2 min read
05 Jan 2021

As an individual, you have specific short and long-term financial goals in life. While your short-term goals may encompass home renovation, going on a vacation, etc., long-term goals entail building a corpus for:

  • Funding higher education of your children
  • Bearing their marriage expenses
  • Retirement

Unit-linked insurance plans (ULIPs) and systematic investment plans (SIPs) are two financial instruments that help you to address these needs.

Advantages of ULIPs

  • Triple benefits
    ULIPs are insurance cum investment products, where a certain portion of the premium you pay goes into providing life cover. In contrast, another part is invested in the markets to earn returns and build wealth. ULIPs offer triple advantages of life cover, wealth creation and tax benefits.

  • Choosing the preferred asset class
    ULIPs give you the benefit to choose your preferred asset class based on your risk appetite. If you are an aggressive investor, you can select equities. On the other hand, if you are a moderate investor, you can choose debt funds. You can also switch between funds within the ULIP.

  • Partial withdrawals
    ULIPs allow you to make partial withdrawals after the mandatory 5-year lock-in period. You can withdraw an amount as per your needs and goals. Though there aren’t any rules on the amount you start to withdraw, make sure you don’t withdraw huge sums, which might lead to policy termination.

Additional Read: Step-by-step guide to choosing a ULIP

Advantages of SIPs

  • Habit of disciplined savings
    SIPs inculcate the habit of disciplined savings, essential for long-term wealth creation to address various goals. A certain amount is deducted from your account each month and invested on your behalf through the auto-debit facility.

  • Start with a small amount
    The beauty of SIP is that you can start with a small amount,as low as Rs. 100. With time, as your income increases, you can increase the amount accordingly to build the desired corpus. When you stay invested for an extended period, you gain from the power of compounding. Assuming returns of 12%, a monthly investment of Rs. 1,000 for 10 years, which would grow above Rs. 2.30 lakh.

  • Protect against market volatility
    Since SIPs spread your investments over a long period, it protects you from market volatility. It protects your corpus from a significant dip when markets turn sour. A drop in the corpus can affect your financial goals.

Both ULIPs and SIPs have their advantages. If you wish to obtain life cover along with wealth creation, ULIPs are your best bet. On the other hand, if you want wealth creation that beats the effects of inflation, SIPs are your preferred partner.

Get money in your bank account with 1-step verification, with pre-approved offers by Bajaj Finserv. Your loan amounts, card limits and insurance is already approved.

DISCLAIMER:
While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent inaccuracies or typographical errors or delays in updating the information. The material contained in this site, and on associated web pages, is for reference and general information purpose and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Subscribers and users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. In case any inconsistencies observed, please click on reach us.

*Terms and conditions apply