INTERNSHIP PROJECT REPORT

COMPARISON BETWEEN ENDOWMENT &PPF,

MUTUAL FUND & ULIP, ENDOWMENT & ULIP,
MUTUAL FUND & PPF

PREPARED BY M. KALYAN KUMAR

DATE:24/10/2019
 INTRODUCTION ABOUT THE PROJECT
MUTUAL FUNDS:

Mutual fund is a type of investment security made up of pool of funds collected from the people
who are ready to invest in mutual funds who are called investors. So, these investors are ready to
invest in securities such as stocks, bonds, debentures, money market instruments, any other
securities. So, the funds which are collected are managed by a individual who is expert in managing
mutual funds who are called as professional money managers.

As previously mentioned, that mutual funds pool the money of the public and invest that money
into different securities in the stocks and bonds.so, the value of the mutual funds depends upon the
performance of the securities in which the company had invested. So, when someone is buying
any mutual fund in any company, they are buying the performance or part of the portfolios value.

Mutual fund companies work in such a way to generate more returns to its investors by investing
the funds into different securities. Basically, these companies main aim to reduce the risk and
increase the return for the investor based on the type of mutual fund. So, these companies invest
the funds into different securities.

Mutual fund is both an investment and an actual company. These company works as both; it is
strange but it is true. Let’s take example that an investor buys a share in ITC, he is buying the part
ownership of the company and its assets. Similarly, in mutual fund company’s investor is buying
the ownership of the company and its assets. The only difference is ITC is into manufacturing of
FMCG good whereas mutual fund companies are into business of making investments.

RETURNS TO INVESTORS IN MUTUAL FUNDS:

If an individual investing into the mutual funds, that person will be getting returns in three different
ways:

 Dividend on stocks and interest on bonds is one way of return to the investor. He or she
can receive the amount from the fund owners in the form of distribution or else they can
reinvest the amount and get more shares.
  The second way of return is that the individual can sell the securities and get the capital
gain (purchasing value – selling value) for the same.
 Is the price of the mutual fund increases, then also they can be sold and get profits.

TYPES OF MUTUAL FUNDS:

Mutual funds are divided into many types based on the return the investor seek. Some of these
funds are sector funds, money market funds, mutual funds that buy back other mutual funds.

 EQUITY FUNDS:
The largest category of the funds are these equity funds. Here equity funds are named as
the size of the companies like mid cap, large cap, small cap. Some other companies are
named as per their investment approach they are aggressive approach, income-oriented
approach, value and others.
 FIXED INCOME FUNDS:
These types of funds are also are the one of the big groups. Here the fixed income mutual
funds focus on the investments which give the fixed return, such as bonds, government
bonds, debentures, corporate bonds or else other any debt instruments.
 MONEY MARKET FUNDS:
These money market instruments are the safest short-term debt instruments. Here mostly
certificate of deposits, treasury bills, ETC are traded in the mutual funds.
 BALANCED FUNDS:
Balanced funds are the funds which are typically invests both in stocks and bonds. These
funds are also called as ‘asset allocation funds’ the primary objective of these mutual fund
is to reduce the risk exposure to one asset class or other.
 GLOBAL OR INTERNATIONAL FUNDS:
International funds are the type of the funds which invests only in the assets located outside
the country. Global funds means where an individual can invest anywhere in the world,
including home country. These types of funds are the most volatile in nature and might be
safer sometimes and riskier in sometimes. So, these are the one of the unique type of funds.
  SECTOR FUNDS:
These are the funds which are categorized as per sectors in the economy such as financial,
technology, hospitality, health, and so on. These funds are extremely volatile because of
the particular sector trend.
 SOCIALLY RESPONSIBLE FUNDS:
These funds are also called as the ethical funds which are invested based the certain beliefs
that the company should follow. For example, socially responsible funds don’t invest in
‘sin’ industries such as tobacco, alcoholic beverages, weapons, or nuclear power. Here
investors invest only in such companies such as green technology companies like solar,
wind power and recycling.

