ELSS or ULIP: Which one is better?

ELSS and ULIP offer tax advantages under Sec 80C of the income tax Act. Both the investments serve different purposes, thus the investment perspective should be kept in mind while investing. ULIP is a mix of investment and life insurance, and on other hand, ELSS is an equity-oriented fund and gives more returns than the traditional savings schemes such as fixed deposit, recurring deposit, etc.

Equity Linked Saving Scheme (ELSS):

The ELSS mutual funds invest in the capital market and selected companies, with different capitalizations. You can only claim a deduction of 1.5 lakhs under Sec 80C against the scheme that you have opted for. The returns from the ELSS mutual funds are tax-free, whether opted for capital appreciation or dividend plan. The only drawback of the ELSS scheme is that these funds have a lock-in period of 3 years.

Many investors opt for these mutual funds, given the decent return offered by them. The investment route can either SIP or a lump sum. Given the volatility in the market, you should opt for a SIP and invest lump sum whenever the market is bearish.

Advantages of ELSS

The mutual funds have a 3 year lock-in period as compared to other close ended mutual funds
These mutual funds have given higher returns in comparison with FD or RDs
There is no maximum limit to invest
Top 5 ELSS Funds

Selecting an ELSS fund is cumbersome exercise, and depends upon your financial goal, investment horizon, and risk appetite. Here’s a list of top 10 ELSS funds that have given higher returns in the past: http://www.shoprwise.com/elss-or-ulip-which-one-is-better/

Unit Linked Insurance Plan (ULIP):

It is commonly known as ULIP, an investment cum insurance plan. Under this plan, one part of the income is used for insurance purposes while the other will be deposited as your choice, be it equity, debt, balanced, or money market funds via ULIP. The contribution is also exempted from the Section 80C of the income tax act. The lock-in period is of 5 years. You can also switch to another scheme depending upon the time horizon and financial goal.

A simple ULIP vs. ELSS comparison should help clear your doubts regarding these two investments.http://www.shoprwise.com/elss-or-ulip-which-one-is-better/

It is recommended to make an informed decision while investing in these instruments. Draw your financial plan and invest wisely.

ELSSs invest over 80% of their assets in equity. In other equity-linked tax-saving schemes like NPS, the equity allocation is capped at 75%. Other schemes, such as MF Retirement Plans, ULIPs, do not have an upper limit on equity investment but have a 5-year lock-in period. Thus, you can gain the maximum wealth-generating potential of equities.

Unit Linked Insurance Plans, better known as ULIPs, are a product offering from insurance companies that provide a ‘Combo’ of investment and insurance. The underlying investment funds offered by ULIPs are similar to that of mutual funds.

Functionally, there is nothing common between Equity Linked Savings Schemes (ELSS) and Unit Linked Insurance Plans (ULIPs). It is a basic rule to not mix up insurance and investments. ELSS and ULIPs are two different products that serve different purposes. While a ULIP is a mix of life insurance and investment offered by life insurance companies, [ELSS](https://www.etmoney.com/mutual-funds/equity/elss/38) is an equity fund. Apart from this, both are tax-saving investments.