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Behavioural Mistakes That Damage Wealth Creation

May 26, 2026 by MFG Support

In today’s world, investors have easy access to information, market updates, expert opinions, and investment products. Despite this, many investors still struggle to create long-term wealth. The reason is simple — successful investing is not driven only by knowledge, but also by behaviour.

Emotions such as fear, greed, impatience, and overconfidence often influence investment decisions more than logic. These emotional reactions lead to behavioural mistakes that can significantly damage long-term financial outcomes.

Here are some of the most common behavioural biases that negatively impact investors and their portfolios.

1. Recency Bias – Assuming Recent Performance Will Continue

One of the most common mistakes investors make is believing that recent performance will continue indefinitely.

Many investors choose mutual funds based only on short-term returns or recent rankings. A common question financial advisors often hear is:

“Which are the top-performing funds?”

Investors tend to rush towards funds or asset classes that have delivered strong returns in the recent past, assuming the trend will continue. For example, after a sharp rally in small-cap funds or a particular sector, investors often increase exposure aggressively without considering valuations, risk, or market cycles.

However, markets are cyclical by nature. Asset classes and fund categories move through periods of outperformance and underperformance.

The reality is:

Last year’s best-performing fund may not remain the top performer in the future.
Short-term returns can create misleading expectations.
Chasing recent winners often results in buying investments at elevated prices.

Successful investing requires suitability, discipline, and long-term thinking rather than performance chasing.

2. Sunk Cost Fallacy – Holding Weak Investments for Emotional Reasons

The sunk cost fallacy occurs when investors continue holding poor investments simply because they have already invested substantial money in them.

Instead of evaluating whether the investment still deserves a place in the portfolio, investors become emotionally attached to it. Even when a mutual fund scheme consistently underperforms or no longer aligns with financial goals, investors continue holding it and often keep averaging the cost.

This behaviour is driven by the mindset that selling the investment would mean accepting a loss.

However, investment decisions should always be based on:

future potential,
suitability for financial goals,
and portfolio quality.

The amount already invested in the past should not influence future decisions. Emotional attachment to underperforming investments can prevent investors from reallocating money to better opportunities.

3. Short-Termism – The Desire for Quick Profits

Many investors enter equity markets expecting quick returns and instant wealth creation. As a result, they frequently react to short-term market movements.

When markets rise sharply, investors become aggressive and overly optimistic. During corrections, fear takes over and they panic.

This lack of patience leads to:

frequent portfolio changes,
unnecessary switching between funds,
stopping SIPs during market declines,
and exiting investments too early.

Equity investing is designed for long-term wealth creation, but many investors behave like short-term traders.

In reality, long-term wealth creation in equity markets depends on:

disciplined investing,
consistency,
and the power of compounding over time.

Patience remains one of the most important qualities for successful investing.

4. Lack of Asset Allocation Discipline

Asset allocation is one of the most critical aspects of portfolio management, yet it is often ignored during emotionally charged market conditions.

During bull markets, investors tend to overexpose themselves to the best-performing asset class or market segment. For example:

investing excessively in equity mutual funds during market rallies,
allocating heavily towards small-cap funds after strong performance,
or increasing exposure to gold and silver only after prices have already risen significantly.

These decisions are usually emotion-driven rather than goal-driven.

During market downturns, panic often forces investors to exit investments at the wrong time, locking in losses and disrupting long-term financial plans.

Ignoring proper asset allocation increases portfolio risk and volatility.

A disciplined asset allocation strategy helps investors:

manage risk effectively,
maintain portfolio stability,
and reduce emotional decision-making during market fluctuations.

Diversification across asset classes is essential for long-term investing success.

5. Loss Aversion – The Fear of Loss

Loss aversion is one of the strongest behavioural biases in investing. Psychologically, the pain of loss feels much stronger than the joy of gains.

This bias leads investors to make two major mistakes.

Holding Losing Investments Too Long

Investors often continue holding poor-performing investments in the hope of recovering losses and reaching the original purchase price. Instead of accepting mistakes and making rational decisions, they delay corrective action.

Selling Winning Investments Too Early

At the same time, investors often book profits quickly in quality investments because they fear losing gains already earned.

As a result:

Weak investments remain in the portfolio for too long,
while strong wealth-creating investments are exited prematurely.

Over time, this weakens overall portfolio quality and limits long-term wealth creation potential.

Successful investing requires investors to allow quality investments sufficient time to grow while remaining objective about underperforming assets.

Conclusion

Investment success is not determined only by selecting the right products or predicting market movements. Behaviour and emotional discipline play an equally important role.

