Several people often wonder what to do with regard to protecting themselves from any instances of fraud. Most people wish to take decisions based on solid information but often remain anxious about whether they have to learn and absorb several complicated concepts and terms. A simpler approach is the need of the hour in this case. Prior to any financial decision, one can write down answers to the key questions on paper. This can be done solely by oneself or with an advisor for offering the answers.
Here are the key aspects that you have to keep in mind:
- Ask about the name of the financial institution selling the product. Several institutions and firms may not possess membership of the exchange. Do not ever deal with these firms unless you know about the registered broker in whose name you will be executing the trade. Always know the firm and people you are dealing with in this regard. This name should be there for the contract notes, papers, documents and so on.
- Find out about the accountability of the financial entity. It has to be accountable to either RBI, SEBI, PFRDA, IRDA or the Government. Ask for the name of the regulator and proof of registration.
- Seek the document which shows the product name and its approval from any regulator. Don’t rely on advertisements, pamphlets and PPTs. Seek a copy of the offer document, information memorandum, a formal offer and so on.
- Find out how the money will be invested for earning returns. In case of an IPO, ask for the company and its business and in case of mutual funds, know where they will be investing. In case of a bond of any finance company, learn about the key business.
- Jot down your entire obligations and ask your agent to show you proof where it is written that this should be covered by the customer. Learn about fees and charges.
- Write down what you will receive in full detail and how you can evaluate the performance of the investment. In the case of dividends, note it down and in the case of a bond, there will be several variations. Note the interest payable and when you will get it.
- Talk about the possible negatives including market fluctuations and how they can impact your investment. Learn about the entire spectrum of risks. Ensure that you know the outcome of not paying up your premium.
- Find out whether you have to stay invested in this particular financial product for a specific duration and your choices in case of any change in the situation. Always write down key terms and conditions of the product in question.
Make sure you review everything that you noted with your financial advisor and then invest after he/she gives you the go-ahead. Always take your time before investing in any financial product.