ULIPs vs Mutual Funds: Where to Invest your money?

ULIPs or Unit Linked Insurance Plans versus Mutual Funds – Which is a better form of investment? How do you know which type of investment gives better returns? To help you decide with your investment plan, we have come up with this article.

Definition: ULIPs vs Mutual Funds

ULIPs: ULIPs are basically integrated Life Insurance and Fund plan, where some part of your money is invested in an insurance policy and some part of it is invested in mutual funds, bonds and stocks. There is no pre-defined percentage of the money division. You may be given many options, and you may be asked to purchase your plan according to your age and risk taking capability. Also, the operational cost is deducted, and then your profit is calculated.

Mutual Funds: Mutual funds are invested funds, where investment banker employed by the mutual fund company, decides in which stocks the money is to be invested and then comes up with a fund. Investment bankers constantly monitor mutual funds, and hence, you will have someone who will be working for your funds, to give you maximum benefit. It does not come with any Life Insurance Plans.

ULIPs vs Mutual Funds: Transparency and Liquidity

I believe there has to be transparency in the policies where you are investing. As an investor, you must have good knowledge about what amount of your invested amount will be invested in which areas, which I believe is very complex in ULPIs. Since it is an integrated plan, the returns will depend on multiple factors. Whereas, in mutual funds, it is very transparent. You will have all the information where your money is getting invested. There is no hidden charges in any form. Also, consider the lock-in period.

In ULIPs, the lock-in period will be more. Even if you do not like it, you will have to stick to your investment for a longer period of time, which is not the case with mutual fund investments. Plus, if you plan to withdraw your money in ULIPs, you will have to bear heavy losses, up to 60 percent of the money invested.

Which form of investment is better?

It has been seen that ULIPs have given better returns when invested for a period of more than 10 years. For a shorter period of time, Mutual funds are way ahead of the ULIPs. Another factor to keep in mind while choosing what type of investment to go with is whether you have any investments in any insurance plans or not. If you have not invested in any insurance plans, you may go with ULIPs even if you are not eyeing on 5-10 years time period. If you do not want any lock-in period, better go with mutual funds, and invest in insurance plan separately.

Who should invest in Mutual Funds and ULPIs?

Mutual Funds

Anyone who wants a good return but do not want to be fall under any kind of lock-in period.
Anyone who has already invested in insurance policy/policies.
Anyone who does not wish to go with the longer form of investments.


Anyone who has not invested in insurance policies.
Anyone who does not mind being invested for more than 10 years.

Advanced Tip: If you wish to invest in ULIP, go with online ULIPs, as the returns are more.

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