Insurance, Taxes and Investments

Strange as it sounds but many people confuse themselves in the name of the above 3 items and either land up with what the agent suggested, invest some where it is GOOD to invest as heard from somebody or crib about it after 2 years!!!

Its amazing how a human being functions when it comes to money matters. I see on an average people fighting and haggling for 1 Re with a vegetable vendor or 1Re at petrol bunk but loose out 100’s of rupees in the above games!.

Games – Off course, unless you dont take to educate yourself about it, most people out there are ready to do a fast con job.

Insurance.

Your agent is only interested in selling you a money back/endowment policy with high premiums and low coverage – do you need it?

Your agent tries to insure everybody in family including your spouse and even the Kid in the name of future returns – what nonsence. Insurance is puraly needed to replace the financial liability which araises in the key earning memebers death or disability – I laugh when policies are taken on one housewifes and 5 year kids!!

Golden rule – “Dont mix investments with insurance”. Treat and respect them seperately. Period.

Ask the agent for term policy which is low premium but gives high coverage and watch the agent disapper never to trouble you again.

Taxes

Yes, upto Rs 1 Lakhs, you need to plan for it.

a) Most people including me forget our salary PF contribution, this by default is ignored and we invest. Kindly take this amount as the starting point.

b) Remove all the LIC, medical policy premiums. If anything is still left – sit down and calculate how much you can save and for how long – All 6 year stuff can go to the popular NSC, PPF types of issues – dont forget that anything deposited in PPF is not taxed, its interest is NOT taxed, its final withdrawal is NOT taxed – the only golden instrument which locks up things and gives it back safely.

c) A wiff of Mutual funds would do good too – save every month from April to next march so that you dont try to time the market and ride out all the ups and downs easily. As any broker would say “tax saving is not done ONLY in march”.
Investments

Now – A Equity Linked Savings Scheme ( ELSS) is NOT the recomended mode of saving and insurance as your agent brain washes you.

Investment needs to be split into debt or safe instruments which are gauranteed NOT to loose money and equity linked instruments for beating that deadly inflation followed by asset class things like land, egoistic entities like gold…

Everybodies ability to save depends on their incomes but the golden rule is a mix is allways suggested based on time horizon one can save money. Your age plays a direct role here. Younger you are – more risk you can take, older you are – debt instruments are preferred.

The pyramid rule applies here very much. First the solid base like savings bank account. This is followed by medium risk investments like Mutual funds etc. The last segment or the cream is the top – pure equities.

So next time, you know what you need and how to evade that salesman!