How Mutual Fund Is Better Than Other Investment Plans |
Posted: June 12, 2019 |
An investment which is best suited to one person may not suit or serve the purpose to another. It all depends on the financial and life goal of an individual who is planning to make the investment. Many a time, people fail to understand the basics of financial products and get confused. This results in people giving individual advice on a specific financial product like, “Mutual fund is better than Life Insurance” or “ULIP or other sip plans are better than mutual fund”. It is vital to understand that both these products fulfil different financial needs. This article will help you understand the difference between the two products, so that you can judge for yourself which product is better for your individual case. Every financial product in which you can invest holds distinctive features and benefits. It is essential to understand each product and what it has to offer in absolute detail. While making a decision on any investment, the first thing that needs to be taken into consideration is how it becomes an asset to you in the time period you are going to hold the investment. After all, it is your hard earned money which you are going to invest in a particular financial scheme. To compare between Mutual funds and investment plans, we can take the life insurance product- ULIP which draws a fair comparison between the two investments. In ULIP, you can get benefits of both life insurance and mutual funds. ULIP is designed in such a way that it offers life insurance as well as an investment opportunity in market-linked securities in the same plan. Part of the premium of ULIP goes towards the life cover component of the plan and the rest is invested in the market to generate wealth for the investor. ULIPs are a great choice for investors who want the dual benefit of life insurance together with high returns from the equity market. The funds of ULIP invested in the equity market are managed by experienced fund managers, just like mutual funds which not only helps your money grow, but also carry lower risks. Similar to mutual funds, in ULIPs, the policyholders have the option to choose the funds as per their risk appetite and the returns they are expecting. For high returns, they will need to be aggressive and invest most of their investment in equity funds. For medium returns, they will need to invest a maximum of their corpus in debt related funds. You can also have the flexibility to adjust your risk by investing in both equity and debt market funds to maximise your returns and at the same time being careful of the volatile market conditions. Conclusion Hope the above analysis would have helped you clear a lot of confusion between Mutual fund and other investment plans. If you don’t want the hassle of maintaining two different investments, i.e. life insurance investment and mutual funds together, then ULIP is your ideal choice. ULIP will be a smart investment product for individuals who don’t have much knowledge on equity market or different fund option available with the mutual fund, but want to benefit from long-term capital appreciation through investment opportunity in equities. List down your financial goals and requirements and accordingly put your money in the appropriate investment product. If you already have ample life insurance coverage and want to invest in the market-related investments, then the mutual fund may be the best way forward. You can take help of a mutual fund calculator that will help you explore the top 10 mutual funds options. Do note that investment in a mutual fund is related to market risk and hence, explore your options carefully before investing. A lot of information on mutual funds is available online, do read it and keep enhancing your knowledge on mutual funds along the course of investing.
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