Many investors fail to achieve their financial goals not because markets disappoint them, but because emotional decision-making repeatedly leads them towards poor choices.

Investors who maintain discipline, follow proper asset allocation, stay patient during volatility, and focus on long-term goals are more likely to create sustainable wealth.

In investing, managing behaviour is often more important than timing the market.

Different Types of Asset Allocation Strategies

May 21, 2026 by MFG Support

Asset allocation is one of the most important aspects of financial planning and investing. It refers to the process of dividing investments among different asset classes such as equity, debt, gold, and cash equivalents. The right asset allocation helps investors balance risk and return according to their financial goals, investment horizon, and risk appetite. Different investors may require different allocation strategies depending on their needs and market conditions. Here are some of the most commonly used asset allocation strategies.

1. Strategic Asset Allocation (SAA)

Strategic Asset Allocation is a long-term investment approach where investors decide a fixed allocation among various asset classes based on their financial goals, risk profile, and time horizon. For example, an investor may decide to allocate 60% to equity, 30% to debt, and 10% to gold.

Once the allocation is decided, the portfolio is periodically rebalanced to maintain the original mix. Suppose equity markets perform very well and the equity portion increases from 60% to 70%. In such a case, the investor may sell some equity and shift the amount to debt or gold to restore the original allocation.

This strategy focuses on discipline, stability, and long-term wealth creation through compounding. It avoids emotional decision-making and helps investors stay invested across market cycles.

2. Tactical Asset Allocation (TAA)

Tactical Asset Allocation is a more active investment strategy. In this approach, investors temporarily adjust their allocation to take advantage of short-term market opportunities.

For instance, if an investor believes equity markets are undervalued and may perform well over the next few months, they may increase their allocation towards equity. Similarly, during periods of high uncertainty or expensive valuations, they may reduce equity exposure and increase debt allocation.

Tactical allocation decisions are generally based on market valuations, economic outlook, interest rate trends, or other macroeconomic factors. While this strategy can potentially enhance returns, it also carries a higher risk because incorrect market timing can negatively impact portfolio performance.

Therefore, Tactical Asset Allocation requires market understanding, active monitoring, and disciplined execution.

3. Dynamic Asset Allocation

Dynamic Asset Allocation involves changing the asset mix automatically based on predefined rules or changing market conditions. Unlike Tactical Asset Allocation, which depends heavily on investor judgment, dynamic allocation usually follows a systematic model.

In reality, many investors find it difficult to make allocation changes on their own because emotional biases such as fear and greed often influence investment decisions. During market rallies, investors may become overconfident, while during corrections, panic may lead them to exit at the wrong time.

Dynamic Asset Allocation Funds can help address this challenge. These funds are managed by professional fund managers who follow valuation-based or model-based allocation strategies. The allocation between equity and debt changes depending on market conditions and predefined investment models.

This approach reduces the need for constant monitoring and helps manage market volatility in a more disciplined manner.

4. Core & Satellite Strategy

The Core & Satellite strategy combines stability with growth opportunities. In this approach, the majority of the portfolio, typically 70–80%, is invested in stable and diversified investments such as index funds, large-cap funds, or diversified mutual funds. This portion is known as the “core” portfolio.

The remaining 20–30% is allocated to “satellite” investments, which may include thematic funds, sector funds, mid-cap funds, small-cap funds, or other high-growth opportunities.

The core portfolio provides long-term stability and consistency, while the satellite portfolio aims to generate higher returns by capturing growth opportunities. This strategy helps investors participate in emerging trends without taking excessive overall portfolio risk.

However, investors should ensure that satellite investments remain a limited portion of the portfolio, as concentrated or thematic bets can increase volatility.

5. Age-Based Asset Allocation

Age-Based Asset Allocation is a simple and commonly used strategy where the asset mix is linked to the investor’s age. A traditional rule suggests that the equity allocation should be approximately “100 minus the investor’s age.”

For example, a 30-year-old investor may allocate around 70% to equity, while a 60-year-old investor may allocate around 40% to equity and a higher proportion to debt instruments.

The logic behind this approach is that younger investors generally have a longer investment horizon and greater ability to handle market volatility. Older investors, on the other hand, may prioritize capital protection and regular income over aggressive growth.

Although the formula may not suit everyone perfectly, it provides a basic framework for balancing risk according to life stage.

6. Goal-Based Asset Allocation

Goal-Based Asset Allocation is one of the most practical and personalized approaches to investing. In this strategy, the investment mix is determined by specific financial goals and their time horizon.

