BusinessULIP or Equity- Which is Better?


ULIP or Equity- Which is Better?

Every individual wants to build a substantial financial corpus. Therefore, many look for investment options that can help them achieve their financial goals. ULIPs and equities are investment options that can enable investors to gain substantial returns.

What are ULIPs?

A unit linked insurance plan (ULIP) is an insurance product that offers life cover as well as investment benefits. When a person invests in ULIP, a part of the premium goes towards life cover, and the other part is invested in different investments like equities and debt instruments.

By purchasing ULIP, an investor can provide his/her family with financial protection in case of an unfortunate event. In case the insured person passes away during the tenure of the plan, the insurer can offer a sum assured to his/her nominee. This sum assured can help the insured person’s family pay for regular expenses and meet future goals.

Furthermore, ULIPs can provide stable returns as they invest in equities and debt instruments. Thus, ULIPs are a great investment option to meet long-term financial goals.

What are Equity Investments?

One of the best options that can help investors build a substantial financial corpus are equity investments. Direct equities have a great potential for growth. Thus, an investor can maximise returns by investing in equities.

Investors should keep in mind that equities are a riskier option. This is because there are various factors that can impact the stock markets. This can cause ups and downs in the price of equities. Therefore, direct equity investment is suited for investors with a high-risk appetite.

What are the Benefits of Investing in a ULIP?

  • It Can Provide Financial Protection

If the policyholder meets with an untimely demise during the plan’s tenure, then the insurance company can offer a sum assured to his/her family. This sum assured can lower the financial burden on the family of the policyholder. Thus, ULIPs can safeguard the policyholder’s family in case of an unfortunate event.

  • It Can Offer Good Returns

By investing in ULIPs, an investor can gain good returns over a long period. Hence, ULIPs can help achieve long-term financial goals.

  • It Offers Tax Benefits

Under Section 80C, premiums paid to buy a ULIP can be claimed as a tax deduction. The tax deduction limit is ₹1.5 Lakh.

What are the Benefits of Investing in Equities?

  • It Can Offer High Returns

One of the most important reasons people invest in equities is to earn substantial returns. However, there are factors that can cause the stock markets to go up and down in the short term. But by staying invested for a long period, investors can ride out the short-term ups and downs. Thus, they can gain significant returns over the long term.

  • Safety Against Inflation

Inflation tends to reduce the value of money. However, the returns from stock markets outperform the inflation rate. Thus, stocks are a great option to hedge against inflation.

  • Diversification

Investors can invest in stocks across various industries. Therefore, stocks provide them with the benefit of diversification. As diversification can reduce the risk, it helps investors build a stable portfolio.

ULIPs or Equities- Which is Better?

Making a choice between these options depends on your requirements. In case you want one product that offers insurance and investment benefits, then a ULIP is a better option. However, if you want to earn substantial returns, then equities are right for you. But it is recommended to invest in both if you want to build a stable portfolio.

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