There are many different investment schemes that are available in India. The main thing to consider when choosing an investment scheme is the long-term goals and objectives of the investor. In addition, it is important to determine which type of investment will provide the highest return and what kind of risk is involved with each option.
In order to make an informed decision, it is important to understand the different types of investment schemes available and their associated risks and benefits.
Here we are going to do a comparative analysis between ULIPs vs Mutual Funds vs PPFs.
A ULIP is a unique investment vehicle that merges the idea of investment and insurance. It allows you to purchase a small amount of equity in a mutual fund or insurance plan and then participate in the growth of your investment.
You can choose to buy into any of the schemes offered by various insurance companies, with each plan having different features and offerings. The amount you buy will depend on what you are looking for in terms of returns, but it will also depend on how much money you have available.
When you invest in a ULIP, the premium amount is divided into two parts – the first part is used as the premium payment for the insurance policy while the second part is invested in Mutual Funds.
ULIPs are usually sold as investments, which means that they provide regular dividends on your investment at fixed intervals. You can also sell these units at any time to realize their value. This type of plan is ideal if you want to invest in something more than just stocks because it has been proved time and again that mutual funds offer better returns than stocks do.
Public Provident Fund (PPF) is a long-term saving option to help people get into the habit of saving for their life after retirement.
The PPF is a government-sponsored, voluntary, and non-regressive pension plan for workers and employers. The interest earned on the money deposited in the Public Provident Fund (PPF) is exempt from income tax. The interest earned on PPF deposits is also not subject to any other tax, such as wealth tax or CIT.
Pension is a form of deferred payment for life and health care services provided by employers or employees to an employee after retirement or during his/her service period.
Pension is usually provided to retired employees who have contributed to the pension fund during their working life. Pension payments are usually paid monthly or quarterly according to the terms of the contract between employer and employee.
To calculate these Pension payments, you can try out the Online PPF Calculator. It is a free online calculator which runs PPF computations based on the yearly investment amount, rate of interest, and time period.
Mutual funds are comprised of a pool of investors who pool their money together to purchase shares of companies that they believe will grow over time and increase in value, thus making them profitable for them individually as well as collectively when they sell their shares at a later date (usually after 5-7 years).
MFs are very popular among investors because they provide passive returns that do not require any active management or attention from the investor, which makes them appealing to retirees who do not want to have to deal with day-to-day issues like stock trading or portfolio management in order to achieve their financial goals.
Mutual Funds can be broadly classified into three types:
Here is a comparison study between these three investment vehicles:
Investment in ULIP is less popular than investing in PPF and mutual funds because of the cost involved. The tax benefits from unit-linked insurance plans make them more attractive than both PPF and investments in mutual funds.
Moreover, insurance protection schemes for ULIP also ensure returns on investments. Hence, it is quite clear that ULIP could be a good option for investments to accumulate your retirement corpus, but it must be done judiciously. So, choose wisely!
Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.