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Too many financial options? Beware
Brijesh Dalmia
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March 27, 2007

When you go shopping, you get a lot of options to choose from. Everything looks so tempting that you wish you could buy all of them.

But then you realise you cannot buy all of them and so you identify the best product that suits your budget and serves the purpose. You have to decide on the basis of your need and available resources.

Once you buy the necessary stuff, there will always be new editions and new designs introduced in the market. In this case do you sell your belongings to buy the new ones? May be once in a while, but not as a process. 

The same applies in the world of investment and financial planning.

You need to understand your requirement and choose a product through which the objective can be achieved. You may not need to churn your portfolio very often to try different products and schemes, which keep on introducing in the market place.

Let's look at some of the examples.

Life Insurance

With the private sector being opened up in the life insurance business, a customer can choose from a wide range of products. Every now and then an insurance company launches a new scheme.

It gives their advisors a reason to celebrate because now they can sell more by suggesting the benefits of the new policy to their existing clients.

The investor also gets 'lured' by this new thing. They keep on adding to their existing number of life insurance policies till they themselves don't know which policy is meant for what.

The point is, be careful about choosing the right insurance policy and then stick to it rather than buying new policies here and there until you need more life insurance coverage.

Each new policy comes at a hefty price due to high administrative and commission costs. Further, the burden of paying regular premiums may take away the opportunity to invest in other good investments products.

Mutual Funds

Mutual funds are great investment vehicles. However, you don't need to invest in each and every scheme of a mutual fund to get the benefit of investing in mutual funds.

5-6 good funds are sufficient to provide the required diversification and above average returns. In fact, it has been proven that excess diversification prunes performance. People fail to realise this. They buy mutual funds like stocks.

Agents and distributors sell each new fund offer as something special and different. Big hoardings and TV ads make you believe and assure you that the newly launched scheme is something great which is not available in the existing portfolio.

It probably makes more sense to add fresh investment to the existing schemes rather than buying new funds each time. This is like equity linked saving scheme, ELSS, at an individual level.

Credit Cards

This is a great fancy. There is a great competition going on in the market place about the number of credit cards one holds. One considers it to be a status symbol if s/he holds 5-6 credit cards.

What's the point keeping so many cards? Ultimately, it's the credit limit, which matters. The more the cards, the more is the chance of losing it, its mis-utilisation, more fixed annual charges and so on.


Again, the number of bank accounts held by an individual is going up. For a working individual, 3-4 bank accounts are a must - God knows why. The requirement of minimum balance, time needed to monitor all the accounts, everything has a cost.

It is expensive to own a lot of things when you can do without them. With so much stress already there, it may be worthwhile to reduce the time you devote on identifying new products and options all the time.

The end message is - keep it short and simple.

Curb the lure of being the owner of a lot of things. Rather, concentrate on a few good things in that category. It will save you time, energy and money. What else are you looking for?

The author is a Certified Financial Planner. He can be reached at

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