Tip Tuesdays: Understand the Cash Outflow of a Financial Instrument Before You Invest In It

It’s March and I’ve seen a good number of people blindly investing in a financial instrument (usually Unit Linked Investment Plans) at the very last minute for the sole reason that it saves them from paying a certain amount of income tax. What’s forgotten in the heat of the moment is the cash outflow that you need to bear in the years to come.

It might not be a problem today to pay Rs 50,000 as the premium amount, but will you be able to pay this premium each year for the next twenty to thirty years?

It’s therefore a good idea to stop for a moment and think about the cash outflow you’d need to bear in the years to come to continue this investment.

What do you think?

Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.

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