The Khatkhatem of investment products

It's heartening to know, so many of you have visited my blog even though it's been a long time that I have written anything, but believe me, nothing interesting was happening that I would have liked to share with you all, till yesterday.

Case study

Yesterday, (yes I know it was a Holiday but I was working/helping) I was approached by a friend who had been advised by an "insurance adviser/consultant" on a certain investment cum pension product with added life cover from a well reputed insurance company.

In konkani cuisine, there is a very nutritious and ethnic dish called 'khatkhatem', which is essentially a curry of a variety of  vegetables. While the essence of this dish is to provide a nutritious meal to the consumer, the above combination of insurance, investment and pension is totally unhealthy and a recipe for disaster.

Now this (story) product (being from an insurance company) has three parts to it .

1. Pay an annual premium of  Rs.70,000/- for 27 years. After which my friend would get Rs, 68 lakhs at his age of 60.(graphic attached)

2. He was also going to get a life cover of 60 lakhs.

3. Invest the accumulated 68 lakhs in a pension product (of the same company) at the age of 60 to get Rs 5 lakh per anum for his lifetime. (approx 41000 pm in 27 years)

Here is what I had to say to my friend (for the sake of simplicity I advised him in 

1. Contribute the same amount of Rs.70,000/- for 27 years in a simple product like PPF, your gross returns stand at 81.6 lakhs.(graphic attached)

2. Buy a term life cover of Rs 1 crore costing Rs. 15,000 annualy. Your returns even after deducting the term life premia from the PPF investment are 0.55% more and additionally you are getting 9.6 lakhs.

3. Pension always needs to be linked with inflation. If we consider a yearly expense of Rs. 2,40,000 and inflate it by 6%, then in 27 years my friend would need about 11.57 lakhs per anum, what good will that 5 lakh pension for life do if his requirement is more than double of that?

Coming back to the pension requirement from age 60 yrs, if I trace back the retirement corpus my friend needs, based on a yearly expense of 2.4 lakh, a figure of nearly Rs. 2 crore pops up. Mind you this is the inflation adjusted figure unlike a fixed pension beneift.

This friend of mine is risk averse, (In India who isn't?)  Hence my advise to him was, don't invest in Equity Mutual funds, but stick to simple products and you are much better off than falling prey to a mis - seller. In the coming years you can increase your investment whenever your income increases.

Cost: 

The commissions that agents selling mutual funds, Reserve Bank of India and other bonds and Post Office deposits, as compared to that received by insurance agents are a scandal. The commissions are enormous, generally around 15 per cent of first year premiums and 7.5 per cent in the second and 5 per cent from the third year onwards. For a financial product that is supposed to be an investment, this is a shocking level.

The above incident was a clear case of buyer beware. If you buy insurance as investment then your fixation for Guaranteed returns will ultimately pinch you very hard in the pocket, not necessarily right away but surely in the years to come. More importantly, buying illiquid insurance products will only diminish your choice of savings.

So, don't invest in Mutual funds, but don't hit yourself in the foot by buying unhealthy investment products from insurance companies, Agreed that their job is to sell, but it is for you to decide whether that concoction suits your financial life.

Ninad Kamat

CERTIFIED FINANCIAL PLANNER^CM

www.letsmakeaplan.in

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स्वच्छ भारत अभियान

Monday morning I received this forward from one of my friends on a popular messaging application platform on the mobile, it was about committing to the स्वच्छ भारत अभियान....

As a citizen of of India

I Commit that I will not throw

any garbage/waste on road/street

but only in dustbin or location

provided for the same.

I shall also spread this message

to my near and dear ones! 

This is an excellent initiative by our Honorable Prime Minister who himself symbolically wielded the broom on Thursday to launch a nationwide campaign that aims to clean up India in the next five years. The PM chose Valmiki colony in Delhi's heart - a place which was once home to Mahatma Gandhi - to do the sweeping in a small area for a minute, in the company of party colleagues and officials. He said that the स्वच्छ भारत अभियान should clean up the country by 2019, the 150th anniversary of Mahatma Gandhi.

