ULIPs, mutual funds or stocks: What's the best for long-term wealth creation?
ULIPs are a mix of insurance and investment, meaning a part of your premium goes towards life insurance, while the rest is invested in various funds, like equity or debt. The key advantage of ULIPs is the insurance coverage that comes along with the investment. However, they have charges like mortality costs, higher fund management fees, and fund allocation fees.
According Manish Kothari, CEO & Co-Founder, ZFunds, 'For ULIPs, the associated costs like mortality cost, higher fund management charges, higher fund allocation charges eat into investor savings. Also, ULIPs come with a minimum 5-year lock-in, making liquidity a challenge.' STRICT TERMS AND LIMITED FLEXIBILITY WITH ULIPS
Also, ULIPs have stricter terms. 'Once you go in for a ULIP plan, you need to keep paying premiums without fail for three years or more before you can even take a withdrawal,' said Swapnil Aggarwal, Director, VSRK Capital.
He added, 'ULIPs do not have the option to switch funds or AMC as frequently as mutual funds, either. You are well and truly stuck once you opt for a ULIP plan, and that is quite limiting during times of uncertainty in the markets.' STOCKS: HIGH POTENTIAL, BUT MORE RISK
On the other hand, stocks are shares of companies listed on the stock market. Investing in stocks means you directly own a part of a company. Stocks can offer some of the highest returns over time, especially if you invest in growing companies, but they also come with more risk. Stock prices can be volatile, and short-term market fluctuations can lead to losses.
Manish Kothari stated, 'For stocks, it is essential to plan the entry and exit prices. Making the right calls demands a combination of skill, research and time that the common investors might not have.' MUTUAL FUNDS: THE BALANCED OPTION FOR WEALTH CREATION
This is where mutual funds have an edge. With mutual funds, you don't have to worry about market timing, and professional management helps reduce the chances of making costly mistakes.
Swapnil Aggarwal, Director at VSRK Capital, agrees with this view, highlighting that mutual funds are superior to ULIPs due to their flexibility and liquidity.
He mentioned, 'For long-term wealth creation, mutual funds are comparatively superior to ULIPS because of their flexibility and liquidity. While both ULIPs and mutual funds have similar overall returns, mutual funds give the investor greater freedom.' THE FLEXIBILITY OF MUTUAL FUNDS
Unlike ULIPs, mutual funds allow you to invest or redeem your money at any time without being tied down for a certain period.
'With mutual funds, you have the option to invest or redeem your money at any time without being tied down for a certain period. You also have the choice of switching between the different funds or Asset Management Companies (AMCs) depending on your objectives or variation in the market,' he added.
Manish Kothari, the CEO and Co-Founder of ZFunds, also believes that equity mutual funds are an ideal choice for long-term wealth creation.
'Equity mutual funds are best for long-term wealth creation as they help investors build a diversified portfolio across market caps and industries, that is managed by a professional fund manager. Having a diversified portfolio is crucial to mitigate the market risks and volatility,' said Kothari. COST-EFFECTIVENESS AND ACCESSIBILITY OF MUTUAL FUNDS
Additionally, they are affordable, with fund management fees regulated and reduced as the fund size grows. You can start investing with as little as Rs 10, making them accessible to everyone, mentioned Manish Kothari.
'The open-ended design of mutual funds also enables additional investments and provides liquidity to investors. Thus, making them a more flexible option,' he added. WHICH IS BEST FOR LONG-TERM WEALTH CREATION?
It really depends on your goals, risk tolerance, and investment knowledge. If you want a combination of insurance and investment, a ULIP might suit you, but if your focus is purely on wealth creation, mutual funds and stocks are usually the better options. Stocks might offer the highest potential returns, but they come with more risk and require more attention. Mutual funds provide a good middle ground with less risk and professional management.
