Simple works. Complicated designs make your systems, your life decisions complicated. The US Navy discovered this simple fact in 1960, and what better way to remember the same but through an acronym:

KISS for “Keep It Simple, Stupid”!

Your lives need not be complicated. Your day-to-day life decisions need not go through a complex analytical process. Investment decisions, more so.

To make your investment decisions simple, here are some pro-tips:

1. Do not invest in any device that you do not understand fully.
2. Do not invest in policies that offer too many things. One policy, one offering. Let that be your mantra.
3. Do not trust agents selling policies, and investment ideas blindly. They have their own agenda.
4. Study. Google. Bing. Research. Spend at least one hour a week studying about personal finance. That is it. Take notes, if possible. A page a week. That is all.

If the tips are self-explanatory, you need not read any more, and can better invest your time reading up something else. If not, read on:

Do not invest in any device that you do not understand fully. 

With the investment market maturing, we have a plethora of opportunities in the market. You have insurance policies, mutual funds, shares, future, options, ULIPs and tens of others types of opportunities floating all around. So, which do you invest in?

Each device serves some definite purpose, but if you think about it, you invest or spend your money in these devices for two specific purposes:

1. Minimise risk: It may be health risk or death risk or accident risk. We want risk to minimised. Remember, risk can never be eliminated. (We would talk about risk more in subsequent articles.)
2. Maximise return: You want to retire comfortably, and make your money do all the hard work. The harder your money works, the more are your returns, the more relaxed you would be.

Try and understand what purpose a particular device serves. Click here to know the purpose that is to be served by Insurance Policies. 

If any device “claims” to serve both the purposes – high return with minimum risk – be aware, and read the next point.

Do not invest in policies that offer too many things. One policy, one offering. Let that be your mantra.

There are these insurance policies for which you pay a high amount of premium, and they provide you both insurance coverage and also some nominal return over the tenure. Trust me, you would have done better to take a term insurance (life coverage) paying a fraction of the premium required for the all-offering-policies, and investing the remaining amount in a PPF (Public Provident Fund) account. [Read about Retirement Plan: Just PPF! by clicking here.]

Likewise, you have this Unit-Linked Insurance Plan (ULIP) which claims to provide investors “both insurance and investment under a single integrated plan”. Really? Just find about the administrative charges. In its stead, you would be better off taking a term insurance and investing the rest in Mutual Funds.

One device, one offering. Term insurance for hedging risk, mutual funds for healthy returns. No complications.

Do not trust agents selling policies, and investment ideas blindly. They have their own agenda. 

To be fair to agents, they have a family to run, and obviously they would push policies that maximise their return, their commission. These agents can be physical agents or online platforms. That does not mean that you do not consult them, if need be.

But just do not trust them blindly. Ask them questions like:

• What are the assured returns?
• What would be volatility like?
• What are the inherent risks?
• What are the administrative charges? Are their companies providing the same policies for a lower administrative charge giving a bigger bang for your buck?

But to ask these questions, and appreciate their dodging answers better, you need to:

Study. Google. Bing. Research. Spend at least one hour a week studying about personal finance. That is it. Take notes, if possible. A page a week. That is all.

Personal finance is interesting. That you are reading this, means you are interested. Who is not interested in money! Just read more. Take notes. Discuss with your peers. There is no shame in discussing mistakes you made, or learning from the mistakes of somebody else.

Not that complicated, is it now?

Just Keep It Simple. 

Amartya Dey, India

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