They say that the toughest part of any person’s life is to ‘Earn’. But no, I believe that the toughest thing is to decide that where to ‘invest’ that earned money. Investment gives you returns on your already earned money and it either doubles your savings or at least give it a satisfactory increment, so that you can easily deal with your expenses. The goals of investment may differ person by person. You may be a single one, who needs to cover his/her education loan or a family man, who is seeking for a protection for his dependents. So, before stepping ahead with this idea of Investment, everyone goes through an inner battle of choosing between Insurance and Mutual Funds. So, here is a distinguished guide of Insurance and Mutual Funds to make your decision more logical.
Life Insurance is a protection scheme to make your family secured, if you are not with them, I.e. dead.
A mutual fund works as an acceleration tool for your wealth through market linked investments.
The goal of Life Insurance Policy is to provide a safeguard to finance of those who are dependent upon you e.g. your parents, spouse or children.
Mutual Funds have different goals. These are those investments which are made to meet your own financial needs like education, purchasing a property, starting a business, etc.
Life Insurance Policy has a lesser risk factor involved as it promises to give you returns, even after your death. If you remember that Cliché line of LIC “Zindagi ke Saath bhi aur Zindagi ke baad bhi”, well, LIC meant it!
But Mutual Fund doesn’t include that “Zindagi ke Baad bhi” wala tag. It doesn’t provide you any death benefit but for Christ’s sake, it gives you a Fund Manager.
If Life Insurance is used as an investment, it is indeed expensive and you cannot expect good returns at least equivalent to mutual funds.
As Mutual Funds give you the option to diversify your fund, it can maximise your returns, without being dependent on a single fund for growth.
Life Insurance is a boring local train ride, you know its speed, time and destination which make your journey easily predictable. But Mutual Fund is a ride with a stuntman on Pulsar NS 200. You know the destination but you can never predict the speed or time or even the condition of your limbs after the whole journey as it is based on share market’s bulls and bears. No line can better explain it than “Mutual Funds are subject to market risks, please read all scheme related documents carefully”. It means “Enter at your own Risk!”.