Insurance vs Mutual Funds: Better option of investment for millennial today

September 03, 2020 12:39 PM

Investments for some is just to put aside funds to save tax under Section 80C. But the younger tech-savvy generation has started to look at investing in life insurance plans or MFs which can help them to have financial freedom.

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Taken together, Gen Y and Gen Z include the people that fall between 27 and 37 years of age. Millennials represent nearly 34 per cent of the Indian population and 47 per cent of the workforce. India’s millennial population at 400 million is the highest in the world and its purchasing capacity is projected to cross 330 billion dollars by 2020.

In addition, this very section of the population is quickly catching up on savings, the focus on consumption. According to a report by Deloitte India and lobby group Retailers Association of India, millennials are now 47 per cent of India’s workforce.

Their approach towards financial investment differs quite a lot as compared to their preceding generation, they tend to evaluate investment from a technological perspective. Therefore, being a financially literate generation, millennials are choosing online channels for their insurance purchase.

Investments are for others, just to put aside any funds to save tax under Section 80C of the Income Tax Act. But the younger tech-savvy generation has started to look at investing in life insurance products or Mutual Funds which can help them to have financial freedom.

When it comes to investment choices, there are numerous choices each individual faces. Wherever one plans to invest the money, however, and how much that is a personal choice. With a wide variety of financial items at the fingertips, it may be an exhausting affair to pick one specific product. The main interests here are the goals.

A BankBazaar study titled ‘Aspiration Index 2018: Decoding Indian Millennials’ on millennials shows that millennials prefer having life insurance to investing in mutual funds. The study further shows that while 72 per cent of millennials have life insurance policies, 56 per cent prefer investing in mutual funds. The study says that most millennials do not have a high-risk appetite. Millennials seem to be portrayed as ‘high on risk’ in general, but do not seem to exhibit that when it comes to financial planning.

Here are the key aspects one can keep in mind;

Financial Goals

A life insurance policy is a crucial component of a retirement plan for an individual because it covers the financial security of your dependents, parents, or children. Mutual Funds are a valuable commitment to meeting your long-term financial goals, whether it is for college, purchasing a home, starting a business, etc.

The latest trends of Insurance products on Return of Mortality Charges makes the product much wider and acceptable as an investment. – Additional stamp duty will be levied on the purchase of mutual funds, including lump sum, SIP, STP, and dividend reinvestment


If a life insurance plan is used for investment purposes, it is not only expensive but also does not promise similar returns to the mutual funds. Yet the new Insurance plans are consumer-friendly pair with stronger returns and insurance rewards for changing times. In addition to a mutual fund offering the option of fund diversification, you can maximize your returns without having to depend on a single fund for growth

For less risky investors, Guarantee Products offerings are lucrative than any Fixed Income Instruments as it also offers inbuilt Life Insurance which is otherwise not available on MF Exempt Exempt Exempt (EEE) Benefits which is otherwise not available under MF


If we talk about liquidity in terms of Mutual Funds, except with ELSS. one can withdraw funds within a year, however, 1 per cent of the fund value (exit load) is deducted whereas we get limited liquidity due to a minimum lock period of 5 years in insurance. Moreover, Insurance as a product is EEE wherein Mutual funds attract LTCG / STCG


Insurance is ideally designed for people with an asset building and investment long term financial program. If it’s for retirement, schooling for children, or other financial ambitions, it’s kept as an asset until maturity works. This gives you double savings and security incentives, all in one package.

Furthermore, they are available with Mutual Funds for individuals who are not knowledgeable with the equity market or different fund options but would like to benefit from long-term capital appreciation with equity investment. Today’s mutual funds are worse off with the new implementation of stamp duty adding fuel to expense for an investor. Also, the Insurance products feature of ROMC makes proposition much more matter than Mutual fund.

By, Pankaj Chauhan, CEO, and MD, EPOCH Insurance Brokers

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