ADVANTAGES OF MUTUAL FUNDS:

There are many reasons to invest in mutual funds. Some of the advantages are as follows

 DIVESIFICATION:
Diversification or mixing the investments and asset portfolio to reduce risk is one of the
advantages of the mutual funds. Here the other objective is to increase the return to the
investor. Because of these diversifications only a fund manager can able to reduce risk and
increase the returns. Large mutual funds typically own hundreds of different stocks in many
industries.
 EASY ACCESS:
Mutual funds are the easy to access compared to the stocks. These are highly liquid in
nature. Also, when it comes to certain types of assets, like foreign equities or exotic
commodities, mutual funds are often the most feasible way in fact, sometimes the only way
for individual investors to participate.
 PROFESSIONAL MANAGEMENT:
Many people don’t have much knowledge about mutual funds. So, they directly cannot
manage their portfolio, here the experts who are good in managing the portfolios are
appointed to take care of the mutual funds. The primary work of thus expert is to do market
research carefully and skill full trading on behalf of the investors.
  ECONOMIES OF SCALE:
Because a mutual fund buys and sells large amounts of securities at a time, its transaction
costs are lower than what an individual would pay for securities transactions. Moreover, a
mutual fund, since it pools money from many smaller investors can invest in certain assets
or take larger positions than a smaller investor could.

DISADVANTAGES OF MUTUAL FUNDS:

Liquidity, diversification, and professional management, all these factors make mutual funds
attractive options for a younger, novice, and other individual investors who don't want to actively
manage their money. However, no asset is perfect, and mutual funds have drawbacks too.

 FLUCTUATING RETURNS:
Like many other investments without a guaranteed return, there is always the possibility
that the value of your mutual fund will depreciate. Equity mutual funds experience price
fluctuations, along with the stocks that make up the fund.
 CASH DRAG:
Mutual funds pool money from thousands of investors, so every day people are putting
money into the fund as well as withdrawing it. To maintain the capacity to accommodate
withdrawals funds typically have to keep a large portion of their portfolios in cash. Having
ample cash is excellent for liquidity, but money is sitting around as cash and not working
for you and thus is not very advantageous.
 HIGH COSTS:
As earlier mentioned, that mutual funds provide investors with professional management.
So, for the same they will be charging some fees. These fees reduce the fund's overall
payout, and they're assessed to mutual fund investors regardless of the performance of the
fund. As you can imagine, in years when the fund doesn't make money, these fees only
magnify losses. Creating, distributing, and running a mutual fund is an expensive
undertaking. Everything from the portfolio manager's salary to the investors' quarterly
statements cost money. Those expenses are passed on to the investors. Since fees vary
widely from lack of liquidity fund to fund, failing to pay attention to the fees can have
 negative long-term consequences. Actively managed funds incur transaction costs that
accumulate over each year.
 LACK OF LIQUIDITY:
A mutual fund allows you to request that your shares be converted into cash at any time,
however, unlike stock that trades throughout the day, many mutual fund redemptions take
place only at the end of each trading day.
 TAXES:
When a fund manager sells a security, a capital-gains tax is triggered. Investors who are
concerned about the impact of taxes need to keep those concerns in mind when investing
in mutual funds.
UNIT LINKED INSURANCE PLAN (ULIP):

A unit linked insurance plan (ULIP) is an investment product that provides for insurance payout
benefits. ULIP offerings are primarily concentrated in India. The investment vehicle requires a
premium payment which is invested in investment products for capital appreciation.

A unit linked insurance plan can be utilized for various benefit payouts including life insurance,
retirement, education and more. A ULIP offers varying provisions to the investor as benefits. A
ULIP is typically opened by an investor seeking to provide coverrereage for beneficiaries. It is
paid into by the owner in the form of premiums, with the intention of the plan’s worth to be paid
out at a specified time frame for a specific purpose. With a life insurance ULIP, the beneficiary
would receive payments following the owner’s death. Plans can include varying provisions for
triggering payments.

A unit linked insurance plan’s investment options are structured similar to a mutual fund. The
assets in a ULIP vehicle are managed to a specified objective. The vehicle calculates a daily net
asset value. The vehicle is market-linked and appreciates with increasing share value. When an
investor purchases unit in a ULIP, he or she is purchasing units along with a larger number of
investors, just like an investor would purchase units in a mutual funds. Different ULIPs offer
different qualified investments. Investors can buy shares in a single strategy or diversify their
investments across multiple market-linked ULIP funds.

ULIPs require a premium. Premiums vary with the terms of each ULIP. An initial lump sum is
typically required along with annual, semi-annual or monthly premium payments. Premium
payments are proportionally invested towards specified coverage and in the designated
investments.

Unit linked insurance plan investors can make changes to their fund preferences throughout the
duration of their investment. The funds offer transferring flexibility. Numerous investment options
are also available including stock funds, bond funds and diversified funds.

