LIC vs SIP or mutual funds- Which is better?

 

An investor who is risk averse and wants to invest his hard-earned money would undoubtedly wonder which is better: LICs or SIPs. The temptation to compare the advantages and risks of both LIC and SIP is unavoidable.

But much like a mango and an apple, LIC and SIP are two very distinct goods. Here, we'll go into more depth about the advantages of both products.

The distinction between insurance and investing must be understood before delving into the differences between LIC and SIP.

What is Insurance?

In essence, life insurance is a contract between the insurer (insurance company) and the insured in which you agree to pay a certain quantity of money (the premium) and the business agrees to pay the sum covered in the event of the insured's death.

Companies also pay a maturity benefit after the specified time frame at the same time. The maturity benefit amount varies between policies and plans.

What is SIP?

Systematic investment plans, sometimes known as SIPs, are monthly investment plans provided by mutual fund companies in which you make a set payment each month. Your funds are invested in equities or debt instruments in this case, and a return is produced.

Read more about:- mutual funds

LIC Or SIP – Which is better?

Both goods are among the finest in their peer group and are really good. But here, the crucial issue is: What do you need?

The reason of buying – Insurance 

LIC is the finest option if you wish to buy for insurance needs. A range of insurance products are available for purchase.

The reason of buying – Investment

SIP is preferable if your motivation for purchasing is investment. SIP yield is superior in the long run therefore.

LIC vs SIP or mutual funds- Which is better?

Mixing Insurance with Investment?Combining investments and insurance into one package is never a smart idea.

More than 90% of Indians purchase endowment or ULIP plans, which mix insurance and investing, to meet their needs.

Both the returns on these products and the insurance coverage are subpar. Learn more about it.

One should absolutely purchase term insurance if they require it for insurance.

If you need to invest, you have a number of choices to pick from, including bonds, mutual funds, post office savings plans, and so on.

There are SIP mutual funds available so that investors may select their investment amount, time horizon, and frequency.

SIP can provide returns that are indexed to inflation.

Taxation of SIP and LIC

You receive a tax benefit of Rs. 1.5 lakh for LIC Investments under Section 80C, and the maturity is also tax-free. While the maturity or redemption of a SIP is tax deductible.

LIC vs SIP or mutual funds- Which is better?

After one year, SIP profits exceeding $1 lac are subject to a 10% tax. Gains are taxed at 15% if withdrawn before the year has passed.