For short-term goals such as buying a car, creating an emergency fund, or planning a vacation, investors may choose a conservative allocation with higher exposure to debt and low-risk instruments.

For long-term goals such as retirement planning, children’s education, or wealth creation, a growth-oriented allocation with higher equity exposure may be more suitable.

This approach helps investors align their portfolio with real-life financial objectives rather than focusing only on market movements. It also improves investment discipline and clarity by assigning a purpose to every investment.

In conclusion, there is no single asset allocation strategy that suits every investor. The right approach depends on individual financial goals, risk tolerance, investment horizon, and behavioral discipline. A well-planned asset allocation strategy can help investors manage risk, reduce emotional decision-making, and improve the probability of achieving long-term financial success.

Understanding Credit Scores and Credit Bureaus in India

May 8, 2026 by MFG Support

India’s growing economy, rising disposable incomes, easy access to loans, and evolving lifestyle aspirations have transformed the way people spend money. Today, consumers have access to home loans, vehicle loans, personal loans, credit cards, Buy Now Pay Later (BNPL) facilities, and instant digital credit like never before.

While access to credit has improved significantly, lending still remains a risky business for financial institutions. Banks and lenders need to evaluate whether a borrower is financially disciplined and capable of repaying debt on time. This is where credit bureaus and credit scores play an important role.

The Role of Credit Bureaus

Whenever an individual takes a loan or uses a credit card, the repayment behavior associated with that credit facility gets recorded by credit information companies, commonly known as credit bureaus.

These bureaus collect financial data from banks, NBFCs, housing finance companies, credit card issuers, and other regulated lenders. Based on this information, they prepare a detailed credit report and generate a credit score for borrowers.

In India, the four RBI-licensed credit bureaus are:

TransUnion CIBIL
Experian India
Equifax India
CRIF High Mark

Whenever a person applies for a loan or credit card, lenders usually check the applicant’s credit report and score before making a lending decision.

However, it is important to understand that credit bureaus do not approve or reject loans. They only provide information. Banks and financial institutions take the final lending decision based on their own internal policies and risk assessment models.

The Biggest Myth About CIBIL

Many people believe that having a record with CIBIL means they are “blacklisted.” This is one of the most common misconceptions about credit scores.

In reality, anyone who has taken a loan or used a credit card is likely to have a credit record. A credit bureau maintains information about borrowing and repayment behavior. It does not maintain a “blacklist” of defaulters.

A low score generally reflects delayed payments, loan defaults, high credit utilization, or excessive borrowing. On the other hand, disciplined repayment behavior can help improve the score over time.

What is a Credit Score?

A credit score is a three-digit number that reflects an individual’s creditworthiness based on past borrowing and repayment behavior.

Most credit scores in India range between:

300 to 900

Generally:

750 and above is considered good
800 and above is considered excellent

A higher score improves the chances of getting:

Faster loan approvals
Better interest rates
Higher credit card limits
Easier access to premium financial products
Factors That Influence Your Credit Score

Some of the key factors that affect a credit score include:

1. Repayment History

Paying EMIs and credit card dues on time is the single most important factor.

2. Credit Utilization Ratio

Using a very high percentage of your credit card limit may negatively impact your score. Ideally, utilization should remain below 30-40%.

3. Multiple Loan Applications

Frequent loan or credit card applications within a short period may signal financial stress.

4. Type of Credit

A healthy mix of secured loans (like home or auto loans) and unsecured loans (like personal loans or credit cards) is generally viewed positively.

5. Loan Defaults or Settlements

Loan write-offs, settlements, or prolonged overdue accounts can significantly damage the score.

What Does a Credit Report Include?

A credit report usually contains:

Personal details
PAN-linked credit accounts
Loan and credit card history
Outstanding balances
EMI repayment track record
Days past due (DPD)
Loan inquiries made by lenders
Written-off or settled accounts

Lenders use this information to assess the repayment capacity and credit discipline of the borrower.

Credit Scores Matter More Than Ever Today

With the rapid growth of digital lending, fintech apps, instant personal loans, and BNPL services, maintaining a healthy credit profile has become increasingly important.

Even small-ticket digital loans and delayed repayments can impact your credit score.

Today, lenders also evaluate:

Banking behavior
Income consistency
Existing liabilities
Fraud risk indicators
Digital financial footprint

Therefore, responsible borrowing has become an essential part of financial planning.

How to Check Your Credit Score

Today, checking your credit score has become extremely simple and fully digital.

