Equities Or Endowment Policy - Which Is Better For Me?
Updated On Feb 08, 2022
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Equity stock investments can be made directly or through equity mutual funds and ULIP programmes. The benefit of mutual funds is that you don't need specialist knowledge to keep track of your investments because skilled portfolio managers will do it for you and provide you the best possible returns. You can also trade directly if you have a good understanding of stock market moves and keep a close eye on them. The majority of equity investments are made to generate wealth, either in the form of capital gains or in the form of increased value. You receive money in the form of dividends when equities provide capital gains, whereas a price increase allows you to sell shares at a higher price and benefit by keeping the difference.
Endowment plans are made to achieve a variety of goals. To begin with, it is a secure investing approach for accumulating wealth. Two, it is a life insurance policy that provides financial security to your family in the event of your unexpected death. Endowment plans have a long history, and millions of people rely on them to save money, secure their lives, and save money on taxes both during investment and withdrawals.. Endowment plans are popular among risk-averse investors because they provide guaranteed returns. Life insurance provides a financial safety net for your family in the event that things do not go as planned.
What is the difference between an endowment and equity life insurance?
Most investment portfolios include both equities and endowment life insurance. As a result, it's critical to grasp the finer points in order to determine what works best for you and the precise allocation for each.
1. Investment Risk:
- Direct Trading: Profits are determined by the stock's market performance.
- Mutual Funds: The performance of the several equities that make up the fund determines its return. Because the money is dispersed across equities, it is less hazardous than direct trading.
- Continue to use ULIPs to replace equity and loan allocations, as they offer a threefold benefit. There is also life insurance coverage included. Make a large sum of money. This is the most secure of the three options.
- Guaranteed Returns + Annual Additions + Annual Bonuses
- Investing and insurance
- Investing in the safest way possible
- In the event of death, the nominee receives the Sum Assured + Bonus.
2. Tenure in an Investment:
- Direct stock trading has no time constraint or commitment.
- Mutual funds: In general, mutual funds do not have a tenure. The Equity Linked Savings Scheme has a three-year lock-in period (ELSS).
- A 5-year lock-in term is necessary for ULIPs.
It all depends on the plan and the length of time you pay your bills.
3. The Investment Purpose
- You can employ capital gains and dividends to boost your net worth.
- Profit from fluctuations in the market's value.
- A reliable approach for constructing a corpus
- Returns that are guaranteed
- Bonuses as a method of profit-sharing
4. Emergency Assistance:
- Partial withdrawals without abandoning the insurance are possible in the event of a medical or other personal emergency. This can only be done using ULIPs.
- ULIPs are the only way to get life insurance.
- The firm provides future payments until the period ends in the case of permanent disability.
- It can shield you from both life and death.
In the event of a big crisis, everyone ensures that they have a safe asset to fall back on. Endowment plans provide long-term profitability, giving you peace of mind. This guaranteed corpus serves as the backbone of your equity investment, ensuring that you and your family will be able to live comfortably. After that, the goal should be to build wealth using ULIPs, which is conservative but proactive because you can change your asset allocation plan based on your life stage and market changes. Both ULIPs and endowments provide life insurance, giving them the appearance of private money. ULIPs and endowment plans offer more flexibility and security than direct stock trading.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.