Unit linked insurance plan investors can make changes to their fund preferences throughout the
duration of their investment. The funds offer transferring flexibility. Numerous investment options
are also available including stock funds, bond funds and diversified funds.
TOP COMPANIES OFFERING ULIP INVESTMENT:

ULIP investment offerings are primarily concentrated in India where they were first launched.
HDFC Life is a leading provider of ULIP investments. The firm’s plans offer varying provisions,
terms and investment options. Other ULIP providers include Aegon Life, PNB MetLife, Kotak
Life, ICICI, India First, SBI Life and IDBI Federal.
ENDOWMENT POLICY:

An endowment policy or endowment plan is a type of life insurance policy that provides the dual
benefit of investment cum insurance to the policyholder. The policy provides coverage to the
insured for a specific period, at the end of which sum assured plus the accrued bonus is paid to the
insurance holder. According to the tenure of the policy, the bonus is paid to the insurance holder.
Generally, endowment plans are specifically designed to offers a lump-sum benefit after a specific
tenure i.e. on policy maturity. However, in case the insured person dies during the term of the
policy, the beneficiary of the policy will receive the sum assured amount plus the bonus if any
from the insurance company.

WHY SHOULD YOU BUY AN ENDOWMENT POLICY?

One of the main reasons to buy an endowment policy is that it provides an option to make savings
in a more disciplined way so that one can fulfill their short and long-term financial needs.
Moreover, along with an option to create a financial cushion the plan also provides the benefit of
insurance coverage. Even though, an endowment policy offers lower returns as compared to the
other investment plans but at the same time, the risk involved is also very low in an endowment
plan. Apart from this, as we have mentioned above, the plan also offers an option to save on taxes
on the returns.

These benefits offered by an endowment policy make it preferable for investors with low-risk
appetite. Moreover, apart from death benefit offered to the beneficiary of the policy in case of
insured decease, the plan also provides maturity benefit to the policyholder.

TYPES OF ENDOWMENT PLANS:

 Endowment without Profit

 Endowment with Profit
 Unit Linked Endowment plan
 Full Endowment
1). Without Profit Endowment Policy:

In without profit traditional endowment policy, a sum assured amount is paid to the policyholder
as maturity benefit or to the beneficiary of the policy as a death benefit.

2). With Profit Endowment Policy:

With profit endowment policy assures lump-sum money to be paid at the time of death or maturity
of the insurance holder. The sum assured amount of the policy increases as the insured acquires
reversionary/regular bonuses. These are guaranteed bonuses that are payable to the policyholder.
Apart from this, in certain cases, the policy also offers terminal bonus known as a non-guaranteed
bonus that is payable to the insured at the termination of the endowment policy.

With profit, best endowment plans for individuals who want to have a regular flow of income or
need to fulfill specific objective like repaying a mortgage, etc.

3). Unit linked endowment policy:

A unit-linked endowment plan is a type of endowment policy wherein a part of the premium is
paid for the insurance coverage and the other half of the premium amount is invested in different
units of investment funds. The insured can choose the fund options for investment according to
their suitability.

4). Full profit endowment:

Under this variant, the basic amount guaranteed to be payable to the policyholder is equal to the
death benefit, right from the period of policy initiation. According to the speculated market-based
appreciation, the ultimate payout provided is relatively higher.

BENEFITS OF ENDOWMENT POLICY:

1. Provides the dual benefit of insurance cum investment.

2. As a long-term systematic saving plan, an endowment policy not only provides an option
to create financial cushion but also helps the insured to meet their long-term financial goals.
 3. Depending on the type of plan you choose, the best endowment policy can also act as the
best investment option for the insured.
4. The benefit of the tax deduction is available on the premium paid and maturity proceeds
under section 80C and 10(10D) of Income Tax Act.
5. Apart from the benefits of investment and savings, the insured can take advantage of
different rider benefits available under the plan like premium waiver benefit, disability,
critical illness, etc.
6. An endowment policy also provides loan facility to the insured in case of an emergency.
7. Bonus facility is offered by the policy which is payable to the insured at the maturity of the
policy.
8. An endowment plan is a low-risk plan since it offers a guaranteed maturity benefit.

FEATURES OF ENDOWMENT POLICY:

Maturity Benefit:
In case the insurance holder survives the entire tenure of the policy then maturity benefit is
provided to the insured as the total sum assured amount along with the bonus acquired at the end
of the policy tenure.

Death Benefit:
In case of the insured deceased, the beneficiary of the policy receives the sum assured amount plus
the bonus (if any) as death benefit by the insurance company.

