Mutual funds Vs ULIPs: What is better for investing in midcaps and smallcaps?

economictimes.indiatimes.com:

Vivek Jain, Vice-President, Policybazaar.com and Pankaj Mathpal, MD, Optima Money Managers, in conversation with ET Now.


What kind of ULIPs are we talking about? The modern ULIPs are said to be more investor-friendly and looking at the increasing exposure in small and midcaps, specific midcap and small cap ULIPs have been launched. These insurance companies are really trying hard to not only woo investors but also trying to make the most of the trend wherein smallcaps and midcaps are ruling as far as returns are concerned in the portfolio. Considering the costing that is involved in a ULIP plan and the return that they need to churn out, what does having exposure in small and midcaps work for an investor?
Vivek Jain: Let me start off with talking a bit about the new age online ULIPs and talking a bit about their costs. Tthere are four key types of costs in a ULIP plan but in the new age ULIPs, the premium allocation charges are generally not there. The policy admin charges are also generally not there or are very low. There is a charge of life insurance which is the mortality charge that in the new age ULIPs is generally returned at the time of maturity. So the life cover that you are getting in a ULIP is generally is not costing you anything because that gets returned at the time of maturity.

Unlock Leadership Excellence with a Range of CXO Courses

What is then left is just a fund management charge, which is capped at 1.35% in case of equity funds and ranges around 0.8-0.9% in case of a debt fund.
Coming to new ULIP funds getting launched, midcap funds have always been there