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Ulips Vs Mutual Funds

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Submitted To:

Dr. Latika Sahni

Submitted By :Megha Bansal

(MBA 3RD SEM)

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Objectives

To know the customers awareness about Ulipsand Mutual Fund.

To compare the investment in ULIPS plan withthe Mutual fund.

To study the degree of risk involved in both.

To analyze the future prospective of theseinvestment option.

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Introduction to the ULIPs

Unit-linked insurance plans, popularly known asUlips are life insurance policies which offer a mixof 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) andnot with the insurance company

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Different types of charges under ULIPs

PremiumAllocation

Charge

FundManagementCharge (FMC)

PolicyAdministration

Charge

SurrenderCharge

SwitchingCharge

Mortalitycharge

Riderpremium

charge

Partialwithdrawal

charge

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Working of ULIPs

ULIPs work on the lines of mutual funds. Thepremium paid by the client (less any charge) isused to buy units in various funds (aggressive,

balanced or conservative) floated by the insurancecompanies.

Units are bought according to the plan chosen bythe policyholder. On every additional premium,more units are allotted to his fund.

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USP of ULIPS

Insurancecover plus

savings

Multipleinvestment

optionsFlexibility

Works like an

SIP

Fund Switching

Option

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HURDLES OF ULIP

Nostandardizati

on

Lack ofFlexibility inLife cover

Overstatingthe Yield

Internallymade SalesIllustration

Not all Showthe Benchmark

Return

Early exitOptions

CreepingCost

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Introduction to Mutual Funds

A Mutual Fund is a trust that pools thesavings of a number of investors who share a

common financial goal.

The money thus collected is then invested

in capital market instruments such asshares, debentures and other securities.

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INVESTORS

RETURNS

FUND MANAGER

A Mutual Fund

is a trust thatpools the

savings of a

number of

investors whoshare a

common

financial goal.

Process

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TYPES OF MUTUAL FUNDS

Types of

Mutual Fund

By Constitution

By Investment

Objective

Open-ended

Close-ended

Interval

Equity Funds

Debt Funds

Hybrid Funds

Money Market

Diversified Funds

Tax Saving Funds

Index funds

Sectoral Funds

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Benefits

AffordabilityRegulatory oversight

Professional management

Tax Benefit

Liquidity

Diversification

Return Potential

Flexibility

Transparency &

Advantages

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Disadvantages of Investing in Mutual

Funds

Disadvantages

Taxes

Fees andcommissions

Managementand risk

Noguarantees

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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

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Points of difference between ULIPs

& Mutual fund

POINTSOF

DIFFERENCE

OBJECTIVE

LIQUIDITY

FLEXIBILITY

COST

INVESTMENTDURATION

INVESTMENTOBJECTIVE

TAX

IMPLICATION

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Percentage of people who have invested in

ULIPS, in Mutual fund and both

30%

51%

19%

0%

10%

20%

30%

40%

50%

60%

ULIPS Mutual fund Both

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Annual income of the investors

17%20%

40%

23%

14% 16%

37%33%

5%

11%

26%

58%

0%

10%

20%

30%

40%

50%

60%

70%

Below 2 lacs 2lacs-4 lacs 4lacs-6 lacs Above 6 lacs

ULIPS

Mutual Fund

Both

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Factors consider by investors before investing in

ULIPS and Mutual fund

39%42%

12%

7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Safety ofPrincipal

High Return Maturity Period Terms andConditions

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Information Sources helpful to the investor

in making investment decision

5%

21%

5%

66%

3%

0%

10%

20%

30%

40%

50%

60%

70%

Journals ReferenceGroup

Television Brokers Newspaper

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Preference of investor regarding different

types of funds

0.215

0.115

0.268

0.306

0.096

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

Equity basedfund

Debt basedfund

Balancedfund

Open endedfund

Close endedfund

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Preference of ULIPS or mutual fund on the

basis of following factors

38% 40% 34%17% 12%

62% 60% 66%83% 88%

0%

20%

40%

60%

80%

100%

120%

Mutual fund

ULIPS

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Investment in ULIPS and Mutual fund by

risk profile

53%

33%

14%12%

61%

26%

0%

10%

20%

30%

40%

50%

60%

70%

Low risk Moderate risk High risk

ULIPS

Mutualfund

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Expected annual Return from both ULIPS

and Mutual fund

7%

36%

47%

10%

2%

10%

35%

53%

0%

10%

20%

30%

40%

50%

60%

less than10%

11-15% 15-20% 20-25%

ULIPS

MUTUAL FUND

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Preferred tenure of investment for ULIPS

and Mutual Fund

7%

23%

70%

12%

37%

51%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Short term Mid term Long term

ULIPS

Mutual Fund

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Awareness among peoples regarding the

controversy of ULIPS

59%

41%

yes

no

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Preferred investment option for investing

their money in future

69%

31%

Mutual fund

ULIPS

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Findings

People are aware regarding Ulips &Mutual fund but, the awarenessregarding 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 aninvestment decision of an investor.

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

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Insurance and tax rebate is the most importantreason for investing in Ulips & people are

investing in mutual fund for the appreciation ofthe capital invested by them.

Among the various advantages liquidity &flexibility plays the most important role for the

preference of mutual fund over Ulips

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Low risk is taken in case of Ulips & moderate riskin case of mutual funds.

The expected annual return is high for mutualfund comparative to Ulips.

The preferred tenure of investment is same forboth Ulips & mutual fund

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The recent controversy related to Ulips willgoing to affect its future demand &in future

also more number of investors will like toinvest their money in mutual fund.

So future is bright for mutual funds.

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RECOMMENDATIONS

The people do not want to take risk. The AMC should

launch more diversified funds so that the risk becomesminimize. This will lure more and more people to

invest in mutual funds and Ulips.

The expectation of the people from the mutual funds ishigh. So, the portfolio of the fund should be preparedtaking into consideration the expectations of the

people.

Try to reduce fund charges, administration chargesand other charges which help to invest more funds in

the security market and earn good returns

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Different campaigns should be launched to educatepeople especially regarding SIP.

Companies should give regular dividends as itdepicts profitability.

Companies should give handsome brokerage tobrokers so that they get attracted towards

distribution of the funds.

ULIPs is good for those who prefer investment plusinsurance.

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