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Strategic Investing in a Changing World

Fri, 15 May 2026 10:37:36 +0000

The Silent Shift –Understanding Changing Investment Trends in 2026

Introduction: A Market Phase of Quiet Transition

At present, financial markets appear relatively stable on the surface, with limited sharp movements in benchmark indices. However, beneath this stability, a gradual shift in investment patterns is becoming visible.

Rather than broad-based participation or momentum-driven activity, current market behaviour reflects increasing selectivity and caution among investors.

In this environment, it becomes important to focus not just on market direction, but on how investment approaches are evolving in response to changing conditions.

Market Context – From Broad Participation to Selective Approach

In earlier phases, market movements were supported by liquidity and widespread participation. Currently, there is a noticeable shift toward:

Greater emphasis on fundamentals
Increased sensitivity to valuations
Preference for consistency over rapid growth

Key Trends Observed in the Current Phase

1.Increased Selectivity in Stock Performance:

Market trends indicate that:

Companies with relatively stronger fundamentals are showing resilience
Stocks with weaker earnings visibility may face pressure

2.Investor behavior suggests growing awareness of valuations:

Stocks with elevated valuations may see limited upside
Reasonably valued businesses are attracting attention

Interpretation: Investment decisions appear increasingly aligned with risk reward considerations.

3.Measured Institutional Participation

Institutional investors continue to participate in the market, though with a cautious approach:

Selective allocation strategies
Emphasis on long-term visibility
Reduced exposure to speculative segments

Current conditions may be characterized by:

Gradual price movements
Sector-specific activity
Consolidation in broader indices

Such phases are typically associated with portfolio realignment and reassessment of investment strategies.

Common Investor Challenges in This Phase

1.Expectation of Short-Term Gains

Markets in consolidation phases may not always deliver quick returns, which can lead to

Impatience
Frequent portfolio changes

2.Following Market trends without Adequate Analysis

Following short term trends without adequate analysis may increase the portfolio risk.

3.Portfolio Imbalance

Concentration in specific sectors or themes may lead to:

Higher volatility
Reduced diversification benefits

Suggested approach for Investors

1.Maintain a Goal-Oriented Investment Strategy

Investment decisions may be aligned with:

Individual financial goals
Investment horizon
Risk tolerance

2.Continue Systematic Investment Where Appropriate

Systematic approaches such as SIPs may help in:

Managing market volatility
Averaging investment cost over time

3. Consider Diversification

A balanced allocation across asset classes—such as equity, debt, and hybrid instruments—may help manage risk.

4.Review Portfolio Periodically

Investors may consider reviewing:

Asset allocation
Sector exposure
Alignment with long term Objectives

5.Focus on Fundamentals

Investment selection may consider:

Financial strength of businesses
Earnings visibility
Long-term sustainability

Opportunities and Considerations

Even during relatively stable phases, markets may present opportunities in:

Fundamentally strong businesses
Reasonably valued segments
Long-term investment themes

However, investment decisions should be based on careful evaluation rather than short-term market movements.

Market Outlook

Near-term market behavior may continue to be influenced by:

Global economic developments
Interest rate expectations
Institutional investment flows

Conclusion: Importance of Discipline and Perspective

The current market phase highlights the importance of:

Maintaining investment discipline
Avoiding reactionary decisions
Staying aligned with long-term financial objectives

Disclaimer: Mutual Fund investments are subject to market risks. Please read all scheme-related documents carefully before investing.

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The Hidden Risks of Investing in Small-Cap Stocks

Mon, 09 Dec 2024 03:30:05 +0000

The Hidden Risks of Investing in Small-Cap Stocks

Retail investors have been significantly impacted by the recent downturn in micro-cap stocks. These small companies, with market capitalizations up to Rs 5,000 crore, have seen substantial declines in value. Since September, nearly a quarter of the 1,300 micro-cap stocks on the National Stock Exchange (NSE) have dropped by at least 20%, with some falling as much as 60%.

Retail investors, who hold up to Rs 2 lakh in shares per company, have been particularly affected. Their investments in small-cap stocks have surged since the pandemic, reaching a 15-year high as of September. In many cases, retail investors hold a significant portion of these stocks, sometimes over 80%, while promoters have reduced their stakes.

