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Sunday, April 1, 2018

Dont be a financial fool - a suggestion on April Fool's day!

Step by step guide to buy ULIPs
Few days back I came across a news report on Rahul Dravid being conned by an entity on investments. A firm promised him more than 40% return on investments and duped him of crores. While I don't feel surprised when I hear my housemaid or my neighbor aunty are miss-sold a chitfund or endowment plan, Rahul Dravid, the ace cricketer known for his perfect calculation on field being conned, came as a big shocker to me. Shocked to know that a person who is a millionaire or even a billionaire on his own right who can afford a personal Charterd accountant or even a team to take care of his finances can fall in this trap. The point to note here is anybody can fall into this trap. These frauds in the name of ponzi, misselling wrong products and false promises has been existing since long. It is likely to continue in some form or the other. The point we should focus here is to catch it before it traps us. These wrong investments have a patern to it. If we learn the pattern and ask few questions, we can save ourselves from being cheated and a lot of mental agony along with it. Let me give you some points to ponder over.

It should strike if someone guarantees you high referral bonus, guarantee high returns, or kickbacks on your investments etc. The best way to identify and handle these, is stick to wellknown finanicial products, well known financial advisors and brokers and well known financial institution. Though there are numerous online frauds available, these fraudster may knock your door and call on your cell-phone, to give you a more genuine feel to it. Financial fraud is not limited to running away with money, it inculdes misselling as well. Be clear about investment objective and expected return. Do little bit of calculation and follow few steps to safeguard yourself.

These are the traps, however, there is no harm in double checking and being assured of you are not duped.   Whoever is the seller few points you definitely need to check before you say "yes"
So, take few steps and varify -

1. Google it - if it is a genuine company, or even false, it will have  a website or some online listing. If it doesn't have no internet presence, don't even bother looking at it. 

2. Do a little search - if you find the company name, check for the results its throwing up. Check for reviews. Reviews will guide you a bit.

3. Ask for the business model - no, you are not getting personal. If you are asked to invest 1 lakh rupee and assured of a 50% return in one year, you must know the source of the return. Any fixed deposit in India will not give 10% return if bank rates are hovering around 7%. Equity related investments have a potential of giving higher return.

4. Dont be emotional fool - last week my young cousin had a query that if I would like to buy an insurance product from her, a specific product which is her target. She was told by her bosses that it was the best seller product. Mind you, I am talking about a very very reputed company. I felt helpless. I was astonished to see it was a high cost endowment plan. I really wanted to help my little sis. And she wasnt working with the insurance company, but the retail broking wing. So, I offered to buy some mutual funds worth 4 times her target, incase it helped her. But to my surprise, the company refused to consider it. If I were not aware of the product features, I would have simply bought the insurance to make my sister happy, which is nothing but highest level of misselling. My sister is matured and understanding :-) but dont comit this mistake.

5. Call on that toll-free no. - It takes few minutes. Whichever financial product you are buying, in the brochure you will find a customer care no. Call up and verify the commitment s your broker made it you. Tally the benefits. If it suits you and if it completely match, you are quite safe.

Read, google, compare and ask experts on forums like Quora etc to make an informed decision. This financial year has brought in many changes, look forward to sharing updates and insights on them. Stay invested  Stay happy. 

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