Sunday, December 16, 2007

Unit Liked Insurance Plan and Mutual Funds

Below are some of the differences which will help in taking your decision based on your own risk appetite and your long or short term goal -

1. MFs are for the short-term, ULIPs for the long run .MFs are popular short-term products. Retail investors park their money in MFs so that they can exit when they have made enough gains. But that’s not how ULIPs function. ULIPs are essentially looked upon as long-term instruments where an investor will systematically invest every year with a certain lock-in period. ULIPs are natural way of systematic investment as you pay premiums on a monthly, quarterly, bi-annual or annual basis.

2. MFs are aggressive and churn their portfolioBecause mutual funds have to deliver returns in the short-term, they tend to be more aggressive. The investment philosophy of mutual funds and life insurers differ to some extent. Typically, MFs are more aggressive players who take larger bets on hot sectors.MFs churn their portfolios considerably. Life insurance companies, on the other hand, are far more conservative and take much longer calls on the market

If you are looking long term Benefits, Ulips is best option.

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