Financial planning cheat sheet

Here's a quick summary of all that I have assimilated about personal financial planning over the years

Insurance: Don't go for ULIPS or complex insurance plans, stick to simple term insurance, it is the cheapest method. Insurance cover should be about 10 times your annual expenses (not income). Online only insurance policies will give you the best deal since they cut out the agent's commissions, consider icici pru's iprotect or aegon religare's iterm. Btw, you need insurance only if you have dependents, so no child insurance policies please. also, never lie on the insurance application, it's a sure shot way of claim rejection

Investment: Consider asset allocation to all the following asset classes - liquid, gold, equity, debt, fixed income, real estate

Liquid: Keep aside some amount as liquid investment for contingency requirements - either in a savings bank account or some good liquid fund, expect returns of 4-6% p.a. on this. 6 months expenses is a good thumb rule for how much to set aside here

Gold: Consider keeping about 5-10% of your total portfolio as gold. Gold ETF is a good way to invest in gold, you need a demat account for that. If you don't have that yet, consider opening a demat account and start purchasing gold ETF on monthly basis. GOLDBEES is a good one. Buying physical gold is not a great idea - banks charge a huge premium for certified gold coins, jewellary incurs huge making charges

Equity: Unless you have lots of spare time and interest in following the stock market, stay away from individual stocks. Instead, invest in established mutual funds. Don't invest in a lump sum. Rather go in for STP or SIP. Look for market dips to invest a little extra. diversified equity funds are the best choice (HDFC equity, HDFC top 200, Fidelity equity, Reliance RSF). Index funds are good too, you can also invest in index ETFs through a demat account (QNIFTY), the management charges are usually lower. Invest for a long time frame, at least 10 years, and don't be perturbed by market changes. If you don't have money to spare for 10 years, don't invest in equity, invest in debt. http://www.fundsindia.com/ is a good online provider for mutual fund investments without any charges

Debt, fixed income and Real estate in a later post.