Consumers can:

Access one free full credit report annually from each credit bureau
Check scores instantly through bureau websites, banks, fintech platforms, and financial apps

Monitoring your credit report regularly helps in:

Detecting errors
Identifying fraud
Tracking improvement in score
Improving loan eligibility
Final Thoughts

A credit score is not merely a number — it is a reflection of financial discipline and repayment behavior.

Responsible borrowing, timely repayment of dues, controlled use of credit cards, and avoiding unnecessary debt can help build a strong credit profile over time.

Loans And Asset Creation – Do They Go Hand-In-Hand?

May 8, 2026 by MFG Support

Rahul was just like any other investor who wanted to become absolutely debt-free. However, he wasn’t aware of the fact that a smart investor understands being debt-free in a different way. After spending a lot of time in the industry, he came across the fact that debt is actually a good thing to have! He then started looking for good debt, and this is how he was able to build some wealth by taking good loans. Reducing bad debt is the first important step that an individual needs to take during the asset creation process.

Loans and asset creation do go hand-in-hand. However, you are only able to get good results if you know the difference between good debt and bad debt.

Good Debt

Good debts are bank loans that you get for the assets that help you make profits. When you take a loan for a large rental property, actually, the tenants are paying off the loan on your behalf. This is what a good debt is. In case of a good debt, you don’t have to shed out any money from your pocket for repaying the loan. If you use the income of your business to repay a business loan, then it is known as a good debt.

A Bad Debt

Bad Debts are taken for assets that don’t really produce any profits for you. Good examples of a bad debt would be a television set, a smartphone, or a car. These are some of the items that don’t yield any profits for you, and you have to pay off the amount from your pocket.

This is the time when a smart investor takes all the points as he purchases a car for cash, but starts his business with a loan. He takes a loan to use it on the assets that produce him some income. So, the bottom line is that when you start reducing your bad debts, you are actually starting to build some wealth for yourself. Taking a bank loan is never easy, as the interest rate takes a toll on one’s savings. Anyone who wishes to build some wealth and create assets for their business by taking loans can easily do so by planning everything in advance.

Kinds of borrowers

Two types of people take bank loans. The first type is those who show either severe dislike or extreme affinity towards taking a debt. The other types are those who follow a balanced approach in the process of taking a loan. They usually borrow monetary funds from the bank, but prepay them much before the maturity date. So, it is very important to understand what kind of borrower you actually are. Taking good debts and repaying them much before the maturity date is a very smart move to make.

Timetable for Prepayment and Repayment

Whenever you take a loan, you have to ensure that you prepare a suitable timetable for repayment and prepayment. There are various borrowers who prefer to prepay the entire amount before the date of maturity. However, you shouldn’t get carried away and instead make a sensible decision considering your budget. The only time when you shouldn’t go for prepayment is when you find a money-making instrument that offers you really good post-tax returns. This is another great way to build a lot of wealth by investing your money in money-making instruments.

Tax Benefits

Tax benefits should also be taken into consideration when planning to repay a particular loan. One can easily claim a deduction on their income in certain cases if they take a bank loan that satisfies all the conditions laid down in the Act. One needs to make the most out of the tax benefits so that asset creation and loan repayment go hand in hand.

Never go off the limits

As a borrower, one should always understand their limitations. One needs to take on a decent amount of loan and handle it sensibly. Make wise decisions and avoid stretching your finances if you want to build wealth through a bank loan. Keep your expenses under control, and you will surely end up creating some money-making assets for your business.

Understand Which Loan to Take and Which Ones to Avoid

A borrower needs to take a loan that helps them increase the value of their assets. Try to increase your human capital by taking loans. Taking loans for your business can also prove to be a great idea, as you can easily repay the loan through the profits that come in. You should definitely avoid taking any kind of personal loans for consumption. These kinds of loans are non-productive in nature and will yield no income to you. Several assets depreciate from time to time. You should avoid taking any kind of a loan for buying such assets, either.

Hence, loan and asset creation can go hand in hand if they are planned and executed well, keeping in mind one’s current financial position, responsibilities, as well as liabilities.

Are you saving enough for your child’s education?

May 6, 2026 by MFG Support

A child’s professional or higher education is one of the most important financial goals for every parent. Parents start imagining right from their child’s birth that their baby will grow up to become a doctor, engineer, pilot, or astronaut.

But with the cost of education increasing drastically over the past few years, turning such dreams into reality may require a lot more planning than before.

Many schools in metros are charging fees as high as Rs 75,000 to Rs 1 lakh per annum for a kindergarten student, which is probably equal to the total amount that our parents paid for our entire education. Tuition fee for IIM-Ahmedabad for the 2010-12 batch is around Rs 13.70 lakh, which may go up to Rs 57.23 lakh after 15 years, assuming education inflation at 10% per annum.

