Investment Process on Track in a New Financial Year

By | 21st March 2018

Investment is a process that demands planning and perseverance. So that, it is important that we follow a goal-based investment approach. That involves allocating money to different asset classes based on time horizon and risk profile. As well as choosing the right investment options that provide the best from these asset classes. Unfortunately, many of us either do not plan or abandon long-term investments when faced with short-term adversities of the market. So, it is important to get your investment process on track in a new financial year.

Similarly, it is also common to see investors investing haphazardly to save on taxes at the end of the financial year. While investing in a planned manner helps in starting the process on a positive note. It is equally important to monitor the progress of the portfolio in a disciplined manner to ensure that it remains on track to achieve all your investment goals within defined time horizon. Therefore, it is always prudent to review the portfolio at a predetermined interval to avoid making abrupt investment decisions. The beginning of a new year can be the right time to do so.

Although there is no significance of a new year in the review and investment process, it helps in maintaining the discipline of reviewing the portfolio at fixed intervals. If you have been contemplating following this approach, the start of new financial year provides you an opportunity to do so. Here is what you can do for “Your Investment Process On Track In a New Financial Year”:

Take a close look at your existing asset allocation:

Asset allocation plays an important role in ascertaining what to expect from your portfolio in terms of returns and the attendant risks for achieving it. Time horizon is an important factor in deciding the right asset mix in the portfolio. For example, while investing for long-term, your focus should be on staying ahead of inflation.

For short-term investments, the safety of capital should be the top priority. Therefore, if your existing asset allocation is too aggressive—eitherin terms of how much is allocated to equities or exposure to different segments of the stock market. It is time to rebalance it. If it is too conservative, it is time to either start investing in an asset class like equity or increase exposure to give your portfolio a chance to earn a positive real rate of return.

Review your insurance portfolio:

Risk management should be an important part of your investment process. It should cover the risk to your life, health, and property. Make sure you are adequately insured, both in terms of life and health insurance. Besides, if you have been following a strategy of mixing your investments with insurance and have accumulated a number of policies, it is time to change that. Remember, it is not the number of policies but the quantum of risk cover that should matter to you. A term insurance plan is an ideal product to reduce your costs and to ensure adequate risk cover.

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Review your tax savings investments:

Many taxpayers have the habit of investing at the fagend of the financial year to save taxes. Needless to say, this approach often compels them to invest haphazardly. As a result, they fail to benefit from their tax saving investments, despite the mandatory lock-in period. Remember, tax savings investments can play an important role in your wealth creation process. Therefore, you must review your tax saving investments at the start of new year. Although you may not be able to make the required changes for some of your existing investments due to the mandatory lock-in-period. It will make a huge difference to your future investments. Simply put, if you have not yet invested to save taxes for the current financial year. You must try to follow the right process. First, make tax savings an integral part of your overall investment plan.

Second, while planning your investments under Section 80 C, ascertain how much you have to invest in compulsory options, such as provident fund, insurance premium or housing loan repayment. Then decide the amount for other options such as Public Provident Fund, equity-linked savings scheme (ELSS), NPS and retirement funds of mutual funds. Last, but not the least, you must adopt a disciplined approach of investing every month for tax savings. This will ensure that you not only stagger lock-in periods but also do not feel the burden of having to arrange for a lump sum amount for investment at the end of the financial year. Besides, when you invest in equity-oriented options every month, you benefit from averaging due to the volatile nature of the stock market.

So, with these steps, you can have your investment process on track in an new financial year.

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