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ULIP or Mutual Fund Which One to Choose?

Actually speaking, there is no comparison between ULIP and Mutual Fund.

However, if you are looking for a systematic approach in deciding post-LTCG that you should go for ULIP or Mutual Fund + Term Plan here is a readymade help.

First, we will take a look at taxability part especially LTCG. For discussion purpose let’s assume that ULIP and Mutual Fund investments are done for long-term (1 year and above). This clearly means that on Mutual Fund profit you need to pay LTCG @10% above 1 Lakh in a financial year. On the other hand, ULIP maturity amount is tax exempted.

From taxability point of view, ULIP is a defiantly better choice (post LTCG), provided it offers higher return compared to Mutual Funds.

Don’t get confused, follow a simple method given below.

Go for ULIP

  • When you have low or medium risk appetite.
  • When you want life cover along with investment.
  • When liquidity is not important to you.
  • When you want a financial instrument for tax saving.

Go for Mutual Fund

  • When you have a medium or high-risk appetite.
  • When you are looking for a pure investment product that offers high returns.
  • When you want your investment to be liquid. (Except ELSS).
  • When you have term plan to protect your family.
  • When you are OK with paying additional LTCG tax.

 

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Sathish Kumar

Wealth Consultant

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