Do You Good saver but a bad investor?
The below writeup will help you to understand how do you save intelligently but invest badly.
Every one of us are financial planners as well as doctor also.We rely on self-medication when we are ill or need a medical assistant when our family members are hit by minor medical emergencies. Similarly, we also think that we are a good financial planner, who can plan finances very well. We always believe that investments that are higher risky, give us more returns. We judge an investment product depending upon its past performance, current status and reviews given by friends or relatives.
It is always seen that most people follow the investment advice meant originally for their friends or colleagues. They usually do not think that this advice could be applicable to their friends, but may not be suitable for them. Such an attitude may land them in a huge financial mess.
We aside a part of our monthly income as savings, however, we always understand that more profit more risk,This shows we are a good saver, but a bad investor. Our obsession with guaranteed returns is so high that we end-up earning insufficient returns. Due to inflation, we lose the balance between risk and return.
How do we generally save?
Our financial planning, usually involves keeping aside excess money in an account. This amount saved could be used for the our various needs . The saving account usually consists of FDs, PPF, long-term bonds, stocks, insurance policies and Post Office Monthly Income Scheme, etc. In addition to these we also prefer for investment in gold, plots and other property for investment.
Who manages that amount we save?
Our investments or savings are generally managed by three people, besides ourselves. The first being investment advisor, who advises on the schemes you should invest in. The second comes the insurance agent, who is usually a family friend or a relative. The third being loan processing officer, who helps in getting a loan.
The three set of managers
The insurance agent, who suggests child plans for our kid’s future, which means their education and marriage; retirement plans ; money back policies plans, and at times even ULIPS. The agent suggests these products keeping in mind the tax benefits these schemes provide to the investors. However, at the end, we pay higher in the form of premium and other fees, and get illiquid and low-return products. Since, ULIPS come with heavy front loaded charges and lower returns.
The Investment Advisor
The investment advisor suggests the investor to put in their money in various products like bonds, stocks, MFs and FDs. Here, if two different clients approach an advisor for different goals like buying a luxurious home and saving for kid’s future, the advisor is likely to suggest similar products to both of them.
The investment advisor is simply concerned by his fee and interest, rather than the end use of the client. Investment advisors generally provide suggestions without considering client’s assets, liabilities, goals, responsibilities and cash flow. Now you can imagine the situation and end result!
Loan processing agent
The officer who processes our worth documents to give maximum loan eligibility. In most cases, we end up taking full loan amount as per the approval, without doing an analysis on the benefits we’ll earn after paying for the property.
Comprehensive Financial Planner
The above mentioned parties do not interact with each other, results are no mean and wrong financial planning, which may cause losses to the investor. Therefore, it is wise to be financially alert and make sound investment decisions, rather than completely relying on different investment advisors and agents.
If you think that you should outsource your personal finance management to someone, then go for a comprehensive financial planner who will do in-depth and do more than what these 3 parties are delivering you so far. Comprehensive financial planner understands your whole investment at a glance . He knows all your goals, investments, risk appetite, expected future income and expenses.