The enthusiasm for small-cap stocks has been driven by the potential for high returns. However, these stocks are highly volatile and susceptible to market fluctuations. Promoters, who have a better understanding of their companies' performance, have been selling their shares, leaving retail investors more exposed to the risks.

The recent market correction has highlighted the dangers of investing heavily in micro-cap stocks. Many of these companies were overvalued, trading at high multiples despite minimal or no profits. As the market adjusts, retail investors are likely to face further losses. You can read more on the subject here & here.

In conclusion, while small-cap stocks can offer significant returns, they also come with substantial risks. Retail investors should be cautious and consider diversifying their portfolios to mitigate potential losses.

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A Quick guide on transition into NRI

Thu, 22 Aug 2024 04:00:00 +0000

Managing Your Investments as an NRI: A Quick Guide

Moving abroad for a new job or fresh start is exciting, but understanding the complexities of managing your finances during the transition from resident to non-resident Indian status is essential. This shift impacts investments, banking, and taxation. Here’s a detailed guide to help you navigate this transition, make informed decisions, and avoid any legal or financial pitfalls. Here’s a quick guide:

Understand Your NRI Status: If you’re out of India for 182 days or more in a year, you’re considered an NRI. Update your status with your bank to avoid complications.
NRO and NRE Accounts: Convert your resident bank account to a Non-Resident Ordinary (NRO) account and consider opening a Non-Resident External (NRE) account. NRE accounts are tax-free and allow free remittance, while NRO accounts handle income earned in India.
Efficient Fund Transfer: NRIs can transfer up to $1 million annually from NRO to NRE accounts. Ensure compliance with RBI guidelines and necessary documentation.
Update Investments: Update KYC details for mutual funds and stocks to reflect your NRI status. Transfer holdings to a new demat account if needed.
PPF: NRIs can retain existing PPF accounts until maturity but cannot open new ones or renew after maturity. Contributions are allowed only within the maturity period.
EPF: NRIs can withdraw all funds before leaving India. If funds remain, EPF interest becomes taxable if not working with an Indian employer.
NPS: Contributions can continue as long as you remain an Indian citizen. Update KYC with the centralised record-keeping agency. Foreign citizens cannot contribute.
Inform Tenants about NRI Status: Notify your tenants about your NRI status to ensure they deduct tax at the correct rate. Failure to do so may result in additional tax liabilities.
Starting Fresh Investments: With updated KYC, you can start new investments using foreign earnings. Mutual funds are a popular choice for NRIs as they don’t require a demat account. However, only a few fund houses accept investments from NRIs residing in the US and Canada due to regulatory constraints.
PIS vs. Non-PIS Accounts:

PIS Account: Easier to open, lower minimum investments, linked to NRE/NRO accounts, allows repatriation of funds, but has strict regulations and reporting requirements.
Non-PIS Account: More freedom to invest in assets, fewer rules, linked to NRO account, limited repatriation options, may involve more paperwork and higher fees.

Be Informed: Follow a comprehensive checklist and consult financial experts to ensure smooth financial transactions abroad. Stay informed and keep financial documents updated for a stress-free experience.

Update your investment and bank account status upon returning to India. Explore new opportunities in Gujarat International Finance Tech (GIFT) City for favorable NRI rules allowing them to hold assets in US dollar as well as other foreign currencies without tax implications in India.

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Indian Real Estate for NRIs

Thu, 11 Jul 2024 05:00:00 +0000

Navigating Tax Dilemmas: An NRI’s Journey in Indian Real Estate

Selling property in India as a Non-Resident Indian (NRI) is no walk in the park. The labyrinth of tax laws and bureaucratic hurdles can turn a simple transaction into a nightmare. Take, for example, the hefty 20% tax deducted at source—a surprise to many, including my friend Arjun, who sold his ancestral home last year. He was baffled by the deduction and only later learned that maintaining past tax returns could have eased his tax burden.

