Why Insurance is Being Sold as Investments

Nutan gupta

05 Oct 2016

Have you ever thought why your agents, bankers and brokers call you to sell insurancepolicies? This is the time of the year when you might be getting the maximum number ofcalls because most of us are looking to save tax.

When was the last time you quoted your insurance policies when someone asked you about your investments? A lot of people use the terms insurance and investment interchangeably. But in reality, these terms are not similar.

But, where does this confusion come from? Most of the people think that buying insurance is equal to investing because they are being told so by their agents. Have you ever thought why you keep getting frequent calls from your bank executives to sell insurance policies? They convince you till the time you buy a policy. This is because they get a fat commission for selling each insurance policy. Insurance policies are being sold in the name of investing for your future. While the truth is that insurance is not an investment product. The sole purpose of buying an insurance is to secure your loved ones financially.

One of the major point of differentiation between insurance and investment is that insurance does not give you any return (apart from securing your family financially),while investments give you high returns in the long run. Life insurance demands premium either annually or semi-annually, and these premiums are not very low. So it does notmake sense to pay high premium for a product which is not even deriving any profit. It is better to opt for term insurance which has lower premium and serves the purpose of insurance as well. A bank fixed deposit earns you a return of around 9 percent while the return on insurance is just around 3-4 percent.

The ideal way of differentiating insurance and investment is by identifying the basic purpose they serve. A person opting for any of these should be very clear what he wants. If you want to secure your family, go ahead with insurance. If you are looking to make a profit, go ahead and invest. Insurance distributors are paid to sell you policies, and it is a part of their job to convince you to buy insurance policies. It is you who will decide if you want an insurance or an investment. Choose wisely!

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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Why Insurance is Being Sold as Investments

Nutan gupta

05 Oct 2016

Have you ever thought why your agents, bankers and brokers call you to sell insurancepolicies? This is the time of the year when you might be getting the maximum number ofcalls because most of us are looking to save tax.

When was the last time you quoted your insurance policies when someone asked you about your investments? A lot of people use the terms insurance and investment interchangeably. But in reality, these terms are not similar.

But, where does this confusion come from? Most of the people think that buying insurance is equal to investing because they are being told so by their agents. Have you ever thought why you keep getting frequent calls from your bank executives to sell insurance policies? They convince you till the time you buy a policy. This is because they get a fat commission for selling each insurance policy. Insurance policies are being sold in the name of investing for your future. While the truth is that insurance is not an investment product. The sole purpose of buying an insurance is to secure your loved ones financially.

One of the major point of differentiation between insurance and investment is that insurance does not give you any return (apart from securing your family financially),while investments give you high returns in the long run. Life insurance demands premium either annually or semi-annually, and these premiums are not very low. So it does notmake sense to pay high premium for a product which is not even deriving any profit. It is better to opt for term insurance which has lower premium and serves the purpose of insurance as well. A bank fixed deposit earns you a return of around 9 percent while the return on insurance is just around 3-4 percent.

The ideal way of differentiating insurance and investment is by identifying the basic purpose they serve. A person opting for any of these should be very clear what he wants. If you want to secure your family, go ahead with insurance. If you are looking to make a profit, go ahead and invest. Insurance distributors are paid to sell you policies, and it is a part of their job to convince you to buy insurance policies. It is you who will decide if you want an insurance or an investment. Choose wisely!

Have Referral Code?