We all like to make certain resolutions for the New Year and promise ourselves to follow them. It is time totake stock of your savings and investments for this year and start planning for the new year. Keep thefollowing investment planning tips in mind for 2010.
1.Get yourself a financial plan
As an individual it is very important to have a financial plan which will guide you with investments as per your goalsand needs. It serves a very important purpose of bringing discipline to your investing habits.An ideal plan gives you a complete picture of your current investments and liabilities, your net worth, cash flow, goalsand a specific plan to achieve those goals. The goal can be buying a car, house, going for a vacation, children'seducation or building a retirement corpus. When you are young you tend to live for the moment and do things as theycome but it's very important to secure your financial future. It does not have to be at the cost of a good lifestyle.
2. Start SIP (Systematic investment plan)
SIP is a proven instrument for long term investments for steady returns. Timing the market is rarely possible foranybody and you can end up spending a lot of your productive time and energy trying to do that. Even after doing thatthe chances of getting it right remains very low. Better alternative is to do SIP in some equity funds with a good trackrecord of performance.
3.A budget helps you break down your spending and compare on a month to month basis. Thus it helps you identifyareas where expenditures can be cut and money diverted to meet your goals like buying a car or house. When youlook at your budget and see anomalies, it becomes possible to take remedial action. Do not procrastinate on this
4. Make your PPF and other fixed income investments at the beginning of the financial yearIf you invest in the latter half of the year, you miss out on a good amount of interest income. Investing early in theyear will tie-up your money which will also help you control certain discretionary expenses.
5.You can get life cover, child education cover, health cover and save for retirement when you invest in the rightinsurance policies. Besides this, you get tax exemptions to reduce your current tax payout. This exercise should bedone in the beginning of the financial year so that your tax planning can be taken care of. Remember that choosingthe right insurance policy can be a tricky exercise and you might need to take assistance from a qualified financialplanner.
6. Buy a house• A house is one of the best investments you can make and it offers many advantages:• You save on the rent• Your interest payments are tax deductible• It usually appreciates in value• In times of need it serves as great collateral• Peace of mind and many other intangible benefits
7.This involves matching your investment vehicles with your investment goals. Your investment choices shouldalways be based on your age, portfolio, personal situation and level for risk tolerance. Diversification is the key tominimizing risk. You should not put all your eggs in one basket. Real diversification means spreading your moneyacross multiple asset categories including stocks, bonds, real estate and commodities etc.
8. Rupee cost averagingIf you invest directly in stocks then rupee cost averaging is one technique you should look at adopting. It is similar toSIP for Mutual Funds. You fix certain amount of money for a stock and buy at regular intervals regardless of the price.In this way when the prices are low you get more units and vice versa. The key here is to select quality stock for therupee cost averaging.
9.Stay invested for the long term and don't allow every downward market move to rattle you. It's far too easy to panicwhen you're watching daily, weekly or monthly results. Too many trading tips, recommendations etc only confuseyou. Investment is like a test match and not a T20 match.
10. Don't wait. Start now!One of the mistakes we do is waiting for the right time as well as a lump sum amount to start investing. Being slowand steady wins in this case. Start small but start now. All you need is self discipline to stay on course!
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