Terms & conditions to know before investing money

Q: We are inundated with telemarketing call selling us different products and guaranteed income and capital preservation policies and funds. Even if I am going through the internet my demat account or an agent, what are the terms and conditions that I need to monitor before writing out money for this?

A: Few very fundamental rules - one is if there is a telemaketer calling you, ask them for an email or a written proposal. What we have seen is a lot of telemarketers promise a lot of written proposals which they are not allowed on a regulatory basis specially while selling ULIPs which are insurance products basically masquerading as wealth product and they use assumptions which actually the regulator does not allow and when you ask them in writing, they never come back to you. So always ask for an email -- where is this originating, what is happening. The second fundamental point would be in terms of the information. All the information is available on the regulator's websites about the scheme. But reading the offer document itself is little onerous for ordinary investors because it is a big document so there are scheme information documents which are simplified versions which give the risk factors which give information about the fund manager, what is the objective of the scheme. I think few key points you should notice, you should notice how old is this scheme, what has been the performance, what is the philosophy, what is the investment process that the fund manager and the fund house believes in, are there value investors, growth investors, blend investors, then you have to look at the risk factors that what has been the kind of volatility of returns. So suppose you are saving for a house which you have to purchase two years from now and the volatility has been 20-25 percent in that fund, you might lose 25 percent of your principal and not be able to buy your house. I think then you should not be in that fund. That is a very simple example that I am giving. So you have to look at your financial gold and your risk appetite and then match it with the risk factors, which the fund is showing you.