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    Should I relook at ULIPs to save LTCG tax?

    Synopsis

    If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

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    Now that the ULIP is the only way to avoid capital gain tax, should we relook/prefer ULIPs to mutual funds? Since ULIPs also invest in markets, the returns should broadly be in line.
    -- Shashwat Goswami

    Veena Malgonkar, certified financial planner, KM Wealth Solutions, responds:

    I still believe that insurance and investing should not be mixed. Buy a term insurance cover for your protection needs and invest the rest of the money in mutual funds. Capital gain tax cannot be a criteria for making an investment decision.

    First step is to determine your insurance needs and take adequate cover through a term insurance - which is the cheapest way of protecting your family. Do consult a financial adviser for this.

    The main reasons to invest in mutual funds are:

    1. Over the long term, the mutual funds have consistently delivered better returns than ULIPs.
    2. You can get stuck in a ULIP that is underperforming. You have much more flexibility in mutual funds.
    3. Expenses are opaque in a ULIP - for mutual funds it is much more transparent.
    (If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)

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