Investor Query: Please let me have your advice on Whole Life Insurance Policy?
Mr. Gerard Colaco: Viewed from any angle, whole life insurance is a poor choice. First and foremost, the very concept of life insurance is not properly understood. Life insurance is a protection against sudden, unforeseen and unexpected loss of earning power. Clearly therefore, life insurance is not needed during a person’s entire life, only during a person’s financially productive life.
Mr. Gerard Colaco: Common investors in the stock market routinely rely on tipsters and manipulators, little realizing that most ‘experts’ are sadly innocent of sound investment knowledge. Our view of stock market…
Mr. Gerard Colaco: Some aspects of investment have already been touched upon. For example, an emergency fund is in some ways an investment. However, its objective is more insurance oriented, and we therefore do not consider an emergency fund to be part of our investment portfolio.
Mr. Gerard Colaco: Parking has two aspects. One is emergency funding. The other is pure parking. You are already familiar with the concept of an emergency fund.
An example to understand what is meant by pure parking. Suppose you have sold a real estate property for Rs 40 lakhs. With this money you want to buy another piece of real estate. You do not know whether you will be able to get a satisfactory unit of real estate in a week or a fortnight or a month or 6 months. But, the moment you identify a satisfactory real estate asset, if the price is right, you will want to conclude the deal immediately. So, the period of your investment is highly uncertain. The investment must therefore be very liquid and be readily available when you require it.
Mr. Gerard Colaco: The first purpose, for which people may invest, is for emergency funding and/or the parking of funds.The second purpose for which people invest is to earn regular returns.
When we talk of regular returns for resident Indians, we generally speak of avenues such as:
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