken ICICI Prudential ULIP plan called ACE. It was so good, it found enemies within ICICI Prudential itself and was retired very soon after launch. If you wish to drill down, consider this - coming from LIC ULIP plan. http://www.licindia.in/endowment%20plus_features.htm Fund Management Charge: The Maximum for each Fund will be as follows: Bond Fund: 1.00% p.a. of Unit Fund Secured Fund: 1.10% p.a. of Unit Fund Balanced Fund: 1.20% p.a. of Unit Fund Growth Fund: 1.30% p.a. of Unit Fund These are the fund maximums allowed. The balanced fund of 1.2% beats your combo fund with 1.54% expenses, isn't it ? Side stepping the issue - Selection of mutual fund portfolio :

A combo fund while helps in performance, may not do well with taxes. A good balanced fund like HDFC Prudence is tax efficient and also deliver good performance. Reply

Santosh PawarApril 26, 2012 10:23 AM I agree with Srikant sir, and I think this article is biased towards ULIP and written by an insurance agent. Reply

RRKApril 26, 2012 11:52 PM Santosh, Do you agree or not ? If you don't please share your comments. disclosure: I sold more mutual funds than ULIP. Reply

LaymanApril 27, 2012 12:21 AM Good one RRK. But I have one doubt. As ulips are in the market for the maximum of some 8 years( i dont know much). it became so popular after the 2008 down turn. Do you have any history of the ulip performance to validate it as a better product to the mutual funds? Pls bear me if my qustion is very silly Reply Replies

RRKApril 28, 2012 1:48 PM

layman, thanks for the comments. Prior to Sep 2010, ULIP fund were allowed FMC of 2.5%, hence the old ULIP funds lag behind in performance due to these high expenses. Currently, Except for the lockin, ULIP Mutual funds have no inherent disadvantage over regular mutual funds. So, you should check your plan FMC carefully. Reply

JagadeesApril 27, 2012 5:18 AM Kudos for a balanced article with nice summary of advantages on either side. But in most of the ULIP products i have seen(mostly HDFC, ICICI, Indiafirst etc.) had a premium allocation charges in the range of 5-7.5% in the initial five years and thereafter it has been around 3% or so (in addition to FMC and policy administration charges). I should say IDBI is the only one i saw with low premium allocation charges for the first year and none for the remaining years!!! So the calculations basically depends on the type of product we choose. Basically a medium sized fund management cant run profitably without charging 2% in total charges. That is a basic truth. Charges can be in whatever fancy terms but ultimately it will add up to minimum 2% per year. But i agree carefully selected ULIP plan (with Nifty index fund option)is best one for a investor to lock-in his commitment. Loved your last point :) Cheers Reply Replies

RRKApril 28, 2012 2:00 PM ULIP plans are designed with different charge structure. Some charge more under policy admin charges and some charge more under premium allocation charges. Some mislead customers saying zero premium allocation charges and charge limbs under policy admin charges. This is why I believe one should look at Net Yield as the indicator for all costs. By IRDA regulation, customers are supposed to be given an EBI before they buy the policy. The EBI need to be signed by the customer. Most of them dont understand the importance of it, sign it blindly. Which is not good.

IRDA also made it mandatory that Net Yield can't more than 3% for 10 year plan. This means if your gross yield is 10%, you should not get less than 7% IRR. But a good ulip plan should return around 7.9%-8.3%. If not, dont buy those plans. Reply

RamApril 27, 2012 6:00 PM I don't agree with this calculations.... simple calculation Scenario A: 1 lac p.a in ULIP gives a return of 30 l change Scenarion B: 1 lac p.a -- put it as 8333 p.m in equity via SIP. Your total corpus at end of 15 years even assuming a modest 12.5% CAGR is 41.39 lacs. When you remove the insurance cover for the 10 Lacs @ 2,500 pa then the gain is still 41 lacs. Even if you add on top of that 100,000 tax exemption for ULIP per year at highest tax bracket, you're saving 4.5 lacs over 15 years on tax. Even if I deduct that from Scenario B, the corpus amount is 35.5 lacs -- beating Scenario A by 5.5 lacs And we all know that I've taken a conservative approach of 12.5% CAGR for scenario B. It can even easily touch 20% when the total corpus would be a mind boggling 79 lacs. I think this article has some calculation errors Thanks, Ram Reply Replies

RRKApril 28, 2012 1:53 PM Ram, Thanks for the comments. The main problem in is the way the expenses are computed. ULIP has several layers of expenses which

are confusing, where mutual funds offer flat expense ratio. Gross yields are yields generated by fund before expenses. In my calculations I have assumed same 10% for both. I think you assuming different Gross Yields for both scenario. If you do, then that is not correct. Let us discuss this further to understand each other point of view. Reply

