Remember when your parents compared you to your sibling, and somehow your bad qualities outweighed his good qualities? That hurts, right! One positive outcome of this practice is the habit of comparisons before reaching any decision, especially where finances are concerned! Say LIC or mutual funds, which is a better investment out of the two, and where should you park your money?
LIC is not an investment per se; LIC offers life insurance cover for securing the financial future of your loved ones after your death. There exist insurance products in the market that come with an investment element in them, like ULIPs. However, many such plans have limited insurance coverage and do not offer high returns as such. Thus, defeating the dual purpose of insurance and investment.
On the other hand, mutual funds are inherently financial products that cater to the investment needs of different types of investors. An asset management company (AMC) pools in money from different investors, which fund managers then invest into different asset classes such as stocks, bonds, real estate, annuities etc. Mutual funds are a good option if you have an investment horizon of five to seven years or more. For risk-averse people, they should invest in equity-oriented hybrid schemes or balanced schemes.
LIC VS Mutual Funds?
Based on the above, LIC is a tool to safeguard your family’s financial interest by getting your life insured in return for paying premium amounts to the insurance company. Mutual funds are designed to create wealth or increase your wealth through investments into different types of financial and other assets. Therefore, it is clear that mutual funds are better than LIC, as far as investments are concerned.
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