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ULIP or SIP – The Better Investment Option

 

Investment is a key to good financial planning and hence it is always recommended to invest for fulfilling your both long term and short term goals. On one hand, where short term investment goals may include going on a family trip, renovation of the home, etc. the other hand long term investment goals may include the following:

 

 Retirement planning

 Investing for higher education of children

 And bearing the expenses of the marriage of your kid(s)

These are some of the long term investment goals and they may vary with person to person, but  the bottom line is everyone should invest. There are two highly recommended investment instruments that help you to fulfill your dreams or future goals:

Unit Linked Insurance Plan (ULIP Investment) and

Systematic Investment Plan (SIP)

 

Even though both these long-term investment plans have their own set of advantages and disadvantages but which is best between them is a matter of debate since forever. Today, we are going to discuss a comparative analysis of both Unit Linked Insurance Plan Online and SIP. Moreover we will also try to understand which is better.

What is ULIP Plan?

ULIP full form is Unit Linked Insurance Plan and it is a combination of insurance and investment. Here, you get the chance to select an investment option from an extensive range of funds like debt funds, equity funds, money market funds, etc. With the investment, you get life insurance cover as well in ULIP.

Benefits of ULIPs

The advantages of investing in ULIP are:

Enjoy Triple Benefit: Apart from insurance and investment, ULIP investment also provides tax benefits. In this way, a portion of your investment in ULIP goes to life cover and another part goes for investment to build wealth and earn returns. In addition to these two, you also get tax benefits by opting ULIP.

 

Partial Withdrawal Opportunity: After the lock-in period of five years, you get an opportunity to make partial withdrawals in ULIP investment. You can withdraw a part of your investment as per your goals and requirements. Though most of the ULIP providers do not follow any rules for partial withdrawals, it is recommended not to withdraw an amount that leads to the termination of the policy.

 

 Select Preferred Asset Class: As per your risk appetite, you can choose your preferred asset class. If your risk appetite is high, you can select equity investment, whereas a moderate investor can select debt funds for investment in ULIP. Additionally, you can switch among the funds in ULIP investment.

What is SIP?

Systematic Investment Plan or SIP is an investment tool that gives you an opportunity to invest in different schemes of mutual funds at regular intervals.

Benefits of SIP

The advantages of investing in SIPs are:

No Need of Big Investment: The best part about ULIP investment is, you can start your investment with a small amount as well. This amount can be as low as Rs.500 and with increment in your income; you can increase this amount as per your future requirements. Due to the long term of investment, your invested amount increases. For example, if you are investing in a SIP that gives 12% interest and you are investing Rs.1, 000 every month for 10 years, then you will be getting Rs.2.30 Lakh after 10 years.

·         Inculcates the Habit of Regular Savings: SIP investment develops the habit of regular saving in you. The regular savings habit plays an important role to create a corpus for your future goals. Through auto-debit feature, your money can be deducted automatically and invested without any effort on regular basis.

·         Protects Against the Volatility of Market: SIP invests your money for a longer period of time, thus it protects you from the volatility of the money market. It protects your invested money from a significant market dips and enables you to increase your corpus that you are investing to fulfill your future goals.

Final Words: Both SIP and ULIP investments have their own benefits. If you want life insurance cover with investment in the money market, then ULIP is the best for you. However, if you do not want your money get affected with the market inflation, then SIP should be your partner for investment.

So, it entirely depends upon you which type of investment you want as both of these have their set of advantages.  

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