He has further invited a set nine of popular celebrites and bureaucrats including Goa Governor Mridula Sinha, master blaster Sachin Tendulkar, Congress leader Shashi Tharoor, Bollywood actor Aamir Khan, Priyanka Chopra, Salman Khan, Yoga guru Ramdev baba and a team of 'Tarak Mehta ka Ooltah Chashmah'. 

While this mission is about the Gandhian principle of cleanliness, I feel the same applies to our financial life.

Here's how you can clean up your financial mess and streamline your finances by following the 3 simple steps given below:

1. Clean up your Insurance Portfolio:

Most of us have a number of traditional life insurance policies(sometimes only1). Its important to not mix insurance with investments and keep/buy only those Insurance policies which offer pure life cover and nothing in return at the end. This ensures that you are not earning negative real returns and actually utilising your money resources in the most effective manner. Now this does not necessarily mean you need to buy Term cover and go on "Hibernation", diverting surplus funds to better products like PPF, SIP's and taking sufficient Health Insurance is equally important.

2. Clean up your Investment Portfolio:

Over the years we all have "collected" investment products which have been either forced upon us by way of excellent sales and marketing techniques or because of our fixation and affection of fixed and guaranteed returns. This has led to accumulation of many junk investment products which have no defined purpose in our financial life. Take this opportunity to clear the mess and withdraw/redeem such investment products, start from ground zero if need be, by preparing a financial plan.

3. Prepare a Financial Plan

Financial Planning follows a well defined process, hence it can really help you streamline your financial life. In the first step itself it defines your current financial situation(starting from ground zero) followed by developing your financial goals.... (see image).Financial planning provides a road map for your financial life. It can make the journey less stressful, more fun, and more successful. And, you can start right now — even if its only a few steps at a time. If you do not have the time or expertise to prepare a financial plan connect with the right Financial Planner

If you go to see, it is not really necessary to find some or the other reason to start cleaning India or our financial portfolio's for that matter, but its always better to have a mission with a vision. You cannot embark on a journey without a destination. The स्वच्छ भारत अभियान is clearly a mission, and a clean India by 2019 a Vision of our Honorable PM. Although this looks like a herculean task, believe me, its very much achievable, after all you are going to spend 100 hours every year out of the available 8760 hours which is a little more than 1% of the total available time.

Don't forget to add a similar amount of time to clean and streamline your Financial Portfolio. After all this cleaning, I ensure you, you will have achieved peace of mind and increased your productivity multiple times.

Ninad Kamat

CERTIFIED FINANCIAL PLANNER^CM

www.letsmakeaplan.in

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How to build a portfolio for your financial life?( part II of II)

Here's how you can build your financial portfolio.

The first step towards building a portfolio is to have a clear goal. Once you have that, then it's relatively easy to build the rest of the portfolio in a way that's suitable for meeting your goals.

Goals that need to be fulfilled in the short-term are fundamentally different from long-term goals. Short-term goals are best fulfilled using fixed-income products such as a bank or a post office deposit.

If you are saving gradually towards such a goal, then the post office or bank recurring deposit is a reasonable tool. It yields a return of 7.5 per cent per annum. However, this should only be used for savings targets that are no more than two to three years away. Any longer and the ill-effects of the low returns will start becoming more and more meaningful.

For fulfilling long-term financial goals, the best option is to use a portfolio comprising of equity mutual funds. As we have read, equity is the only type of asset that can ensure that your money grows faster than inflation and does not actually lose value in real terms. Fixed-income investing is safer, but generally cannot beat inflation.

However, equity mutual funds can be volatile and thus only suitable for long-term investments. Over the short-term, the ups and downs of the stock markets could very well lead to temporary losses. Because of this, it is not recommend to invest in equity mutual funds if your financial goal is nearer that about three to five years.

This point is beautifully illustrated in the accompanying graph. This graph traces the growth of an investment over ten years in three different types of investments. We have chosen three types of funds and calculated the average performance of all funds that are more than ten years old. What looks risky in the short-term can work very well in the long-term. What looks like volatility can actually bring great returns.

Two of these funds are equity oriented. Of them, one invests in large companies while the other invests in smaller companies. The third type is a very short-term fixed-income fund called liquid fund. These funds are heavily regulated to be closest to risk-free investments. For the purpose of understanding returns in this graph, they can be considered equivalent to bank and other deposits.

