What to buy in 2019? This is a common query for financial advisors in the month of December. A lot of financial advisors will recommend options based on your age and income. They are trained to offer you advice and then mutual funds or other products. Your conversation with your financial advisor is also dependent on the money that mutual funds, insurance firms and others spend on distribution.
While you listen to that advice, you need to make a resolution in the New Year. You need to start reading up. There is no weapon like knowledge in the world of personal finance. Yes, you need professional advice.
But it is also important to make the most of that professional advice. You cannot hand over the future of your finances to your financial advisor just because he or she knows. Your financial advisor and you make a team. To generate the right output from the team effort, it is important for you to know the basics of how your money works.
Agreed that a lot of literature is complex. In many pieces, the headline says one thing and the article reads something else. If you are not a numbers person, you are not going to give a second more to that information resource. You may want to find out one meaningful resource that you would refer to every day. It is just like you studying a language. You make an effort to learn. When stuck, you can refer to a guide or a dictionary or ask the expert. However, the key is to start reading up and be nice to finance. It will allow you to understand the risks involved in your investments and take a measured call.
The New Year is all set to bring a new government to India in May 2019. You will go out and exercise your right to vote. A lot is likely to happen by then. If you are someone who is new to investing, you may want to keep track of these developments. They affect your personal finances in some way or the other.
Your finances this year will have to take into account the potential shocks we may witness during the year. You need to prepare for both good news and bad news.
In the New Year, let us resolve to talk and discuss more investments. We are talking about investing. This is different from saving or protecting your money. Investing is an effort to help make your money grow. No matter how small now. You need to start training your mind to see an opportunity to invest and not just save.
Putting your money in a fixed deposit is not an investment. That is capital protection. As we have discussed thumb rules in the past, you may set your goal in 2019 for investment and capital protection.
Once you decide to allocate your money toward investing, you may want to look at your options. Exchange-traded funds (ETF) and index funds are a perfect way to get a taste of investing. You can start off with them. Advantages of these funds are many.
First, they are very simple products for you to track. If you buy a Sensex or a Nifty ETF or an index fund, your return is the performance of these benchmarks. Second, the expense ratio or the fund management fee for these funds is the lowest. So, you spend 0.5-0.9 per cent of your investment on the fund management in these funds against over 2 per cent in diversified equity mutual funds. This means you get a higher return. While your financial advisors and mutual funds may not push them too much, you may want to stick to that idea. As a customer, you must insist that you would want to begin with an ETF or an index fund.
Investing is all about seizing the right opportunity. In 2019, this needs to be your regular habit. No matter how volatile the financial markets, it is here to stay. You need to follow a regular investment pattern. For that, you need to resolve to get disciplined about your income and expenditure, and create a monthly surplus. Let that be your New Year Resolution.
Advantages of ETFs