When you want to invest money, or even when you do not want to invest money it is your banker who knows about it.

Right? In most cases yes.

So you go to a bank and are wondering what to do…and there appears a Relationship manager. He comes and tells you the following:

It is convenient to invest through a bank (true, but convenience comes at a price)

We will do all the documentation, your KYC (know your customer forms), ulip forms, etc.
(this continues your amazing financial illiteracy longer)

We will give you a full range of products (income fund yielding 9% p.a. and a car loan where we charge you 14% – amazing range of products)

We think you should not have so much in savings account and fixed deposits but have it in a mutual fund (you think they are doing all this in YOUR interest, after all which bank does not like CASA?)

All this is told to you in the nice environment of a bank.

Ha have you heard of the word ‘uberrimae fidei’ – do you know what it means?

Here – this is what it means:

A legal agreement requiring the highest standard good faith. “Uberrimae fidei” or “uberrima fides” is Latin for “utmost good faith.” Insurance contracts are the most common type of uberrimae fidei contract.

Why only Insurance contract? so that the insurance company can reject your claim saying ‘Your husband did not disclose the diabetes that he had’.

Sadly however in a banking transaction there is no uberrimae fidei – the banker NEED NOT TELL YOU THE TRUTH. This is sad because we belong to a generation that BELIEVED(S) THE BANKER. We thought a banker will not cheat – ask your parent if you want. Most of us believed that when a banker offered a product it was capital guaranteed. Right? hmm

So here you are scared of investing, scarred by a family friend or own parent’s investing mistakes. You think your RM has your interest at heart (cannot blame you we are all created to trust our service providers unless proven other wise – my fruit vendor has NEVER cheated me in so many years – I just tell him ‘achha nahi tha, and he gives me a free replacement, no questions asked), You believe since you do not lie, he will also not lie.

So you see – the trap is very well set. Sadly we all walk into it.

When the returns do not come, you start panicking…and there is NOTHING that you can do. Sad. You are reminded of another Latin word : Caveat Emptor in banks.

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  1. Bottomline. Keep it simple.

    Invest in diversified mutual funds.
    SIP for very very long term in 1 large cap, 1 large-mid cap and 1 multi cap which has a proven track record of at least 5 years.
    For 80 C use EPF or PPF
    And FD on parents name with u as nominee.

    And the most important mantra – Sada Jeevan Ucch Vichaar.
    Get rid of excess materialism and its associated evils.

  2. Mr. Pat Munroe a town banker in Quincy Florida observed that even during the great depression in 1929, people would spend their last nicked on a bottle of cold coke. He told everybody in town to buy coca cola shares as he considered it to be a good investment. He even lend money to buy those shares, that share which was $40 is in millions today.
    If only bankers were like Mr. Pat Munroe.

  3. A joke worth sharing…related…
    A man enters a bank with a gun in one hand and 5 lac rupees in other….
    He shouts…….khabardaar………..agar kisini muje life insurance, ulip, mf etc bechneki koshish ki to…….main ya sirf apne account me paise jama karne aya hu……..

    Ha ha ha….

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