ULIPs are not recommended for either insurance or investment. Go for equity funds for the latter
09-Sep-2014 •Research Desk
Could you please let me know if we should go for ULIP OR SIP in MFs? Am looking forward to Birla Sunlife Frontline Equity plan. Please could you recommend if I should go with it? I am just looking for investment here and have no need for 80c benefit.
- Abhishek Saxena
The choice is very simple. You must go in for a systematic investment plan in a mutual fund. ULIPs are not recommended either for insurance or investment. The major reason for selecting mutual fund SIP over unit linked plans is their expenses and flexibility. ULIPs charge high costs during initial 4 to 5 policy years. Mutual funds can charge a maximum of 2.5% as expense ratio for equity funds and 2.25% for debt funds. Whereas, ULIPs may charge a minimum of 5 to 6 percent as expense during first year. What is more, mutual funds tend to be far more transparent about their investment strategy and portfolio and offer you anytime exit, if the performance is lagging. In the case of ULIPs your investment is locked in for five years irrespective of the plans performance. You should select an equity fund on the basis of your needs and risk appetite. The Birla Sunlife Frontline Equity is a Large & Mid Cap equity fund rated four star by Value Research. You may invest in it.