Each and every investment should be done because of a strong reason. I see people who take Insurance policies to save tax at the last rush hour

of the year !!!   Better loose the tax benefit and don’t take that policy. That kind of investment is nothing more than a waste or burden.

When someone asks you the reason for making a investment, you should know why you did it ?

“A good investment is one which has a purpose”

Ninad Kamat

CERTIFIED FINANCIAL PLANNER^CM

www.letsmakeaplan.in

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How to build a portfolio for your financial life?( part I of II)

To understand how to build a portfolio, we need to understand what the term means and what it implies. This is necessary to understand what role a portfolio plays. A portfolio is actually a type of briefcase. No, seriously, the original meaning of the word is simply a bag designed to carry documents in. It became associated with investments because in the early twentieth century, stockbrokers would keep each client's share certificates in a separate portfolio. From thereon, the word gradually came to mean any kind of collection of documents. In finance, it specifically means the investments held by an investor, generally all the investments that an investor has.

However, the word's meaning in personal finance has evolved a great deal. A portfolio is a lot more than a collection. For individuals, the best way to plan their investments is to have a separate portfolio for each financial goal.

Different mixes of funds, stocks and other assets lead to different risk levels and different gain expectations. Most people find it difficult to match these to what they want. If you're asked, "What is your risk level?" you'll probably give an answer of some sort but it will just be your gut feeling.

However, if you think of specific financial targets and think of the money needed for them, then you will be able to answer questions about risk and returns precisely. For example, you'll need money for your daughter's higher education after three years. You'd like to buy a house at least ten years before retirement. You'd like to go on a vacation to Europe after two years. You'd like `2 lakh to always be available for emergencies.

Each of these goals is very precise. The risk you can take with it, as well as the amount of money needed can be quantified quite precisely. Therefore, it is relatively easy to decide what kind investments should be made for each of them. Each individual must have many portfolios, one for each financial goal. The other important thing is that a portfolio is not simply a collection. It has different parts that fit together in specific roles and complement each other. 

With experience, you'll learn the basics of constructing a portfolio as well as learn about some model portfolios.Having a separate portfolio for each financial goal gives you the best chance of fulfilling them.

To be continued....

Ninad Kamat

CERTIFIED FINANCIAL PLANNER^CM

www.letsmakeaplan.in

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Sketch is sourced from Carl Richards of behaviourgap and is used with prior permission of the creator. They are subject to copyright.

Woww!!! SENSEX at 27k.... You still waiting on the sidelines??

I always wonder whether its the dynamic nature of Equity Markets or the high returns that has attracted me towards this asset class.  But when I dig a little deep I find that its actually both (frankly with a slight bias towards the nature). Having entered this personal finance profession(mid 2007) at the cusp of a recession, I can proudly say I am grateful enough to experience a complete cycle of equity market movement. Having said that, I also wonder about, how many investors benefited from this complete cycle. And the the only number that comes to my mind is, a very minuscule one - not more than 5% of Indian investors.

But why??

Is it the volatility of equity markets, the fear of loosing your hard earned money, or is it the Fear of Sensex Figure aka FSF (right now its 27000) that is keeping you away. While I have already covered the first two aspects of this question in my earlier blogs, I would like spend some time on (this stupid) FSF.

Timing the market

FSF is nothing but greed of timing the market. Back in September 2013, when everyone was bearish about the economy and the equity markets, did you ever think that the stock markets would zoom over the next nine months and that equity funds would deliver a 50 per cent-plus return? No, right. Nobody can say for sure when the next correction will come about, so that you can start your investments. Instead if you had simply started investing a small amount (via mutual funds) you would have generated returns in excess of 12%.

Converesely:

What this same FSF could also do to you is, as and when your financial goals are near it will deter you from withdrawing or shifting your Equity investments to a safer (debt) asset class if the markets are inching upwards, as greed would have overpowered your consciousnesses about financial goals and you will have made a strong attachment towards this high return instrument.