Do The Maths Before Investing:

Calculate the amount you will require for your child’s education, considering the current cost of a particular course and keeping the education inflation in mind, which may be 10% per annum. Once you calculate the expected cost for your child’s education, you can start investing monthly to build the corpus. There can be two methods of deciding the amount of investment.

One is investing a fixed sum every month throughout the accumulation phase. For example, if you want to accumulate Rs 50 lakh in the next 15 years, you need to invest Rs 10,506 per month, considering 12% return from your investment. If you feel the amount is quite big, you can follow the growing annuity method, where you start with a smaller amount initially and increase it subsequently with a rise in your income.

For example, if you expect a 10% rise in your income on a year-on-year basis, and decide that you will increase your investment accordingly. You can start with Rs 6,000 per month in the first year and keep increasing it by 10% every year to build the corpus of Rs 50 lakh in the next 15 years with a CAGR of 12% from your portfolio.

Buy An Adequate Cover:

Every parent wants their child to get the best education. Parents should always buy adequate life insurance cover to take care of a child’s education in case of any unforeseen event. The sum assured may not be the amount that is required for education in the future, but the amount that can generate an amount equal to that in the future, considering some returns on that investment. A term plan can be the best choice to get a higher sum assured with a low premium.

Stick To Your Asset Allocation:

Asset allocation refers to how much of the various asset classes you have in your portfolio. The idea of asset allocation is that if one of your asset classes in your portfolio performs poorly, then returns of your other asset classes will balance the returns of your portfolio. Some general asset classes are equity, debt, gold, and real estate.

You can consider equity shares or equity-oriented mutual funds, fixed income instruments like fixed deposits, PPF, small saving schemes of post office, bonds, debt-oriented mutual funds, gold or gold ETF, etc., in your portfolio. The percentage allocation of each asset class in your portfolio may depend on your risk appetite, but don’t avoid equity just because it is more volatile than a fixed-income instrument.

Factors for Determining the Appetite and Digestion Level of Risk

May 6, 2026 by MFG Support

Among the universal options for investment, there is none that does not test the investor on either of the two factors- appetite for risk and gains expected. Like almost every decision one faces in life, investments are a dilemma. Usually, only what is high risk can bear the fruit of high gain and vice versa. However, risk is something that must be calculated holistically before the investor takes the plunge because, in an untoward case, even the losses may turn out to be exceptionally huge. Lower risk, mostly, indicates more stability in the investment option. The appetite for risk and its tolerance are two very different things. Though used interchangeably, these terms define different aspects of the investment.

The appetite for risk in an investment pertains to the readiness with which you might want to take that risk. However, with focused calculation before any investment move, you may become aware of your ‘tolerance’ for the risk that you are thinking about taking. It is much like understanding the shock absorber phenomenon for a vehicle. Though a car has shock absorbers to perform on the road that are not smooth or bump-free, however, there is only as much shock as a particular make of car can take; and beyond that pressure, there may be severe damage to the vehicle. So, while the risk appetite may depend on the personality of the investor, the tolerance level is something that has to be calculated.

The following factors help determine the appetite for risk in the investment:

Depending upon Age

At the beginning and at a younger age, investors are willing to take relatively higher risks to reap greater rewards expected out of an investment. This is done at a stage where liabilities like loans, etc. and responsibilities are at a minimum. The early twenties may be a good time to invest in such a way. However, as one progresses into their 30s, family and responsibilities take higher priority, so the best idea is to form a balanced and diverse portfolio of investments that, while fetching you high returns, must also cover the risks your investment is susceptible to.

In the later years, it is advised that the degree of risk be reduced to a minimum for ease and convenience during the last years of working and the post-retirement stage as well.

Experience and Knowledge

Understanding the money market and investments in general is a big plus point for an investor. It helps if the investor is aware of the upcoming schemes and investments. It is also advisable to stay abreast with the way various sectors are performing so that you know when to act bearish and when to withdraw the money in a bullish scenario.

The risk tolerance is subjective and may depend on the following factors:

Digestion – According to Income

This is the greatest factor that determines an investor’s tolerance for risk in the investment. The income is calculated by combining the returns in the form of salaries and in any other form, such as rent on the property, etc. Needless to say, the higher the income, the higher is the level of risk tolerance. This is so because the income is always there to cover the sudden losses, if any.

