Ulips Vs Mutual Funds

Submitted To :
Dr. Latika Sahni

Submitted By :
Megha Bansal (MBA 3RD SEM)

Objectives
To

know the customers awareness about Ulips and Mutual Fund. compare the investment in ULIPS plan with the Mutual fund. study the degree of risk involved in both.

To

To

To

analyze the future prospective of these investment option.

Introduction to the ULIPs

Unit-linked insurance plans, popularly known as Ulips are life insurance policies which offer a mix of investment and insurance similar to traditional life insurance policies, but with one major difference.

Unlike traditional policies, in Ulips investment risk lies with the insured (i.e., policy holder) and not with the insurance company

Different types of charges under ULIPs

Premium Allocation Charge Surrender Charge
Fund Management Charge (FMC) Policy Administration Charge

Switching Charge

Mortality charge

Rider premium charge

Partial withdrawal charge

Working of ULIPs
ULIPs work on the lines of mutual funds. The premium paid by the client (less any charge) is used to buy units in various funds (aggressive, balanced or conservative) floated by the insurance companies. Units are bought according to the plan chosen by the policyholder. On every additional premium, more units are allotted to his fund.

USP of ULIPS

Insurance cover plus savings

Multiple investment options

Flexibility

Works like an SIP

Fund Switching Option

HURDLES OF ULIP
No standardizati on
Internally made Sales Illustration

Lack of Flexibility in Life cover

Not all Show the Benchmark Return

Overstating the Yield Early exit Options

Creeping Cost

Introduction to Mutual Funds

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities.

Process
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.
INVESTORS

RETURNS
FUND MANAGER

TYPES OF MUTUAL FUNDS

Open-ended By Constitution
Close-ended Interval

Types of Mutual Fund

Equity Funds

Diversified Funds Tax Saving Funds Index funds

By Investment Objective

Debt Funds Sectoral Funds

Hybrid Funds
Money Market

Advantages
Regulatory oversight Transparency & Flexibility Affordability

Benefits
Return Potential

Liquidity

Diversification

Professional management

Tax Benefit

Disadvantages of Investing in Mutual Funds

Taxes

No guarantees

Disadvantages

Fees and commissions

Management and risk

Comparison between ULIPS and Mutual fund

Unit

Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in terms of their structure and functioning.
ULIPs can be termed as mutual fund scheme with a insurance component

Points of difference between ULIPs & Mutual fund

TAX IMPLIC ATION OBJEC TIVE

INVESTMENT DURATION INVESTMENT OBJECTIVE

POINTS OF DIFFERE NCE

LIQUID ITY

COST

FLEXIB ILITY

Percentage of people who have invested in ULIPS, in Mutual fund and both
60%

51%
50% 40%

30%
20% 10% 0%

30% 19%

ULIPS

Mutual fund

Both

Annual income of the investors

70% 60% 50% 40% 40% 37% ULIPS Mutual Fund Both 58%

33% 30% 20% 10%

0% Below 2 lacs 2lacs-4 lacs 4lacs-6 lacs Above 6 lacs 17% 20% 16% 11% 26% 14% 5% 23%

Factors consider by investors before investing in ULIPS and Mutual fund

45% 40% 35% 39% 42%

30%
25% 20% 15% 10% 5% 0% 12% 7%

Safety of Principal

High Return

Maturity Period

Terms and Conditions

Information Sources helpful to the investor in making investment decision

70%
60% 66%

50%
40%

30%
21% 20%

10%
0%

5%
Journals Reference Group

5%
Television Brokers

3% Newspaper

Preference of investor regarding different types of funds

0.35
0.306 0.3 0.268 0.215

0.25
0.2

0.15
0.1

0.115

0.096

0.05
0 Equity based Debt based fund fund Balanced Open ended Close ended fund fund fund

Preference of ULIPS or mutual fund on the basis of following factors

120% 100% 80% 60% 62% 60% 66% 83%

88% Mutual fund ULIPS

40%
20% 0% 38%

40%

34%

17%

12%

Investment in ULIPS and Mutual fund by risk profile

70% 61% 60% 53% 50% 40% 33% 30% 20% 12% 10% 0% Low risk Moderate risk High risk 26%

ULIPS
Mutual fund

14%

Expected annual Return from both ULIPS and Mutual fund

60%
53% 50% 40% 30% 20% 10% 0% less than 10% 11-15% 15-20% 20-25% 7% 2% 10% 10% 36% 47% 35% ULIPS MUTUAL FUND

Preferred tenure of investment for ULIPS and Mutual Fund

80%
70% 70%

60%
51% 50% 40% 30% 20% 12% 10% 0% Short term Mid term Long term 7% 23% 37% ULIPS Mutual Fund

Awareness among peoples regarding the controversy of ULIPS

41%
yes no 59%

Preferred investment option for investing their money in future

31% Mutual fund ULIPS 69%

Findings
People are aware regarding Ulips &Mutual fund but, the awareness regarding mutual fund is high comparative to Ulips.

People with high income group are more likely to invest their money but, people who invest in both Ulips and mutual fund mostly belongs to the income group of more than 6 lacs.

Broker and reference group plays an important role while making an investment decision of an investor.

Open ended funds & closed funds are more popular among investors.

Insurance and tax rebate is the most important reason for investing in Ulips & people are investing in mutual fund for the appreciation of the capital invested by them. Among the various advantages liquidity & flexibility plays the most important role for the preference of mutual fund over Ulips

Low risk is taken in case of Ulips & moderate risk in case of mutual funds. The expected annual return is high for mutual fund comparative to Ulips. The preferred tenure of investment is same for both Ulips & mutual fund

The recent controversy related to Ulips will going to affect its future demand &in future also more number of investors will like to invest their money in mutual fund.

So future is bright for mutual funds.

RECOMMENDATIONS
The people do not want to take risk. The AMC should launch more diversified funds so that the risk becomes minimize. This will lure more and more people to invest in mutual funds and Ulips. The expectation of the people from the mutual funds is high. So, the portfolio of the fund should be prepared taking into consideration the expectations of the people
.

Try to reduce fund charges, administration charges and other charges which help to invest more funds in the security market and earn good returns

Different campaigns should be launched to educate people especially regarding SIP. Companies should give regular dividends as it depicts profitability. Companies should give handsome brokerage to brokers so that they get attracted towards distribution of the funds.

ULIPs is good for those who prefer investment plus insurance

.