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How to compare the returns of a ULIP?

The returns that reflect in mutual funds are after the expense ratio and is realisable in the hand of the investor

I want to understand how to gather information for specific ULIPs such as UTI ULIP & HDFC click to invest. There are 2 scenarios, one where I have already invested for say 12-14 installments, then I want to know, how much returns have I made so far, how much money will I receive if I quit now and so on. I also want to know what is the best exit strategy from a ULIP. If I want to compare ULIPs with other instruments, how do I do it?

It is difficult to compare the returns of ULIPs like we do for mutual funds because of differing charges, benchmarks and asset allocation patterns used by different insurers.

However, UTI ULIP is a mutual fund that falls in the debt oriented hybrid category. You can compare its returns to other similar MFs in the Value Research website. You should note that the returns of mutual funds are after the expense ratio and are realisable in your hands should you exit.

On the other hand, HDFC Click 2 Invest is a ULIP offered by an insurer which offer insurance protection with investments. You can check the fund value of your plan on the insurer's website and based on your premiums and the premium paying term you can calculate your average return. You can probably compare this return to the returns on the index to get at the relative performance of your investment.

HDFC Click 2 Invest is a low cost ULIP which charges for mortality risk and fund management alone. Fund management charges are reasonable too at 1.35 per cent per annum, which are deducted before an investment is made. For exit, ULIPs have a 5 year lock in period and lack the liquidity of open end mutual funds. These are market linked plans and if the plan doesn't perform you will be able to switch to a better fund only after the five year lock in expires.

We don't recommend ULIPs because it is not advisable to mix insurance and investment. Term insurance is the best way to get a life cover. Equity is the best form of long-term investment, and mutual funds the easiest way to invest in equity.

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