Equities Or Endowment Policy - Which Is good for Me?
Updated On Mar 24, 2022
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Direct equity investments, as well as investments in equity mutual funds and ULIP programmes, are all choices. The advantage of mutual funds is that you don't need specialised knowledge to maintain track of your assets since trained portfolio managers will do it for you and give the greatest potential returns. You may also trade directly if you understand how the stock market works and keep a careful eye on it. The vast majority of stock investments are made with the goal of creating wealth, either through cash gains or increased value. You receive money in the form of dividends when equities create capital gains, whereas a price increase allows you to sell shares at a higher price and profit from the difference.Endowment plans are created to meet a range of objectives. To begin with, it is a risk-free means of amassing wealth through investment. Two, it is a life insurance policy that protects your family financially in the case of your untimely death. Endowment programmes are used by millions of individuals to save money, preserve their futures, and save money on taxes at both investment and withdrawal. Because they provide guaranteed returns, endowment schemes are popular among risk-averse investors. In the event that things do not go as planned, life insurance provides a financial safety net for your family.
What is the difference between endowment life insurance and equity life insurance?
The majority of investment portfolios include stocks and endowment life insurance. As a result, recognising the nuances is crucial in determining what works best for you and how much of each to allocate.
1. Investing Risk
- The performance of the stock market determines profits in direct trading.
- Mutual Funds: The fund's return is determined by the performance of the shares that constitute it. It is less risky than direct trading since the money is spread among stocks.
- Continue to utilise ULIPs to replace equity and loan allocations since they produce a threefold return.
- Life insurance is also available. Earn a substantial sum of money. This is the most secure choice of the three.
- Annual Additions + Annual Bonuses + Annual Guaranteed Returns = Annual Additions + Annual Bonuses + Annual Guaranteed Returns
- Investing and Insurance Investing in the most secure manner possible
- The applicant receives the Sum Assured + Bonus in the case of death.
2. Putting Money Aside for the Long Run
- There are no time constraints or commitments with direct stock trading.
- Mutual funds: Mutual funds, in general, do not have a tenure. The lock-in period for the Equity Linked Savings Scheme is three years (ELSS).
- ULIPs must have a 5-year lock-in period.
- Everything is dependent on your approach and how long you pay your payments.
3. The Goal of Investment
- Capital gains and dividends can help you increase your net worth.
- Profit from swings in the stock market's pricing.
- A dependable method for creating a corpus
- Profit margins that may be counted on
- Bonuses as a form of profit distribution
Help in an Emergency
- In the event of a medical or other personal emergency, partial withdrawals without surrendering insurance are permissible. ULIPs are the only way to do this.
- Life insurance may only be obtained through ULIPs.
- In the event of permanent disability, the employer pays future benefits until the time limit is reached.
- It has the ability to save both your life and your soul.
Everyone ensures that they have a solid asset on which to fall back in the event of a terrible disaster. Endowment plans are long-term profitable investments that provide you peace of mind. This assured corpus serves as the foundation for your equity investment, ensuring that you and your family are able to live comfortably. Following that, the goal should be to develop wealth through the use of ULIPs, which are conservative yet proactive in that they allow you to change your asset allocation plan based on your life stage and market fluctuations. Endowments and ULIPs both provide life insurance, giving them the appearance of private funds. Direct stock trading does not provide the same level of flexibility and protection as ULIPs and endowment plans.
Also Read: How Endowment Policy Premium Calculated?
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.