Welcome to our insightful column into the world of financial wisdom! In a time where the specter of financial frauds looms large in Kashmir, this column is curated to be your beacon of light, guiding you through the intricacies of money management and investment decisions. Financial literacy is crucial for making informed and effective decisions about managing money, investments, and overall financial well-being. Our aim is to empower individuals to make sound choices and build a secure financial future.
By Irshad Mushtaq
Banks play a crucial role in the financial system by accepting deposits from the public and providing loans and other financial services. However, in recent years, some private banks have expanded their services to include insurance products. This shift has led to a situation where innocent investors are being lured into insurance policies without fully understanding the implications.
Many investors fall victim to emotional sales techniques that promise guaranteed returns, bonus benefits, and assured incomes. However, they often fail to consider the lock-in period, charges, and overall returns associated with these policies. It is essential for investors to spend quality time researching and understanding the intricacies of any investment, especially when it comes to insurance products.
One common example is investing Rs. 10,000 per month, which amounts to Rs. 1.20 lakh per annum and would result in savings of Rs. 12 lakh in 10 years. With an expected rate of return of 15%, the maturity amount would be around Rs. 26.30 lakh. However, by investing the maturity amount into a liquid fund with an expected return of 6%, one could generate an annual income of Rs. 1.56 lakh for a lifetime, in addition to the saved amount. This demonstrates the importance of carefully considering investment options and not succumbing to emotional sales tactics.
One key piece of advice is to never mix investment with insurance. While insurance has its own importance, it should be kept separate from investment decisions. For insurance, term insurance or health insurance are the most suitable options.
Investors should avoid schemes that restrict their ability to exit or involve excessive charges, as these can have detrimental effects on their financial planning. It is imperative for individuals to be well-informed and cautious when making investment decisions. Long-term, high-quality investments with low costs and flexible exit options, such as mutual funds, are recommended. Ultimately, taking the time to thoroughly research and consider all aspects of an investment decision is crucial. Once a decision has been made, it is important to stay committed to the long-term plan and avoid being swayed by emotional sales tactics. By following these principles, investors can achieve their financial goals and secure their future.
- Author is NISM qualified, Mutual Fund advisor and distributor having experience of 18 years in financial market.