Friday, January 09, 2009

Investments

So I bought a pair of Adidas running shoes worth Rs 4899 earlier this week. Add to this Rs 4000 worth of non-refundable air fare to travel to Mumbai, and I have already invested nearly 9000 bucks on the upcoming half-marathon. Such big investments make it impossible for the baniya in me to back out of the race now. (Plus, after nearly three months of training, I am fairly confident of finishing the race. How quickly I finish though, is a different matter altogether...)

Talking of investments, one kind of investment you will need to start thinking about soon is the one you will need to make under section 80C to reduce your tax liability. Although, in these troubled times, I don't know how many people will go with ELSSs, here's a small piece of advice if you are thinking about ICICI Prudential: be sure to find out whether you are investing in a one-time payment scheme or a recurring payment scheme.

In the latter case, you will have to repay the amount for at least the next two years (three years in total, which is the lock-in period for an ELSS). I was burnt badly by this issue last year — I had made a huge investment with ICICI Prudential the year before, and then invested in different mutual funds (including ICICI Pru) last year too. Only later on did I realize that I had bought recurring payment policies both the times (the concerned managers never informed me that this was the case). So this year I will have to invest more than Rs 1 lakh in ELSS (which is the maximum amount on which you can save tax under 80C).

Remember, ICICI Prudential is an insurance company first and then an investment house. Their managers sneakily made me buy two insurance policies with huge premiums, zero sum assured on maturity and completely subject to market risks. It is much better to invest with real mutual funds (like SBI or HDFC MF), which have a one-time payment policy as default and where there's no attempt to sell you insurance.

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