The Importance of Filing ITRs

Not filing Income Tax Returns (ITRs) is a common oversight among NRIs. The significance of filing ITRs voluntarily to keep records straight can't be emphasized enough - Assessment officers (AO) rely on past ITR’s to evaluate income and decide the TDS rate, without these records your chances of reducing TDS rate diminish. This resonates with my cousin Priya’s experience. She had to wait almost a year to get her capital untied from the tax department due to missing ITRs.

Real Estate Market Realities

The Indian real estate market often favors cash transactions, putting NRIs at a disadvantage, this can lead to selling properties below market value. A client experienced this firsthand when he had to sell his flat in Mumbai at a price much lower than he had hoped for, simply because he couldn’t accept cash.

Strategic Tax Planning

Careful planning is essential to navigate the tax implications and ensure compliance with both Indian and international tax laws. Understanding double taxation avoidance agreements and managing joint ownership are crucial. This will help avoid juggling between tax consultants in two countries to avoid paying taxes on the same income twice.

Lowering TDS Rates

Many NRIs don’t know that they can lower the default 20% TDS rate by submitting Form 13 online before selling their property. This requires documents like PAN, sale agreement, buyer’s TAN, bank statements, and past ITR copies. The process can take up to 5 weeks, so it’s best to plan ahead.

Remittance of proceeds

When it comes to remitting sale proceeds to their country of residence, Non-Resident Indians (NRIs) encounter specific rules and challenges. NRIs must obtain a 15CB certificate from a chartered accountant (CA) to do this. The 15CB process involves an audit where the CA verifies the transaction’s validity and ensures compliance with all conditions for remittance.

When property sale amounts are paid in cash, obtaining the certificate becomes challenging. Buyers sometimes insist on cash payments to save stamp duty. NRIs accept these cash amounts and deposit them separately into their NRO (Non-Residential Ordinary) account. However, this creates difficulties during remittance because the CA requires proof of these funds to issue the 15CB certificate. NRIs should avoid accepting cash payments if they intend to remit the entire sale amount.

Remember, staying informed and prepared is key to managing investments and maximizing returns in the evolving Indian real estate market.

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Investment Lessons from 2023.

Wed, 07 Feb 2024 09:34:20 +0000

Investment Lessons from 2023.

Investment mistakes can provide valuable learning opportunities, providing insight into how decisions can be better made in the future. It is difficult to navigate the complex world of investing, and there is a great deal of room for error. For example, there can be significant financial implications for insufficient research - It can lead to substantial losses. In addition, when determining the timing, location and duration of investments, there is a common tendency to overlook the risk profile of the investor. Your portfolio may be compromised by overestimating or underestimating the risks. But fear of mistakes should not prevent us from taking action and waiting for investments to grow on their own.

Due to the unique combination of geopolitical tensions and market slowdowns, investors in 2023 faced a demanding environment. This combination of factors made the market ripe for potential mistakes, as unsuspecting investors poured funds into new offers and hopped between investments in the hope of capitalizing on sudden, unexplained market shifts. It is important to note that a thorough understanding of the risks involved as well as an informed decision-making process are needed in order to invest on the market.

The market’s unpredictable fluctuations fueled a pervasive “fear of missing out” mind-set among investors, leading them to hastily switch from one trending investment to another in pursuit of quick gains. Unfortunately, this often led to the purchase of assets at inflated prices, which will inevitably result in significant losses when the bubble burst. Moreover, some individuals have concentrated all their investments in one asset and avoided diversification because of the temptation to pursue high returns.

We need to reflect on our financial objectives and make sure we're on solid ground with our money. This includes being able to operate on guard rails, having clarity and peace of mind about our finances, and making good decisions. It is important to first understand what not to do in order to ensure that your financial situation is stable.

Let's take a look at the things that shouldn't be done to make sure the finances are in order first.

One of the most common financial mistakes is to view finances through the lens of investments. As people often invest in products that are already doing well or where their colleagues and friends are investing, this product centric view can be problematic. Instead, the portfolio should be tailored to the individual's and family's specific needs, rather than to include products that are doing well or that their friends are investing in. This is the start of building a strong financial foundation.

