ULIPs vs Mutual Funds: Which Is A Better Investment Post LTCG Tax?

ULIPs vs Mutual Funds

ULIPs vs Mutual Funds: Which Is A Better Investment Post LTCG Tax?

Even though majority of Indians were unhappy about LTCG, there was one group who were happy about it and started aggressive marketing of their product can you guess whom? Yes, you guessed it right its none other than our friends from Insurance community and started their marketing push for ULIPs. ULIPs are exempted from LTCG but it doesn’t make it an attractive investment option why? Let us discuss in detail about this in the below post.

First of all let us look at the charges associated with both ELSS and ULIPs

1. Charges

ULIPs vs Mutual Funds1

Please note that GST will be charged on all these charges.

2. Returns illustration

There are 2 friends Vishal and Pankaj both of them were 25 years old and wanted to invest ₹1 Lakh a year for a period of 10 years. Vishal being lured by ULIP campaigns decided to invest in a famous ULIP and Pankaj who had other ideas invested in mutual funds.

The below table shows an illustration on how Vishal’s investment grew over a period of 10 years.

ULIPs vs Mutual Funds2

Now let us see how Pankaj’s investments have grown in the same period.ULIPs vs Mutual Funds3

From above 2 tables it’s clearly evident that Pankaj’s mutual fund investments have generated around 8% higher returns than Vishal’s investment even after considering 10% LTCG.

The above illustration depicted about the corpus and cost of mutual funds and ELSS. Now let us see the other factors.

3. Liquidity

Mutual funds have high liquidity where you can invest any time and redeem even next day (Except for ELSS). Both ULIP and ELSS are permitted for claiming exemption under section 80C.

4. Insurance

ULIPs offer insurance cover however the coverage would be low if we compare with a similar term plan. Mutual funds do not provide any insurance but if someone needs an insurance can take a term plan and invest in mutual funds for better returns and insurance coverage than investing in ULIPs.

In general insurance and investments should not be combined as it would lead to complications in achieving your financial goals. Also ULIPs might look attractive without LTCG but it may not be so when you see you final corpus. So don’t wait start investing as low as ₹500 per month in SIP’s from today using our WealthTrust platform.

Invest in Mutual funds on WealthTrust app.

New to Mutual Funds? Learn more about basics of mutual funds.


What are ULIPs charges and are they better than MF


Visit our website to know more about WealthTrust. Do read our blogs on Mutual funds.


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