AskDalal is a investment blogging portal dedicated to Indian investment community , where every blog answers a question.It may be stocks, bonds,commodity, real estate or anything else.Post your blog title or a question, community will do research and answer the question to give you your own research report.It is 100%free , no registration is required to browse and ask questions.It's great for writers looking for article topic,and cool for investor looking for answers.
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1. What is SIP
SIP ( Systematic Investment Plan) is a method of investing in a mutual fund. For example you want to invest 1 lakh rupee in reliance power fund this year , buy you don't want to invest all that money in a single day . What if market crash next month by 20%.
To protect yourself from such unknows you will invest some amount each month. say 8200 Rs /month .
That way you protect against unknowns and don't gamble with all the money at once.
2. What is ULIP
ULIP ( Unit Linked Insurance Plan ) is a financial product that offers you life insurance as well as an investment like a mutual fund. Part of the premium you pay goes towards the sum assured (amount you get in a life insurance policy) and the balance will be invested in whichever investments you desire - equity, fixed-return or a mixture of both.
Investments in ULIP attract the benefit under Section 80C.
Since insurance company is investing some money in fund , you insurance converage will be less then a pure life insurance for same premium.
3. Should you buy ULIP instead of Mutual fund
If insurance is not your requirement then its not recommended to buy ULIP as compared to MF.
On the other hand, ULIP is a very transparent and flexible insurance policy. Premiums paid can be single, regular or variable. The payment period too can be regular or variable. The risk cover (insurance cover) can be increased or decreased.
From a tax aspect both mutual funds and ULIPs get tax deductions under section 80c. The key difference however is that proceeds from ulips are tax-free under section 10(10d) unlike those from a mutual fund which attract capital gains tax.