Expenses

For investors who have great expenses, the net available income is reduced remarkably. This is because even with high incomes, the expenses extract a major part of the income and leave very little behind. In consequence, the risk tolerance is reduced, and the investor must not enter a very risky investment. Keeping financial health intact is the primary objective.

Financial Objectives

If the investor keeps in mind certain short term goals for which not much financial planning has been done, investing a large amount from the income or savings may not be possible. However, if the very same goals were planned and had not erupted suddenly in the course of events, then the tolerance for risk would have been much higher than in the unplanned situation.

If the goals are long term, even then the tolerance limit for risk may increase to some extent for the simple reason that no liquidity is required immediately.

Liquid Cash

If the investor has carefully put aside some contingency funds in the bank or has liquidity in hand, he/she would be better equipped to tolerate the risks that the investments bring with them. It’s so since a contingency fund or cash at hand serves as a good cover in case an investment results in losses.

Insurance

Insurance comes in a variety of forms today. And solely, or in combination, if there is sufficient insurance to cover an individual and his risks in the investment, the investor becomes more tolerant towards risk.

For example, if your car is insured for accidents, it may leave you with excess funds to channelise into investment rather than when the car does not have insurance. Similarly, personal health insurance is also highly recommended. With medical procedures becoming complicated and expensive, it takes off a significant financial burden off the shoulders to be well-insured.

So, before investing, it helps to judge whether your appetite for risk and tolerance are at compatible levels.

Why should you buy a personal accident policy?

May 6, 2026 by MFG Support

Sachin broke his leg while playing football on Sunday with his buddies, which left him temporarily disabled. He has bought adequate life insurance cover on his life and a health insurance plan for his whole family, but has ignored personal accident. You buy a life insurance to cover the risk to your life and a health insurance plan to cover your health. What if, like Sachin, you have an unlucky day in your life? This is where a personal accident policy can come to your rescue. Unlike life insurance, a personal accident policy is not sold aggressively for a simple reason: the premium is low, and the agent’s commission is limited. Most of the time, accident cover is bundled with motor insurance with limited benefits. Ignoring a personal accident policy may become costlier sometimes.

Scope of cover

A personal accident policy provides compensation in the event of injuries, disability or death caused solely by violent, accidental, external and visible events. The scope of cover under these policies is not limited to road or train accidents but includes even snake or dog bites. Standard exclusions like self-inflicted injury or injury due to the use of intoxicants are applicable.

Benefits

Benefits under the policy may range from compensation against death only to permanent disablement or temporary total disablement. Policy may also cover benefits like daily or weekly hospital cash benefits, expenses incurred for carriage of the dead body from the place of accident to the residence or may pay an education fund for dependent school-going children. Full sum assured is paid in case of total permanent disability or death, but in case of permanent partial disability, compensation is limited to a part of the total sum assured under the policy. All plans don’t offer the same benefits. One has to take care of basics like selecting the right policy as per one’s need and ensuring that the policy is renewed regularly to avail the benefit of such a policy should the need arise. One point of confusion among buyers is the difference between total permanent disablement (TPD) and partial permanent disablement (PPD). TPD means loss of a hand, leg or eyesight, while PPD means loss of a finger or toe in insurance terms. While considering a personal accident policy, it is important to ensure that your policy covers maximum eventualities, including partial permanent disablement.

Who should buy the policy?

Every individual should consider a personal accident policy as it covers the risk of permanent disability, which may be worse than death. Any adult residing in India can buy the policy. Age at entry as well as at which cover ceases may differ from one plan to another. Some insurers don’t include minor children in the plan. People who are prone to road accidents or engaged in work that requires physical labour, like operating heavy machinery and working in dangerous situations like construction, must buy such insurance cover on their lives.

Tax Benefit

Premium paid towards a personal accident plan is not eligible for a tax benefit. In some plans, selected benefits of personal accident have been bundled with health insurance. Premium paid towards such policies is eligible for claiming deduction U/s 80Dof IT Act, but one should understand that these plans are not a substitute for personal accident plans.

It is always advisable to read the plan brochure before signing the proposal and go through the policy document as soon as you receive it to understand the fine print of the policy. A personal accident policy is strongly recommended to insure personal risk at an affordable cost.

Planning a vacation! Don’t ignore travel insurance

May 6, 2026 by MFG Support

Going on holiday is an important event for many of us. We spend much time, effort and money to plan the most memorable experience during our vacation. With rising income, many are travelling abroad for holidays as well. What happens if things don’t go according to plan? This is where travel insurance comes in handy. Although many consider travel insurance to be an unnecessary expense, buying one can make a lot of sense, whether you are travelling overseas or within the country.

