The last decade was perhaps the most difficult in my investment life of 3 decades. I am happy I survived – thanks to a fantastic investment advisor who like wine is maturing with age. There of course have been mistakes and big ones – happily there have been learnings. And like the Englishmen say “one day we will be able to laugh at them” – so here is the learning.
1. Do not get carried away by hype: In the early part of the decade when I believed that mutual funds and term insurance is a nice way to invest, ULIPs made their way into the Indian market. I was inundated with charts, graphs, and excel sheets showing how unit linked plans could make money for you in the long run. It was easy to believe it and unit linked products with asset management charges as low as 0.8% were available. I succumbed.
Tell tale signals: When I bought the unit linked plan there were signals that lies were being foisted on me. The so called ‘top executives’ of the company were not buying. The promoters were not putting significant portion of their money in the product.
What happened next: The product remained the same, but he assumptions changed! Fund managers were not willing to join life insurance companies. Those who did quit to join the mutual fund industry. Performance was bad compared to even the mediocre mutual funds.
Learning: It is difficult for an employee to understand the truth especially if his salary depended on not understanding the truth. Even today the life insurance industry is full of people who buy term and invest in mutual funds. The only persons who buy unit linked plans are those whose wives, brother, sister, neice, bosses, ….are selling life insurance.
Change: Media can scream, but if there is a 1:500 ratio between education budgets and financial advertising budgets, odds are the advertisers will win. Simple is it not?
Will continue to write about my other mistakes…this is just the 1st chapter..!
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