What are Difference between ULIP and Mutual Fund

Difference between ULIP and Mutual Fund

This is one of the most commonly asked questions by a potential investor who is often confused by the mix use of these 2 investment instruments. Many financial planners use these terms interchangeably. However, ULIP and Mutual Fund are two separate concepts.  We have explained the meaning of ULIP and Mutual Fund and the difference between them. 

Mutual fund

Mutual fund is an investment plan where your money is managed by a portfolio manager. He puts your money into multiple companies on the basis of your investment objectives and associated risks. For every investment made in mutual fund, certain units of that fund are allocated to the investor. There are multiple types of mutual funds available in the market; each having its investment objectives, liquidity and risks.

Unit Linked Investment Plans (ULIP)

Unit linked investment plans are a hybrid combination of investment and insurance schemes. Herein, a small portion of the monthly premium goes to secure life insurance and the rest is invested just like a mutual fund. 

Difference between ULIP and Mutual Fund

Basis Mutual Funds ULIP
Regulating Authority SEBI IRDAI
Product Type Investment Insurance
Liquidity Highly liquid Less liquid
Potential Returns High returns subject to market risks Low returns as part of it are invested in the insurance 
Lock-in period Only in ELSS 3 to 5 years
Tax benefits ELSS are eligible for deduction under 80C.

Long Term-

Equity Funds: Tax Free

Debt Funds: 10% or 20%

Deduction under 80C
Charges  Low- 1% to 2.5% No upper limits
Portfolio Disclosure Mandatory Disclosure No such requirement

Regulating Authority and Product Type

Mutual funds are an investment product and are regulated by the Securities Exchange Board of India (SEBI). The Unit linked investment plan is essentially an insurance plan with additional investment option. 

Liquidity and Lock-in Periods

Multiple mutual funds options are available in the markets viz. equity, debt, growth, index, hybrid, etc. Most of the mutual funds are highly liquid as compared to less liquid ULIPs, as ULIPs are meant for a relatively long time. Usually, only ELSS mutual funds have a lock-in period, rest all mutual funds can be redeemed easily almost anytime. 

Potential Risks & Returns  

ULIPs are less prone to market risks are they are insurance instruments. Mutual funds are comparatively riskier as they invest directly into the market which is highly market. This volatility is also the reason why mutual funds give a higher return than ULIPs. ULIPs offer a safer but lower return as a chunk of it is invested in insurance policies. 

Portfolio Disclosure 

As per the rules of SEBI, the companies have to maintain a strict disclosure of transactions and such other information. SEBI has directed all fund managers to send the portfolio statement via email to its unit holders every month. Such rules and regulations help to ensure transparency and accountability. On the other hand, there is no such regulation for ULIPs.

Tax Benefits & Charges

The charges associated with mutual funds are as low as 1% to 2.5% which is far lesser than that of ULIPs. Charges on ULIPs have been reported to be as high as 18% and there are no such upper limits. ULIPs are eligible for deduction under section 80C. The ELLS category of mutual funds is eligible for deduction 80C. Mutual funds options other than ELSS do not have deduction under section 80C but they provide additional tax benefits such as returns on mutual fund up to a certain limit is exempt. Also, as per general reports LTCG on such mutual funds attracts much lesser tax. 

How its Benefits of Investing in Mutual Fund Online

Investing in Mutual Fund Online

Investment in mutual fund online is gaining popularity as the easiest ways of investing. Such investment could be done by accessing our Website or downloading the VSRK mobile application.

Benefit of investing in mutual funds online

There are various benefits of investing in mutual fund online. We have mentioned some of them as following-

  • Online Registration and E-KYC

The customers can register online through filing the necessary information and submitting the required documents viz. PAN card and Aadhar card. Such information is sent to the backend for verification. Once the information is verified you are ready to invest.     

  • Option to Invest in Small Amounts

Investing in mutual fund online gives you the option of investing in various securities in small amount. You have the option to start your SIPs with just rupees 500 per month. By keeping out a small portion of your salary aside you would be able to accumulate a wealth over a long time.

  • Ease of convenience 

Investment in mutual funds online is one of the simplest and the easiest form of investment. in this you just need to have the access to the website or mobile application of your AMC. You can access your portfolio information, current stock rates and various other information just through one click.  

  • Liquidity 

One of the most important benefit of online investment in mutual funds is the liquidity. the investors have the option to redeem the unit at any point of time. However, mutual funds do have factors like pre exit penalty and exit load we should be taken into consideration before redemption. 

  • Security of funds 

All the mutual fund related transaction come under the scope of SEBI. SEBI is a government regulated organization regulates AMCs to maintain transparency and accountability of transactions. Its aim is to safeguard the investors and solve their grievances. Further, SEBI makes it compulsory for all mutual funds to disclose their portfolios every month.

Fill the form for further inquiry


This will close in 0 seconds