How to Decide Between Investing in Stocks and ULIPs?

When choosing the best investment options, most Indians get confused between ULIPs (Unit-Linked Insurance Plans) and stocks. Although both are different financial products, they are similar in their working. For example, both ULIPs and stocks allow investors to get market-linked returns and build a decent corpus in the long run. So, how do you decide between the two and which is suitable for you? To know the answer, read on. 

What is ULIP?

ULIP is primarily a life insurance policy that offers investment opportunities. The premium you pay for the policy is divided into two parts. One portion is used to provide life insurance protection, and the other is invested in the money market to generate returns. 

You can invest various assets like stocks, mutual funds, and bonds of your choice as per your risk appetite and financial goals. Also, ULIPs give you the flexibility to switch your funds as per your changing goals and market movement. 

What are stocks?

In simple words, stocks or shares are financial products that allow you to buy ownership in an organisation. When you buy stocks of a particular firm, you share a part of the ownership and share a part of their earnings along with others who have purchased the shares. 

The buying and selling of stocks of the listed companies take place on the stock exchange. The price of the stocks is determined by the demand and supply of the stocks. When the demand increases and the supply is short, the prices go up and vice-versa.

Difference between ULIPs and Stocks

ULIPs are primarily insurance products, and the fund managers take all the investment decisions based on your specific risk appetite. Also, in ULIPs, the fund managers diversify the investment by investing in different assets and mitigating the market volatility. 

On the other hand, stocks are pure investment products and are vulnerable to market movements. They carry high rewards-risk potential. 

ULIPs have a lock-in period of five years. During this period, you cannot withdraw funds from your corpus. In contrast, stocks do not have any lock-in period and offer high liquidity. You can sell or trade your stocks at any time you want. 

When you invest in ULIP, you get exposure to equity and debt markets. Also, you need not actively make investment decisions. The fund managers take care of the investments, and they carefully invest in selected funds that promise to offer valuable returns. 

However, when you invest in stocks, you must have a good understanding of how the market functions. It would help if you did your research well about different stocks and must have the ability to predict the market movement to reduce the risk of loss. 

How to Decide Between Investing in Stocks and ULIPs?

When choosing the best investment options, most Indians get confused between ULIPs (Unit-Linked Insurance Plans) and stocks. Although both are different financial products, they are similar in their working. For example, both ULIPs and stocks allow investors to get market-linked returns and build a decent corpus in the long run. So, how do you decide between the two and which is suitable for you? To know the answer, read on. 

What is ULIP?

ULIP is primarily a life insurance policy that offers investment opportunities. The premium you pay for the policy is divided into two parts. One portion is used to provide life insurance protection, and the other is invested in the money market to generate returns. 

You can invest various assets like stocks, mutual funds, and bonds of your choice as per your risk appetite and financial goals. Also, ULIPs give you the flexibility to switch your funds as per your changing goals and market movement. 

What are stocks?

In simple words, stocks or shares are financial products that allow you to buy ownership in an organisation. When you buy stocks of a particular firm, you share a part of the ownership and share a part of their earnings along with others who have purchased the shares. 

The buying and selling of stocks of the listed companies take place on the stock exchange. The price of the stocks is determined by the demand and supply of the stocks. When the demand increases and the supply is short, the prices go up and vice-versa.

Difference between ULIPs and Stocks

ULIPs are primarily insurance products, and the fund managers take all the investment decisions based on your specific risk appetite. Also, in ULIPs, the fund managers diversify the investment by investing in different assets and mitigating the market volatility. 

On the other hand, stocks are pure investment products and are vulnerable to market movements. They carry high rewards-risk potential. 

ULIPs have a lock-in period of five years. During this period, you cannot withdraw funds from your corpus. In contrast, stocks do not have any lock-in period and offer high liquidity. You can sell or trade your stocks at any time you want. 

When you invest in ULIP, you get exposure to equity and debt markets. Also, you need not actively make investment decisions. The fund managers take care of the investments, and they carefully invest in selected funds that promise to offer valuable returns. 

However, when you invest in stocks, you must have a good understanding of how the market functions. It would help if you did your research well about different stocks and must have the ability to predict the market movement to reduce the risk of loss. 

ULIPs vs Stocks. – which is better?

The decision to invest in any of the above investment options depends on your needs, risk appetite and the number of dependents you have. 

You can invest in ULIP if,

  • You are looking for a long-term investment plan
  • You have a low-risk appetite
  • You don’t have a life insurance cover
  • You are looking to get long-term tax benefits

You can invest in stocks if,

  • You understand the risks and are looking for short-term returns
  • You already have a life insurance cover
  • You are looking for an investment option that offers excellent liquidity

Now that you know the differences and you know the upsides of investing in Stocks and ULIPs, go ahead and find the right option for you and secure your future, financially. 

The decision to invest in any of the above investment options depends on your needs, risk appetite and the number of dependents you have. 

You can invest in ULIP if,

  • You are looking for a long-term investment plan
  • You have a low-risk appetite
  • You don’t have a life insurance cover
  • You are looking to get long-term tax benefits

You can invest in stocks if,

  • You understand the risks and are looking for short-term returns
  • You already have a life insurance cover
  • You are looking for an investment option that offers excellent liquidity

Now that you know the differences and you know the upsides of investing in Stocks and ULIPs, go ahead and find the right option for you and secure your future, financially. 

You should try this site artdailymagazine and click here to know more about lawyernews and If you use this site you will find a lot of information about topmarketwatch

Sabith
News

Leave a Comment