Second, investing solely for saving taxes is a foolish exercise. Rather, a portfolio of investments should be set up based on objectives, risk profiles, duration, income requirements, returns and tax efficiency. If it is also possible to save taxes as a byproduct, it is acceptable.

Thirdly, it's not a waste of money to have a security net and to spend money on it. Many people think what they're paying for insurance is money that goes down the drain. However, insurance is a risk transfer for small premiums; only when catastrophic events occur does one realize its importance. Life throws us curveballs, and having insurance is the safety net. It's also a good practice to have adequate contingency and liquidity funds! Covid's helped a lot of people understand it!

Let us talk about some of the things we should do with our money now.

First, we've got to have a plan for our lives and our money. We're planning most of our life's events, birthdays, vacations, weddings, etc. But we're often operating without a plan when it comes to our finances. Money's important, and we've been working all our lives for it. It is therefore essential to take a serious look at our own money and wealth so that we can come up with a plan of action.

Second, most of us have a number of financial goals. These objectives need to be prioritized, resources allocated, and investment directed at them. In order to achieve the objectives, it is essential to work in a planned manner and to achieve them in a deliberate manner. It's equally important to keep within the budget, so that money allocated for one goal like retirement doesn't get consumed by other goals like children education.

Lastly, we must shift our focus to controllables, such as our own expenses, our goals, and what we put aside each month. It's not going to sound inspiring, and it's probably going to make you yawn.

During the investment term, investors are often faced with unforeseen events like asset cycles, market downturns, interest rates, economic and geopolitical developments. However, it is not productive to obsess over these factors. Instead, it would be best to stick to the plan and adjust accordingly to changes in the course of the journey. That's because long term investment is a game of patience and discipline. A diversified portfolio that is compatible with investment objectives and risk tolerance is important. It is vital to make the right allocation of assets when investing. Studies have shown that asset allocation is the main driver of portfolio returns, not the specific selection of schemes. The importance of asset allocation cannot therefore be underestimated.

The cornerstone of wealth creation is regular investments. Because most people receive their income on a monthly basis, it's wise to set aside an amount that can be invested in the future. You can spend the rest of that money after you've invested, without guilt!

In conclusion, building wealth requires discipline, determination, and patience over a long period of time. It is not possible to create wealth overnight. To achieve great results, it takes time, effort, and a willingness to stay the course. You can build a strong financial foundation to help you achieve your objectives and ambitions by following the principles of good investing and choosing appropriate investment options.

Keep in mind, the key to success is that you keep your focus, remain disciplined and continue on course!

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Fear of missing out on a new investment trend

Sat, 04 Feb 2023 14:16:42 +0000

Fear of missing out on a new investment trend

Do you know ‘FOMO (Fear of Missing Out)’ is the most common emotion in the investing world today? The fear of losing out on what is hot in the market adds up to anxiety and irrational decisions instead of disciplined investing. It is important to stay focused on your long-term financial goals without falling prey to the fear of missing out on the latest investment trends. Read on to know how the FOMO factor can influence your financial journey and financial success.

The biggest secret to successful investing is to stick on to long-term investment strategies that are aligned with your financial goals. Making an investment decision based on greed or fear can be one of the major reasons to fail as an investor.

What is FOMO (Fear of Missing Out)?

FOMO or Fear of Missing Out is a psychological phenomenon that motivates or makes a person anxious to take certain actions to not miss out on amazing opportunities that others are already talking of the benefits. Nobody likes to get left behind. For example, you see a festival offer going on a certain product that everybody is talking about. Following the herd, you will also buy that product even if you do not need it with the fear of missing out on the best. The same gets applicable when it comes to investment opportunities.

How does FOMO affect investors?

Fear of missing out on new investment opportunities can hugely impact you as an investor. When you hear your friends, relatives or colleagues have bragged windfall profit from the equity market or from any other investment option, it is quite natural to get envious or dissatisfied with the returns that your investment has delivered. This emotion of fear can ultimately affect your investment decision-making and can potentially distract your financial plan. We need to avoid falling prey to the fear of missing out on investment trends. Here are some important steps to actively avoid FOMO while investing.

