Financial Literacy is the ideal scenario when financial products are being bought and not sold. When I say this, it simply means a product has been bought because the buyer thought it’s a need, rather than a want or desire->basic economics.
Though financial products are completely different from FMCG or to say other necessary commodities, it holds a very crucial place in the market space. The way financial products are being sold today, it calls for a complete change. For that to happen, the investor needs to be aware of what is he planning to buy and do the options available to him fulfil those needs.
In a market where products are just treated as Third-Party products, it is imperative for the investor to wake up. For example, what happened to ULIPs? It was a bubble that burst. Investors lost money. The regulatory authorities did not take strict action against the companies. The easiest thing that they did was to ban those products. Under such circumstances, financial literacy gains more importance. Investors need to be better informed and take diligent steps. Awareness amongst investors of developed countries is much higher and there is a lot to learn from there.
It will take a lot of time for investors to reach to the level of literacy. For that to happen, an investor has to help himself. Ranging from Life insurance to Health insurance to Mutual funds, investors should be able to read between the lines. All these products call for deeper understanding before they are bought.
A lot of investors end up buying financial products because of peer pressure or for the sake of buying them. There is less research and that is why investors lose money. This results in investors running away from financial products, which of course, is not the right thing to do. Sensible and thoughtful investment can get good returns. But for that to happen, a lot of homework is required.
A lot of investors keep investing thinking that they will recover the lost money. But this is not the right approach at all. Unless investors are well informed they will continue to lose money.
As the regulator is only busy giving out more licenses and probably sorting out petty issues, the investor has to adopt the policy of “Help yourself”. Help seems to be at distance and helpline is always busy!