‘Sensex zooms’ screams the newspaper headlines these days and you can’t wait to make some fast bucks. But then you’re a little hesitant to take the plunge into stock market investing. You know little about stocks and risky investments and all these years you have parked your hard earned money only in bank deposits, PPF and postal savings that give you maximum security. Stocks are not your cup of tea.

But, times have changed. Today the lure of the stock market has drawn many a small investor into its fold. And if you are game for some risk taking that’s comparatively safer, we mean it - you can be assured of high returns irrespective of whichever direction the sensex moves. Heard of a Systematic Investment Plan?

A Systematic Investment Plan (SIP) allows you to allocate a fixed amount every month in mutual funds, bonds or debt. Such an investing strategy enables you to regularly set aside a given amount irrespective of the behaviour of the stock market. And say experts, this helps you gain the maximum when you consider the average.

Let’s say you invest in a given SIP when the NAV of the fund is Rs 9. Over a period of time the NAV could move up or down. It may move to Rs 12 for a month or even higher and you buy units at a higher price. The NAV may go down to Rs 8 too which means you buy units at a lower rate of Rs 8. With SIP you invest on a regular basis and Rupee Cost Averaging acts as an automatic market timing mechanism that eliminates the need to time the market.

So what other benefits does SIP offer? A Systematic Investment Plan takes care of Inflation. It absorbs the ups and downs and acts as a financial cushion. What’s more. It gives you the Benefit of Compounding and yes - the Convenience of investing a small amount each month not to mention the comparatively high returns and the no-load feature associated with most funds.

Wondering how you could go about investing in a SIP? First of all, ascertain your goals. Once that is done decide on your choices from equity, debt, balanced funds depending on your age, risk profile and tenure of investment. Also, decide how soon do you need your money and accordingly choose how much you can set aside each month to meet your goals. Preferably invest in both - income and equity funds. This will help you gain handsomely from one even if the other one has taken a beating.
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Don’t put all your eggs in one basket
The Post Office is a good investment avenue. Consider it.
Don’t invest in a fund if you do not understand its workings.

Retirement planning is important. Don’t procrastinate.
Account for it now.
If you plan to take a safe risk with stocks try the mutual fund route.

Don’t base your judgement on the buying decisions of others. Trust your instincts and you will not have to regret much later.
It makes sense to allow flexibility in your long-term investments. You never know the changes life may bring in course of time.
As a stock investor don’t get carried away by the company’s past performance. It is not necessarily indicative of future performance.
Track your fund’s performance once you have invested. And see to it that you compare apples to apples.
Don’t buy insurance only for tax purposes. Ascertain your future needs and buy accordingly.
Term insurance is the cheapest risk cover you can get. Makes sense to buy one especially if you have borrowings.
While investing, preferably read the fine print first and the other details later. The risk factors are mentioned there.
Periodically conduct a review of your long-term investments. You may need to invest more or less and the earlier you know of it the better.
Invest in stocks only if you can take risks and preferably when you are young. At an old age, making good a monetary loss may not be easy.
Always ascertain the cash flow of your investments and invest accordingly.
Know that EMIs on housing loans are linked to the Prime Lending Rates.
When hunting for a housing loan find out whether it a monthly or a yearly reducing balance you’re offered. The monthly is better.
While buying insurance know that you have 15 days time to take a decision. You may return a policy within such time if you think it does not fulfill your needs.
Housing loan companies are known to not make changes even if your loan is on a fluctuating basis many a times. Monitor your loan account.
Before deciding on a housing loan, get the terms and conditions clarified on pre-payment penalty, part payment, charges for shifting from fixed to floating etc
In case of a housing loan know that it’s a buyers market now. Bargain aggressively for interest rate reduction.
Pre-payment penalties on housing loans is history now.
Unit linked plans are linked to the sensex. Know that ups and downs of the stock market will influence them accordingly.
If you have bought unit linked risk plans, review them at regular intervals. You may consider a shift if your fund is not performing.
If you are not much of a risk taker do not buy unit linked insurance plans.
Consider investment in mutual funds as part of your short-term goals.
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Sleep on it Tonight
Life insurance agent to would-be client:
"Don't let me frighten you into a hasty decision. Sleep on it tonight.
If you wake in the morning, give me a call then and let me know."
 
I'm One of Them
You ought to feel highly honored," said the businessman to the life insurance agent, "so far today I have had my secretary turn away seven insurance agents."
"Yes, I know," replied the agent, "I'm one of them."
Life Insurance and You

A financial planner once said this about the life insurance buying habits of Indians; they don’t buy life insurance, it is sold to them. Unfortunate, but true. Individual awareness & understanding of life insurance products is extremely low, and many among the insured don’t even know whether the life insurance policy they own meets their insurance needs, & in a larger context, their personal finance needs.In most cases, chances are, they could be doing better.

The first & the most important step towards ‘doing better’ involves being financially literate & having, at the least, an elementary understanding of what life insurance is all about. This means being aware of the various types of insurance products on offer in the market, as well as having the ability to understand one’s life insurance needs and find appropriate fits.

Life insurance is chiefly a risk management tool, meant to offer financial protection to your dependants in the unfortunate event of your death. If you are adequately insured, your life insurance’s should enable your dependants (spouse, children, parents) to maintain their current lifestyle and pursue their life goals…till such time as they are in a position to set up an alternative income stream by themselves. That’s the basic purpose of life insurance.

(Reference : The Layman’s Guide to Insurance)

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