Be Crorepati By Saving Commission On MF SIP And Insurance

What is the actual cost of free investment advice? For middle class, ultimately savings are the only source to create wealth. In absence of knowledge on investments people need to take assistance of elders or financial advisors. To save more most of the people seek advice from people who sell schemes, by investing in scheme the advisor will get commission from the company and the investor will get free advice.

In my research, I (Viplav Majumdar) found that your quality of life is the result of financial decisions you take in daily life. People pay huge price of taking investment and financial advice from others for free, mainly because of these 3 factors.

1) Quality advice in your interest
2) Wrong investments
3) Maturity value that you get after 30 years

I shall discuss one by one and the ways to take right financial decisions on your own.

Quality advice in your interest
For your financial success you need to right financial decisions based on your personal, professional and financial situation. This advice can be taken only in the form of comprehensive advice from expert who knows approximately all the subjects of finance, investments, loans, strategies, etc. For middle class, they have access to mainly insurance agents and mutual fund distributors in the name of experts. Families feel that they don’t need to pay fees as they are paid on sales of investment products. Lastly, it leads to an investment decision based on limited advice, A scheme is sold to you without considering your need, your priorities just to make a sale.

Wrong investments
I found in my research that most of the families invest in wrong investments, which don’t match in their situation. No one wants that one makes losses at maturity. 90% of middle class families invest to make guaranteed loss, they invest at less returns than the rate of inflation, they come to know about this after 10, 15 or more years at the time of maturity. At maturity they feel they don’t have sufficient funds to pay for child’s education or their retirement.

If Rs. 5 lacs is invested and the maturity is Rs. 12 lacs in 15 years, it’s a loss in purchasing power. The value of five lacs should be approximately 13.7 lacs with inflation, loss in capital value though the accounting value says that you have profit you end with capital loss.

If you get a proper time of 15 years to get benefit of compounding returns, you can be financially free in just 15 years of service with right investments. Even after investing for 15 plus years, middle class families fail to plan financial freedom because of wrong investments based on obligation, limited advice and commissions.

Commissions
Taking free advice leads to an investment in insurance, mutual fund these have direct plans, which have less premiums in insurance and higher return in mutual funds. In insurance you pay almost 5% less premiums every year if you buy directly without agent’s code. In mutual funds you get 1.5% more every year if you buy directly. So you will say what’s the big cost?

42% of maturity value! Yes you are right, if you are supposed to get maturity of 70 lacs through your agent, if you go directly your maturity would be 1 crore instead of 70 lacs in the same scheme. How much will you pay for taking the name of scheme for investment, 30 lacs?