ELSS vs ULIP: Where should you invest for tax saving in FY22?

Overview

The returns it produces and the benefits it offers over time are the most important parameters to consider when choosing the right investment plan for yourself. When looking for market-linked investment options, however, a common debate is whether to go with ELSS vs ULIP plans.

While both offer attractive market returns, determining which investment option is best for a person’s long-term financial goals can be difficult. Before deciding between the two investment vessels, make sure your financial goals are aligned with the respective schemes, and then pick the plan that best meets your needs.

What Is ULIP?

The ULIP full form is Unit Linked Insurance Plans, which are one-of-a-kind insurance plans that include both life insurance and the ability to invest in the stock market. This is accomplished by putting a portion of your insurance premium into market funds (debt, equity, or balanced funds), and the rest into your life insurance.

What Is ELSS?

An Equity Linked Savings Scheme (ELSS) is a type of equity mutual fund in which a significant part of your investment is allocated to equity-related securities. The ELSS equity funds, like all mutual fund investments, are managed by experienced fund managers.

ULIP vs ELSS — A Comparative Analysis

• ELSS is a good option for those looking for a short-term investment plan with fast returns. Returns on equity markets are higher than those on other investment instruments. However, to get the most out of them, you must invest in them for a long time.
• So, with an ELSS SIP, you can invest small sums over a shorter period of time with low volatility risk and high returns. Furthermore, ELSS provides maximum transparency by allowing you to monitor the performance of your funds in real time. This type of investment is ideal for young investors who do not rely on investment income for their livelihood.
• ULIPs, on the other hand, provide both insurance and investment benefits. No other investment instrument combines the benefits of life insurance with the goal of generating wealth through market returns. However, because of multiple charges and high fund manager commissions, the return potential of ULIP is very limited. Over the course of the five-year lock-in period, the ULIP returns are expected to be between 8 and 10%.
• ULIPs, in comparison to ELSS, have a low to moderate risk profile and are an excellent investment option for people of all ages. Long-term ULIPs are highly recommended because the primary goal of this investment vehicle is to develop your wealth over time and help you achieve your financial goals.

Wrapping Up — ULIP vs ELSS

You can choose from a variety of tailored ULIP plans based on your long-term financial needs. The Bajaj ULIP plans available on Finserv MARKETS, for example, are designed to secure your child’s future, provide financial support during retirement, or simply broaden your investment horizon over the next few years. Visit Finserv MARKETS now to select from the best-rated funds across sectors for your ULIP investment.