Bonus Offered:
With profit endowment policy offers bonus facility to the insured, wherein the bonus amount is
accumulated during the entire tenure of the policy and is paid along with the maturity benefit and
death benefit. The bonuses are classified as:

 Reversionary Bonus- Reversionary bonus is a non-compulsory bonus which is added by

the insurance company to the sum assured amount of the insurance policy and is payable
either at the maturity of the policy or in case of death of the policyholder.
 Terminal Bonus- The terminal bonus is a return for loyalty bonus that is paid at the maturity
of the policy as a reward of loyalty to the insured maintained throughout the tenure of the
policy.
Rider Benefit:
The best endowment policy make it a point to provide add-on rider benefit to the insurance holder
that can be availed along with the basic policy coverage. The different types of rider benefits
offered by the best endowment policy are:

Critical illness Rider- In case, the insured person is diagnosed with any critical illness like heart
attack, cancer, paralysis, kidney failure, etc. Then an extra sum assured amount is payable to the
insured along with the basic sum assured of the policy.

Accidental Death- If the insured has opted for accidental death benefit rider, then in case of
accidental demise of the insured person an extra sum assured amount as an accidental death benefit
is paid to the beneficiary of the policy along with the basic sum assured amount.

Disability Benefit Rider- In case of total or partial disability of the insured person, a sum amount
is offered as a monthly installment to the insured, equal to the basic sum assured amount.

Premium Waiver Benefit- If an insured has opted for premium waiver benefit then the premium
amount is waived off for the entire tenure of the policy, in case the insured suffers from a
permanent disability or critical illness.

Tax Benefit:
The best endowment policy also come with tax benefit option on the premium paid and the
maturity proceeds under section 80C and 10(10D) of Income Tax Act 1961.

Claim Settlement Ratio:

It is the percentage of claim settled each financial year Vs the claim received. A high percentage
of claim settlement indicated that the company has a good record of hassle-free payment to the
insured nominee. While buying an endowment life insurance policy it is important that you check
the insurers’ track record. A good track record of an insurance company reduces the risk factor
involved in case bonus is declared on endowment policy.
PUBLIC PROVIDEND FUND:

The Public Provident Fund is a savings-cum-tax-saving instrument in india, introduced by the

National Savings Institute of the Ministry of Finance in 1968. The aim of the scheme is to mobilize
small savings by offering an investment with reasonable returns combined with income tax
benefits. The scheme is fully guaranteed by the central government. Balance in PPF account is not
subject to attachment under any order or decree of court. However, Income Tax & other
Government authorities can attach the account for recovering tax dues.

ELIGIBILITY:

Every individual who is a resident of india in the particular previous year are eligible to invest in
the Public Provident Fund and are entitled to get tax free returns.

NON-RESIDENT INDIANS:

As of august 2018, as per the Indian ministry of finance, NRIs should not invest in PPF accounts
and are not allowed to open. However, they are allowed to continue their existing PPF accounts
up to its 15 years maturity period. An amendment to earlier rules allowing NRIs to invest in PPF
was proposed in the finance bill 2018, but has not yet been approved.

INVESTMENT:

A minimum yearly deposit of ₹500 is required to open and maintain a PPF account. A PPF account
holder can deposit a maximum of ₹1.5 lacs in his/her PPF account (including those accounts where
he is the guardian) per financial year. There must be a guardian for PPF accounts opened in the
name of minor children. Parents can act as guardians in such PPF accounts of minor children. Any
amount deposited in excess of ₹1.5 lacs in a financial year won't earn any interest. The amount can
be deposited in lump sum or in a maximum of 12 installments per year. However, this does not
mean a single deposit once in a month.

The ministry of finance, Government of India announces the rate of interest for PPF account every
quarter. The interest rate compounded annually and paid on 31 March every year. Interest is
calculated on the lowest balance between the close of the fifth day and the last day of every month.
DURATION OF THE SCHEME:

Original duration of the scheme is 15 years. But, on application by subscriber, it can be extended
for 1 or more blocks of 5 years each.

PUBLIC PROVIDEND FUND MATURITY OPTIONS:

There are 3 options for the individuals who has invested in PPF account at maturity

 Complete withdrawal.
 Extend the PPF account with no contribution – PPF account can be extended after the
completion of 15 years, subscriber doesn't need to put any amount after the maturity. This
is the default option meaning if subscriber doesn't take any action within one year of his
PPF account maturity this option activates automatically. Any amount can be withdrawn
from the PPF account if the option of extension with no contribution is chosen. Only
restriction is only one withdrawal is permitted in a financial year. Rest of the amount keeps
earning interest.
 Extend the PPF account with contribution - With this option subscriber can put money in
his PPF account after extension. If subscriber wants to choose this option then he needs to
submit Form H in the bank where he is having a PPF account within one year from the date
of maturity (before the completion of 16 yrs in PPF). With this option subscriber can only
withdraw maximum 60% of his PPF amount (amount which was there in the PPF account
at the beginning of the extended period) within the entire 5 yrs block. Every year only a
single withdrawal is permitted.

