Investing in capital markets has been one the most rewarding in the medium to long term but I have been a strong advisor of the basic financial hygiene that one needs to maintain before venturing into markets. I use markets as a broad term here since it covers ETF’s, bonds, stocks, mutual funds which are available to invest in through brokers.

I have tried to list key checkpoints an investor should be aware to enjoy the long term journey in capital markets. Note that the checkpoints vary based on your age and the below checkpoints are valid for people in 20-40 yrs.

  1. Term insurance – Very basic; your family will get a huge lump sum when you die, lowest premium. As a good practice, never mix term insurance with an endowment, Investment-linked or Annuities. Mix it only if you have a good reason and know the pitfalls.
  2. Medical insurance – Family health insurance for cases when you or your family members are hospitalised. Convince all your near and dear ones to get it as not doing it might force you to exit your investment at times you do not wish for. Invest time in researching key terms like family-floaters, deductible, co-pay, riders. Get in early to enjoy low entry premiums, no-claim discounts. There is no right time, earlier the better!
  3. Go for accidental insurance as a rider.
  4. Emergency fund – Avoid using your credit card as an emergency fund. This amount varies based on your lifestyle but imagine some unforeseen medical, legal emergency where it might take time to claim from the insurance. This fund can vary from min $1K to max $20K and has to be in cash i.e bank deposits. Discipline is the key here, start with a minimum.
  5. Contingency fund (6mth monthly expenses + instalment payments) – This is good to have. Entirely based on the family lifestyle.

There is no fixed rule for the above checkpoints, it’s a moving goal, but being aware is the key here as channelling funds from above checkpoints into markets will make you nervous and exit at times when you don’t want to.

I am happy to receive feedback on the above frameworks, something that can be done without using excel sheets 😉

If you can’t explain it simplyyou don’t understand it well enough.

Albert Einstein

Talking about tools, I am also looking for an application where I can link and track all multiple bank accounts balance, insurance and all investments, kind of a personal financial cockpit. Since most banks and brokers expose data using API’s I think this should be possible with strategic partnerships but for archaic institutions like insurance and mutual-fund houses an email scraping plugin(vetted by third parties to make sure only authorised data is scraped) can be a good option. If you guys know any application like this, please feel free to share it with me in comments or on twitter.