Investments - Useful tips

Vidhata is now the owner of his own restaurant on the station road. He is usually successful with his investment decisions. As we saw before, he was a cautious investor and would check various sources of information, make sure that he understood every aspect of the product and only then invest.  As a result, all his friends at the restaurant used to look up to him as an investment advisor. He is always willing to share with them his experience with investments.

Safeguards

As they say, “Prevention is always better than cure”, it is best to be careful while investing so that we do not face problems. Here are a few pieces of advice that Vidhata gives his friends:

General advice while investing

1. Most importantly, always do your homework thoroughly. Never invest on tips. Study products before you invest in them and use different sources to form your opinions.
2. Don’t get carried away with fancy advertisements. Understand products and be sure that they will help you meet a goal.
3. Don’t simply purchase insurance products because your agent tells you to. Make sure you understand the product and how it will meet your needs.
4. Always maintain detailed records of all your investments. These should include the date on which you apply for a particular investment, the amount of the cheque and

While dealing in equities are

• Make sure that you buy and sell shares through a broker that you trust.
• Do not deal with unregistered brokers. If you do, the exchange will not bare any risk if your transactions go wrong.
• Even if you trust your broker, always keep a record of all the instructions that you give him.

Consumer rights

Many things can go wrong while investing. But that does not mean that you have to get discouraged. All formal investment products are well regulated either by a government regulator or self governed by an association of companies. They try to make sure that the investment process is simple and beneficial to you and also that you do not get cheated.

Equity markets are strictly monitored and regulated by The Securities Contracts (Regulation) Act, 1956, The Securities and Exchange Board of India (SEBI) Act 1992, The Depositories Act, 1996 and The Companies Act, 1956. Stock exchanges also have a set of stringent rules and regulations.

Mutual funds are overseen by the Association of Mutual Funds of India (AMFI) and the insurance sector is regulated by the Insurance Regulatory and Development Authority of India (IRDA). All these organisations are dedicated to investor protection.

There are other institutions that have been set up specifically to take care of your complaints. These  may include an ombudsman and investor protection or investor grievance cell.

An ombudsman is a person who tries to solve issues between the general public and an organization. The organization could be a government institution, a private company, a large society, etc. There are ombudsmen appointed for specific sectors or even by large companies themselves. For example, there are ombudsmen for banks, life insurance, mutual funds, etc. Each ombudsman is in a position to look into complaints made against organizations that it represents. For example, if you have a complaint against a bank, you will have to approach the bank ombudsman. All ombudsman bodies are governed by the Right to Information Act (RTI act of 2005). They are legally bound to reply to any complaints that they receive. They try to sort out an investor complaint keeping in mind the rules.

Ombudsman

Product: Banking Operations and Credit Cards

• Regulator: RBI
• Send complaints to: Reserve Bank of India

Product: Mutual Funds and Stock Market Related

• Regulator: SEBI
• Send complaints to: Securities and Exchange Board of India

Product: Insurance

• Regulator: IRDA
• Send complaints to: Insurance Regulatory and Development Authority

Making a complaint

Vidhata once applied for bonds of a state government power company. He attached a cheque for the required amount with his application from. His cheque was passed and the amount was debited from his bank account. He was expecting the bonds to reach him within two weeks. He regularly read in the newspapers about the status of the state power company’s bond issue. He read that it was concluded successfully. He also read that it was fully subscribed, which meant that the company collected as much money as it set out to collect. But there was no sign of his bonds!

He did not panic. He wrote a letter to the company, giving them all the details of his application and the cheque payment. Once he did not receive a reply from them, he wrote to SEBI’s investor protection cell. They promptly sent a mail to the company requesting them to explain why the bonds had not reached Vidhata even through the cheque had been debited. They sent a copy of this letter to Vidhata.

Within a week, the company replied to both SEBI and Vidhata. It explained that the bonds had been dispatched to his residence but they were returned twice as there was no one to take the delivery. It was then that Vidhata remembered that he and his mother had made a trip to his sister’s place as she had just delivered a baby. They had stayed for three days and perhaps the bonds had reached his home at that time.

The shares were dispatched once more and this time, Vidhata received them.

• The lesson to learn is that we must in the case of any problem that we have with our investments:
• Be clear about the details of our investment – dates, amounts, cheques issued, etc
• First we must try to sort out the issue with our broker or the company which we have a problem with.
• Only if we do not receive any reply from them should we go to the investor protection cell of the concerned authority.

Source: Portal Content Team