How to dodge 'Blue Whale' traps in personal finance

You must have heard about the scores of teenagers across the world succumbing to The Blue Whale Game also known as "Blue Whale Challenge". This deadly game consists of a series of progressively self-harming tasks assigned to gullible players by administrators, with the final challenge requiring the player to commit suicide. Many of these seemingly adventurous tasks like waking up at 4:20 am, climbing a crane, carving a specific phrase on the person's own hand or arm, standing on a bridge and roof, listening to breathing, and watching videos seem innocent, but are all part of the plan to cause harm.

It's all about trust, and from that point thereon the game administrators use this trust to exploit. In managing your money as well, often people we trust the most end up giving us harmful 'Blue Whale' advice. Often such money tasks can lead us to financial suicide. DNA Money asked top experts to list out such faulty advice so that you can be warned.

Personal Finance management is a topic that is vital to ensure that major goals in life are met and life itself proceeds smoothly throughout. Finances are a very vital part of life -- yet most people choose to ignore it or treat it cavalierly, according it least priority. Since investors at large do not show interest in finances and are largely unschooled here, it's a fertile ground for various financial service providers to take advantage.

"Have money, save in insurance" - One of the biggest Blue Whale money mantras is insurance. There are numerous instances of wrong products being pushed for pecuniary interests by distributors. Insurance policies are routinely peddled as investment products.

Traditional insurance products can trap investors into low yield that & could sap cash-flows for a long time. Insurance also creates a long term commitment, which is undesirable in most cases.

Suresh Sadagopan, founder, Ladder7 Financial Advisories, says, "Ulip products are sold based on the premise that they give eye-popping returns. Consumers most times buy based on a single sheet showing amazing past returns with complete disregard to what the product is about, it's fitment for them and evaluating whether there are any more credible alternatives."

"Investing in the most popular product" - Investment products are pushed based on what is the flavour of the season at that point. It can be balanced funds at one point, Capital protection fund at another, gold etc. Based on what has caught investors fancy. Product sellers tend to latch on to a fad and ride the wave with products they can capitalise the fad with.

The first thing investors should realise is that returns are not everything. Having a portfolio that is aligned to their situation in terms of risk-return profile, tenure, tax efficiency, the periodicity of returns, etc, is important, says Sadagopan. Chasing returns is a mirage. That does not achieve anything. Most times, investors get in and exit at the wrong time. In doing this, asset allocation principles are not followed and the portfolio is just a jumble of meaningless investments.

Investors should take interest in finances and should get a working knowledge of it. A good advisor can be invaluable too.

"This worked for me, so it's best for you" - Personal finance is a very specific and personal matter. What is good and relevant for one person may not be the right option for another. This is something that people forget while soliciting advice from friends and family, says Ajit Narasimhan, category head - savings and investments, BankBazaar.com.

The wrong financial advice, no matter how well meaning, can be disastrous. Financial investment has to be goal-based to provide the best returns when needed. They should also be relevant to your financial situation.

"Different people have different goals and financial situations. You need to match these with your financial plans. For instance, if you are planning to take a break from work to pursue higher studies, you would need to save up differently compared to your friend who is saving up to buy a new car," says Narasimhan.

If you are planning to utilise your funds in the next two to three years, you need to invest in mid-term instruments compared to liquid funds if you are holding on only for the next six months.