Are ULIP’s better than Equity to save LTCG?

Are ULIP’s better than Equity to save LTCG?

After the introduction of Long Term Capital Gains (LTCG) tax on equity income, there is news floating around that, investing in ULIP’s will help investors save the tax. It is just a 10% tax on an income which is far higher than any other asset. To escape that, the effort that people have been taking is showing clearly the reason why retail investors have not made money in stocks.

The returns that ULIP’s have given in the last 5 years is 9.21% for large cap and 18.31% for a small cap. As against the average returns that mutual funds have given in the same period at 14.73% for large cap and 26% for Small cap. Even if capital gains are paid, the net returns will be far higher than what ULIP’s will make for its investors.

Products5 years CAGRTaxesNett
Mutual Funds14.731.473Lakhs13.26
ULIPS9.2109.21

Over a longer period, compounding will create big magic to the Mutual Fund returns which the ULIP investors will lose. Once the age is passed & opportunity is lost, one has to live with mediocre life, just because of these kinds of hasty decisions. Instead of worrying about the 10% tax, just continuing to be invested will give them far higher returns than taking action to sell their investments and moving them to ULIP’s to save the 10% tax, eventually they will be losing near 200% of opportunity.

1 Lakh Investment after 20 Years
Mutual Funds14.15 Lakhs
ULIPS5.82 Lakhs

1 lakhs invested at 9.21% for 20 years will generate a corpus of 5.82 lakhs. The same 1 lakh in Mutual Funds even after paying 10% capital gains tax will be 14.15 lakhs. Be prudent, don’t panic for paying 10% tax and move your investments, in the bargain the brokers and government are the beneficiaries.

About Author

Ramesh Sigamani

Related posts

A Fund Manager’s View On Market Trends

Meeting with Mr. Jayesh Gandhi, Senior Fund Manager, ABSL. Recently, I had the opportunity to meet Mr. Jayesh Gandhi and talk about our favourite topic, “THE MARKETS”. Mr. Gandhi manages the Mid & Small-Cap funds of Aditya Birla Sunlife Mutual Fund, schemes of which have been consistent performers in...

Read More

Why Mutual Funds May Trump Real Estate as An Investment Option?

We Indians are believers in creating assets and leaving it behind for the next generations. Saving up and funding assets is a must, for most Indian families. So, what kind of assets do we look at investing in? In a typical Indian family, it will mostly be gold, real...

Read More

Is investing in Gold a Good Option for Akshaya Tritiya?

Akshaya Tritiya is almost here with the festival falling on 18th April this year. This festival is considered, a very auspicious one. The name itself suggests that it is the third lunar day (Tritiya) of the Hindu calendar, indicating unending prosperity (Akshaya). Tradition has it that this very auspicious day is for...

Read More

Give a Reply