New Fiscal, new Plans
A new financial year does not witness any revelry. Not many even notice it. Most of you think of it as the time when you start preparing for your tax return. For those of you who work in the banking sector, it’s the end of late night work. In most countries, the calendar year is the financial year. India is among a few countries that follow an April to March fiscal routine. There were rumours that the government was considering a change. With elections on the anvil, it will be for the new government to decide.
In the meantime, you may want to note a few ideas for the new fiscal that starts on April 1, 2019:
Financial advice In the new financial year, take professional help. Many of you follow a ‘Do-It-Yourself’ (DIY) approach to investing. Asking around friends and family is okay. However, financial planning is a team effort. Besides reading up on your own about potential investment options, you need to get an independent voice to guide you to make a financial plan.
Reading newspapers is just the first step. You should approach a registered independent financial advisor. You must align your investments with your life goals. Once you meet that person, share your thoughts on the kind of goals you plan to achieve. The professional advisor will guide you accordingly and suggest an appropriate investment plan.
Act on your financial plan
If you are new to investing, it is the right time to start executing plans you have been planning for some time now. Signing up for a Systematic Investment Plan (SIP) of an equity-linked tax saving scheme should be your first step. You will not only start investing, but also do tax planning. However, if you are averse to risk, you may want to start your SIP in an index fund. That way, returns on your investment track the movement of stock indices like Sensex and Nifty.
That is the least you can do to grow your money and win against inflation over the years. Over 30 years, the BSE Sensex has returned an average 14.4 per cent. It is the highest against any other asset class like gold, real estate or fixed deposits. You can only protect your capital with these assets. Your financial goals can be realised only by owning financial assets like equity over the long-term.
Buying stocks
If you have already tried out index funds or mutual funds, you may look at buying stocks in the new fiscal. Just like you do an SIP in a mutual fund, you can look at fundamentally strong shares. If you already own a car and plan to buy a second one, you may want to purchase shares of the car company instead. An investment of Rs 6,00,000 in a Swift Dzire in 2009 would have given you a resale value of Rs 1,50,000 in 10 years. That is provided you maintained it well. If you had invested a similar sum over 10 years in Maruti Suzuki shares, your investment would have been over Rs 50,00,000. That is just because Maruti Suzuki shares have jumped close to 10 times in the past 10 years.
Similarly, Mahindra and Mahindra shares were barely at Rs 100 a decade ago. Today, they trade close to `700. There are other examples like Eicher Motors and Bajaj Finance. It is a good idea to stick to fundamentally strong companies that form a part of the Sensex or Nifty. That is a good beginning.
Investing is not for the faint-heartedIf you keep all your money in property or gold or a fixed deposit, you are not investing. You are playing safe. Nothing wrong with that. But, equity investing is not for the faint-hearted. The ride in equity investing is fraught with sharp swings. The path is upwards but never linear. In a decade or two, you will witness share price rallies and share price slumps. Those who can stay invested, actually create wealth for themselves.
A tip for beginners and veterans
If you are new to investing, sign up for a Systematic Investment Plan (SIP) of an equity-linked tax saving scheme. You will not only start investing, but also do tax planning. But if you are new and averse to risk, you may want to start your SIP in an index fund. However, If you have already tried out index funds or mutual funds, you may look at buying stocks in the new fiscal. Just like you do an SIP in a mutual fund, you can look at fundamentally strong shares.