PUBLIC PROVIDENT FUND TAX CONCESSIONS:

Annual contributions qualify for tax deduction under Section 80C of income tax. The tax benefit
is capped at ₹1.5 lacs per financial year. Contributions to PPF accounts of the spouse and children
are also eligible for tax deduction.

PPF falls under EEE (Exempt, Exempt, Exempt) tax basket. Contribution to PPF account is eligible
for tax benefit under Section 80C of the Income Tax Act. Interest earned is exempt from income
tax and maturity proceeds are also exempt from tax.
LOAN FACILITY:

Loan facility available from 3rd financial year up to 6th financial year. The rate of interest charged
on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 2% more than the
prevailing interest on PPF. However, the rate of interest of 1% more than PPF interest p.a. shall
continue to be charged on the loans already taken or taken up to 30.11.2013.

Up to a maximum of 25 per cent of the balance at the end of the 2nd immediately preceding year
would be allowed as loan. Such withdrawals are to be repaid within 36 months.

A second loan could be availed as long as you are within the 3rd and before the 6th year, and only
if the first one is fully repaid. Also note that once you become eligible for withdrawals, no loans
would be permitted. Inactive accounts or discontinued accounts are not eligible for loan.

FEATURES OF PUBLIC PROVIDENT FUND:

The public provident fund is established by the central government. One can voluntarily open an
account with any nationalized bank, selected authorized private bank or post office. The account
can be opened in the name of individuals including minor.

 The minimum amount is ₹500 which can be deposited.

 The rate of interest at present is 8.0% per annum (as of Dec 2018).
 Interest received is tax free.
 The entire balance can be withdrawn on maturity.
 The maximum amount which can be deposited every year is ₹150,000 in an account at
present.
 The interest earned on the PPF subscription is compounded annually.
 All the balance that accumulates over time is exempted from wealth tax
INTEREST RATES FOR PPF FOR LAST YEARS:

YEAR QUARTER RATES

April 2016 – September 2016 8.1%

2016-17 October 2016 – March 2017 8.0%

April 2017 – June 2017 7.9%

2017-18 July 2017 – December 2017 7.8%

January 2018 – march 2018 7.6%

April 2018 – September 2018 7.6%

2018-19 October 2018 – march 2019 8.0%

April 2019 – June 2019 8.0%

2019-20 July 2019 – September 2019 7.9%

 BENEFITS UNDER INCOME TAX ACT 1961

ie. Eligible investments as per 80C are as follows.

Eligible investments as per 80C:

 Life insurance policy:

If an individual invests in LIP, can avail not only the deduction under 80C but also
exemption on the maturity benefit at the end of the policy term under section 10(10D).

Date of policy issued Exemption u/s 10(10D) Deduction u/s 80C

Any sum received under Life Premium paid to the
insurance policy at the end of the extent of 10% of
In respect of policies maturity of the policy term is minimum capital sum
issued on or after exempted and any bonus received is assured.
1/04/2013 also exempted. This exemption will
be availed only if the premium paid is
lest than or equal to 10% of the basic
sum assured.

 Any amount deposited in Public Provident fund.

 Any amount invested in National savings scheme.
 Fixed deposit in any bank or post office for 5 years.
 Contribution towards Unit linked insurance plan (ULIP).
 Notified units of mutual funds.
 Deposit in notified bonds of NABARD.
 Deposit in senior citizen savings scheme.
 Tuition fee paid for the education of the children.
 Repayment of loan taken from banks.
 Employers contribution towards the statutory provident fund, recognized provident fund.
  Deposit in Sukanya samridhi scheme.

If we observe the above points that all are eligible for deduction under section 80C. So whoever
invests in the ULIP, Mutual fund, endowment and Public provident fund are all eligible for
deduction. So, whose so ever income is more and paying more tax and reduce their income tax by
investing into these any of these schemes.
COMPARISION BETWEEN ENDOWMENT AND PUBLIC PROVIDENT FUND

Public provident fund and endowment plan are two different investments and suits for different
needs. Comparing two investments would result in drastic differences. Endowment serves for the
insurance cum savings both but public provident fund serves only for savings that too long term.

