Commonsense BEFORE investing!!

Many of us use our commonsense after investing rather than before investing. Hence, thought to share some tips on commonsense before investing!!

We hear a lot of miss-selling but we never accept the truth that it happened mainly because of our ignorance. Wherever we trusted blindly or ignored, such bad investments happened in our life.

Commonsense BEFORE investing!!

Let me list the commonsense tips which you can utilize before jumping into investment. I am sure that this list is not the END. However, at least a great beginning.

# Check the seller is authorized or not – A person who is selling you some product or service related to investment, must be authorized to do so under the various regulations like IRDA, RBI, or SEBI. Hence, cross-check whether the person has a proper license to sell his service or products.

I am not saying that all authorized persons will sell you the right product or advice. But this should be your first screening.

# Check the product approval – The next checklist is to verify whether the product you are buying is approved by the regulator or not. It may be mutual funds, NCDs, FDs, or Life Insurance. In the same way, there may be certain products that are not approved like bitcoin. In the same way, lending someone blindly without any proper valid reason may bring you into a trap of trouble (like lending to a builder).

# Product feature – The next step is to understand the product or service. Try to ask the question as if you are a 6 Yrs old kid and not understanding the product fully. Accept the reality that you are ILLITERATE and list your questions like is it insurance or investment, the complexity of the product, lock-in of the product, why he is referring or suggesting you this product, the reasons shared are valid and suitable to your requirements or not, risk-reward, are there any withdrawal penalties and how easily I can come out from the investment without any hassle are the few of the questions you can ask yourself.

This is the most important aspect of any investment. Act like a child or illiterate while going through this process. Never heed anything which is usually orally communicated. Instead, make sure that whatever they are claiming is all part of the product declaration.

# Stay away if someone SELLING by claiming TAX BENEFIT, TAX FREE, GUARANTEED or SAFETY like FD

Yes, while selling something, if someone is using these terms, then that person or product is a red flag for you. It means they are hiding the real features of the product and highlighting these eye-catching words to sell. Hence, always stay away from such people.

# Learn and Explain your kid – If you are able to understand the product fully and can easily make your kid understand what product or service you are buying or investing, then it is a sign that you understood the product to a certain extent. Hence, understanding any product or service to the kid level is very much important.

I hope these many are sufficient for the day to digest. I too don’t have the strength to write as since 14 days our whole family reeling under Covid and I was discharged from hospital 3 days back. We are recovering but it takes time. Be safe and be inside the home with family!!

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