'Investments' is a
sacred term for individuals. For many, investing means a kind of
'compulsory' savings from one's earnings and getting lumpsum
However, there is a lot more to investing than just that.
Investing falls within a broader gamut of financial planning. It
requires considerable thought and groundwork. Here, we have
outlined some important guidelines to be borne in mind while
planning your finances.
1. Do your homework
Before investing your money, ensure that you have done your
homework well. It is 'normal' for sales pitches to be
aggressive. Most sales executives are mainly interested in
'commission earned' or 'business garnered', which reflects in
their monthly targets. That is why one only gets to hear the
'best case scenario' from agents/sales executives.
A lot of sales agents/consultants try to exploit the
individual's vulnerability and lack of knowledge while making a
sales pitch. For instance, how else can you explain so many
individuals in the low-risk category investing in high-risk
Or why term plans, in spite of being the cheapest form of
insurance, are still not bought by most individuals? Or why
mutual fund IPOs find so much favour with investors even when
there is no fit in their portfolios?
One should understand his own profile in terms of income, risk
appetite and future plans and only then, make investments in
tune with the same. Individuals need to know what benefits
different products offer and how they fit into their financial
portfolios before taking a call on investing in them.
You must listen to advice from different quarters but the final
decision should rest with you alone after a careful analysis.
After all, it's your own hard-earned money.
2. Keep your eyes and ears open
Keep your eyes and ears open at all times for any investment
opportunity that comes your way. The opportunity could be by way
of changing market scenario or new product launches. Individuals
shouldn't lose out on any opportunity just because they didn't
know it existed.
Of course, this involves a bit of updating yourself with latest
product trends, market conditions and changing economic
scenario. This way, you will not be completely at the mercy of
the consultant/agent to provide you with investment-related
information and solutions.
3. Involve yourself
While buying any financial product, ensure that you have
involved yourself at critical stages. For example, while taking
life insurance, see to it that you personally fill all the
details in the proposal form. I
nsurance agents many a times, used to, themselves, fill up
details like the height and weight of the insured, his age and
medical history among other things, based solely on their own
judgement. They merely asked the individual to sign on the form
at the end.
What individuals don't realise is that this can lead to
rejection of claims at a later stage if discrepancies are found
in the proposal form. The insurance company cannot be faulted
for rejecting such a claim. It is a shortcoming on the agent's
part who should have requested you to fill the form yourself,
else fill it himself after verifying your details.
All the necessary medical tests should also be diligently given.
As mentioned earlier, any 'false claims' might lead to
rejections at a later date.
4. Inform your near and dear ones
This is especially true in case of life insurance. Inform your
near and dear ones as soon as the policy is bought. If your
spouse and/or parents know that you have a life insurance cover
wherein he/they are nominees, they will be better placed to
follow up with the life insurance company for the claim proceeds
should something happen to you.
Typically, life insurance should not be so sacred that you don't
broach the topic in the family. All related (and affected)
parties must know exactly what needs to be done in your absence.
5. Maintain a logbook
Always maintain a logbook of your life insurance
policies/investments. Individuals can and do have a variety of
investments ranging from life insurance (endowment, term plan,
ULIPs) to mutual funds and PPF/NSCs. A logbook should contain
details about the same.
Over an extended period of time, it becomes difficult for one to
remember or track investment details like maturity date,
maturity value and rate of interest. This logbook will take care
of that problem. Of course, it goes without saying that for the
logbook to be really effective and useful, it should be updated
periodically to reflect investments and redemptions.
This logbook should also include details of an individual's
liabilities like home loans, personal loans, the amount
outstanding on such loans, the EMI and business liabilities (in
case the individual runs a business) among others.
Details of the logbook should also be shared with your
dependents (spouse, children, parents). An important reason for
making a copy is, in case of an unfortunate eventuality, the
spouse knows his/her exact financial status. Also, one wouldn't
want someone to come out of nowhere one fine day and stake a
claim on the family's assets based on some 'fictitious'