In case you want to avoid losing your hard earned money, here are some tips to keep in mind when dealing with Investment agents who try to sweet talk you into buying insurance or other financial policies.
1) Don’t sigh blindly on the documents : I understand that reading 20-30 pages of policy documents are a cumbersome job and even educated people prefer to just sign at the cross marks which the agents point them to. Yet this is one of the easiest ways for agents to cheat and sell you an entirely different product compared to the product advocated.
2) Understand the features of the policy: Read between the lines and ask questions. Find out the different charges that eat into your principal at various stages of policy – inception, policy life, and exit. Some agents may try to evade the question or falsify the information and it is the buyer who has to do his own “home work”.
3) Don’t follow the herd: Don invests just because of past performance and expects the performance based on past performance: Just because a mutual fund has given double digits returns, the past is not a correct way to predict the future. This sour fact was realized by many individuals who put their money in high return mutual bonds not realizing that during the recession these will be the most badly hit funds, wiping out the entire principal.
4) Free advice is not “free”: The agents get paid based on each policy they sell. The commission on any ULIP plan in India can be anywhere between 30- 50%. Amazingly, this commission is indirectly deducted directly from the buyer’s pockets. One strategy that the agents also employ is providing a discount of 10-20% on policy, knowing they lure the buyer into the trap of buying a policy who thinks he got a great deal.
5) Expecting magical returns: Magical returns also mean high risks. Understand where your money is being invested – the companies, the sectors, and the percentage of money “actually” being invested.
Surely, by following these small and basic tips, you can save yourself from the pain of running after agents who are known to sell and run looking for new prey.