In fact, behavioral finance tells us that investors are emotionally wired to act at exactly the wrong times. Although the dynamic nature of Equity Markets makes it important for a investor to dedicate a lot of time towards research of individual stocks, thanks to Mutual funds this is not mandatory. We already have a good set of consistently performing mutual funds which you can choose and start your investments systematically without FSF.

For the first time I am sharing an example of my personal investments with you. I have purposely deleted the names of the funds as I feel that's the least important(for now). Its the time(no of days) that I would like to point out that my investments have spent in the market. In the first investment which is an SIP I made it a point to continue investing through the bad times as well as the good ones, whereas the second one was a gift by my father and I am still proudly holding it.

When I look at people still investing in boring traditional investments, I have mixed feelings of sadness & despair. Why do investors lack interest in Equities, rather what is so interesting about Fixed deposits/Real Estate/Gold that people flock to it. History is a great teacher, they say, and I hope it teaches us to make better decisions when it comes to our personal investments.

Ninad Kamat

CERTIFIED FINANCIAL PLANNER^CM

www.letsmakeaplan.in

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Are you still Procrastinating......

Back in April I had written about how Inflation invisibly effects our Financial health. Today its time to focus on its evil twin - Procrastination - is the practice of carrying out less urgent tasks in preference to more urgent ones, or doing more pleasurable things in place of less pleasurable ones, and thus putting off impending tasks to a later time, sometimes to the "last minute" before the deadline. 

So consider this, we have a standard (hard) working life of about 30 yrs, and due to increase in longevity and advancement in science and medicine we need to consider an equal number for our post retirement life.

But here' what most of the young population feels:

As young and unmarried individuals who have just begun to earn and feel good about it, they do not engage seriously with money or investment decisions. There are several excuses—not enough money; too many choices; very complex; uncertain about where to start; too much paperwork. While you procrastinate about money and also allow your financial health to play out by default.

This lazy attitude of मागिर पलोया (procrastinating) with your money life is (quite irritating) causing unwanted troubles in the future. 

There are several youngsters who have not opened their bank statements, haven't deposited the dividend cheques, not filed the tax returns, or completed the KYC process with a mutual fund. They have a PAN card since the employer insists on it. The taxman would want to know if they can establish how they built their assets, and whether they paid the taxes on their income before doing so. Assuming you won't get caught is a bad idea. Keep empty shoe-boxes to store statements, bills, papers, and notices and take the time to sort them periodically. Form groups to know how to file your tax and do it on time. These habits, if developed early on, will help, as you move up in your career and your income rises.

Conclusion:

Over the past decade, India’s young brigade has increased exponentially, and though our schools and colleges have thought us about compounding in our mathematics syllabus, they have not really played their part of imparting the most basic and practical knowledge about its effects (and that of inflation either). 

After all, in this era of smart phones, I dont think it will be that difficult to learn and achieve much more with our money if we stop procrastinating.

PS: I had bought a second hand tablet in February this year and was planning to pen my ideas via sketches (inspired by Carl Richards of Behaviour Gap). Although it was only used to for amusement of my son(procrastinate) till sometime last week when Janki asked me "didn't you buy this for office work". So in all seriousness here is my 1st sketch. Hope I can improve upon this.

Ninad Kamat
CERTIFIED FINANCIAL PLANNER^{CMwww.letsmakeaplan.in}facebook

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Money Is not Everything...

After reading Wealth can only be created some time back you might think why I am saying - Money is not everything, now. Of course, money has its own role to play, but don't give too much power to money. It’s not just money that makes things work; people have power in their determination. Many of the big demonstrations that have happened in the world, big changes that have come through in the world, they didn't happen through money.

When Mahatma Gandhi started this big movement in India, he didn't do it because of money. It was a vision and it is this vision that takes you along. Money has its role to play, but don’t think money is everything.

Money can help us be more effective in our service and help it expand, needing to attract money to sustain yourself keeps you grounded and connected with meeting the true needs of society. Money creates relationships with those you share it with, and relationships can help your spiritual development. Money can be a wonderful mirror for you to see yourself more clearly.