Benefits

Medical Cover

In case of a medical emergency while travelling, a travel insurance policy can cover your liability to a large extent. Medical costs can be extremely high in foreign countries, and especially so in First World countries. Most travel insurance policies provide for cashless hospitalization and can be a boon in case of emergencies. Personal accidents are covered as well.

Travel Delays and Cancellations

Even the best-made plans can be disrupted due to situations beyond our control. Flights could be delayed or cancelled for a variety of reasons, including bad weather, emergencies and technical problems. Your airline may provide accommodation or make alternative travel arrangements in case of flight cancellation or delay. However, they are under no obligation to reimburse your hotel bookings or the cost of passes and tickets for any event you might have planned. A good travel insurance policy covers you adequately for any such eventualities.

Loss of baggage or documents

Despite the recent advances in technology, the fact remains that airlines lose a lot of baggage every year. If they happen to lose or delay your baggage, it can throw your travel plan out of gear. Similarly, if you happen to lose your travel documents, like a passport or bank credit or debit cards, while travelling, it can cause a lot of hassle. A travel insurance policy will cover you in these situations as well by providing you with emergency cash and reimbursing costs.

Missed Departure

A travel insurance policy may cover you in the case of a missed Air or rail departure arising from situations beyond your control. This normally covers situations where the departure was missed due to failure of public transport, or in the unfortunate event where the vehicle you are travelling in meets with an accident.

Loss of Tickets

You may also be covered in the event that the intended travel could not be completed due to the loss of tickets. In such situation, the original charges for the tickets are reimbursed.

Hijacking and Political Risk

In the unfortunate event that the policyholder is a victim of hijacking or any other political risks, the travel insurance policy may provide relief in such situations as well. Most policies will provide a daily cash allowance and/or a lump sum in case of such occurrences.

Personal Liability

A good travel insurance policy will provide you protection against personal liability as well. Suppose the car you drive in a foreign country happens to meet with an accident. Any liability arising out of the same may be covered by your travel insurance policy.

Costs of Insurance

The cost of insurance will depend on a variety of factors, such as the location where you are travelling, the type of visa, duration of stay, type of coverage, etc., but it is generally not very high. Companies now offer insurance for different geographies like the USA, Europe and Asian countries rather than universal policies. Travel insurance can be bought very easily online from websites of the insurance companies or insurance aggregators, and of course, through insurance agents.

Exclusions

Like any other insurance policy, it is important to read the policy document in detail to understand the benefits and exclusions of the plan. Coverage and benefits may vary from one company to another or even between two different plans of the same insurer. It is important to go through the policy documentation to understand the details of what’s included or excluded in the policy to ensure it meets your requirements.

Insurance is bought to provide protection for any unforeseen events that one may encounter. Although travel insurance may seem like an unnecessary expense, it’s of immense importance should the need arise. It’s suggested that you always buy travel insurance.

Five mistakes that destroy retirement dreams

May 6, 2026 by MFG Support

Everyone dreams to retire to a peaceful life when they don’t have to worry about earning money or meeting budgets. They want to do whatever their heart desires without worrying about its affordability. Yet the hard reality is that most people are not saving enough for their retirement. Many will be forced to work till they physically cannot and be constantly worried about finances. This is especially true for a country like India which does not have a social security net like in advanced countries. Here are five mistakes that destroy retirement dreams.

Not having a proper plan

In the words of Lewis Carroll “If you don’t know where you are going any road will take you there”. People do not have well thought-out plan to save for their retirement. They fail to anticipate the impact of inflation on their long term expenses. As a result they wish and pray that everything will work out fine. They realise their mistake when it’s too late. For example, if average inflation remains at 6%, a 30 year old having an expense of Rs 40,000 per month now will need Rs 1,72,000 per month when he attains the age of 60. This will be time when he will not have a job that pays a monthly salary.

Making the wrong investment choices

Everyone wants low risk and high returns. In the real world unfortunately it works a bit differently, higher the risk higher the return. Risk does not mean that one gambles their money. Seasoned investors understand the risk associated with an investment and invest only when they are comfortable with the underlying risk. A common investor however does the exact opposite. They will either take unacceptable risk or lose their money by falling prey to get rich quick schemes. The tax adjusted returns of such investments are often lower than the prevailing inflation. Instead of their money growing, they actually lose value of their money. Another mistake commonly made by investors is to confuse insurance with investment. Investing in a life insurance policy is not the good investment decision, no matter what your insurance agent says.