 PPF: is a public provident fund means for long term savings and for retirement. anyone
can entitle to open the PPF account. Only Indian residents are allowed to open these
accounts in india.
 ENDOWMENT: is an insurance cum savings type of investment. Here the policy term
will not be same, differ from different individuals based on their flexibility. This policy
can be taken by individual himself or else can be taken on the family of the individual that
is spouse, children and parents.

POINTS ENDOWMENT PPF

SCHEME Insurance cum savings Only investment

type of scheme

PURPOSE Risk protection Only for savings purpose

RISK Safe because of the whole Safest because fully

amount will be returned at controlled by government
the end of the policy term. of india.

TARGET AUDIENCE Suitable for the people Suitable for the people
who is having future goals who wants to invest and
and having dependents on leave and to get fixed
them. return without inflation
effect on the amount.
 TENURE Flexible as per the 15 years
individual

PREMATURE In if an insured person In PPF premature

CLOSURE withdraws the policy in disclosure is not
middle then the whole available.
amount will be given back
only after deducting
certain penalties and
taken back benefit of tax.
Loan facility is available
LOAN here that means after Here also loan facility is
certain period the insured available
person can take loan from
the amount he invested in
the policy.
Here the endowment is Here the PPF is eligible
TAX BENEFITS eligible for tax deductions for tax deductions under
under section 80C. section 80C.

ASSIGNMENT Here in some cases the Here in PPF no such

FACILITY assignment facility is assignment facility is
available that means the available.
policy can be transferred
for any other names who
might be creditor of the
insured person or else
policy owner.
Different types of endowment policies and offered by different banks are as follows

 HDFC life endowment assurance plan

 HDFC life super savings plan
 PNB met life endowment savings plan
 PNB met life endowment guaranteed income plan
 SBI Life – smart money bank gold
 SBI – Shubh Nivesh

These are the some of the famous endowment policies in india. But when it comes to Public
Provident Fund only one type of scheme where the interest rates will be changed as per the
inflation.
 COMPARISION BETWEEN MUTUAL FUND AND ULIP

Mutual fund is a collective investment scheme. Many investors invest their money in the fund to
form a pool, which is then invested in stocks, bonds and other asset classes by a fund manager.
From time to time, the mutual fund distributes dividend to its investors. However, there are funds
where the dividend is reinvested in the scheme and the investor gets a lump sum at the time of exit.

Both ULIPs and mutual funds carry a certain element of risk in them that arise from investing.
While the risk may be lower in case of debt investments, it is higher in case of equity investments.
While debt investments face the risk of defaults and changes in interest rates, equity investments
face the risk of market volatility and the fund manager’s skills

MAJOR DIFFERENCE BETWEEN MUTUAL FUNDS AND ULIP ARE AS FOLLOWS:

 Insurance cover:
The key difference between mutual funds and ULIPs is the insurance cover provided by
the latter. While mutual funds are pure investment products, ULIPs provide cover and
investments. In addition, while most mutual funds don’t guarantee any returns, some ULIPs
offer a minimum amount in the form of a sum assured in case of death of the policy holder
or the fund value, whichever is higher. In this way, ULIPs are superior to mutual funds.
 Cost:
While ULIPs may be more expensive than mutual funds in the initial years, being a long-
term product, this cost is spread over a longer period and hence, becomes similar to the
cost of investing in mutual funds.
Insurance companies offering ULIP plans have several layers of costs and it is not easy to
comprehend total cost of the plan. But it is not difficult to read the expenses of a mutual
fund. Even a novice investor can see the costs that he is paying in mutual fund as fund
expenses.
 Tax benefit:
Another advantage that ULIPs offer is tax benefits1. This is comparable to tax saving
schemes of mutual funds. Both these products offer tax deduction under section 80C of the
Income tax Act up to Rs 1 lakh (increased to Rs 1.5 lakh in Budget 2014). While in case
 of mutual funds, the lock in period for the investor to avail this tax benefit is 3 years, it is
5 years in case of ULIPs. This actually helps the ULIP investor by making him stay
invested for a longer period and therefore, reaping returns that are more likely in a long-
term investment.

MUTUAL FUND Vs ULIP:

Both 'equity-Mutual Fund' and 'equity-ULIP' invests their money in stocks. This makes their returns
unpredictable in short-term. But in long term their net of inflation returns are good. Then what is the
difference between ULIP and mutual fund?

If they are so similar then why we have two different names for the same thing? The reason is,
they are similar but not the same.

