MLF seminar on Investment: Investing in the Right Asset Classes
Debashis Basu explained how one can invest in a mix of financial products for retirement and other goals
 
In the second part of “Back to Basics: Investing & Insurance”, Debashis Basu, editor Moneylife, educated the audience about various asset classes and how to allocate savings effectively in each. Most savers are clueless when it comes to savings. They earn,  spend, and whatever is saved is kept in bank fixed deposits with no savings plan. This habit, Mr Basu cautioned,  would leave little money for meeting  future goals such as buying a house, children’s education and  retirement. Mr Basu spelt out various ways to be smart with money and  how to invest safely.
 
Mr Basu took the audience through how they can plan their investments for different goals. He urged people to be cautious and avoid making mistakes and lose capital. However, too many investors are lured by the image of big financial brands or glib talk of sales staff hawking their products. These include stocks, mutual funds, gold and realty. 
 
He explained the difference between investment products and speculative investments and the impact of inflation on their savings. He demonstrated how inflation erodes the value of their nest egg.
 
Stocks and equity funds are the best assets available for creating long-term wealth. The best way to invest in stocks is through regular investing in equity mutual fund schemes. He pointed out how much one should invest in equities and fixed-income products. There are various fixed-income products available, but one should choose those that deliver tax-efficient returns.
 
On gold, Mr Basu said the metal is a precious, but speculative, investment and cannot be valued since it does not pay interest or dividend. The price of gold is only derived by what others are willing to pay for it on a given day. 
 
If you buy gold, betting on guaranteed returns, based on previous price trends, you may be in for a nasty surprise. This has been Moneylife’s stand for over three years and the recent crash in gold prices demonstrated the risk it carries.
 
Mr Basu also pointed out that all talk about high returns on realty is based on anecdotes rather than hard data which is simply not available in a uniform, standardised form over a long period. 
 
Mr Basu said that people must differentiate between a house that one buys to live in (which can also appreciate significantly) and realty as an investment which will be bought and sold. 
 
Realty carries high transaction costs in terms of stamp duty, transfer charges and taxes. This leads to significant erosion in returns.
 
He warned against mixing investment with insurance through products like unit linked insurance plans (ULIPs) saying, “there are better investment products available at lower costs that can be used for investment.”

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Health Insurance Regulations: What You Need To Know
Gaurang Damani explained the key features of health insurance regulations 
 
On  10 January, Moneylife Foundation held two back-to-back events titled, “Back to Basics: Investing and Insurance”. Gaurang Damani a well known activist who has filed a pathbreaking public interest litigation (PIL) that has led to significant, pro-consumer changes in health insurance regulations, explained the new rules to the audience that comprised insurance consumers as well as many agents.
 
He started by discussing how the process of getting a health insurance policy itself causes considerable stress, thanks to the various tests, clauses and compliances after the long and hard search for the right product. 
 
Mr Damani said, the new Health Insurance Regulations (Regulations of 2013) contain some salient features related to premiums, senior citizens, policy issuance guidelines, claims and TPAs.
 
Here are some important features:
 
Premium cannot be increased arbitrarily after a claim is made, especially in multi-year policies. Loading of premium on renewal will have to apply across the policy portfolio and cannot depend on an individual’s policy experience. 
 
For multi-year policies, on the other hand, the premium would be fixed for at least a block of three years.
 
For senior citizens, who have often been soft targets for the sales force of insurers, the new regulations specify an entry date of 65 and clarify that there cannot be any exit date. 
 
The Regulations also say that insurers and TPAs will have to set up separate grievance cells for senior citizens.
 
Policies are portable up to 45 days before the maturity of the policy and even the cumulative bonus would be portable. 
 
The free-look period has been set at 15 days from the policy date and the free-look period only applies to policies with a term longer than a year.
 
The TPA will have no power in rejecting claims and TPAs function in forwarding claim papers has also been made stricter..
 
On the issue of dispute resolution, Mr Damani said, “Grievances must be acknowledged by the insurer in three working days and resolved in 15 working days. For claims-related complaints, consumers can write to the Grievance cell of the insurer and if there is no response, write to complaints@irda.gov.in or call toll-free at 155255.” Mr Damani addressed many questions in his interactive session, which can be accessed at the Moneylife Youtube channel https://www.youtube.com/MoneylifeTV

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Stocks trading far below their book value is a popular indicator of value for...

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