Got an ap­petite for risk? Read, re­view and in­vest

Ad­vi­sors at ithought Fi­nan­cial Con­sult­ing urge in­vestors to read finer de­tails on of­fer doc­u­ments and not be lured by ad­ver­tise­ments

The New Indian Express - - EXPLORA | FEATURES - Dia Rekhi

In­vest­ing in var­i­ous fi­nan­cial prod­ucts and pack­ages can be ex­tremely in­tim­i­dat­ing for in­vestors. Of­ten peo­ple sign on the dot­ted line with­out com­pletely un­der­stand­ing the terms and con­di­tions as­so­ci­ated with dif­fer­ent fi­nan­cial pack­ages. Many fall prey to the false prom­ises and ex­or­bi­tant re­turns that are ‘guar­an­teed’ in var­i­ous schemes.

In or­der to avoid be­ing lured by ad­ver­tise­ments and smooth talk­ing fraud­sters, in­vestors should first read all of­fer doc­u­ments to un­der­stand how the fi­nan­cial prod­uct is struc­tured. CE spoke to in­vest­ment ad­vi­sors at ithought Fi­nan­cial Con­sult­ing to get a fix on what in­vestors can look out for while sign­ing up for dif­fer­ent fi­nan­cial prod­ucts.

“One should have a thor­ough un­der­stand­ing of the as­so­ci­ated costs, risks, and the ex­pected re­turns,” said in­vest­ment ad­vi­sors at ithought Fi­nan­cial Con­sult­ing.

“Ev­ery in­vestor must know whether the prod­uct is suit­able for their in­vest­ment needs, and should have clar­ity on the terms and con­di­tions if they would like to stay in­vested or exit. Many prod­ucts may have an exit load (a penalty for pre­ma­ture exit) or lock-in pe­riod (time dur­ing which in­vest­ments can­not be liq­ui­dated). It is also im­por­tant to re­view the track record of the fi­nan­cial prod­uct to see if there was any

mis­rep­re­sen­ta­tion in the past.”

While ac­cess to in­for­ma­tion and fi­nan­cial ad­vice is avail­able aplenty on the In­ter­net and so­cial me­dia, the jar­gon that sur­rounds per­sonal fi­nance can be con­fus­ing and over­whelm­ing.

Fur­ther, as fi­nan­cial lit­er­acy isn’t a part of any school or col­lege-level ed­u­ca­tion cur­ricu­lum, coun­sel is sought from friends, fam­ily or col­leagues rather than pro­fes­sion­als. How­ever, ap­proach­ing an ad­vi­sor could make for a good op­tion but peo­ple should make sure that the ad­vi­sors are reg­is­tered with the reg­u­la­tor. Speak­ing to a trusted ad­vi­sor could help un­der­stand the ‘why’ and ‘what’ as­pects of their fi­nances.

A good tip is to make all pay­ments of ad­vi­sory fees through bank­ing chan­nels only and main­tain duly signed re­ceipts men­tion­ing the de­tails of your pay­ments. Al­ways ask for your risk pro­fil­ing be­fore ac­cept­ing in­vest­ment ad­vice and in­sist that in­vest­ment ad­vi­sor pro­vides ad­vice strictly on the ba­sis of your risk pro­fil­ing and takes into ac­count the avail­able in­vest­ment al­ter­na­tives. As­sess the risk-re­turn pro­file of the in­vest­ment as well as the liq­uid­ity and safety as­pects be­fore mak­ing in­vest­ments. In­sist on get­ting the terms and con­di­tions in writ­ing duly signed and stamped. Read the terms and con­di­tions care­fully, par­tic­u­larly re­gard­ing ad­vi­sory fees, ad­vi­sory plans, cat­e­gory of rec­om­men­da­tions and so on be­fore deal­ing with any ad­vi­sor.

Red flags that in­vestors should look out for could ap­pear in many forms. For starters, it may be worth­while in­ves­ti­gat­ing why the charges or bro­ker­age are higher for a prod­uct com­pared to other prod­ucts in the same cat­e­gory.

“An in­vestor should avoid prod­ucts where the exit con­di­tions are not clear or if they do not suit the in­vest­ment pur­pose (i.e. long lockin pe­ri­ods for short-term in­vest­ments),” the ad­vi­sors said. “In­vestors should re­mem­ber that any­thing that looks too good to be true prob­a­bly has hid­den risks or costs as­so­ci­ated. One should also ver­ify if the fi­nan­cial prod­uct has been ap­proved by the reg­u­la­tor (for ex­am­ple, in­sur­ance prod­ucts by IR­DAI).”

If you are an in­vestor who is look­ing to in­vest and an­a­lyse your risk ap­petite, a fi­nan­cial plan could be a good place to start to be­come aware of your risk pro­file and fi­nan­cial needs. “Work­ing with a pro­fes­sional, at least in the ini­tial stages, will lay a strong foun­da­tion. As with any field, per­sonal fi­nance is dy­namic and ev­ery in­vestor must con­sis­tently up­date their knowl­edge,” the ad­vi­sors said. “This could be done

Ev­ery in­vestor must know whether the prod­uct is suit­able for their in­vest­ment needs, and should have clar­ity on the terms and con­di­tions if they would like to stay in­vested or exit

—In­vest­ment ad­vi­sors at ithought Fi­nan­cial Con­sult­ing

by read­ing col­umns, watch­ing videos, par­tic­i­pat­ing in in­vestor aware­ness pro­grammes, etc. Al­ter­na­tively, con­tin­u­ous en­gage­ment with an ad­vi­sor will keep you well in­formed and en­able bet­ter se­lec­tion of fi­nan­cial prod­ucts un­der pro­fes­sional guidance.”


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