Ultimately, the best investment for you will depend on your personal financial goals and how comfortable you are with risk. Diversifying your investments across these options can also help you balance risk and return, ensuring that you're on the right path to building wealth over the long term.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
&w=3840&q=100)
Business Standard
04-08-2025
- Business Standard
Irdai imposes ₹5 crore penalty on Policybazaar for violating norms
The Insurance Regulatory & Development Authority of India (IRDAI) on Monday imposed a penalty of Rs 5 crore on Policybazaar Insurance Brokers for multiple violations. 'Irdai, in exercise of the powers under Section 102 of the Insurance Act, 1938, has imposed a penalty of Rs 5 crore on M/s Policybazaar Web Aggregator Pvt. Ltd. (now known as 'M/s Policybazaar Insurance Brokers Pvt. Ltd.') along with Direction, Advisory, and Caution for various violations established under the Insurance Act, 1938 and Rules and Regulations made thereunder,' IRDAI said in its press release. According to IRDAI, apart from regulatory breaches such as KMPs (Key Managerial Personnel) holding directorships in other companies without prior approval from the insurance regulator, Policybazaar was also found guilty of promoting products in a biased manner and ranking various insurance products as top or best without 'making available any material to the prospects to make an informed choice.' As per the order, the aggregator's website displayed only details of ULIP products from five insurance companies, while the Insurance Web Aggregator (IWA) had agreements with other life insurance companies offering ULIPs. Similarly, under the 'Health' section, there was mention of 'Top plans-health insurance' from 12 insurers in a particular sequence (rating). Although the IWA had agreements with 23 insurers, it only named some products of about 12 insurers as 'Top plans'. The order noted that at the time of inspection (1st to 5th June 2020), the top five ULIP plans displayed on the site were Bajaj Allianz Goal Assure, Edelweiss Tokyo Wealth Gain+, HDFC Click2 Wealth, SBI Life e-wealth Insurance, and ICICI Signature. 'By showing certain insurance products of some insurers as 'Best' or 'Top plans', it has led to the creation of preference and promotion of these insurers and their specific plans only,' the regulator added. Moreover, there were no clear grounds on which these products were marketed as the best or top in their category. The insurance regulator also noted delays in remitting insurance premiums to the insurer. IRDAI's order highlighted that Policybazaar mostly used its own payment gateway and its own nodal account for collecting premiums, with a minimum of three working days required to remit such insurance premiums. Upon examining a selection of 67 insurance policies, IRDAI found that premiums were remitted with delays exceeding 30 days. Additionally, for 8,971 sample insurance policies, delays in remittance ranged from 5 to 24 days. For another set of around 77,033 policies, premiums were remitted after 3 working days, according to the order.
Time of India
04-08-2025
- Time of India
IRDAI penalizes Policybazaar Rs 5 crore for various violations including biased and misleading product promotions
Unfair product promotion Academy Empower your mind, elevate your skills Delay in remitting insurance premiums to the insurer Insurance watchdog IRDAI has penalised Policybazaar with a total of Rs 5 crore on accounting of violating 11 charges under various provisions of the Insurance Act and IRDAI (Insurance Web Aggregators) Regulations, from regulatory breaches like KMPs (key managerial personnel) holding directorships in other companies without prior IRDAI approval, Policybazaar was found guilty of promoting products in a biased manner, and ranking various insurance products are top or best without 'making available any material to the prospects to make an informed choice', as per the IRDAI addition to this, Policybazaar, or Policybazaar Insurance Web Aggregator Pvt. Ltd, referred to as IWA in the order, was fined Rs 1 crore for delaying the remittance of premiums paid by policyholders to the concerned insurers. Read on to know to the order, on the IWA website, at the time of inspection (1st to 5th June 2020), the top 5 ULIP plans displayed on the site were Bajaj Allianz Goal Assure, Edelweiss Tokyo Wealth Gain+, HDFC Click2 Wealth, SBI Life e-wealth Insurance and ICICI Signature.'The IWA website displayed only details of ULIP products of 5 insurance companies, while the IWA had agreements with other life insurance companies that offer ULIPs. Similarly, under 'Health section', there was mention of 'Top plans-health insurance' from 12 insurers in a particular sequence (rating). In the same way, there are 23 insurers having agreements with the IWA; however, the IWA had named some products of about 12 insurers as 'Top plans''By showing some particular insurance products of some insurers as 'Best' or 'Top plans', it has led to the creation of preference and promotion of these insurers and their specific plans only', it added. Moreover, there were no clear grounds on which these products were marketed as the best / top in their rules stipulate that an IWA shall not rank or compare the products in a manner that seeks to promote one insurer over the other. 'Words like 'best', 'top', or 'No. 1' are not allowed unless based on verified, factual, third-party data disclosed transparently and within the ambit of the regulations. Endorsing one insurer or set of insurers over the others leads to scanty choice for the customer to select the products. It also gives rise to a non-transparent manner of displaying the products', the order IRDAI order also highlighted that Policybazaar was mostly using its own payment gateway and its own nodal Account for collecting the premium, with its minimum working days required to remit such insurance premium standing at 3 working days. This violates Section 64VB of the Insurance Act, 1938, which states that insurance intermediaries are required to remit the insurance premium within 24 hours of the receipt of the the examination of the selected 67 insurance policies, a delay was noticed in the remittance of insurance premiums, exceeded by more than 30 days. Further, for 8971 sample insurance policies, the delay in the remittance of insurance premiums ranged from 5 days to 24 days. Further, for another set of around 77033 policies, the premium has been remitted after 3 working days', noted the also sold over 97,000 policies without mapping each policy to an AV (Authorised Verifier). Rules note that the policy-wise details of policies sold via 'Telemarketing mode' should have been tagged by Authorised Verifiers. However, 97,780 policy records were mapped as 'unassisted' or 'unmapped' out of a total of 4,32,366 policies sold through Telemarketing Mode. A lack of such record keeping meant no one could ascertain who concluded the sale of each of these (Insurance Web Aggregators) Regulations make it mandatory for the IWA to maintain policy-wise and AV-wise details, wherein each policy solicited by the IWA is tagged to the AV. IWA Regulations also cast an obligation on IWA to maintain data in such a way that the Authority can have regular and timely access to it.