NagpalApril 29, 2012 5:09 PM How come mortility charges are reducing with increase in age in illustration shown above.Please clarify. Reply Replies

RRKApril 30, 2012 4:58 PM Dear Nagpal, That is the significant advantage of Type 1 ULIP plans. Type 1 plans pay only maximum of fund value or sum insured. As fund value grows bigger and bigger, the life risk premium for the company goes down. If any point, fund value exceeds sum insured, the mortality premium will become zero. Nice isn't it ? But type 2 ULIP Plans pay BOTH fund value AND sum insured at death of policy holder. Hence the mortality premium will go up year on year on those plans.

JasonMay 7, 2012 12:46 PM Thats correct, RRK you have analysed a Type 1 ULIP. As per the IDBI Brochure, "Death Benefit is the higher of the following two amounts: (a) Sum Insured or (b) The Fund Value in your Investment Account"

However, in the case of MF+Term Plan, at time of death, the nominee would get both- the fund value and SA. The only reason one would buy ULIP is for the risk cover as an additional benefit, else there are hoards of other investment products available. A better way of "comparing apples to apples" would be to compare the same benefits. i.e. a Type 2 ULIP plan like you have mentioned and a MF+Term Insurance. The costs for ULIPs would work out more for sure.

AVMay 8, 2012 3:46 PM I think, in all fairness, when making a general comparison between ULIPs and MF+Term Insurance vis-avis costs, one should compare the average vanilla ULIP instead of one with features, such as declining mortality charges when it normally increases. And that too when only when the higher of sum assured is only guaranteed. To sum it up, by making a trade-off - reducing cost at the expense of benefit (ie. either sum assured OR fund value) - ULIPs look cheaper. Of course, if BOTH the benefits were to be included, then the story might be different, as costs of ULIPs would be higher.

RRKMay 15, 2012 10:53 AM Jason, AV, I respect your views. As a financial planner, I dont find ULIP II plans exciting where the investor would get both fund value and insurance amount. Insurance is for risk cover. when you have dependents and if you dont have enough assets, you have risk. You need insurance. When you build assets, your risk level goes down. Your dependents chances of survival correspondingly goes up with your increased assets. I believe the sum insured should go down and more of the money can be released towards investment rather than paying for insurance expense (mortality charges). This is why I have taken ULIP type 1. No justification to buy ULIP type 2 plans.

Fro apples to apples, I should have used MF+decreasing insurance term plan. If you have some data, send to me, I will try to recalculate the costs. But I dont see any significant difference. It could be 0.1% to 0.15%. not more than that. Reply

SundayThotsMay 5, 2012 12:25 PM Hello RRK, Very informative and nice analysis. As you have written many people, including me, have formed opinions before Sept 2010 about the advantages of MF + Term over ULIPs. This is an eye-opener. But even after reading this, I still hold MF + Term better just for the flexibility it offers. Years of MF investments has taught me that no fund can consistently do well. Once upon a time, high performing funds like Reliance Growth or Franklin Prima have gone through prolonged slumps. An investor has a flexibility to redeem them and invest in better performing funds, which is not possible in ULIP. By the way, the 100,000 per year that you have to pay, can it be paid as monthly premiums? If not you may have a timing risk with ULIPs. --What is EBI? Reply Replies

RRKMay 15, 2012 10:31 AM (1) EBI is Estimated Benefit Illustration. All insurance agents need to produce a table (similar to what I posted) and get written acceptance from the buyer. EBI is best tool to estimate the cost of the plan. This will reveal all hidden costs. (2) Yes, the payment can be made monthly in ULIP plans also. But if your idea is to get "SIP benefit" like mutual funds, several ULIP Plans allow you to invest your premium directly in a liquid fund or bond fund and move monthly a fixed amount to equity fund on a particular date automatically. ICICI Prudential Insurance calls it ATS - Automatic Transfer Strategy.

