During our life, we will be needing huge chunks of money for various purposes like home, vehicle, foreign trip, children’s education, daughter’s marriage, retirement and last but not least for maintaining health.

Your investment portfolio should be a right mix of  insurance, equity, debt, gold and real estate and the allocation will be based on individual’s risk taking capability, goals and the period. We have included insurance under investment as it’s an investment to safe guard your family during your ‘absence’.

When a particular asset class has appreciated, it’s important to rebalance so that your investment objectives are intact. This is very important to realize or safe guard profits.

Every instrument which has the potential to earn has the potential to loose and we need to understand this.  So equity should be in our portfolio as they outperform all other asset class over long term.

We need to invest in debt so that we can meet our short term goals and can guard against financial turmoil during which the value of your equity investments might have eroded.

Gold is considered to be a safe heaven for it’s stability of it’s value internationally. You might have noticed Gold prices soaring when the markets crash.

Real estate is another asset class where your investments can exponentially increase or decrease. Normally, they perform better than equity and are less volatile but when you invest during an upswing just like the recent real estate bubble, you tend to book losses.

So, you may ask why can’t I play safe with Debt and Gold? You can. But the question is, are your investments giving you returns (after tax) more than the inflation rate? Are your returns growing better than GDP of your country? Ideally your investment should generate returns at least 15% per annum to be considered as good investment.

So your allocation to high return/risk assets can be more when you are young and have less liabilities and should be less when you are nearing to retirement or when you wanted to utilize that money for a purpose in short term. For example, you can have debt to equity ratio as 30:70 when you are at the age of 30, 50:50 at the age of 40 and 70:30 at the age of 50. These ratios should be planned carefully with your financial planner based on your liabilities, risk taking capacity and goals.

A person needs cover till his/her family is financially dependent on him/her. Typically, you need to be covered till you kids start earning and are not dependent on you. It’s good to take maximum cover offered by an insurance company. Among the types of insurance, “Term Plan” is considered to be the best bet for getting maximum cover in every sense. In India, LIC is the only company who offers cover for a maximum duration of 35 years for its “Term plan” “Amulya Jeevan”. Stay tuned for more articles.

Do you know that the insurance we pay for Vehicle is not money back type? Try to know why it is offered like this and you will know why you should prefer “Term” insurance over other types of insurance.

We already told you that insurance is basically a protection against a financial loss which can arise on the happening of an unexpected event.

Unexpected event could be loss of life, vehicle theft, hospital expenditure due to health problems etc.

Though no body wishes that this happens to them, one needs to be prepared for these eventualities for leading a secure and happier life.

Life Insurance

Life Insurance is must for every individual who earns bread and butter to his/her family. If you are just a dependent and no body is relied on you for financial support any time in your life then you don’t need to take an insurance policy.

These are the most popular life insurance products:

• ULIPs
• Term Plan
• Endowment Plan

As the name says, this insurance is for general purposes. We can call it as non-life insurance. Health Insurance is also a type of General Insurance. Since Health Insurance is important to us, we discussed it separately.

What are the popular General Insurance types?
Motor vehicle insurance, Travel Insurance, Asset Insurance, Travel Insurance, Home Insurance/Shop Insurance, Accident Insurance, Corporate Insurance

For more information on each one of these, stay tuned.