"When our hearts are pure, our intention is clear and the work is good, resources will come. When it is needed, as much is needed, it will simply come." ~ Spiritual Guru

Ninad Kamat

CERTIFIED FINANCIAL PLANNER^CM

www.letsmakeaplan.in

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How to connect with the right Financial Planner(Part II)

The biggest issue one faces in hiring a Financial planner is “Trust”, so you need to build a great level of trust with the Financial planner and for that you need to interact with him, spend time with him, get references from family and friends and once you are satisfied you can then hire him/her. A financial planner at the end is someone who is also interested in educating you and not just making money from you. Just imagine a doctor who gives you medicine, but does not tell you the preventive measures to take, so that you are not ill next time. Would you like to visit him again? He should be interested in educating you up to a level where you can take informed decisions yourself. Only then you can call him a good doctor, the same applies to a financial planner.

Unmask the Poser Smart questions to ask a financial planner and the answers he should be giving you Q. What qualifies you to be a financial adviser? A. I am a certified financial planner (CFP) or I have a certificate from Irda/Amfi/National Institute of Securities Markets. (A CFP is better qualified to manage a portfolio). Q. Do you have relevant experience? A. Yes (Make sure you are not the guinea pig. The years do not matter so much as the kind of exposure and profiles he has handled in the past). Q.Can you give references from current clients? A. Yes (Speak to at least two existing clients to ensure you get quality service). Q. Will you draw up a service agreement? Will the advice be given in writing? A. Yes, and the advice will be recorded in writing. Q. Is my fee your only source of income? Do you get commissions for the products you recommend? A. Client fee is my only source of income. I do not earn commissions on the products I recommend.

Current Status of Financial Planning Practice in India

There are three ways a Financial Planner in India makes money:

1. By pure consulting and advising (by making the financial plan)
2. Through Commissions (from products sold to clients) 

3. Combination of 1 and 2


So what you have to look for while hiring a financial planner is that He/She should be an Independent Financial planner and  has no compulsion of executing the plan through him. There should be freedom in Clients hand that he/she can execute the plan from anywhere he/she wants. As an additional service the Financial planner can give an option to have financial plan executed through them, but it should never be compulsory, as otherwise there will always be some level of biased attitude while recommending products to you.

How much to Pay:
This is a debatable topic, still let’s try to understand and find out how much do Financial Planners deserve.
Financial Planners in US and Australia get as much as $150 to $200 per hour. (that’s close to 7.5k – 10k per hour). Financial Planners in India cannot and should not ask for that kind of money for two reasons:

 

1. They will not get it 

Financial Planning is new in India and there is still no standard procedure to create a financial plan. So what they can expect is not more than $30-$40 max per hour.

Now in India people will laugh if a Financial Planner asks money in per hour basis, it’s just not what Indians can imagine. We Indians like to pay one time fees or lump sum fees, that’s the model India runs on. A good financial plan takes around at least 10-12 working hours (strongly focused and distributed across several days). From that point of view a price range of 10k – 25k looks reasonable for a Financial plan. Anyone who is charging less than Rs 10,000 is undervaluing it and working more for less money. Other point is, you have to understand that all financial planners differ from each other and the amount of detail and care they take while creating it.

BE SMART

Certifications from Amfi and Irda are essentially a licence to sell a certain financial product, while a certified financial planner, or a CFP, is a qualified adviser. It is important to distinguish the two. Better to pay for good advice then act on free advice that is biased.

Ninad Kamat

CERTIFIED FINANCIAL PLANNER^CM

www.letsmakeaplan.in

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How to connect with the right Financial Planner(Part I)

As a blogger, there is no specific time/date/place where you will get an idea to write about( I know I've said this before).

Like this: Ironing my office going clothes in the morning has been a ritual for the past 8 years. These 10-12 minutes are also where some of the ideas for this blog pop up. Here is one interesting topic that came up the other day I would like to share with you.

Are you looking for Financial Planner/Advisor? If you are, you should go through this post that talks about almost all the necessary information you need before hiring a financial advisor. Most investors are confused about simple things like, where to find a good financial planner/advisor, what they should expect from him and most importantly they do not understand the financial planning environment in India. There are lots of myths and misunderstandings around the financial planning field and this post will give you most of the basic information you need to be aware of, while hiring a Financial Advisor.

