Everyone thinks about investments at some point in life for a promising future. The two most preferred options for investment in the current times are Mutual Funds and Insurance Policies. Often people face confusion between which is the best investment choice amongst these. Depending upon the custom needs of an individual the choices may vary. So, let’s explore, compare and get complete insights into mutual funds and insurance policies and then you can decide where to invest.
Mutual funds – A General Analysis
When you invest your money in mutual funds, it means that you are investing the sum in diversified holdings. Mutual funds are professionally managed and the sum obtained from the investors is invested in different stocks, bonds, different kinds of assets and various money market instruments.
There are various mutual fund schemes in the present times and you must remember the fact that mutual funds are subject to market risk. The returns may vary based on the exact mutual fund policy and the type of plan. The main advantage of mutual funds is that returns are higher and the investment is diversified into multiple options, thereby the risk is managed.
Insurance policies – An overview
There are different kinds of insurance policies and the premiums for each may vary. Some examples are life insurance policy, accidental insurance policy, health insurance policies, education investment-related policies, old age pension based policies etc. In an insurance policy you have to pay a certain sum of money at regular intervals and after the maturity period, you may get a combined amount that involves the principal as well as interest. But the terms and conditions of each insurance policy will vary.
For example, in life insurance policy the nominee may get the entire amount as promised in case of an unfortunate event, and the money will be received even if the policy was not matured.
How to decide the best investment among these?
Both mutual funds, as well as insurance policies, are good investment decisions. Some people prefer both these options for investment and sometimes people are biased between the two. So, it all depends on the perspective of an individual. The following differences between the two will help you to analyze the situation better.
Mutual funds Vs Insurance Policies
- If you have chosen a particular insurance policy then the scheme would remain same. But if you invest in some mutual fund policy then you can rest assured that your investment is being diversified.
- When one compares the returns then it can be found that mutual funds are really promising. Thus, the returns on mutual funds are much higher as compared to the insurance policies.
- Policy premiums are huge.Thus policyholders have to compensate some of their current expenditure to pay the premium. But in mutual funds, the minimum investment is usually less.You can invest as and when you want as Flexi SIP plans are available nowadays.
- Life insurance is typically purchased for the benefit of others and usually only indirectly for the insured person.But when you invest in mutual funds, you can you can redeem mutual funds whenever you want ( in case of open-ended funds) and use the amount to meet your financial goals.
- In an insurance policy, you will have to pay the premium regularly. Thus if you want a certain sum at the maturity period of policy then you can’t stop paying the premiums and if it is a health insurance policy then it will lapse if you stop paying the premium. But in case of mutual funds, the options are flexible. You can go for SIP or lumpsum investment in mutual funds and withdraw the money as and when needed.
- There are lots of insurance policies where the entry load is really high and based on the scheme, the exact percentage may vary. But in case of mutual funds, the amount is either very minimal or almost negligible.
Thus, based on the custom needs, the investment choices will vary. You can even invest in both the options and it will help in creating the optimal balance.If you choose to invest in mutual funds we are always there for your help!
Tradeplus offers you an option to invest in direct mutual funds where you can add almost 1% per anum to your returns.You need not lose your money paying commissions to brokers.Our Web and Mobile MF investment platform offers Flexi SIP, Conditional orders, and complete portfolio reports, all at zero commissions.
If mutual fund investment is on your mind then you can undoubtedly trust our platform for an unsurpassable experience!