Reply

PPMay 6, 2012 11:14 AM Hi RRK, Would it be possible to post the Excel version of the first two sheets, so we could understand and compare the formulae used for calculations. Reply Replies

RRKMay 15, 2012 10:55 AM Yes, I will share the file. If you need the excel file, Please send me an email at rrkinvest at yahoo dot com. subject:request ulip cost excel file Reply

justgrowmymoneyMay 9, 2012 8:33 PM RRK I would say this is a well researched article. Numbers dont lie. I recreated the spreadsheet you did and wanted to highlight the following: 1)The ULIP Service tax is levied on Policy Admin and Allocation charges, mortality charges and also on the FMC so that increases the Service tax and the amount that can be invested each year 2)The Year 10 and 15 loyalty additions to this plan are 3.15% of the average fund value over the preceding 3 year period. This brings in an element of surprise as the loyalty additions may be high or low depending on when one started the policy. Accordingly I have modified the loyalty additions and what I see is a final IRR of 8.05% (Versus MF+ Term Plan 7.73%). I agree that numbers dont lie. However the loyalty bonus is not uniform across different ULIPs making the cashflow tough to generalize. The death benefit in the MF+Term plan starts with 10 lacs and goes beyond 20 lacs by year 8, 30 lacs by year 12 and is around 38 lacs in Year 15 benefitting the heirs way more than Type I ULIP. Under Type 2 the IRR could fall. This MF+Term plan death benefit was not highlighted in the spreadsheet.

When IRDA capped the maximum charges to be 2.5% for plan duration > 10 years (3% for less than 10 years) charges wise ULIPs started to enjoy the advantage at par with 2.5% max expense ratio for Mutual Funds. Thus the final performance boils down big time to the actual performance delivered by the schemes. The MF returns are all widely available in public domain. I did some effort to find the performance for some long performing ULIP schemes with ICICI https://www.iciciprulife.com/public/Fund-Performance/Performance-Summary.htm The long running schemes appear to have been performing well (old era ULIPs). However do note long running ones Maximizer I, II, III are all usually closed for fresh subscriptions so the new era ULIPs wont include them. I am just giving examples here. If the fund performance deteriorates - which is more likely over 15 years - the end corpus will not necessarily be as great as a MF with 2-3 switches in that period. Just dismissing this line of argument saying that people dont have the acumen to switch MF schemes would not be accepted! If people have to grow money they must make some attempt to learn what may be good times to jump ship before it becomes a dud. Even assuming someone is invested in MF until a top flyer becomes a dud they still can come out higher by moving to a better managed scheme given the game is on for 15 years versus a ULIP where they are simply stuck. If you can share detailed ULIP performance data it may make for interesting discussion. For me to summarize: 1) MF + Term Plan death benefit beats ULIPs 2) Charges wise new era ULIPs can beat MFs. But the final IRR depends significantly on the actual scheme performance itself. Also note well performing MF schemes will charge lower as AUM grows. 3) One may find themselves with a dud scheme in ULIP spoiling the whole story. MFs are boundariless in that way - invest, monitor, analyze, switch! [I am not trying to simplify it though]. Reply

RRKMay 15, 2012 11:05 AM justgrowmymoney, I always respect your knowledge and comments. Thanks for sharing the same here.

1) Type 2 plans would cost more only because it pays the extra insurance money. One should not complain the IRR loss for getting something in return. 2)Due to IRDA cap on charges, even type II plans are not that expensive. 3) The objective of the article is to show how "so called low cost mutual funds" end up costing as much as "ULIP plans". This is not to show ULIP plans in good light, but to show when it comes to costs, in long term mutual funds also cost the same, if not higher. 4) This is written out of frustration where even learned people assume a 6% premium allocation charge is expensive compared to 2.5% FMC for any year. With more assets invested FMC cost more. 5) That is why even after showing the mutual fund costs are not cheaper, I concluded mutual funds are better than ULIP in long run for other reasons. I dont want my message to be taken in wrong spirit and cause more misselling of insurance plans. Thanks for your comments and time once again. Reply

indianistMay 17, 2012 9:45 PM How to select a Mutual Fund? and Pls give some information on mutual fund, which mutual fund is good to invest? Reply Load more... Newer Post Older Post Home Subscribe to: Post Comments (Atom)

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1 Top of Form 1 Bottom of Form Insurance industry introduced Unit Linked Insurance Plan (ULIP) some years back when the stock market was rising and people wanted to take advantage of 2 capital appreciation. inShare ULIP, even though an insurance product, Share on Tumblr exposed investors to market risk to a large extent because of its market linked portfolio. ULIP was an instant hit and it did give good returns to investors. In fact, ULIP started being used as a speculative product where people can make easy money. This was far from the truth. The trouble started when market started its downward journey. "End of the euro? Why we might Higher fee, in addition to a declining market, see history unravel this week" was a double whammy for investors. There was much noise from investors' community which forced insurance companies to News restructure the product. The new ULIP is a much better product from safety point of MOST POPULAR view but it also gives you less return than what it provided earlier. TOP NEWS In comparison, mutual funds are a pure investment product. There are different 10 stocks that remain on buyers` radar Jobs You Can Do Forever

