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Should I shift from balanced fund to ULIP?

If your research is correct, your new investment advisor is trying to sell you a Unit Linked Insurance Plan (ULIP)

I am investing ₹2,000 every month through a Systematic Investment Plan (SIP) in HDFC Prudence Fund from the last one year. A few days back, I came across a guy from HDFC Securities. On discussion, he told me that he will help me to reinvest the amount of ₹24,000 which I had invested in HDFC Prudence Fund through a SIP over the year into a plan name HDFC opportunities fund. I did my research and found out that it is called HDFC Life Pro Growth - Opportunities Fund. He told me this ₹24,000 invested every year will redeem and reinvested yearly into HDFC Life Pro Growth - Opportunities Fund and I will simultaneously get Section 80C tax exemption and an HDFC Life cover with it. Should I go for this plan?
- Devank P

To begin with, you should immediately stop taking investment advice from random salespersons. If you can't do without investment advice, hire a professional advisor and pay for it. Also, read up articles on investment basics on our site so that even they can't take you for a ride. First things... is a great place to start your investment journey.

If your research is correct, your new investment advisor is trying sell you a Unit Linked Insurance Plan (ULIP). It would make him rich, but it is unlikely to serve your investment or insurance need. Even if you are planning to buy a life insurance cover, ULIPs like HDFC Life ProGrowth Plus - Opportunities Fund are not a great choice. ULIPs are hybrid products that mix life insurance and investments. We do not recommend ULIPs to buy insurance cover or as an investment option because they are costly and they do not offer adequate life insurance cover or great returns. You should always buy pure term insurance plans to secure an adequate life insurance cover. Term plans offer a very large cover for a small premium.

You have not mentioned what was your investment objective when you invested in HDFC Prudence. This is a balanced (Hybrid: Equity oriented) mutual fund and we typically ask first-time investors to the market and conservative investors to invest in them with an investment horizon of at least five years. Balanced funds are ideal for conservative investors because they help one to grow money without experiencing a lot of volatility. While investing in equity, you should always be prepared to stay invested for a long period. Switching from one scheme to another in a short period would cost you money (taxes and exit loads if any) and it will also rob you of an opportunity to earn superior returns in the long term.

If you are looking for investments under Section 80C, you can choose Equity Linked Savings Schemes (ELSSs) or tax planning schemes.

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