Make goal-specific investments

The first step in financial planning is to identify your short-term to long-term goals. Once you know your goals and evaluate your risk profile, you need to choose the investments that fall in line with your goal for a suitable time frame. Instead of following what others are investing in, your investment approach should be personalised to your goals. This helps you stay on track to reach financial freedom. For example, let’s say you need to invest or plan for a new car that you are planning to buy after two years. In this case, you can invest in debt investment options that you can liquidate after two years. You cannot follow the ‘hot tips’ if that is related to investment options like real estate and equity that are suitable for the long term.

Design a strategy to meet your goals

Once you know your goals, you need to design a strategy to meet those investment goals. For example, when you are planning for your retirement goals, you can invest in a combination of long-term investment options such as investing in equity mutual funds via the systematic investment plan (SIP) route, National Pension Scheme (NPS), and post office saving schemes. The strategy should be designed based on your risk tolerance level and the time frame that you have to reach retirement years. It is not wise to invest all your money in a single investment product even if everyone is talking about it.

Do your own research

Instead of following the market sentiments, you need to do your own due diligence. You may hear from your colleague or friend that they have bragged about a great return on a certain investment which may motivate you to go with the same investment. But it is important for you to realise that the individual requirement of your friend and you may vary and the result may also differ with the time of investment. Your investment may perform much better than your investment or even worse. Hence, it is crucial for you to do your own research, understand the product, and figure out which investment works the best for you.

Be patient and focus on long-term growth

Financial planning is a continuous and long-term process. When you take a long-term and disciplined approach to your investment keeping the focus on the finish line, stress can be reduced and serious FOMOs can be avoided. The most successful investor, Warren Buffett once said, ‘’ Be fearful when others are greedy and be greedy when others are fearful.’’ Wild market movements fuelled by investor creates a desire in you to gain short-term money. Such hot tips should not be followed in order to avoid emotion fuelled investment decisions. The best way to attain financial freedom is to formulate long-term strategies.

It is important not to fall prey to FOMO (fear of missing out) on investment trends. The main adverse impact of FOMO is that it often becomes too late to reap the benefits of the investment that is on-trend. That means the opportunities would have already passed by the time the investment trend hits the headline. Stick to your financial plan to reach goals.

How to inculcate basic financial literacy in children

Sat, 04 Feb 2023 13:54:26 +0000

How to inculcate basic financial literacy in children

The evolution of parental tutelage has achieved a frenzied pace. Children’s lives are vastly different from what they were just a few years ago. As if the times weren’t changing fast enough, social media and the tech industry at large have pushed the boundaries further. All this makes it quintessential for parents to teach their children basic financial literacy.
The consumption economy incentivizes poor financial choices. Frivolity and excesses are deemed natural by brands and influencers on social media. Online marketplaces do serve needs but create an insatiable desire for more. A child acting alone on these platforms is a vulnerable being that needs to learn good money habits.
This is not an alarmist message deterring you from innovation. This is rather an attempt to highlight just how important it is for parents to teach their kids about finance. Money is everywhere, and its knowledge is no less important than grammar, or arithmetic, or the lives of microorganisms.
Besides, you are not alone if you don't like talking to your kids about money. The following pointers are designed to help you initiate the process.
Fix the barriers
Parents must step out of the traditional role of caregivers and embrace determined instructional responsibilities. School curriculums are yet suffering from a dearth of materials on financial literacy. The modern-day also allows for greater economic opportunities due to widely available credit, blockchain, cryptocurrencies, and related developments.
Children as old as seven are capable of learning the basics of money: savings, budgeting, and spending. While teens can be introduced to the world of financial markets, and important topics like inflation and macro-trends. Explain your intentions clearly, and ease into the process thereafter.
Inculcate healthy habits
Build a culture around savings. Impress upon your children the advantages of compounding and how money makes money. Children form their outlook towards money independent of their parents. Ask your child if they’d like to have one candy right now or three tomorrow. Their answer might be an indication of their future money behavior.
The time a parent spends with their child can significantly determine if an early predisposition will translate into a problem later. When giving lessons about wise spending habits, take care to not go on a shopping spree or lavish your child with gifts. Explain your own financial choices and habits to lay out the advantages of a disciplined life.
Promote enterprising undertakings
Concepts like income and the importance of having a steady cash flow can be depicted by real-life exercises. Try giving your children small tasks in exchange for an honorarium. Promote entrepreneurship or just a basic understanding of business by explaining the motives behind marketing campaigns and value systems.
You can also consider enlisting help from an interactive medium. There are plenty of fintech start-ups working in financial literacy for school kids.
What’s in it for you?
Besides being a good parent, making your kids financially literate is also about shoring up your own knowledge. This is parenthood's way of offering an opportunity to better your financial discipline and become a role model for your kids. Be a part of your child’s financial journey and come out a better person yourself.
You must make sure to keep the process fun and engaging. Finance can quickly become boring for a kid that’s yet to enter the world. But with your help, children can do much more than just learn about finance. They can maneuver it to their needs, and bend it to their plans. And who knows? Maybe your child will become a top investment advisor as well.
Disclaimer
This blog is meant for educating people about the importance of the right financial planning. The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. Consult your financial advisor to get personalized recommendations based on your life circumstances.
About Rajiv Nair
Rajiv Nair co-founded Finshield Investment Advisors after successfully managing several large clients and businesses in the financial services industry for over 15 years. Rajiv is a Certified Financial Planner who believes – ‘Any amount of effort in wealth management is worthless if at least a part of it is not usable within your lifetime’. He is known to be steadfast in his Investment philosophy and an avid reader on diverse subjects. Learn more about him here Rajiv Nair | LinkedIn