Poor planning for medical expenses

We seldom fall seriously ill below the age of 35 and hence fail to plan adequately for medical expenses that are more likely later in life. Young people treat their health like a credit card and make unhealthy lifestyle choices without the thought of repercussion later in life. Although medical science has made massive progress over the last few decades, healthcare has become expensive too. A health emergency can put major strain on finances and put other financial goals in jeopardy .It is always advisable to buy a personal health insurance policy at the earliest even if the Company you work for provides the same. The best time to buy any insurance is when you don’t need it.

Inadequate emergency fund

Nothing in life is permanent and emergencies may come in life. You need to switch jobs, get a medical treatment or repair your car. Not having an emergency fund means either taking loan to pay for the expense, withdrawing from your EPF, PPF savings or affecting your other financial goals to fund the emergency. Both of which can negatively impact your retirement planning. It is advisable to keep three to six months of expenses in an emergency fund.

Underestimating life expectancy

Recent advancement in medical science mean less people die from health related problem than earlier. The average life expectancy in India in 1960 was a mere 41 years, as of 2012 it is almost 68 years and rising. There are many more people who will live till the age 85 or 90 years. As a result many people run out of money during retirement and forced to do meagre work to sustain themselves. One should consider their life expectancy to be a 100 years while planning for retirement.

People usually fail to plan their retirement due to lack of financial knowledge and emotional biases in managing their own money. It’s strongly recommended to visit a financial planner to get a comprehensive financial plan made for you and your family.

Is credit card balance transfer a good idea?

May 6, 2026May 6, 2026 by MFG Support

Balance transfer refers to the process of transferring the outstanding dues from one credit card to another. This is kind of refinancing, and Banks frequently give such offers to acquire clients. The rate of interest offered by the new bank is lower than the interest you pay on your existing card. The offer may be tempting, but it may not always be as good as it sounds because the lower interest rate is only applicable for a limited period.

You can save some money

Whether doing a balance transfer makes sense or not depends a lot on the current interest rate that you are paying and the promotional interest rate being offered. Suppose you have an outstanding balance on Credit card A of Rs 50,000 at a rate of interest of 3.4% per month. Card B offers you a balance transfer for 6 months at a promotional interest rate on 1.79 % per month for 6 months with no processing fees. Assuming you pay off the entire balance during the promotional period, you are like to save Rs 3316 as interest charges (Including Service Tax). All these other details remaining the same if the promotional interest rate on card B if 0.99% per month, the amount of savings will be Rs 4,930.

Should you really opt for it?

One should be careful about doing a balance transfer. If a balance transfer is being done with the intention of paying off the full balance during the promotional interest rate period, then it makes sense to go ahead with the balance transfer. However, reality can be different. Many opt for a balance transfer, expecting less repayment pressure, but end up in more debt than they started with. This happens primarily due to a lack of discipline to pay off outstanding in time. Credit Card companies know this, and that is the reason they offer a promotional interest rate for a limited time. They are confident that very few people will be able to pay off their entire debt during the promotional period, and they can start charging exorbitant interest rates once the promotional rate is over.

Things to be careful off

Any fresh purchases made on a credit card after doing a balance transfer do not enjoy any interest-free period. Interest will be charged from the very day the purchase is made. No fresh purchases should be made on a credit card till the entire amount is paid off.

Credit cards often charge a one-time processing fee for doing a balance transfer. This may look like a small amount, but it will quickly eliminate any savings that you might be making by doing the balance transfer. Continuing with our previous example, if credit card B charges a processing fee of 1.99%, it comes to Rs 1118 ( Including service tax) on the outstanding amount of Rs 50,000. The effective savings for promotional interest rate of 1.79% and 0.99% per month will be Rs. 2,198 and Rs.3812 respectively.

Furthermore, while calculating interest charges, we sometimes forget to account for the service tax that is applicable on interest charges. This currently stands at 12.36%. High interest rates applicable to credit cards also mean high service tax payable.

Credit Score

One of the parameters for calculating a credit score is the percentage of total debt to the total credit line available. Since a balance transfer involves moving the outstanding balance from one card to another, it does not have any impact on the credit score. However, carrying a large revolving debt has a major impact on the overall credit score.

Conclusion

Balance transfers do offer some savings from interest charges, but it may not be as substantial as it’s made out to be. Either way, if one is unable to pay the entire balance due on their credit card by the end of the month, they may be living beyond their means. This is a warning sign that all is not well, and it may be wise to stop and make amends. Although
balance transfers provide some relief from interest charges, it is not be mistaken as a silver bullet to rectify one’s problem about managing debt. Let’s not forget that credit card debt is the number one reason for people to fall into debt.