Why you Should Choose Capital Guarantee Plan Over Mutual Funds?

To do strong financial planning, it is imperative to look for options that not only provide financial security but also give an opportunity for wealth creation with the benefit of high returns in the long term. Nowadays, there are many different investment options available in India, which offers the combined benefit of profitable returns and safe investment.

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7.7 Crore

Registered Consumer

Insurance Partners

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Policies Sold

Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

To make an informed choice, it is very important that you consider different aspects like liquidity needs, risk appetite, financial goals and investment horizon while investing. Nowadays, investors often fear investing in the market due to the risk of losing money. However, by choosing a safe investment option, one can not only cover the market risk but can also create a financial cushion in the long term.

Talking about the safe investment option, the Capital Guarantee Plan is a one-stop solution for investors who wants to enjoy the benefits of both worlds. Let’s read further to know why you should choose a capital guarantee plan over mutual funds.

What is Capital Guarantee Plan?

Capital guarantee plans are ULIP plan that primarily focuses to safeguard the investors' money from any losses during the economic crisis. It is a combined investment and insurance product where 50-60% of the investment is made in Guaranteed Return plans and the rest is invested in equity. The plan can be purchased for different policy tenure and premium paying tenure.

As the name suggests, the plan guarantees a 100% return of money invested towards the policy on maturity.

Capital Guarantee Plan or Mutual Fund- Where Should you Invest?

The major benefits of investing in a capital guarantee plan are that the investment is 100% secure. This means that the plan guarantees that on completion of the policy tenure, the investor will get back the entire premium paid towards the policy. Thus, it protects the investors principal in this economic down term.

The plan allows the individual to enjoy profitable market returns with zero risks to capital. Moreover, as an insurance cum investment plan, CG plan offers 120 times of monthly premium as a life cover from day

On the other hand, if we talk about mutual funds, then mutual funds certainly offer better returns as compared to the capital guarantee plan. However, the risk involved in mutual funds is also very high. If we compare both the plans then it has been observed that a capital guarantee plan offers a better return than debt mutual funds.

Moreover, MF being a pure investment product there is no life cover option offered under it. Some of the other disadvantages of investing in mutual funds include high fees, tax inefficiency (tax benefit can only be availed in the ELSS scheme) and exit load.

Mutual funds can be a lucrative option of investment for investors who have a high-risk appetite and who want to gain a high return on investment in the long term. However, investors who are looking for a safe investment option should invest in a CG plan, as it provides the benefit of both financial security and guaranteed returns.

Capital Guarantee Plan Returns

For an Investment of Rs 1 Lac for 10 Yrs & Withdrwal after 20 yrs

Insurers	Guaranteed Returns	7 Yr Fund Performance	Market Linked Returns (basis 7 Yr performance)	Total Returns
Tata Aia Life	10,15,280	19.42%	81,42,870	91,58,150
HDFC	10,00,006	14.97%	41,40,231	51,40,237
Birla Sun Life	10,00,200	16.83%	47,85,647	57,85,847
Bajaj Allianz Life	10,00,004	15.87%	48,06,889	58,06,893

* The rate of return is as of June 26, 2021

Note- Figures may vary based on the market performance

Why is Now the Right Time to Invest?

As the Sensex and equity markets at record has hit the low levels, it is expected to only go up after the Corona Virus Epidemic is over and the returns after 1 year can be as high as 100%. Also, Sensex is on the road to recovery and have recovered from lows of 28K to 35K in June. The Sensex has increased by 82% after the first wave of COVID-1. The sharp fall of the market creates an investment opportunity, and with the past experience, it has been studied that the Sensex overcomes the global virus outbreak over the long term.

Epidemic

SARS

Jan- Mar 2008

EBOLA

Dec 2013- Jan 2014

COVID-19

Jan 2020-Mar 2020 (First Wave)

COVID-19

April 2021

(Second Wave)

Fall During Outbreak

-10%

-3.0%

-33.6%

-6.36%

Return After 1 year

84.0%

42.5%

82%

Wrapping it Up!

Investing in a good plan not only result in good profit but also secures the life of an individual. The money invested now will help to create a financial cushion in the long term. Thus, the investor should plan to invest as per their risk taking capacity and financial needs. With the advantages of a capital guarantee plan like, 100% guaranteed return, tax efficiency and life cover, it is one of the best options to grow your corpus for the long-term without getting affected by the market fluctuations.

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-12-2024

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).