UNIT LINK INSURANCE PLAN

V/S

MUTUAL FUNDS

FIRST WE NEED TO KNOW IS THE COMPARISON POSSIBLE

?

¾ BOTH ARE DIFFERENT TYPES OF AVENUES OF

INVESTMENT.

¾ HENCE, STRICTLY SPEAKING COMPARISION IS NOT

POSSIBLE.

¾ ONLY FEATURES THAT ARE SIMILAR CAN BE

COMPARED.

THEN WHY COMPARE ?

¾ MOST COMMONLY FACED OBJECTION.

¾ GENERAL POPULATION MORE FAMILIAR

WITH MUTUAL FUND THAN ULIP.

¾ NEED FOR EASY SELLING PITCH.

¾ CLASSIC OBJECTION : MUTUAL FUND + TERM
PLAN MORE BENEFICIAL & THAN ULIP.

Prepared by Vijay Kesaria (HDFCSL, Vashi Region, Mumbai) – Dec. 2007 1

FEATURES ULIPs MF +
TERMPLAN
Premium SA once fixed Term Plan would
contribution cannot be changed lapse if premium is
flexibility not paid
Convenience Single product for Keeping Track of
purpose of two avenues of
Investment, Investment is be
Insurance Cover. cumbersome.
Additional Riders NIL
Benefits
Investment Goal Long Term Short Term
Objective Objective

AREAS OF COMPARISION :

¾ STRUCTURE

™ COMPARATIVE BENEFITS

o ULIPS are more beneficial over long term in terms of

Allocation Charges, also Loyalty additions are
possible.
o IN MUTUAL FUNDS no rewards for Long-term
investor as all charges are Fund Based thus eroding
into profits of investor.

™ FLEXIBILITY

o CHOICE of Life Cover with opportunity for

investment.
o ENTIRE SPECTRUM of investment options available
thus, diversification of investment in different markets
is possible.
o SWITCHING option available to enhance portfolio
gains.

™ DISCIPLINE

Prepared by Vijay Kesaria (HDFCSL, Vashi Region, Mumbai) – Dec. 2007 2

 ULIPs being Long term in nature compulsion of investment
by regular premiums thus helps in disciplined savings.

™ FUND MANAGERS PERSPECTIVE

Since most of investor pool in Mutual Funds are Institutional

Investors, they have short term goals MF Manager is under
heavy pressure to book profits in short term thus giving him
hardly any time to have discipline in Investing.

In case Fund Manager of ULIP pool of investors are entirely

Retail in nature and nature of Investment product being long
term & compulsory lock-in of funds, the pressure on the
Fund Manager is comparatively less thus enabling him to
have discipline in investment thus generating higher returns.

¾ DIVERSIFICATION / SWITCHING

In Mutual Funds shifting of portfolio involves costs (entry

load)

In ULIP shifting/switching of portfolio comes at nil costs or

at a lowest cost.

¾ RETURNS

MF Managers view being short term in nature & markets

being volatile in short term returns will be affected. To book
profits timing the market is required for entry and exit,
which may not be always possible.

Fund Managers view in ULIP being long term in nature

timing
the market is not required as in the long term markets are less
volatile, & have shown good returns.

¾ TAX IMPLICATION

Prepared by Vijay Kesaria (HDFCSL, Vashi Region, Mumbai) – Dec. 2007 3

 NO TAX BENEFITS on investment in MF unless it is
Equity linked saving scheme.

Investments in ULIPs are Tax Free u/s 80C

Returns in MF are tax free IF held for more than a year,

However, if held for less than a year they attract (STCG)
Short Term Capital Gains Tax at 11.22%. STCG cannot be
set off against (LTCG) Long Term Capital Gains.

Returns in ULIPs are tax-free.

Snap Shot : MF/ULIP

Feature Mutual Fund ULIPs

Insurance Cover N Y
Multiple Investment N Y
options in one plan
Investment Discipline Y Y
Flexibility: Switching N Y
investment avenues
Long term goal `N Y
Orientation
Strong Role of N Y
Regulator
Income N Y
Generator/Replacer
Liquidity Y N

ULIP THE ONLY AVENUE FOR

ACHEIVEING LONG TERM
INVESTMENT GOAL

Prepared by Vijay Kesaria (HDFCSL, Vashi Region, Mumbai) – Dec. 2007 4