Be Proactive In Investing





Make sure that you research before making an investment choice and keep track of regulatory changes to avoid losses, scams and mis-selling. Unless you have run into a big inheritance, there is a slim chance that you will earn your fortune by being in an idle or static mode. Riches are churned out by people who put in time, effort and money into research. They are not satisfied with being satisfied, and so they seek out the best investing option, the best career avenue, the best way to achieve a goal. They do not compromise on the quality or suitability of a product or service because it meets their basic needs.

So they don't buy an insurance policy just because it helps save tax, invest in a stock because they want equity exposure, or a child plan because it qualifies as an instrument to save for the kid's needs.

So what should you do? Spend time to understand not just the features of the product or service you are buying, but also its overall impact on your finances. Research the company whose stock you want to buy, find out if the insurance policy covers your risk adequately, take a loan after fully understanding the burden of EMI and the total cost of purchase, and spend on a credit card only after finding out the charges and fees.

You also need to take the initiative to keep pace with the alterations in rules and regulation in every aspect of personal finance. Find out the changes in tax rules, new provisions in insurance, and Sebi regulations on stock trading and mutual funds. For instance, after the recent change in taxation rules on debt funds, fund houses are offering the option of extending the holding term to three years to avoid high tax. But you can avail of it only if you are aware of the provision. Be alert and you can optimise your gains and, more importantly, avoid falling a victim to mis-selling and scams.

IF YOU ARE NOT, YOU SUFFER FROM SATISFICING

If you are confronted with an investing choice and decide as soon as an option appears satisfactory, you are satisficing. You aim for a choice that is `good enough', not optimal or rational, because the latter would entail spending time, effort and money on research.

HOW TO OVERCOME IT:

In some investing options, it is better to approach a financial planner since he will take an objective and optimal decision for you. Alternately, assess your needs in a more rational manner before taking a decision.