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10 Tips for Beginners to Invest and Save Money Wisely

dateKnowledge Centre Team dateSeptember 6, 2021 views214 Views
Financial Planning | Tips for Saving Money

A financial plan is an ideal way to plan a secure future for you and your family. India is one of the few countries where there is little or no financial security for the elderly and retired. This makes saving and investing in the right financial products all the more crucial. Without a smart financial plan, you may find it difficult to manage your money wisely. There are multiple reasons to create a financial plan that aligns with your saving goals. If you know the advantages of saving and investing wisely, here are 10 tips that will help you achieve this.

1. Invest money based on well-defined financial goals

Once you’ve decided to start investing money, the first thing to do is decide your goals. Instead of opting for a scheme and investing money directly, set down your financial goals. Your financial goals should be of two types - short-term and long-term.

Defining your financial goals in a clear and precise manner will help you understand when and how much money you need. This can help you make an accurate investment plan for the future.

2. Don’t overlook the allocation of your assets

Asset allocation is the basic requirement when you decide to start investing. Assets can be allocated to various types: Debt, Equity, Gold, Commodities, Property, and Liquid (i.e. Cash). Each of these has separate rates of return, advantages, disadvantages and liquidity.

Therefore, how many funds are allocated in each asset depends entirely on your risk appetite. Understand your risk appetite and allocate your assets accordingly. It is also important to revisit asset allocation regularly instead of making one hard-and-fast rule.

3. Diversify your investments based on your appetite

“Don’t put all your eggs in one basket,” is a common phrase in the financial world. However, this does not mean you have to buy ten different financial products. Instead, diversify your investments based only on your appetite.

If you buy too many different funds in the first week of your investment, you may find it difficult to manage all of them. Instead, start with one or two and as your understanding of your financial requirements and financial products increases, you can diversify your investments.

Investment Portfolio | Tips to Diversify Investment Portfolio | Investment Portfolio Management

4. Study financial products in detail before making a decision

The decision to buy or sell an investment is entirely up to you. However, you should do complete and detailed research before you make the decision. Use multiple avenues of knowledge to understand the advantages and disadvantages of your decision.

Buy or sell investments only when you can define why you are doing so. While taking advice is important, ultimately, the investment will affect your future. Therefore, you should be able to state clearly why you have taken a particular financial decision.

5. Review your investment portfolio regularly

Whether you have only one scheme in your portfolio or ten, you should review your investment portfolio regularly. It is recommended that you review your portfolio at least once a year or once every six months. Doing so will ensure you can identify any scheme that is not performing to your expectations. It can also help you book profit or avoid any losses. This can also help you rebalance your portfolio and manage risk and asset allocation. However, we do recommend not reviewing the portfolio every few weeks or months. This can lead to irrational decisions.

Learn how to adjust your investment portfolio for the post-COVID world

6. Don’t choose investments based on a rate of return

Rate of Return (ROR) is one of the most attractive numbers in any scheme, portfolio or bank account. However, your decision to invest in any product should not be based on this number. Instead, opt to do thorough background research on the financial institution. This will help you understand the institution’s track record and whether or not your decision is wise or not.

7. Don’t postpone taking action

If you have decided to make a financial decision - be it to make an investment or sell it - don’t postpone taking action. Postponing the action will only hurt you in the long run. For example, if you’ve decided to buy a mutual fund because it has affordable rates, don’t postpone. If you postpone the decision, the value of the fund may change and you may have to invest extra money. Similarly, postponing can lead to both profit or loss.

8. Plan for your retirement

Retirement is the inevitable goal for all people. Therefore, it is never too late to start planning for your retirement. When you calculate your retirement corpus, make sure to keep inflation in mind. If you don’t have any government pension, you can also opt for Guaranteed Income Schemes. Canara HSBC Oriental Bank of Commerce Life Insurance’s Guaranteed Income4Life Plan provides three primary advantages:

a. Assured loyalty additions
b. Limited premium payment options
c. Guaranteed Regular income option

9. Buy health and life insurance policies

Health and life insurance policies are two different but equally important products. A health insurance policy can help you cover the medical expenses of all emergencies. Generally, health insurance policies provide for hospitalization, medicines, surgeries, etc.

Life insurance policies are the second requirement. These can help you provide for your dependents in case of an untimely death. iSelect Smart360 Term Plan provided by Canara HSBC Oriental Bank Of Commerce Life Insurance also includes the provision to add your spouse.

10. Invest in an insurance-cum-savings plan if you can’t afford a plain insurance policy

If you can’t afford a life insurance policy due to financial constraints, you can also opt for a insurance-cum-savings policy. The savings component in these policies can help you grow money while providing you with insurance cover. A prime example of this is the Invest 4G Plan by Canara HSBC Oriental Bank Of Commerce Life Insurance. This flexible plan can be customized according to your requirements.

These are the top ten tips that will help you invest money wisely. Keeping these in mind will help you make the most informed decision for your finances. It is never too late to start planning for your future, and so, instead of postponing, take action.

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Frequently Asked Questions (FAQs) Related to Life Insurance Policies

The premium is one of the most important factors to consider before buying a life insurance policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance plan. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Life insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age: It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chance of contracting diseases is low. Young people also opt for the best life insurance policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender: The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits: The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term: Policy terms are also taken into consideration by insurers while deciding the premium amount. Life insurance policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the best life insurance policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation: The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physician’s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence, there are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the life insurance policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance plan.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: A life insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the life insurance policy, the insurance companies generally pay 80% of the total premiums paid.

Buying the best life insurance plan online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. The best life insurance policies online insurance offer higher benefits. Customers should, however, buy online life insurance policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one life insurance policy to increase the cover or avoid claim rejection. In case of multiple life insurance policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy a life insurance policy, the insurance company asks for the nominee details. Only the person named as the nominee in the life insurance plan can cash out in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term, the beneficiary receives the death benefit. In case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment option is chosen, the policy works as a source of regular income.

It is a popular misconception that life insurance plans are only for accidental deaths. A term life insurance plan like iSelect Smart360 Term Plan also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy a life insurance plan in your early 20s because it is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy the best life insurance plan at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why life insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

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