First things first:

Who is a Financial Planner:

A financial planner is a professional who helps his clients to deal with various personal finance issues through proper planning. Just like we have a doctor for our physical problems, we have Financial planners/advisors for our Financial problems. Just because you know “what is a Mutual fund” or some “Tax laws” or can buy and sell stocks on Stock market, it does not mean that you don’t need a Financial planner. Financial Planners are professionals who have got the requisite qualification, have learned strategies and have in-depth knowledge and experience to understand how to structure/restructure a common man’s financial mess and come up with a sound long term plan which will help a client achieve his/her financial goals in future.

Just like CA, MBA, CS and other professional certifications, there exist a certification for Financial Planning which is called CFP (Certified Financial Planner). Read more about CFP Here. CFP is regarded as the top most qualification in Financial Planning  and it is recognized worldwide.

Who is not a Financial Planner:

A lot of CA’s, CS’s, MBA (finance), CFA, ICWA and other Finance related professionals feel that they are the right professionals to do Financial planning for individuals. Just because “Financial Planning” or “Personal Finance” has “finance” word associated with it; does not mean that any one from different finance field can be a Financial Planner. Financial Planning is very different from what CA, CFA or a MBA Finance does.

Financial planning deals with individual personal finance, his future financial goals, the risk taking appetite. Having  CFA or MBA (finance) as qualification will definitely help at some level and may be some CA’s, CFA’s or MBA (Finance) have a great understanding of Financial Planning, but it’s not true for everyone in general. In the same way, any ULIP Agent, Insurance Adviser or Mutual funds agent, Wealth Manager, PMS guy is not a Financial Planner. These people are there to assist a Financial Planner to sell the products. In the analogy of Medicine field, Financial Planner is a Doctor and all these agents, Wealth managers etc. are like Pharmacists.

There are two ways of hiring a Financial Planner:

1. Hiring a Financial Planer

In case you want to hire a CFP (which is recommended) you can get a list of CFP’s in India at FPSB website link.  You can find out CFP based on

• Name/Company
• City/State
• Nature of Employment

Tip: You should search for CFP’s who are “Independent Financial Planners” or “Self Employed”. 

2. Hiring a non-CFP

You can also hire a non-CFP but you have to be very careful while doing that. Before CFP certification came to India, we had excellent planners in the Industry who understood the financial planning process subconsciously and still practice that but without having the CFP certification. They can be from various backgrounds but can have sound financial planning knowledge. They are a rare species.

To be continued....

Ninad Kamat

CERTIFIED FINANCIAL PLANNER^CM

www.letsmakeaplan.in

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Why ULIP's are bad for your financial life.

Flashback...चार साल पेहले...

The row between the Insurance Regulatory and Development Authority (IRDA) and the Securities and Exchange Board of India (Sebi) is turning into an arm-wrestling match between two statutory bodies with huge clout. The chain of Sebi's argument goes like this: Life insurers offer unit-linked insurance plans (Ulips), Ulips invest in equity, hence, Sebi wants Ulip schemes registered like mutual funds. IRDA has no intention of ceding control. Since both regulatory bodies have clout, they will eventually work out some compromise.

और अब And Now....

The so-called turf-war on ULIPs that SEBI and IRDA have been fighting has now taken a life of its own. In reality, just about the least important thing is who regulates ULIPs, while the most important thing-or rather, the only important thing-is that investors understand what they are getting into and make the choices that are best for them. I find that there's a great deal of misinformation floating around about ULIPs and why exactly are so called investment - insurance advisors in favour of them.

Perception: ULIP expenses have been lowered by IRDA. Expenses are now down to just 3 per cent for ULIPs of up to 10 years and 2.25 per cent for longer ones. Mutual funds, by comparison, have higher fund management charges.

