Difference Between Money Back Policy And Mutual Funds

Mutual funds are well-known financial vehicles that aggregate money from investors and invest it in a variety of securities, including stocks, bonds, and money market instruments. Investors can benefit from expert investment management through mutual funds. The fund management team makes investments after doing comprehensive research and by the fund's objectives.

Money Back policies are set up to protect your family's financial interests in the event of a death or severe illness. Money Back plans are among the most popular life insurance products in India since they blend insurance and investing. As a policyholder, you will be rewarded every month for surviving. A Money Back plan is great for people who want a certain return on their investments, as well as monthly payouts and insurance coverage for themselves; the money they put in is known as a premium.

What is a Mutual Fund?

A mutual fund is a pooled investment vehicle administered by an asset management firm. The AMC receives funds from a multitude of investors who all have the same investing goal. These fund insurers provide each investor the opportunity to invest in a range of alternatives. They put their money into stocks, shares, money market instruments, corporate bonds, and municipal bond issues, among other things. Each investor holds a unit, which represents a percentage of the fund's assets. 

Mutual Funds: Some of the Most Popular

There are certain sorts of Mutual Fund schemes that are specifically intended to meet the needs of various people.

1. Equity

Equity, often known as Growth funds, is a type of mutual fund. These funds invest for a longer period and mostly in inequities, or the company's stock. Their main goal is to make money or increase the value of their assets. They are excellent for long-term investments since they can provide larger returns.

2. Funds that invest in income, bonds, or fixed income

Fixed Income Securities such as Government Securities Commercial Papers and Debentures, as well as Money Market instruments such as Treasury Bills and Paper, are used to invest this money. These are investments that are relatively safe and may be utilized to produce income. Examples include short-term funds, gilt funds, liquid funds, and so on.

3. Mutual funds that combine the perfect blend

These funds invest in both stocks and fixed income securities, giving them the best of both worlds in terms of growth and income. A few examples include aggressive balanced funds, pension plans, and monthly income plans.

4. What exactly is a Money BackGuarantee?

In a Money Back plan, rather than receiving a lump-sum payment after the policy period, the policyholder receives a percentage of the sum insured at regular intervals during the policy term. It's similar to an endowment fund with the added benefit of liquidity.

Money Back Plan Advantages

A Money Back guarantees usually come with the following benefits:

1. Payments regularly

You will get a steady stream of money in the form of a 'Survival Benefit' during the policy's duration.

2. Advantages of Maturity

These benefits are paid to the policyholder as the sum guaranteed, including survivor benefits, after the policy term. These benefits cover all sums, which are made up of three parts: the sum assured, the bonus, and the remaining survival benefits.

3. Benefits Upon Death

If a terrible incident such as occurs, death is almost certain.
The sum is guaranteed and a bonus is given to the policy's nominee. In such instances, the nominee receives the sum guaranteed as well as any bonuses applicable to the insurance. Because survival benefits are paid as long as the insured is alive, they are not included.

4. Bonus

In a money back policy, a bonus amount is an additional sum that helps you raise your total payment. However, the bonus amount is mostly determined by the company's success and the policyholder's behavior throughout the policy duration.

Conclusion

If you can't decide between a Money Back plan and a mutual fund, you don't have to be puzzled. While each financial instrument has its own set of benefits, it is essential to first have a full understanding of each one. When choosing a financial product, it's essential to know what each one has to offer and how it will benefit you throughout the period you specify. After all, it is your hard-earned money that you are deducting from your profits and investing in a certain strategy.

Also read - How Can You Save Tax With Money Back Plan?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.