Comparison between Mutual Funds and Unit Linked Insurance Plan (ULIP):

POINTS MUTUAL FUNDS ULIP

A mutual fund pools the Unit Linked Insurance Plans
money from investors and refer to Unit Linked Insurance
uses it to invest in various Plans offered by insurance
securities according to a pre- companies. These plans allow
DESCRIPTION specified investment investors to direct part of their
objective. premiums into different types
of funds (equity, debt, money
market, hybrid etc.).

Mutual funds are ideal Unit Linked Insurance Plans

investment tool for the short to are long term plans offering
OBJECTIVE
medium term.
 you a dual benefit of insurance
and investment.

Only investments in tax saving All Unit Linked Plans offer tax
funds are eligible for section benefits under section 80C.
TAX BENEFIT
80C benefits.

No switching option is Unit Linked Plans (ULIP)

available. If you are not allows you to switch your
satisfied with the performance investment between the funds
of the fund you can exit linked to the plan. This enables
SWITCHING OPTIONS
completely from the same by you to change the risk return.
paying exit charges, if
applicable.

There are no additional Some of the Unit Linked Plans

benefits issued by mutual give you an additional benefit
ADDITIONAL BENEFITS funds. or loyalty benefit by issuing
extra fund units.

You can easily sell mutual Unit Linked Plans have

fund units (except for ELSS limited liquidity. One needs to
and funds that have a stay invested for a minimum
LIQUIDITY minimum lock-in period). period of time as specified in
the policy before redeeming
the units.
 Mutual fund charges include Charges in a unit linked plan
an entry load, the annual fund include mortality charges for
management charge and an the life insurance provided. In
exit load, if applicable. addition, premium allocation
CHARGES STRUCTURE
charge, fund management
charge and administration
charges are applicable.

1. Investment tool suitable for 1.Dual benefit of investment

short to medium term. and insurance.
2. Easy exit possible. 2. Suitable for the long term.

BENEFITS 3. Tax benefit available only 3. Option to switch between

on tax saving funds. the funds is permitted.
4. Offers tax benefits.
 Comparison between Endowment and ULIP

The major difference between endowment and ULIP, is that ULIP is linked with the market to
deliver high returns based on the market conditions. Here the amount will be invested in equity or
debt related schemes. And also, ULIP offers the insurance benefits and covers the life of the
individual or his spouse, children. On the other hand, endowment plans are insurance policies
which considered as risk free, because they provide only fixed returns in case of death or at the
maturity of the policy.

POINTS ENDOWMENT ULIP

Endowment plan provides ULIP’s combines the
protection to the insured along characteristics of a mutual fund
DESCRIPTION
with an investment opportunity. and life insurance product under
a single policy. It gives the
flexibility to invest in different
funds.

MAXIMUM SUM ASSURED No limit No limit

Offer single pay, monthly, Offer single pay, monthly,

quarterly, half-yearly, yearly quarterly, half-yearly, yearly
PREMIUM PAYMENT
and limited pay options and limited pay options
OPTION
There will be no extra charges Here the different charges will
on the policies taken. be levied on the policies. Like
CHARGES
switching charges, maintenance
charges, etc.
 Here the endowment is eligible All Unit Linked Plans offer tax
for tax deductions under section benefits under section 80C.
TAX BENEFIT
80C.
In the endowment policies the In ULIP also this facility
insured person can with draw available but not in all kind of
LOAN FACILITY
90% of his premiums from the policies.
3rd year if the policy term.
At the time of maturity, the At the time of maturity, the
insured will get the sum assured insured can redeem the units
MATURITY BENEFIT
Accrued revisionary bonus, which are collected at the then
terminal bonus, if applicable in prevailing unit prices. Some
the plan. plans also offer loyalty or
additional units either annually
or at the time of maturity.
No option is given to There is risk involved as the
policyholder to alter their premium is invested in different
CHOICE OF RISK
exposure to risk. types of funds (like small cap,
EXPOSURE
mid cap, large cap, etc.) & also
provides the option to switch
between the funds.
No option to track your This allows you to keep a track
individual portfolio as the of your portfolio, regular
TRANSPARENCY
premiums are invested in a intimation regarding the
common with profit fund. percentage of the premium that
is invested along with the
charges levied.
 COMPARISON BETWEEN MUTUAL FUND AND PPF

Mutual fund is a collective investment scheme. Many investors invest their money in the fund to
form a pool, which is then invested in stocks, bonds and other asset classes by a fund manager.
From time to time, the mutual fund distributes dividend to its investors. However, there are funds
where the dividend is reinvested in the scheme and the investor gets a lump sum at the time of exit.

PPF: is a public provident fund means for long term savings and for retirement. Anyone can entitle
to open the PPF account. Only Indian residents are allowed to open these accounts in india. This
is introduced by national savings institute of the ministry of finance in 1968.