Reality: The way IRDA has framed the rules, 2.25 or 3 per cent is effectively the average over the entire lifetime of a ULIP. The charges are heavily front-loaded. During the first year, these charges are as high as 40 to 70 per cent. If the customer cannot continue with a policy for any reason, then his real expenses are far higher. And as it happens, a huge proportion of policies lapse during the earlier years. The front-loading has no logic, except to enrich insurers and agents. And fund management charges being lower than mutual funds is a not a full comparison. In mutual funds, total expenses are capped at 2.25 per cent for equity funds and less for other funds. These are not comparable to the fund management charges of ULIPs because ULIP customers also pay premium allocation charges, policy administration charges, mortality charges, and for guaranteed ULIPs, guarantee charges. Comparing fund management charges alone is a joke.

Perception: ULIPs have led to a massive rise in insurance penetration in India.

Reality: Insurance means insurance, in the sense when the insured person dies, his family gets money to pay for food, rent and education. In a country with minuscule social security as ours, the growth of insurance has to mean the growth in the reach and quantum of risk cover for lives. To call a non-insurance, market risk-bearing product such as ULIP insurance and then present it as evidence of the growth of insurance is simply dishonest.

Ulips have been around for several years. The structures are known. Almost every financial newspaper and business magazine of repute has analysed Ulips and shown in detail why investors should avoid them.In themselves, Ulips are not fraudulent; it's just that investors can get far better deals. So this is a classic case of “buyer beware”. If investors insist on buying Ulips, there isn't much more that can be done since there are already ample warning signs in the public space. It is also easy to understand why agents push Ulips - due to huge front-loaded commissions.

Having said that, the mistake investors make, is to confuse insurance with investment. Insurance is a bet you want to lose. Investment is a bet you want to win. 

Two entirely separate intentions. Use two different instruments.

Ninad Kamat

CERTIFIED FINANCIAL PLANNER^CM

www.letsmakeaplan.in

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Image Source: GKtoday.in

Why You need Health Insurance

Consider this : 

In Bengaluru, consultant architect Francis Jackson had to rush to the hospital in January this year as he complained of shooting pain in the abdomen. Sure enough, it was diagnosed as a kidney stone and Francis had to undergo surgery for the same.
The cost of the procedure and stay at hospital was Rs 75,000.

Thankfully he didn’t have to shell out a single rupee, as he was covered under a Health Insurance plan with a limit of up to 3 lacs.

What is Health or Medical Insurance ?
The term health insurance is generally used to describe a form of insurance that pays for medical expenses. It is sometimes used broadly to include insurance covering disability or long-term nursing or custodial care.

To understand it in simple words, you pay some amount of premium every year to a company, and if some thing happens to you, like an accident or if you have to undergo a surgery, the company will reimburse/pay for it, provided the illness is covered under the Health Insurance Plan.


Why do I need a Health Insurance ?
This is the most common thing you can hear from a person who wants to avoid Health Insurance, but its one of the most important part of any financial portfolio or plan. People concentrate on the fact that, what if nothing happens to them, but they fail to imagine the situation when some thing can actually happen.

The human body is a complex thing, and no one knows what can happen in future, even things like accident is not in your hand , you can take try to avoid it, but what about others, what if some car hits you? What if accidentally you fall from some place? It can happen and it does happen, and when you have to pay a hefty bill for the treatment, you will soon realise that its a good idea to get covered by paying a small premium every year, rather than spending your hard earned savings.

Why is Health Insurance more important now as compared to earlier years
Yes , Health care costs have increased many fold in last 20-30 yrs. Also now, more and more young people are complaining of heart and other diseases which were seen in older people earlier. Because of high stress jobs, poor eating habits and other similar problems, rise in the number of cars, pollution etc, the probability of getting some illness or meeting with an accident has increased substantially compared to earlier days.

What can you do..

• Get a good coverage for diseases and surgeries.
• You have to pay the premium annually for which you can plan ahead, set up a Recurring Deposit A/c or start an SIP in a Liquid fund to set aside money for your annual premium.
• You get tax deduction under section 80D up to Rs 15,000(subject to IT Rules)
• You can also go for group insurance(family floater), its ideal for a family with spouse, parents, kids … With group Insurance every one is covered and you pay less premium , also its more advantageous because there are many things which are covered in group insurance and not single person health insurance.
• Do some online research and choose the product.

Ninad Kamat

CERTIFIED FINANCIAL PLANNER^CM

www.letsmakeaplan.in

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