Investors are urged to examine their holdings to weed out lagging life insurance-cum-investment plans that yield only 4% to 6%, redirecting those funds into equity schemes or loan prepayments. Basic protection must come first, requiring personal health coverage and term insurance worth 10 to 15 times annual income. Furthermore, investors should eliminate duplicate mutual fund schemes in identical categories caused by fear of missing out. Any fund exits must be weighed against benchmark performances over three to five years, alongside exit loads and taxes.
Key points
Investors should review and potentially surrender low-yield traditional insurance plans a…: Investors should review and potentially surrender low-yield traditional insurance plans after assessing exit costs and securing term coverage.
Holding multiple mutual fund schemes within the same category increases complexity withou…: Holding multiple mutual fund schemes within the same category increases complexity without providing genuine portfolio diversification.
Capital liberated from underperforming assets can be effectively repurposed to prepay out…: Capital liberated from underperforming assets can be effectively repurposed to prepay outstanding mortgages or enter high-return equity funds.
Sources checked by our analysis pipeline: 1
Diwali is nearly here. So is the annual ritual of sprucing up homes, clearing out clutter and making room for new purchases and fresh beginnings.
However, the festive clean-up need not stop at one’s home. Investment portfolios, too, deserve a periodic review to restore balance in asset allocation, shed deadweight and make better financial choices.
Take the case of Navi Mumbai-based engineer Vaibhav Wandre. When he reviewed his portfolio recently, he realised that some of his life insurance-cum-investment policies were yielding annual returns of just 5-6%. “I was paying a combined annual premium of Rs.1.2 lakh for policies that did not even provide adequate life insurance cover. I surrendered them and used the proceeds of Rs.3 lakh to prepay my top-up home loan,” he says.
The 42-year-old also directed the money freed up towards equity mutual funds through systematic investment plans (SIPs). “I expect these schemes to fetch relatively higher returns,” he adds.
Mumbai-based software engineer Tanushri Bhatkar, 37, has a similar story. “As part of my annual portfolio review, I discovered that my portfolio had a couple of poor-performing…
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