Which is Better – FD, Mutual Fund, SIP or ULIP?
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Which is Better – FD, Mutual Fund, SIP or ULIP?

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  • 29th Apr 2022
  • 2,628

Which is Better – FD, Mutual Fund, SIP or ULIP?

​The popularity of investment tools has soared in the last decade. With a majority of millennials in the workforce and the new Gen-Z following in suit, investment has never been more vital. With so many investment options available, choosing one that meets all of your needs and works best to amass money while offering the best returns can be difficult. It can be confusing to make a decision when there are a lot of discussions on which is better: ULIP vs. Mutual Fund vs. SIP vs. Fixed Deposit. If you are not sure which investment option is best for your needs, we’ll walk you through some of the most popular choices and help you make the right selection.

All About ULIP vs Mutual Fund vs SIP vs Fixed Deposit

Unit Linked Insurance Policy (ULIP)

A unique investment product, the ULIP combines the benefits of both investment and insurance coverage into a single scheme. A part of the premium is used to finance life insurance, while the rest is invested in other market instruments including stocks, shares, and bonds. It also offers tax benefits under Section 80C of the Income Tax Act, 1961.

Advantages of Investing in ULIP

Benefits Are Tripled

ULIPs provide wealth building, tax benefits, and life insurance coverage in one package. 

Partial Withdrawal

ULIPs feature a 5-year required lock-in period, after which you can withdraw a portion of your money as needed.

Selection of Assets

You can invest and allocate your assets in investing instruments such as life equities, stocks, and debt funds based on your risk tolerance.

Mutual Funds

A mutual fund is a form of financial instrument that invests in securities such as bonds, money market instruments, equities, and other assets by pooling money from multiple investors. Professional money managers administer the funds, allocating assets and attempting to generate investment income or income for the fund’s investors.

Advantages of Investing in Mutual Funds

Diversification is one of the most apparent benefits of mutual fund investment. It’s the technique of distributing a single investment over a variety of asset types. Diversification allows us to build a diverse portfolio that separates the various industries’ headwinds.

Liquidity

To satisfy your financial needs, you can easily sell mutual funds. After the money is liquidated, it is placed in your bank account within a few days. There are other mutual funds that disburse money more quickly.

Professional Portfolio Manager

For individuals who may not have the time or ability to undertake their own analysis and asset selection, a mutual fund is a viable option. A professional fund manager handles everything and decides what to do with your money based on your risk tolerance.

Systematic Insurance Plan (SIP)

A SIP is a strategy for investing in mutual funds. It is a way of investing a certain amount of money into a mutual fund account on a regular basis. You can make payments on a monthly, quarterly, or annual basis, depending on your convenience and financial goals.

Advantages of Investing in SIP

Begin small and expand

You may start with a small investment fund of ₹500 and progressively increase the amount based on your requirements and income development, with the option of reaping the benefits of compounding after a certain length of time.

Habitual Savings

It helps you to adopt a disciplined savings practice for long-term wealth/asset growth by automatically deducting a defined sum from your account.

Protect Yourself From Market Risks

SIPs safeguard your money from current market volatility and hazards because they are long-term investment products.

Fixed Deposit (FD)

A fixed deposit is a financial product offered by banks or non-bank financial companies (NBFCs) that pay a greater interest rate than conventional savings account till the maturity period.

Advantages of Investing in Fixed Deposit

Fixed Returns

FD has a predetermined rate of return. When you open an FD, the rate of interest you’re offered stays the same throughout your chosen time period. Even if interest rates in the rest of the market fall, your FD interest returns will remain untouched.

FD And Loan

An FD is a safe investment to have on hand in the event of a financial emergency. It’s simple to get a loan against a fixed deposit. Based on the bank, you may be able to borrow up to 95 per cent of the value of your fixed deposit.

Tenure Flexibility

The duration of FDs ranges from a week to ten years. You can buy in FDs for a period of time that corresponds to your commercial or personal requirements.

Wrapping up, each financial instrument has its own set of features and benefits. As a result, it’s critical to do your research before committing to an investment opportunity that meets both your personal and financial objectives.

- A Consumer Education Initiative series by Kotak Life

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