types of mutual funds based on the risk Houseviews: 4 stocks that you can bet your money on exposure. Equity oriented mutual funds Bullish on Nifty, target at 5200: Sudarshan Sukhani invest major part of the fund in equities. Hybrid funds or balanced funds invest in both UB group fattens staff bill by Rs 400cr; cuts on Kingfisher equities and debt. Debt funds invest in bonds and fixed income securities. Lets look at some aspects of investing and understand how these two popular products fair against each other. Risk exposure - ULIPs are a relatively less risky product because they are insurance products. Even though ULIPs have great variety of products available investing in equities and bonds, they have to be more careful in investment because of the nature of insurance products. Mutual funds are of various types as explained above. Equity oriented mutual funds are more risky than the hybrid ones and hybrid mutual funds are more risky than the debt funds. Potential of Returns - Since ULIPs invest in relatively low risk products, the potential of returns is also low. The reason is that they have to promise sum assured irrespective of whether the plan makes money. Mutual funds are of different varieties. Equity oriented mutual funds give higher returns than the hybrid ones. Hybrid mutual funds offer better returns than debt funds. Jagan Reddy to stay in jail during Andhra by-poll

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Lock-in period - Since ULIP is an insurance 'IIT Delhi to set up extension campus in Sonipat' product, insurance companies define a lockin period for investment. Hence if an investor 'Taxes make airfares 200-300 pc higher than China' buys ULIP, he or she cannot sell before the lock-in period of 3 to 5 years depending on Indo-Pak defence secretaries to discuss Siachen individual ULIP products and the structure. Obama using drone strikes for political gains: Gilani Most of the mutual funds typically do not have any lock-in period. You can buy and sell Cautious France wary of England in Group D mutual funds anytime. There is a certain type of mutual funds, known as closed fund, which Ireland need to rethink on defensive tactics have lock-in period of 3 years.

Liquidity - Liquidity is defined as the ease with which investors can redeem their investment. It is also about time it takes to receive your investment back after redemption. Needless to say, mutual funds are more liquid since it is more widely traded in the market. Charges - The advantage of mutual fund is its low charges and professional management. The management fee of mutual funds is typically 1% to 2%. ULIP charges are higher.

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WWDC: Apple may show fresh software, new Macs Important Points to iOS 6 beta links surface ahead of WWDC 2012 keep in mind HTC One S coming to India on June 15 Investors Mark Zuckerberg's wealth down $4.5 bn should understand Rain postpones Nadal-Djokovic French Open final the difference between investment and insurance. Never mix these two important Pietersen calls for England T20 compromise aspects of your financial life. The purpose of insurance is to protect your family in case of Kaneria to appear before ECB spot-fixing hearing any exigencies. The purpose of investment is Viv hits back at Ramdin for poor gesture to build wealth overtime. Mutual funds are great product to earn higher returns and build wealth overtime. Investors should stay with mutual funds for longer time to earn higher returns. At the same time, when investors buy ULIP, it is good to continue with From DJ EU Officials Spain Aid Cap Of 100 Bn Euros it till the maturity. 'should Be Enough' One major advantage mutual funds have over ULIP is their history. Mutual funds are in the market for quite a number of years and The latest earning numbers FIRST on CNBC-TV18 hence investors can look at the history of Videos returns. The data point available in the market to help investors to select right mutual fund is vast. The same is not available

for ULIP. ULIPs and Mutual funds offer a variety of products based on risk profile. Investors should understand their risk profile and investment period and then decide accordingly. If an investor has low risk profile and an investment horizon of 3 years, investing in ULIPs or mutual funds with major portion in equity is not a good idea. Similarly an investor with longer investment horizon and high risk appetite should go for equity oriented mutual fund or ULIPs with bigger exposure to equities. Finally, even when investors have bought ULIP as insurance, they must take term insurance to have sufficient protection. The sum assured in term insurance is very high compared to ULIP or any other insurance plan. Term insurance products are pure insurance plan where a large sum is paid to your family members in case of any eventuality. If nothing happens to the insured, there is no disbursement of money.

