SIP or ULIP: Which investment is better for building a ₹1 crore fund?

Investment Planning: Both SIP and ULIP are long-term investment options. Let us find out which of these offers better returns and greater benefits for building a fund of ₹1 crore.

SIP vs ULIP News: Given today's rising inflation and financial needs, everyone desires to have enough money in the future to easily meet their requirements. Merely saving money is not enough; investing wisely—whether for buying a home, children's education, or other expenses—is crucial. That is why people seek investment avenues that not only provide good long-term returns but also cater to their specific needs.

Among the various investment options available, SIP and ULIP are two popular choices that investors select for long-term wealth creation. Let us explore which option might prove more beneficial for building a ₹1 crore fund.

What is an SIP?

An SIP (Systematic Investment Plan) is a mutual fund investment method that allows you to invest a fixed amount every month. Its key advantage is that you can start investing with a small sum and reap the benefits of compounding over the long term.

What is a ULIP?

A ULIP (Unit Linked Insurance Plan) is a combined investment and insurance product. Typically, a portion of the amount deposited in a ULIP goes towards life insurance coverage, while the remainder is allocated to investments. However, various charges are deducted during the initial years, which can impact your early returns. ULIPs also generally come with a mandatory lock-in period of at least five years.

How can an SIP help build a ₹1 crore fund?

Monthly investment: ₹10,000
Estimated return: 12% per annum
Investment tenure: 21 years
Total investment: ₹25.20 lakh
Estimated fund value: ₹1.04 crore

The math behind building a ₹1 crore fund via ULIP

Monthly investment: ₹10,000
Estimated return: 8% per annum
Investment tenure: 14 years
Total investment: ₹16.80 lakh
Total duration: 30 years
Estimated fund value: ₹1.04 crore

In this scenario, you would need to invest for 12 years; however, a fund of ₹1 crore can be accumulated over a period of approximately 30 years, as the money needs to remain invested for the long term.

Which option is better for you?

If your goal is simply to build a large corpus over the long term and achieve better returns, an SIP could prove to be a good option for you. On the other hand, if you desire life insurance coverage alongside your investment, a ULIP might be a better choice.