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Do you know how to make 2008 a financial success?
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January 02, 2008

You were pretty confident about the investments you made at the beginning of 2007. But when the year closed you made nothing much from them.

Be it stocks, mutual funds, real estate or insurance. All or many of your bets fell through.

You bought stocks but at a higher price. The price went up still higher but the uncle next door bought another stock and made stupendous returns on his investments. Or you bought a share on some tip passed on to you by your cousin's uncle's friend's neighbour who got the same piece of information from a shady stock market operator. But the share price plummeted after you bought it.

Or are you the one who bought mutual funds just because your financial advisor promised you the moon? He told you about the past performance of a mutual fund scheme and you bought his logic that mutual fund unit prices move only one way: up, up, up.

Or maybe your insurance agent pushed one policy after another, of companies and various products like ULIPs, money back and endowment plans but forgot to mention the term insurance plan.

Here's the story of our reader Ashish Nagpal, 27, a Delhi-based software consultant, who bought a ULIP policy instead of buying a term insurance as he later realised.

I got married in the summer of 2005. By January 2007 we were blessed with a baby girl and were also able to purchase a 2 bed room flat on the outskirts of Delhi. Since I had taken a loan and had dependants now I wanted to buy an insurance policy that would take care of my family in case of any unfortunate event.

I called up my insurance agent and asked him to come out with the best option that would take care of my requirement. He visited my house two days later and advised me to buy a unit linked insurance programme, ULIP. He told me how ULIPs will help me invest as well as take care of my insurance needs.

He explained all the benefits of investing in ULIPs -- the option of not paying annual premiums after three years without any impact on my sum assured, my premiums getting invested into the share market and buying units for me etc. I gave in to his persistent pitch without thinking too much about the pros and cons of such a policy.

Though the stock market has gained stratospheric heights my units are still not fetching me enough returns. This is because the premiums in the first three years that you pay towards your ULIP policy goes towards a bevy of charges like administration costs, mortality charges and lot other things, my insurance agent said like a sage.

He told me that as time goes by these charges will decrease and more of ULIP premiums will go towards investments in the share market thereby increasing my returns. Also, the sum assured on my ULIP policy is Rs 25,00,000 for which I am paying an annual premium of Rs 30,000.

A friend of mine told me that a term insurance plan would have got me the same sum assured at a much lower annual premium. He told me that I could get a sum assured of Rs 25,00,000 by buying a term insurance at an annual premium of not more than Rs 10,000. He told me I could myself invest the remaining amount -- Rs 15,000 I will save if I switched from the ULIP plan to term insurance -- in diversified equity mutual funds and get better returns than ULIPs over a time horizon of 15 years.

When I hired a professional financial consultant he too agreed with my friend and has asked me to stop paying ULIP premiums after three years and buy a term insurance policy immediately.

Now that I have realised my investment/insurance blooper I bought a term insurance plan and feel much happy that I could insure myself at a fraction of a cost and invest the rest of my money into mutual funds.

Moral of the story:

~ Don't take your insurance agent at face value; cross-check whatever s/he says with a couple of professionals before you make a decision.

~ Always seek professional help for making important financial/investment decisions in your life.

~ Study all the advice -- even if it comes from your professional financial advisor -- before you put your hard earned money.

~ Never make any investment be it in stocks, mutual funds, real estate or insurance unless you are pretty certain about what you are doing.

~ And once you board the ship expect the best and be prepared for the worst.

Did you make such mistakes in 2007? What caused you to make these mistakes? How could you have avoided them? Would you like to inform people about such investment bloopers so that they make wiser investment decisions in 2008?

How are you planning investments in 2008 so that the year ends for you on a happy note?

We would love to hear from you -- email your experiences, advice and opinions in this regard to with your name, profession, age and location. The best entries will be published right here on

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