How to decide if you need a financial planner?

Sat, 04 Feb 2023 13:52:42 +0000

How to decide if you need a financial planner?

No other phrase in finance is as ubiquitous today as ‘Do your own research’ or simply, DYOR. It is the hue and cry of almost every voice in modern finance. No more eggs in a basket, no buy what you know, none of the other old banalities of financial literature. Now, everything is all DYOR.
Research and financial literacy are essential parts of a being. Everything is just a few clicks away: no data too remote, no information that’s unattainable.
At a time like this, it becomes important to consider the merits of hiring a financial planner. When research is as easily available, and products more accessible than ever, does it make sense to hire a financial advisor? Or can you go solo in money matters, and build your dream portfolio yourself?
Consider your position in respect to the following points, and decide if an investment advisor holds value for you. A quick self-assessment test at the end will also help you make a better decision. Here we go!

1. Investment size

The size and frequency of your savings is a crucial aspect of personal finance. If your investment size is smaller, you should look to invest in easier products like mutual funds. Researching mutual funds is easier than individual stocks, and much more structured. But if your investment size is enormous, a financial planner could earn you a higher return.

2. Time on-hand

Research is the most important part of financial planning. Research is what sets you apart from those swayed by trends. Even if you decide to hire a financial planner, it would be a great asset to know and understand the markets. Your research will make your planner’s guidance twice as valuable.

3. Risk capacity

Much also depends upon the risk that you are able and willing to undertake. The risk capacity is directly affected by the number of dependents and future expenses on their account. Other factors include the source of income, the holding period, and upcoming withdrawals and expenses.

4. Investment goals

In case your investment goals are limited to earning a modest return, you could try investing without a planner. But if you want to beat the markets and really make your money work for you, a financial planner is the way to go! With the right advisor, your returns will far outweigh the cost incurred.

Self-assessment test to determine if you need a financial planner!

1. Is financial freedom your primary investment goal? Do you wish to withstand personal troubles or macroeconomic shifts, and live worry-free?
Yes? Hire a financial planner.
2. Do you constantly keep money in cash or idle at the bank? Have you thought about securities investment but never went through with it for some reason?
Yes? Hire a financial planner.
3. Do you have a sizable asset base? Or do you wish to build one before retirement?
Yes? Hire a financial planner.
4. Have you tried managing your finances and found it too overwhelming? Did you get too preoccupied with your finances and missed out on other important things like work and family?
Yes? Hire a financial planner.
5. Do you have the knowledge to value assets correctly, avoid common trading mistakes, and understand market shifts?
Yes? What are you? A financial planner?
Disclaimer
This blog is meant for educating people about the importance of the right financial planning. The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. Consult your financial advisor to get personalized recommendations based on your life circumstances.
About Rajiv Nair

