Keep Your Finances Simple

I have a friend who is a firm believer of insurance products. He buys a new insurance policy every year and sometimes even two policies in a year. Now, he has more than 10 insurance policies. The only problem is that he believes them as an investment product and the life cover that he is getting out of it is an additional benefit. He has accumulated different species of insurance products such as endowment, money back and ULIP.

The chances are high that you might also know someone who is mixing investment with insurance and is risking his financial well-being. You need to understand that insurance is a risk management product and not an investment. We should go for a comprehensive insurance plan rather buying it in a piecemeal manner. Otherwise, we don't get the best insurance value for the money.

Our cover story this time has dealt with the subject of insurance and investment very objectively. It clearly highlights how big you lose by mixing insurance and investment. Three separate case studies are taken where different insurance products are compared with mutual fund investments along with their tax consequences. This is to drive home the point that we need to keep both investment and insurance separate. This will help you remain in control of your finances.

In one of our special reports on sector funds, we have covered how these funds can be used by an investor to spice up their overall portfolio returns. Nonetheless, it requires an active management of the fund because every year or so, a new sector emerges as a winner on whom you should be riding.

You are putting your hard-earned money in different financial products and, therefore, it is important that you get the most out of it. The key to this is to keep it simple.