Equities V/S Endowment Policies
Published On Dec 04, 2021 12:00 PM By InsuranceDekho
Table of Contents
What Is Equity, Exactly?
Although there is a tight line between the two, the phrases equity and stock are used interchangeably. Both indicate a company's ownership and are traded on stock exchanges. Stocks refer to shares purchased and sold on the stock market, whereas equity refers to ownership after debts are paid off. Direct investments in equities stocks, as well as equity mutual funds and ULIPs, are available.
What are Endowment Plans, and How Do They Work?
Endowment plans are created to achieve a variety of goals:
To begin with, it is a sound investing strategy for building a corpus.
Two, it's 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 when they invest and when they withdraw.
Equities V/S Endowment Policies
The majority of investment portfolios include both equity and endowment life insurance. As a result, it's critical to grasp the finer points in order to figure out what works best for you and how much of each you should get:
1. Safety/Risk On Investment
- Direct Trading: Profits are contingent on the stock's market performance.
- Mutual Funds: The performance of the different stocks that make up the fund determines the fund's return. As investment is spread across equities, it is less hazardous than direct trading.
- ULIPs: Triple Advantage-Continue to shuffle equity and debt allocations. There's also a built-in life insurance policy. Build a fortune. Of the three, this is the least dangerous.
- Annual Additions + Applicable Bonuses + Guaranteed Returns
- Investing + Insurance
- The safest investment strategy
- In the event of death, the nominee receives the Sum Assured + Bonus.
2. Investment Tenure
- Direct Stock Trading: There is no lock-in or tenure.
- Mutual Funds: Generally, there is no tenure with mutual funds. The Equity Linked Savings Scheme (ELSS) has a three-year lock-in period.
- ULIPs: A 5-year lock-in term is required.
It depends on the plan and the length of time you pay your premiums.
3. Emergency Support
- Partial withdrawals without relinquishing the policy are possible in the event of medical or other personal emergencies. Only with ULIPs is this feasible.
- Only ULIPs provide life insurance coverage.
The company pays future premiums until the term ends in the event of permanent disability.
It offers both life and death protection.
4. Instruments Of Investment
- Direct Trading
- Mutual Funds
- Unit Linked Insurance Plans (ULIPs)
- Unit Linked Endowment
- Guaranteed Endowment
- With/Without Profit Endowment
- Low-Cost Endowment
5. The Goal Of The Investment
- Capital gains and dividends can be used to build wealth.
- Profit from market value fluctuations
- A reliable approach for generating a corpus
- Returns that are guaranteed
- Bonuses as a method of profit sharing
Every individual requires a safe investment to rely on in the event of a financial emergency. Endowment plans offer that security by guaranteeing long-term returns. This guaranteed corpus serves as the foundation for your investment portfolio, ensuring financial security for you and your loved ones.
Following that, the goal should be to build wealth using ULIPs, which are conservative but aggressive because you may adjust your portfolio allocation based on your life stage and market movements. ULIPs and endowments both offer life insurance, making them good financial investments. Direct stock trading does not offer the same flexibility as ULIPs or the same level of security as endowment plans.
What Is The Correct Time To Purchase An Endowment Policy?
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.