Rajiv Nair co-founded Finshield Investment Advisors after successfully managing several large clients and businesses in the financial services industry for over 15 years. Rajiv is a Certified Financial Planner who believes – ‘Any amount of effort in wealth management is worthless if at least a part of it is not usable within your lifetime’. He is known to be steadfast in his Investment philosophy and an avid reader on diverse subjects. Learn more about him here Rajiv Nair | LinkedIn

Why are we allergic to Insurance?

Sat, 04 Feb 2023 13:50:39 +0000

Why are we allergic to Insurance?

The insurance industry is still growing in India. As per the analysis of industry data and government data, 988 million Indians do not have any kind of life insurance to protect their family in the time of need or during an unfortunate event. That means, almost 75% of our country’s population is uninsured or underinsured. People in India avoid buying life insurance despite being aware of its importance and necessity. Many people consider insurance as an expense and hence avoid buying it at the right age. So, the question that arises more often is why do we procrastinate with the idea of buying insurance? Let’s take a look at some of the major reasons.
Denial to imagine unthinkable happenings
None of us would like to imagine the unfortunate happenings or losing our loved ones. Buying a term insurance does not mean we need to anticipate the worst but to safeguard the family at least financially if not emotionally from an untoward event. We need to be aware of the uncertainties of life and be prepared for it as soon as we start earning to protect our family. Nowadays, people at a young age in their 20s and 30s are succumbing to lifestyle illnesses like diabetes, cardiac problems, etc. But, why do we wait for life-changing events to realize the importance of insurance and to make a smart financial decision? Our ignorance towards the financial risks is one of the major reasons that make us allergic to insurance.
Young age and good health
When we are young and in good health, the thought of buying insurance never crosses our minds. But we fail to understand that age and good health are not permanent. As age increases, health deteriorates. When it comes to buying insurance, with the increasing age and deteriorating health insurance gets expensive. You can buy higher coverage with comprehensive and extensive features at a lower price when you buy them at a young age. It is our misconception of ‘nothing will happen to me’ that makes us fail to take notable consideration of term insurance requirements in our life at an early age.
Relying on employer-sponsored insurance
Most of the companies cover their employees under group insurance plans. We rely on those insurance plans sponsored by employers without understanding whether the coverage limits are sufficient for the family or not. Even if it is adequate, this coverage is only available during our working years. Once we retire, we will find it difficult to get health insurance due to our own health condition. Failing to understand the requirement of adequate insurance coverage is mainly because of a lack of knowledge and lack of proper financial planning.
Overwhelmed by the insurance plan choices
With multiple insurance companies operating in India offering a wide variety of insurance plans, it gets challenging and complicated for us to choose the right and most suitable one. It could also lead us to think that it would be easier to get one whenever needed. It is important to first assess our insurance needs and then buy accordingly.
Misconception on insurance cost
Most of us avoid buying insurance thinking that the coverage is highly expensive, which is a clear misconception. But it is important to note that term insurance plans that provide life coverage and pure protection are cheaper in comparison to developed countries. Though we incur an expense today, our family will be financially secured during any unfortunate event. Failing to understand that insurance is an essential cost for all of us is one of the major reasons to be allergic to insurance.
Insurance is an important aspect of any financial plan. It is important to be adequately insured before we start our financial planning journey to reach financial independence. When we start understanding the necessity of insurance to protect our family, their goals, and needs, and when we start understanding the insurance products better, we can make a smart financial decision.
Not realizing the importance of insurance is what makes us allergic to the product that purely is designed for our protection. It is crucial for us to understand the role insurance plays in the financial journey by shielding our dependents against the financial risks that may arise due to unforeseen life events. We also need to understand that buying insurance at a young age when we are healthy can be extremely cost-effective and more beneficial in terms of features. Let’s stay adequately insured and make smart financial moves!
Disclaimer
This blog is meant for educating people about the importance of the right financial planning. The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. Consult your financial advisor to get personalized recommendations based on your life circumstances.
About Rajiv Nair

Rajiv Nair co-founded Finshield Investment Advisors after successfully managing several large clients and businesses in the financial services industry for over 15 years. Rajiv is a Certified Financial Planner who believes – ‘Any amount of effort in wealth management is worthless if at least a part of it is not usable within your lifetime’. He is known to be steadfast in his Investment philosophy and an avid reader on diverse subjects. Learn more about him here Rajiv Nair | LinkedIn

Are you moving towards or away from Financial Independence?

