If you are wondering why I keep repeating some of these things, it is simple. I keep meeting people who make such basic, basic, basic mistakes in investing, that it is painful.

I met a person earning Rs. 400,000 a MONTH being asked to take a Rs. 700,000 loan, BECAUSE the interest is tax deductible. His own money is lying in the SAVINGS bank account earning 3-4%. The adviser of course is the CA who files the tax return.

Another person who came to meet me has been conned into buying 10-11 life insurance policies – at a premium of Rs. 800,000 per annum. The sum assured? Rs. 90 Lakhs. When he took a ‘loan’ for buying a house he bought a term insurance – single premium for a period of 20 years. He is likely to finish repaying the loan in about 3 years time (total loan period of 7 years). This means this is ALSO a bad product.

Another person wrote in to say that he has taken critical illness cover – and was not sure what all it covers. My take on any critical illness cover is simple. Show it to a doctor (preferably a specialist who understands underwriting or at least a family doctor) and see whether it is worthwhile. I am not at all impressed with the language and exceptions. Damn scary.

Investment lesson 101: Choose your adviser carefully. Set your goals – write it down. Incorporate into your Investment Philosophy. Implement the plan. Monitor your performance vs. the index / the best fund managers…..

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  1. Subra sir,
    Can’t help it! Personal Finance should be made compulsory topic in 10th standard or junior college. Otherwise these mistakes will keep happening. Not everybody read and understand your daily blog.

  2. Making Personal Finance a compulsory subject is not going to help – Mathematics/Simple Interest/Compound Interest is taught in school – but as Subra says, it takes a Complicated mind to understand simple things like Compounding.

  3. Grabbing in living beings is a survival instinct and it is genetic. When the grabbing happens in a very subtle and devious manner intended to grab resources from a customer by obfuscating and making glib marketing statements, it is called cheating. So one can safely deduce that Cheating is a genetic trait and is very common amongst a vast majority of human beings. Majorly it is the customer that is at the other end of this cheating. Be very paranoid about advertising, marketing and every other scheme.

    Health insurance is a very very big scam. The only way to beat it is keep a list of all charitable hospitals handy and avail of their services while at the same time donating something for their upkeep.

  4. it is not really health insurance.it is more like a prepaid medical plan. somehow outside of catastrophic care,i dont understand health ‘insurance’. weird product,weird idea.not insurance by any stretch of imagination

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