Personal Finance Capsule - Never mix Insurance and Investments

Nowadays, any person with a decent awareness of personal finance knows what wise men always advise - never mix insurance with investments.

That's why I was aghast to see a widely followed LinkedIn/YouTube influencer who usually talks about investments and personal finance was peddling insurance products as investment vehicles for achieving financial goals.

I have seen so many people losing their hard-earned money by investing in insurance products.

Transcript

1. Personal Finance Capsule Never mix Insurance and Investments
2. Nowadays, any person with a decent awareness of personal finance knows what wise men always advise - never mix insurance with investments. That's why I was aghast to see a widely followed LinkedIn/YouTube influencer who usually talks about investments and personal finance was peddling insurance products as investment vehicles for achieving financial goals. I have seen so many people losing their hard-earned money by investing in insurance products. TrueMind Capital 02
3. Here's why investment in insurance products is the worst possible investment. TrueMind Capital 03
4. Whenever you invest in any instrument like insurance, mutual funds, NPS, etc., your money gets invested mostly in capital markets - stock market or debt market. Now the instrument you use to channel your money in the capital market plays a significant role in determining your net returns on investments. Every instrument/product has a cost structure to run the company that manufactures these products. TrueMind Capital 04
5. The expenses are deducted-in advance & recurring from your investments (from premiums in case of insurance). These expenses are used for various purposes like fund management charges, operational/admin expenses, agent commissions etc. The returns you get on your investments are after deducting these costs. Therefore, the cost structure of any product/instrument has a significant impact on your net returns. TrueMind Capital 05
6. Higher the cost structure, lower are your net returns assuming all instruments generate the same gross returns. Among all the popular products, the cost structure of insurance products is the highest (as high as 15-20% on an avg./annum over the first 3-5 years). The major component of the cost structure of insurance companies is the agent commission. That's why your bank RM, a friendly neighbor, or a distant relative is so eager to sell you insurance products. TrueMind Capital 06
7. On the other hand, the cost structure of NPS is the lowest (<0.10%). The cost structure of direct plans of mutual funds is in the range of 0.20% to 1.50%. One can meet all their financial goals - children's education, buying a house, retirement corpus, & retirement income by investing in pure investment products like mutual funds, FDs, NPS, post office schemes, etc. TrueMind Capital 07
8. Now to protect your financial goals from an untimely demise, one should always purchase a pure vanilla term insurance plan (with no money back if the insured person survives the policy term) with the same premium throughout the policy term. Insurance is required only when you have dependents and not sufficient assets to take care of their financial goals. To understand how much corpus you need, where and how much you need to invest to meet your financial goals, there are many calculators available online. TrueMind Capital 08
9. We have enabled access to free basic financial plans for everyone so that people get the idea of the direction they need to follow and avoid being mis-sold. Sumit Duseja, CFA Co-Founder, Principal Officer Book one time Free Consultation session with our expert advisors today! www.truemindcapital.com TrueMind Capital 09
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11. TrueMind Capital 11 TrueMind Capital We work for you, not for commissions. Invest online in Direct Mutual Funds schemes with our expert, honest, and personalized advice. Get more returns with zero paid commission and maximize your investments by asset allocation strategies.