BASIC S OF SAVINGS

Earlier there was only one life Insurance Company (LIC) and only one Mutual Fund (UTI). Today there are more than 15 Life Insurance Companies & 30 Mutual funds. Earlier most of the savings & investment products used to come with fixed and guaranteed returns. Today very few with fixed and guaranteed returns and most come with market linked returns. Hence unlike earlier days, present scenario is very confusing.

Under the state of confusions, it is not possible to take correct decisions. Therefore it is essential to remove confusions. This can be best done by understanding the basics of the financial products instead of the product itself. When we talk of basics, the world of financial products becomes very simple because basic products are only three as follows:

1. Pure Insurance
2. Pure Debts (Safe Investments)
3. Pure Equity (Risky investments)

All the financial products available in the market are composed of only these 3 products. Therefore if we learn the basic characteristics and risk return profile of these basic products, we would be able to make Insurance and investment portfolio in accordance with our needs. In the present market, both pure products as well as structured products comprising of these pure products are available. We need to make a choice between them. What we can understand becomes the natural choice. If this is true then pure products are easy to understand.