“Buss Naam hi Kaafi hai” might be an impressive punch line for our favorite actor or to promote some product, but when it comes to making investment decisions, go by what Shakespear says, “What’s there in the name ?”

Although there have been numerous arguments for regulation to be made for the nomenclature of the financial products, so that the common investors are not cheated. But as smart and aware investors, we cannot let the companies take us for a ride, till the time the regulator does not take any decision on the same.

The most misguiding nomenclature is for the ULIP pack. A “Smart Kid Plan” doesn’t ensure (or rather certify) your kid to be smart (you don’t even need his certificate, do you?) Nor does a “Young Star or Young achiever plan” make your kid a star or an achiever. A “Headstart Plan” does not necessarily give a headstart to the kid, and neither would a “Child dream plan” can assure to fulfill his / her dreams.

The nomenclature for all this plans is to hit at the emotional aspect we have towards our children. The companies and the agents canvass the client targetting their sentiments for their kids and convince them to such an extent that “If you really love your child and want to do something for this, then only this plan can do that”.

Agents !! Please give me a break. Just because I love my child, does not give you a liberty to take me for a ride. What you are trying to sell me as a child plan is basically a ULIP ( Refer to my article “Look Before ULIP” for more details on ULIPs). By now, I am very well versed with the dark side of ULIPs, thanks to media. I know how to plan for my child. Yes, I understand, that in order to beat inflation, I will need to invest in equities. But, that does not mean, that the ULIPs or the child plans (just because the names suggest so) are the only options available with me. I can very well create a well diversified portfolio by selecting 3-4 good funds and starting an SIP. I will take a term insurance for myself to take care of my insurance needs. This way I will secure my child’s future even if there was some unfortunate mishap to take place. By this way, I haven’t got any fancy name for my plan but I can make my child smart, star, achiever with my own plan.

When it comes to misleading names, mutual funds come at no exception. The “Balanced Funds” are not really balanced (The word balanced gives a picture of a 50:50 equal proportion of debt and equity to a layman investor).

The “monthly income plans” do not give you assured monthly income. So those who are retired and thinking of MIPs analogous to MIS of post office, this is a wake up call. Although MIPs are debt oriented hybrid funds, targetting capital protection, it can be a good alternative for your fixed deposits. It cannot be the right product to provide you monthly income for your routine expenses, especially when you are retired and dependent on that income.

In case of a health insurance , a “Cashless” facility need not be actually cashless. At times, you might be required to pay to the hospital from your pocket and later get it back, once the hospital receives an authorization from the health insurance company.

The point I am trying to make here is, please do not get carried away by the name. There might be much more to read into the product, than what is apparent by the name. Although it is a generic perception that the name would be a reflector of the nature of the product, the truth might be different. On the contrary, this perception of the investors is used by the companies to name and market their products to attract investors.

We look forward to your feedback and comments on the above article. Please feel free to contact us on saurabh.nidhiinvestments@gmail.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. The readers are advised to use their own judgement and consult their investment advisor before making any investment decisions.)

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21 Comments

  1. Nicely written article. I specifically like the portion of ‘Child Plans’ as it helps me comming out of guilt feeling that I did not purchased a chlid plan for my kid but went for SIP in a good mutual fund.

    Its really time someone to check on these misuse of names. I guess if regulatory is not doing much such blogs are needed to educate people. Cheater are most affraid of educated people (note: educated does not necessarily mean literate).

    1. Thanks for your valuable comments sir.

      And I firmly believe in wearing slippers to protect your feet than expect that someone should cover the earth with a carpet. So better to keep ourselves updated.

      And I also fully agree that educated does not necessarily mean literate. Its time all the literates become a little more pro-active and educate themselves.

      Thanks again.

  2. what’s thr in reply with words.
    now it’s time to act smart.

    think twice before making any of the investment

  3. Very well said Sir G….

    and thanks for timely giving us a wake up call that don’t follow the name or hindi me ek kisi purane ad ki badi achi line yaad aa rahi h ki…

    “DIKHAVE PE MAT JAO APNI AKAL LADAO”

    line ka sahi arth samjha diya sir g apne many many thanks and yes waiting for next article sir g….

    1. Thank you so much Giriraj Bhai for your valuable Comments.

      Yes indeed I believe that “Dikhave pe Mat Jao, Apni Akal Lagao” and these articles are an effort to make the investors aware and not get fooled by names.

      Thanks again for your visits and comments. Look forward to many more in future.

  4. Again a new Rabbit coming out from the Hat of Professor Bajaj!!!!! 🙂
    Your blogs are very interesting to read and also educate people. Keep writing so that educated illeterates like us will try to become literate..;-)
    Hope your blogs provide other people an idea to share their knowledge too… !!!

    Great work.. Keep it up.

  5. This article reminds me of ex SEBI chief Mr. Damodaran – “Informed Investment Pays”….

    Investor Education is the only way to develop the markets.

    Thanks for pointing out the dark side of Insurance sir.. looking for many more like this from you.

    1. Thanks for your valuable comments Varun.

      I fully agree that investor education is the only way to develop the markets.

      Just one thing, I was not trying to point out the dark side of insurance. Rather I was trying to point out the mis-selling practices about insurance.

      Thanks again for your visit and feedback. Looking forward to more in future.

  6. Nice Article, but Sir, this practice is also prevalent ( for ages ) in the Pharmaceutical Industry for AGES. LIVOGEN, LIV 52, GASEX , HAZMOLA to name a few, are the brand names given by Pharma Companies to promote their products. The names are similar to the ailments they intend to focus on
    Prof Ravi Chhabra

    1. Dear Prof. Chhabra,

      Thanks for your valuable comments. I do agree with you about the misleading nomenclatures being practiced across industries. But not being an expert in the pharma field, I would better not comment on the same being done by Pharma companies. But in case you are an expert in this field, I would definitely request and suggest you to bring such facts to light in interest of the larger audience.

      Regards
      Prof. Saurabh Bajaj

    1. Absolutely right Sir !!

      And when we talk about fly-by-night companies, why only health insurance ?? I would say we shouldn’t buy anything from such companies, as there would be a maximum possibility of getting cheated.

      Thanks for your visit and feedback. Look forward to more in future.

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