decide between investing in Equities and ULIPS?

When it comes to investing,often two products are talked about the most, Stocks and Unit Linked Insurance Plans (ULIPs).Clearly different, yet these products are fundamentally very similar in their working. They offer investors exposure to a market-linked portfolio and the opportunity to earn positive returns. So, what sets them apart and which of these is made for you? Let’s find out.

What are Stocks?

In the simplest of terms, stocks or shares are financial products that allow you to buy ownership in an organisation. When you buy shares of a particular firm, you share ownership in that firm’s future earnings and assets with all others who have bought its shares. The buying and selling of stocks of listed companies take place on a stock exchange and demand and supply for the same determines if the price goes up or down over time.

What is a Unit Linked Plan?

A unit linked plan offers life cover to policyholders along with investment option to invest in a number of qualified investments including stocks, mutual funds and bonds. Primarily a life insurance product and a single integrated plan, it allows management of investment and insurance according to specific needs and choices of the policyholder as the policyholder has the freedom to invest in funds of his/her choice. Moreover, the premium paid towards a unit linked plan is divided into two parts. First, towards providing insurance cover, and the other is invested in funds for wealth creation.

What Sets Them Apart?
  • What Sets Them Apart?

    Stocks are a sole investment option with the primary aim of wealth creation. On the other hand, a unit linked plan is a product bundled with wealth creation, life cover, as well as tax saving.

  • The Degree of Risk in Investment

    Stocks being pure investments products, are vulnerable to the market conditions and are exposed to much more risks to be able to generate higher returns.Unit linked plans are primarily life insurance products. Fund managers are therefore careful and use less aggressive investment strategies, which makes them less risky than stocks.

  • Liquidity of the Products

    Unit linked plans have a lock-in period of five years during which funds cannot be sold. Stocks do not have a lock-in period and are more liquid than unit linked plans, as they can be widely traded in the market.

  • The Amount of Research Required

    When you invest directly in the market, you need to invest a lot more time and research into your stock while in the case of ULIPs you can be a passive investor. Because the fund manager is the one,who invests his time to manage the funds.

Stocks Vs ULIPs: Where Should You Invest?

The decision to invest in any of the above investment typically depends on your needs, your risk appetite,number of dependents and so on. While making your decision, ask yourself these questions:

  • What are your financial goals? Do you want to save money, do you want immediate returns, are you looking for financial aid for your family or planning to save tax?
  • Do you have any dependents?If yes, then how many and how long will it take for them to be financially independent?
  • How long do you want to stay invested- short-term or long-term?
  • What is your risk appetite - low, medium, or high?
  • Do you have a life insurance coverage?

Put simply, answer these questions, analyse your needs and current situation to find what works best for you.

Go for Stocks:
  • If you an investor who is looking for short-term returns
  • If you want to free your money easily, i.e., want your investment to be liquid
  • When you already have a term insurance plan to protect your loved ones financially

If you are specifically looking for short-term gains, ULIP may not be an ideal option. Because exiting the unit linked plan in the short term could yield low returns as a major chunk of your investment would go towards meeting the charges. If you are a short-term investor, looking at wealth creation, stocks will score over a ULIP.

Go for ULIPs:
  • When you are looking for a long-term investment plan
  • If you have a low, medium or high-risk appetite
  • If you want insurance protection, i.e., life cover along with investment to provide financial support to your dependents in case of unfortunate eventualities
  • If you are planning to save for long-term goals
  • If you want a financial product to help in tax saving

ULIPs are best suited for you if you want a long-term financial plan of insurance protection and wealth creation. Whether it’s for children’s education, retirement, or for other financial goals, a unit linked plan continued till maturity works as an advantage.


Stocks and ULIPs both have their own benefits and comparing them is like comparing apples to oranges. But it is vital for an investor to comprehend that Unit linked plans are long-term plans, which have evolved over time, and are much better for fulfilling your long-term goals.