One young couple came to me recently wanting to do some ‘financial planning’. Their idea of ‘fp’ was they could give some haphazard information (either for want of data at their end or not wanting to share the data, LOL). They were not too keen to fill up a word document, an excel sheet, collate the details at their end….but were expecting to see a nice pie chart, ‘where am I now’ chart, what tweaking was necessary, etc. Tough, obviously did not happen.

More importantly they had invested in 34 mutual fund schemes and had life insurance policies from 4 companies. And they thought they had done a good job (if not great). What made them think so?

Well, they had diversified had they not?

They had invested in almost all the ELSS schemes that existed in the country and surprise, surprise they also had many FMPs, many ‘Monthly Income Schemes’, obviously 3-4 ULIPs, one term insurance (for the wife who was presumably earning lesser – they were not too eager to share the husbands income, so I can only guess). rofl. So Hdfc, Sundaram, Templeton, Dsp, Reliance, Birla, Icici, Uti, Cholamandalam dbs, JP Morgan, Tata, ….all had their share of this couple’s pocket. Surely it was not an agents idea – doubtful whether any single agent would do this. Then I realised that they invested in ELSS schemes at the last minute – so the colleague in the office who was investing said..’Arre mera agent anewala hai…pan card laya kya’ and the investment was made in the form that was available. No attempt was made to invest more in the existing scheme.

Learning:

Except for investment advisers, investing for tax is a game where the investor is only worried about saving tax. Stupid, but true.

Agents who sold in a particular year did not follow up the following year and ask them to invest more in the existing account (fund houses incentivise folio creation)

Some schemes were growth, some were dividend reinvestment – in case of ELSS you choose growth (if you have exhausted 80C limits) or dividend payout (so that you can reinvest the dividend) BUT NEVER CHOOSE dividend reinvestment. The reinvested amount will be subject to lock in….so perennially you will be stuck to this fund!!

Anyway…they are happy that they have diversified, amfi is happy that they have so many ‘customers’ who have invested in mutual funds (this couple would be counted as 34 people), the agent is happy that here is a couple who like to ‘diversify’ and ‘reduce’ their risk…why am I cribbing?