Difference between Mutual funds and Insurance

Difference between Mutual funds and Insurance

Mutual funds and insurance has become very popular terms in finance sector these days and both of them are extremely important for financial growth and protection. Both mutual funds and insurance are related are finance yet both of them works differently and serve a different purpose, mutual funds are useful for financial growth and progress whereas the main purpose of insurance is to provide protection against any tragedy. Here are the basic differences between mutual funds and insurance.

Mutual funds

Mutual funds are pools of investment from an individual or multiple investors, mutual funds are managed by fund managers from investment companies. Mutual funds are one of the best options to earn safe and stable returns on your investment at the same time mutual funds schemes offer you highly diversified portfolio in which you can invest on debt and equity market. Mutual funds investment portfolio is always monitored by professional fund managers which allows you to earn stress-free returns on your investments. Mutual funds are categorized into various categories.

Types of mutual funds

Equity funds – Equity oriented mutual funds invest the majority of assets in equity-related instruments. Equity funds are beneficial for those investors who have experience of investing in a volatile and dynamic market, the volatile market offers high returns in less time. Beginners should invest in equity-oriented funds only after gaining experience because a volatile market can also work in an adverse way it didn’t handle properly. Equity funds are further divided into various types such as small-cap funds, mid-cap funds and large-cap funds etc.

Debt funds – Debt fund schemes invest majority portion of assets in debt instruments. Debt funds are steady and stable and they can provide risk-free returns on investment. Debt fund schemes are ideal for those investors who don’t have experience of investing in volatile markets. Debt instruments are not affected by volatility so these schemes are a good option for conservative investors. Debt funds are further categorized in various types such as dynamic bond funds, liquid funds and income funds etc.

Hybrid funds – Hybrid funds are a combination of both debt and equity. Hybrid funds allow investors to maintain a diversified portfolio which can offer the best possible returns. Hybrid funds can offer the best possible returns because they have the best risk to reward ratio, equity can provide major gains because of volatility while debt instruments can work as a protective shield against any major loss. Hybrid funds are further categorized into various types such as equity-oriented hybrid funds, debt-oriented hybrid funds and monthly income plans etc.
Benefits of mutual funds

Low starting cost – one the best advantage of a mutual fund is the low starting cost. If you want to start any investment then you need large amount money to begin your investment while mutual funds allow beginning investment with very small amount of money, you can even start your mutual fund’s investment with 500 rupees.

Diverse portfolio – Mutual funds are very diverse and allow investors to invest in equity, debt and bonds. You can even invest in both equity and debt under one scheme. Diversification of investment enables investors to earn returns from equity and debt markets.

Professional management – Mutual fund investments are always managed and monitored by professional fund managers meanwhile you can always get professional advice before you invest your money in any mutual funds scheme.


Insurance these days refers to a legal contract between the insurance provider and an individual to protect His/Her life or expensive goods from unwanted tragedies. Insurance is the best way to protect health and expensive objects in modern times. Insurance companies provide protection and safety to an insured individual in return insured individual have to pay a monthly premium to insurance companies. Insurances are very common these days and there are many types of insurances so every individual can pick insurance as per His/Her requirements.

Types of insurances

Life insurance – The main purpose of life insurance is to protect an individual’s life from unwanted tragedies. Peoples select life insurance to ensure the financial security of their loved ones in case any miss happening happen. Life insurance guarantees financial security individual and His/Her family’s in case of any medical urgency.

Automobile insurance – Automobile insurance is one of the very common types of insurance these days, the main purpose of automobile insurance is to protect your expensive vehicles from unwanted damage. Automobile insurance ensures financial help to repair an individual’s vehicle in case the vehicle meets an unwanted accident.

Education insurance – Education insurance ensure higher insurance of individual’s children. The expenses of higher education are usually high so every individual cannot bear that many expenses in that case education insurance bear all the expenses of higher education of individual’s children.

Benefits of insurance

Provide financial security – Insurance can be very helpful in a difficult time of the insured individual. Insurance gives financial security to an individual in case of medical urgencies, automobile repair in case of an accident or house repair in case of a house destroyed in natural disaster or fire.

Return on investment – Life insurance benefits individual like a long term investment. Life insurance comes with double benefits at one side it provides financial security to the individual if He/She requires urgent medical treatment, on other side life insurance provide a large amount of money on the maturity period. Having insurance is always beneficial because it ensures financial security in difficult times.


Both mutual funds and insurance policies have their benefits and risks. you must read and understand schemes carefully before selecting your mutual fund scheme or insurance policy. Mutual funds and insurance policy should be selected as per your goals and requirements.

Team R Wealth

Team R Wealth

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