Mint
01-08-2025
- Mint
As profits soar, PB Fintech takes a second bite at mutual funds
PB Fintech will re-enter the fee-based mutual fund business to gain another source of revenue under the PB Money vertical, management said during the analyst call for Q1FY26, after profits jumped in the quarter. This is PB Fintech's second attempt at entering the mutual fund business. The first, launched in 2019, ended up breaking away into a separate company called Zfunds, led by CEO Manish Kothari, who previously worked at Paisabazaar. 'That did quite well, but there was conflict between management, because of which that group left and set up a separate business. I am a small investor in the company," Yashish Dahiya, chairman and group CEO of PB Fintech, said during the Q1 analyst call on 1 August. Dahiya has a less than 3% stake in Zfunds, which had about ₹1,000 crore in AUM when it was part of PB Fintech. On Thursday evening PB Fintech reported a 41% year-on-year rise in net profit to ₹85 crore in Q1FY26, and a 33% increase in revenue to ₹1,348 crore. The company's stock opened at ₹1,816.50 on Friday and closed the day around ₹1,780, down 1.76%. Under PB Money Dahiya said the business was nascent, and still a tiny part of PB Fintech. It would likely add to the company's personal finance advisory through PB Money. 'It is too early to say how the model will evolve," he added. The new business will be a part of PB Money, the personal finance arm under Paisabazaar, a wholly owned subsidiary of PB Fintech. PB Money was launched in March and is headed by Santosh Agarwal, CEO of Paisabazaar. It already offers other asset classes such as fixed deposits and bonds. 'Mutual funds are a significant part of household savings in India today, which gives us the confidence that we should be in this space. PB Money is now a much more mature business, and we're in a better position to talk about savings as a real solution. Mutual funds fit naturally into that," Agarwal said during the analyst call. 'While we may not have all the answers yet on what gives us the right to win, I do believe there's room for another strong player in this space. If we execute well, there will definitely be consumer interest," she added. Red-hot industry The Indian mutual fund industry's assets under management (AUM) jumped 23% to ₹65.7 trillion in FY25 from ₹53.4 trillion in the previous financial year, according to a joint report by the Association of Mutual Funds in India and Crisil Intelligence, Mint reported in May. The report said while India's mutual fund penetration (MF AUM to GDP) hit an at all-time high of 19.9% at the end of March, it was still lower than that of many developed economies. 'This indicates there is considerable scope for growth of the domestic MF industry," it said. In June, Franklin Templeton India Mutual Fund said the mutual fund industry's AUM touched ₹72.2 trillion the previous month. The sector is projected to touch ₹100 trillion in AUM by 2030, according to an Axis Capital report from February 2024. SBI Funds Management leads the market with ₹11.14 trillion of AUM as of December 2024, followed by ICICI Prudential, HDFC Asset Management Company (AMC), and Kotak Mahindra AMC. New-age firms in the sector include Groww AMC, Zerodha AMC, Bajaj Finserv AMC and, most recently, JioBlackRock. Analysts' growth concerns PB Fintech operates a digital marketplace for insurance and credit products through Policybazaar and Paisabazaar. It also houses an agent aggregator platform, PB Partners, with 350,000 advisors. Total insurance premium grew 36% year-on-year to ₹6,616 crore in Q1, led by a 65% surge in online new health insurance. Core insurance revenue rose 37% year-on-year, while its credit revenue declined 22%. Analysts, however, said more than 30% growth in the term insurance market was unlikely to continue, with the overall segment expanding at around 15%. 'We believe as we grow, we're actually helping expand the market itself," said Dahiya. 'Digital insurance is becoming a more viable and sustainable business model with better cost structures compared to parts of the traditional offline segment, which may face scale issues going forward." UAE expansion and other initiatives PB Fintech is also looking to expand its insurance business in the UAE, its offerings for corporate clients under PB for Business, its point of sales person (PoSP) business, and its personal finance arm PB Money. 'UAE has turned profitable, which adds to margins, while our UAE and corporate businesses largely offset each other. Together they're close to breakeven. The PoSP business, meanwhile, has been scaling well with improving margins, driven by better quality of business and a shift toward smaller, more efficient partners," Dahiya said. He said PB Fintech expects that by next year the new initiatives could reach a point of breakeven. 'But we do want market share and I don't think we will hold ourselves back for any short-term profit delivery target. We will always do what we think is best for the long-term strength of the business," he added. In May, Dahiya made headlines for launching PB Healthcare Services Pvt. Ltd., a tech-first, integrated healthcare ecosystem. The company invested $62 million from PB Fintech for a 26% stake and also raised $50 million from General Catalyst for 20.57% to set up a 1,000-bed hospital network in the National Capital Region. Though PB Fintech is involved as an incubator, PB Healthcare is a separate entity.