Sat, 04 Feb 2023 13:49:17 +0000

Are you moving towards or away from Financial Independence?

Everyone wants to achieve financial freedom early in their life. Financial independence is not just having money or getting rich, it is much more than that. If you have reached a status where you have enough income to take care of your comfortable living for the rest of your life without having to earn, then you have achieved financial independence. To achieve this, you need to have careful planning and take the right steps. How do you know if your financial independence is at risk? Are you moving away or towards your financial freedom? To find the answer, here are some of the important questions you must ask yourself. If your answer is ‘YES’ to most of the questions, then you are definitely on the right path towards achieving financial independence.

Do you have adequate life insurance coverage to protect your family and dependents in case of an unfortunate event? Your life insurance coverage should be decided based on your current financial situation, future earning potentials, financial obligations, and current liabilities. Have you taken all these points into consideration to choosing the coverage?
Do you have an adequate health insurance policy for yourself and for every member of the family or your dependents?
Do you have the contingency funds to meet emergency financial requirements? Have you ever faced urgent financial emergencies and used contingency funds to meet the need? If your answer is ‘YES’, then you are on the right path on your financial journey towards achieving financial freedom. If your answer is ‘No’ and you have not set up an emergency fund yet or you have taken a loan to meet the urgent financial requirement, you need to focus on your financial planning without any delay.
How many times have you withdrawn or liquidated your savings or investments meant for long-term financial goals such as retirement to meet urgent liquidity needs?
Do you regularly save at least 20% to 25% of your income for your future goals without fail?
Have you restricted your discretionary expenses to a maximum of 20% of your income?
Do you have a solid financial plan and long-term investment strategy to achieve your financial goals? Have you assessed your risk profile? Do you believe in diversifying your investments into different assets and products like equity, mutual funds, exchange-traded funds, gold, and REITs (Real Estate Investment Trusts) not just by restricting to fixed deposits and other fixed-income instruments?
Do you believe in investing in equity for the long term? If ‘YES’ you can expect to build a good amount of wealth over the long run with the magic of time and compounding effect. If you trade in the stock market or equities, then you may need to reconsider your investment strategy for the long-term goals.
Do you pay your debt obligations and credit card dues on time?
Have you created a solid budget and spending plan to get track of your income flow, and expenses and to hold control of your spending habits to save more?
Are you well aware of the investment products that you are choosing? Did you try to understand the features of financial products that you are investing in and what could be the impact of those products on your future financial goals?
Do you regularly review the performance of your investments and explore the new investment opportunities that come up in the market?
Are you working on your passion or hobbies to turn them into passive income sources?
If most of your answers to these questions are ‘YES’ then you are on the right track and moving towards achieving financial independence. If your answer is ‘NO’ to any questions, then you are moving away from achieving financial freedom. All you need for making the money work for you is time and the right plan to build wealth and achieve financial freedom. Once you achieve this, there is no longer a need to work for money. Having a comprehensive and solid financial plan is extremely important to achieving financial independence.
All you need to do is plan properly and make goal-based investments, keep track of your investments, monitor, and review on a regular basis along with keeping a check on your debt-income ratio. To save more towards your goals, you need to keep your debt obligations low. Save for contingencies and be adequately insured to have protection against uncertainties. A disciplined approach towards savings and starting to save early makes a huge difference to your journey towards financial independence. Right direction and goal-based financial decisions with clarity are key to moving towards financial independence.
Disclaimer
This blog is meant for educating people about the importance of the right financial planning. The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. Consult your financial advisor to get personalized recommendations based on your life circumstances.