Mutual Funds vs. Money Back Plans

There are various types of investment options available with you that can surely help you to accumulate wealth over time. You need to invest in those options that can offer high returns for your long-term financial security. We have covered the following investment in below article:

What is a Mutual Fund? 

Mutual fund is a pooled fund managed by an Asset Management Company (AMC). The AMC collects money from a number of investors who all share a common investment objective. These fund insurers provide exposure to each investor  to invest in a variety of options. They invest their contributions in the  form of stocks, equities, money market gadgets, corporate bonds and municipal bond issues. Each investor owns a certain unit, which represents a portion of the holdings of the fund. The gains collected from this collective investment is distributed equally among all the investors after deducting certain additional expenses, by calculating through a scheme’s i.e. “Net Asset Value'' or NAV.

Popular Types of Mutual Funds

There are certain types of Mutual Fund schemes which are specially designed to fulfill different requirements  of different people. 

• Equity 

Equity which is sometimes known by the name Growth funds. These funds investment are for a longer duration and invest mostly in equities i.e. in the shares of the company. Their primary objective is to create wealth or appreciate capital. They have the capability to collect higher returns and are best for long term investments. Examples would be -

• “Large Cap” funds are the funds which invest their money in large established business companies. 
• “Mid Cap funds” are the funds that invest in mid-sized companies. funds which invest in mid-sized companies.
• “Small Cap” funds that invest their funds in small sized companies. 
• “Multi Cap” funds that invest their funds in multi companies such as large, mid and small sized companies.
• “Sector” funds that invest their funds in the companies that are dealing with one type of business. For e.g. Technology funds are invested only in technology companies.

• Income or Bond or Fixed Income Funds

These invest their funds in Fixed Income Securities, like Government Securities Commercial Papers and Debentures, Money Market instruments such as Treasury Bills, Paper, and many more. These investments are relatively safer and are suitable for Generating Income. Some examples would be short term, gilt funds, liquid funds, etc. 

• Hybrid Funds

These invest their funds in both Equities and Fixed Income, and offer the best of both such as Growth Potential as well as Income Generation. Some examples would be Aggressive Balanced Funds, Pension Plans,and Monthly Income Plans, etc.

What is a Money Back Plan?

In a money-back plan, the policyholder receives a percentage of the sum assured at regular intervals during the policy tenure rather than getting the lump-sum amount at the end of the term like other policies. It's like an endowment plan with the advantage of liquidity.

They are quite suitable for individuals who wish to save lots of money through an insurance plan and maintain liquidity. If in a certain case a policyholder dies then the nominee of the policy will get the whole sum assured and the survival benefits are not deducted. Elements of a Money Back Plan

Benefits of Money Back Plan

A money back plan usually comes with the subsequent benefits - 

• Regular Payouts

The policy provides you with a regular source of income in the form of 'Survival Benefit' during the duration of the policy. 

• Maturity Benefits

These benefits are paid to the policy holder as the sum assured at the end of the policy tenure including survival benefits. These benefits include all the amounts which consist of three components such as the sum assured, the bonus, and the remaining survival benefits. 

• Death Benefits

If just in case of an unfortunate event like ,death of the life assured.The nominee of the policy gets the sum assured and bonus. In such cases, Bonuses applicable on the policy are also provided to the nominee along with the sum assured. This doesn't include survival benefits as it is paid as long as the policyholder is alive. 

• Bonus

Bonus amount is an additional amount that helps you to increase your entire payout in a money back policy. But the bonus amount is mostly dependent on the performance of the company and on the behaviour of the policyholder during the entire policy period. 

• Surrender Benefit

The guaranteed surrender amount mentioned in the policy is payable to a policyholder after the completion of 3 years by the insurer. 

Also read 

How The Money Back Policy Works?

Key Advantages of Money Back Policy

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.