POINTS MUTUAL FUNDS PPF

A mutual fund pools the money Public provident fund means
from investors and uses it to for long term savings and for
DESCRIPTION
invest in various securities retirement.
according to a pre-specified
investment objective.
Mutual funds are ideal PPF is for the long term.
investment tool for the short to
OBJECTIVE medium term.
Only investments in tax saving Here the PPF is eligible for tax
funds are eligible for section deductions under section 80C.
TAX BENEFIT
80C benefits.
Risk is based on the portfolio This PPF is the safest one in the
that an individual chosen in his all types of investments
RISK
account. because of this is totally
maintained by the government
of india.
 Here no specific tenure Here the tenure is 15 year.
available. This is as per
TENURE
flexible for the individual.
This is suitable for the people Suitable for the people who
who don’t want to take any wants to invest and leave and
TARGET AUDIENCE
direct risk but can also be to to get fixed return without
maintain moderate risk by inflation effect on the amount.
investing in the mutual funds.
 TYPES OF FINANCIAL RISK TAKERS

1). RISK AVOIDER:

Roughly 90% of risk avoiders say they take a cautious approach to their finances. Many look for
guaranteed returns, even if that means settling for investments that earn less money. They also say
they’d pull back on investing if things got too volatile. Rather than seeing risk as opportunity to
earn bigger returns, they view it as something to steer clear of if at all possible.

Ironically, risk avoiders are so nervous about losing money that they may actually end up exposing
themselves to more risk. People in this group may keep their savings in cash, which means they’re
actually losing money to inflation. They’re also likely to be behind on their retirement savings and
be underinsured. Baby boomers and women are more likely than other groups to be risk avoiders.

2). RISK MITIGATOR:

Risk mitigators represent the largest category of investors, and they’re equally split between
millennials, Gen Xers, and baby boomers. Unlike risk avoiders, risk mitigators are willing to take
a chance on an investment once they’ve done significant research. They also understand the
importance of diversifying their portfolio. Yet people in this group still prefer low-risk investments
and get nervous when markets are volatile.

If you’re a risk mitigator: Don’t get spooked when markets fluctuate. “Focusing only on
investments with a guaranteed return or shifting to conservative investments during a
volatile market can be triggered by doubt,” Keckler said. Sticking to your investment plan
and finding a financial advisor whom you trust can help you navigate those ups and downs.

3. RISK MANAGER:
People in this group see risk as an opportunity and have an informed, well-thought-out approach
to investing. Most say that they have a good understanding of their 401(k) and 45% invest heavily
in the stock market.
“Risk managers tend to take the driver’s seat when it comes to their finances, which makes it easy
to understand their level of confidence,” Keckler said. “In fact, an overwhelming majority are
highly confident they are saving enough for retirement.”

4. RISK EMBRACER:
Risk embracers are more likely to be young and male – 56% are millennials and 67% are men.
People in this category get a thrill from investing and are more likely than other investors to take
a chance on high-risk, high-return investments. Like risk avoiders, they don’t do a lot of research
before they invest and their investments tend not to be well diversified. People with this personality
type are also more likely to buy a home they can’t really afford or make big career changes without
thinking about the financial consequences.

If you’re a risk embracer: If you thrive on danger, you may want to take up skydiving rather
than gambling with your savings. Taking some risk with your investments is a good thing, but you
want to make those moves from a position of financial security. In other words, don’t bet your
next mortgage payment on the next hot stock.

So, based on the individual and his risk-taking habit decide each to invest in different investment.
Same way some will take more risk and invest in mutual funds and some will in ULIP, some in
endowment and safest one is PPF who don’t need to take any kind of risk.

For example, in my internship I have approached 25+ clients to sell endowment policies to them
but I can able to sell only for 3 clients and achieved 120000 which has 30000 policies two and one
60000 policy. So, many clients are having different opinion on the insurance. Some clients don’t
want t take because of the risk might be involved in this endowment policy.
CONCLUSION

From the above explanation regarding to Mutual funds, ULIP, Endowment and Public Provident
Fund, that every investment will be giving good returns in respect of particular category investors.
So, every investor will be divided on the bases of their risk-taking ability. Every investment is a
good investment which are giving benefits in future and also reducing net income while calculating
income tax under income tax act 1961. Each investment discussed in this project is regulated by
some regulatory body. For example, Public Provident Fund is regulated directly by Central
government and also having separate act called PPF scheme 1968. So, these investments are very
safe and secured.