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Is chasing returns equal to chasing rainbows?

Nov 11, 2019 | 8 months ago | Read Time: 3 minutes | By iKnowledge Team

When we were small, we used to manage our expenses through the pocket money given by our parents. And even then, we would be asked to save if we wanted to purchase something. If we couldn’t save as much, then our parents would help. Now that we’re all grown up our pocket money has been replaced by salaries and our parents can’t help us with our savings. We must learn to be our own saviour.

We should have a sound financial plan to cater to all our needs- current as well as future. For saving, we often invest in various things like property, assets, shares, etc. While it is very important and necessary to invest in them, we need to understand why we are really investing? What are we getting by shelling out money for these investments? What are the things you keep in mind while investing? If your answer to these questions was ‘a high return’ then I’m afraid to say you’re on the wrong track.

Why do we invest?

The purpose of investing is not just to earn the highest returns but also to help one to predictably and easily achieve the various objectives and goals that come up over time. You may often look at your friend’s investment portfolio and get jealous of their high returns.  This comparison is very harmful for you. You think of changing your financial advisor or invest hastily into the shares where you think you’ll get higher returns.  When you stray from your own well-thought-out plan to chase higher returns, there is a chance that your portfolio’s performance will go downhill. Your portfolio will likely fare better if you kept your investment plan rooted in your own needs and goals.

Where are we going wrong?

There has always been a hype about timing when it comes to investments. All of us want to invest at the right time. But realising this right time is as difficult as fishing in a hurricane. Many times, even after rigorous financial planning the financial advisors get the timing all wrong. It is usually too late by the time the investor realises that the asset price has gone up. Running after higher returns we tend to keep moving from company to company where we think we’ll get higher returns and once it starts going downhill, we jump to another company. This continuous hoping and skipping is why most investors don’t make money. The more they look for the ‘right timing’ the more they lose.

Investors need to understand where to invest. The asset which is least talked about in the market is the place to invest in. The skipping from one company to another also costs them with taxes which the investors don’t even consider.

To simplify it, we need to first lay down our goals. We need to decide what we really want in long-term with our life. We need to then understand what we need to do to meet these life goals. We need to have a blueprint, a plan. And finally, we need to invest in various assets to meet our life goals. We need to consider various options other than return rate like the asset, years to retirement, the goal, risk profile, tenure and liquidity needs.

What can you do now?

Define what your financial goals really are and reassess if your first answer is, “Getting a higher return.” Don’t buy an investment based solely on how it performed last year, or on how much money it made for another investor. Develop an asset allocation strategy that is designed to balance risk and return. It is important to get the investment returns of your hard-earned money but that will come only if you invest properly. Disciplined investment, proper asset allocation, and periodic reviews are the key to a good financial plan.

Financial advisors at AEGON Life are here to guide you through your financial planning process and help you at every step of your investment- right from deciding your goal and monitoring results. They have various plans where you can invest your money according to your financial goal. To know about Aegon Life’s life insurance products like term insurance and other products, visit our home page.


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