Recent years saw a rise in the subscriptions for ULIPs or the so called Unit linked Insurance Plans. The reason behind being, ULIP is projected as a tool which offers both insurance and also returns on the investment. Although the statement is true by its nature, there are definitely limitations. I personally atleast don't see ULIPs as a form of investment. There are several reasons behind making this rather painful statement.
People have always been the victims either directly or indirectly when it comes to stock market investments. They are shown returns or features which are quite exaggerated by the so called "investment advisors". The same too happened in case of ULIPs as well. ULIPs are good tools when seen as an insurance and with very long term perspective (very long term here means atleast 10 to 15 years).
The executives who are trying more to market their product rather than understanding the actual need of the people exaggerate things. They only put before the investor, the returns that their product gives (might give) rather than the charges that are imposed. People generally tend to invest when they "foresee" the returns. But the truth here is that, the charges that are imposed in case of ULIP are far more than those that are incurred in a mutual fund investment. Nearly 20% or even more in some cases of your initial investment goes for administration charges. This should be properly disclosed to the investor before he puts his money. Once he / she invests in an ULIP, the money gets locked for 3 years officially and more unofficially for more than 10 years if he/she needs returns.
There is no denying that ULIPs are certainly good tool, but only if it is properly exploited. Do not ever invest in a ULIP, if it is for the sake of returns. Understand the actual need for a ULIP and then try to take a decision. Mutual funds are definitely a better option for investment than ULIP.
Only if you are in need of insurance and are willing to take quite an amount of risk (as the investment is linked to performance of the markets), go for a ULIP. Otherwise, my sincere advise is, go for mutual funds.
People have always been the victims either directly or indirectly when it comes to stock market investments. They are shown returns or features which are quite exaggerated by the so called "investment advisors". The same too happened in case of ULIPs as well. ULIPs are good tools when seen as an insurance and with very long term perspective (very long term here means atleast 10 to 15 years).
The executives who are trying more to market their product rather than understanding the actual need of the people exaggerate things. They only put before the investor, the returns that their product gives (might give) rather than the charges that are imposed. People generally tend to invest when they "foresee" the returns. But the truth here is that, the charges that are imposed in case of ULIP are far more than those that are incurred in a mutual fund investment. Nearly 20% or even more in some cases of your initial investment goes for administration charges. This should be properly disclosed to the investor before he puts his money. Once he / she invests in an ULIP, the money gets locked for 3 years officially and more unofficially for more than 10 years if he/she needs returns.
There is no denying that ULIPs are certainly good tool, but only if it is properly exploited. Do not ever invest in a ULIP, if it is for the sake of returns. Understand the actual need for a ULIP and then try to take a decision. Mutual funds are definitely a better option for investment than ULIP.
Only if you are in need of insurance and are willing to take quite an amount of risk (as the investment is linked to performance of the markets), go for a ULIP. Otherwise, my sincere advise is, go for mutual funds.
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