When somebody asked me….what are the steps in financial planning, I just said:

1. have a plan – including a budget

2. stick to the plan – save as much, save as often – in good equity assets

3. sit with a planner – whet your goals

4. take a insurance cover

5. do a SIP

6. do plan your taxation well

7. PPF and Lic are great invest options

then I thought what is wrong with what is written here..Well nothing it is just taking too nice a view of the financial planning industry, the knowledge levels of the people reading this note and of course the managed funds business.

If i were in my normal self, I should have said “Know how to do your financial plan, learn, learn, learn then find somebody whom you can bounce your ideas off, then start creating your own wealth plan”

Of course having a plan, creating a budget, doing a SIP are all important steps….but first you should know what you are doing. That only you can learn, nobody can teach you.

PS: None of these steps are right or wrong….the sequence may be wrong….that is all, be careful.

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  1. I have a slight change with the Point No.7, PPF can be a great investment option but certainly LIC is not. Its a insurance option to cover risk but not a great investment option. It’s always best to separate Insurance & Investment.

  2. PPF and LIC are ABSOLUTELY LOUSY investment vehicles. At best both are savings instruments which will ensure THAT YOUR money grows at a rate LESS THAN INFLATION. At best if you take the tax saving into account it is likely to give you a 1-1.5% REAL RETURN….:-)

    if you see…I have asked what is wrong…there are many things wrong in this post 🙂

  3. LIC gives annualized return in the range of 5.5%. Considering the expenses one incur in a policy, it is highly a sub-optimal product.

    PPF- For entrepreneurs and professionals who don’t have an EPF, is it not better to get an 8% tax free returns in the long run? I fully agree equities are likely to give a far superior return. Still for the purpose of asset allocation and to encourage long term investing in debt, is it not a good option?

    Though the 8% returns offered by PPF is less than the prevailing interest rate, if you observe in the long run, PPF rate have been above the FD interest rates.

    This is one of the few instruments eligible for tax deduction under DTC.

    So it is EEE. Should not be PPF be part of one’s portfolio?

    Why you paint LIC and PPF with the same brush?

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