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ULIP vs. Mutual fund by Anushka in June 11th, 2010 Mutual Fund, ULIP Tags: insurance, investment, ULIP, ulip investment

ULIPs and mutual fund are similar type of investment but not same. As we know mutual funds are more into investments; whereas ULIPs are into investments as well as insurance. When we look into the basic concept the difference between the two is very small, and mainly consists of product structure and risk coverage. The basic difference evolves regarding its regulation. The ULIPs are regulated by the IRDA, whereas mutual funds are regulated by the SEBI. Then the other important aspect is when we look from an industrial point of view, the main focus of mutual funds is on low costs while the main focus for the ULIPs lies in the better performance and the distribution of its products. The other aspect includes flexibility, in this case a ULIP allows us to increase our life cover and at the same time are premiums rates remain the same. This is achieved by reducing our investments. On the other hand you dont get any life cover in mutual funds. The only option we are left is purchasing a new insurance policy which would ultimately lead to additional cost. The other important point to be focused involves that even if the costs of the investments in ULIPs is more compared to Mutual funds, the ULIPs offer better products which are suited for long term investments, whereas mutual fund products can only be used for sole purposes or short term returns. And one more point which acts as a beneficiary in terms of insurance is, that we do not receive any insurance cover in mutual funds whereas we receive insurance cover in ULIP plans. Mutual Funds and ULIPs both are subject to market risks; if something unfortunate happen to investor, family or nominee will receive only fund value. On the other hand ULIPs will give your family guaranteed sum assured in case of death of the policy holder. As these investments are the most preferred investment options to invest. even a small drawback somewhere makes a strong impression in our minds. So in the case of ULIPs vs Mutual funds if we notice, ULIPs are more preferable even if both stand at the same level. Somewhere when we equate both the investment options ULIPs are more beneficial as well as flexible as per our requirements.

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9 Comments Edward gomes Said, June 11th, 2010 @11:23 am I do not agree with ULIP is best buy cause their cost is very high if you go with value return ULIP charge you almost 20/30 % their fee and Mutual fund charge you only 1-2% fee.Still value in Mutual fund is good enough for your return. Last 9 months of ULIP return shows the value decline almost 45 % but in Mutual Fund it shows gain almost 20-30 %. So best buy is Mutual fund and no one guarantee your life this days. Reply

Aman Said, July 4th, 2010 @1:33 pm please let me know if is there any loan facilities on the basis of lic profit plus policy holder.. Reply

pvr.parthasarathi Said, October 23rd, 2010 @2:12 pm Pl. let me know how to know the status of NAV of my future plan policies. Reply

Bilal Ahmad Najar Said, November 10th, 2010 @7:41 pm Dear Sir /Madam, I want to know the policy status and total amount of my policy.My policy no is 142190096.Ihahe paid the three installments of ten thousand,now i want to know the detail of my policy no. thanks Reply

Bilal Ahmad Najar Said, December 8th, 2010 @1:14 pm i Want to know my policy detail,my policy no is 142190096 thanks Reply

sofin basar Said, December 18th, 2010 @3:56 pm sir, please give me advise about matual fund and fix deposit which one is good for me ,which one give me good back . Reply

Tabrej Reply:
December 27th, 2010 at 3:26 pm

Mutual funds will give you better returns then FD but MF comes with risk involved. if you want to take risk then go for Mutual funds. Reply

neet Said, March 7th, 2011 @11:18 pm which is better policy? Samraddhi plus or Jeevan anand Reply

Chandrashekhar baghel Said, April 13th, 2011 @3:26 pm Policy current status policy no-264426633

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Sticky Post LIC Life Insurance Corporation of India Life Insurance Corporation of India (LIC) is a Government of India enterprise, and is said to be the largest life insurance company and also the largest investor of the country. It was founded in the year 1956 and has been serving people ever since. The main objective of this corporation ....Click here to continue reading LIC Jeevan Vaibhav LIC Jeevan Vaibhav (Plan No.809) is a non-linked one time premium endowment assurance policy. Jeevan Vaibhav is a guaranteed return plan. Being a non-linked plan share market risk is Nil.Policy Availability: LIC Jeevan Vaibhav is a close ended plan. It will be available for sale from 21st May, 2012 for a ....Click here to continue reading LIC Jeevan Vriddhi LIC Jeevan Vriddhi (Plan No.808) is a single premium investment plan which offers guaranteed returns. Jeevan Vriddhi is a traditional plan so share market risk is not involved in this close ended plan. The plan is launched on 1st March 2012 and will be avialable for investment till 120 days ....Click here to continue reading LIC Jeevan Ankur LIC Jeevan Ankur (Plan no.807) is a latest insurance plan for the children. LIC Jeevan Ankur gives multiple financial assistance to your child when he/she needs in growing up years. In this plan parent is the Life Assured and child is the Beneficiary.LIC Jeevan Ankur Features:Jeevan Ankur is the must ....Click here to continue reading 2006-2012 LIC of India Valid XHTML Valid CSS | Privacy Policy| Sitemap | Forum | How To

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