Without correct knowledge, investing turns out to be a dangerous business. You will lose your hard-earned money in harmful products – as most people do. Of course, investment information is very easily available. Stockbrokers, distributors, financial planners, insurance agents, relationship managers, online aggregators and dozens of websites, newspapers, magazines and 6-7 TV channels all pouring out information, mostly free. But is such a flood of free information helpful or harmful?
Financial products are technical in nature. It is hard to absorb the torrent of information coming at us. We feel overwhelmed and confused. Should you buy insurance products as investments? Should you go for stocks or equity funds? Are debt funds better than bank deposits? When investments decline sharply should you buy more or stop investing?
These are not easy questions to answer. To answer these, you need to be an expert with practical knowledge and experience. Since that is not feasible, we come to rely on financial companies and their agents for wisdom, but they often mislead and exploit your fears and confusion. The hard realities of the financial marketplace are:
1. You are only a sales target: Both the company and the intermediary (especially relationship managers) are focused on selling a specific product. They are not interested in telling you what else is better for you. None of them take a 360-degree view of your actual needs.
2. No continuous support: There is often no effective support, help and handholding after you have bought product.
3. Wrong advice: Intermediaries earn through commissions they get from selling products to you. Their advice may favour the products that get them higher commission, even if it is harmful for you.
4. Untested advice: Since the advice is only meant to drive you into buying the products offered, it is neither based on any research of the other products in the market, nor based on any research of your requirements.
5. Harmful Products: Many a times, you will land up buying products that are of no use to you, but have been sold to you in such a way that they seem to pay you benefits. And that is what the entire sales force is there for-just selling, without thinking about your benefits.
Remember: Mistakes in buying financial services are not as harmless as making mistakes in choosing shampoo or soap. Financial mistakes can make you lose a large chunk of your life's savings. You also lose time, which you would have otherwise spent in earning solid investment income.
