2020 - Yet another New Year and yet another year of new hopes and beginnings! From an investment point of view, most people begin to consider planning their finances with the onset of the New Year. Now, if want to invest smartly in 2020, then it is time to rectify your previous investment mistakes and choose the right investment options that give you maximum return on your money and meet your financial goals.
Do Your Tax-Saving Investments at the Beginning of Financial Year
If you are one of those investors who don’t do tax planning at the beginning of the financial year (April) and join the last-minute rush around tax-saving deadline (31st March), then you must avoid it at any cost. Last-minute investment may save you tax, but you will hardly earn any returns on it for that financial year.
If you invest at the beginning of every financial year, your investments get one whole year to maximize returns and re-invest the returns for compounded growth!
Choose Your Investment Plan Wisely
A good investment portfolio is a healthy mix of debt and equity. While your portfolio depends on your age, risk appetite, current income and financial position, assets and liabilities, you should diversify your investments in a way that you get optimal returns at a lesser risk. Some of the investments you should consider are:
Fixed Deposits, Public Provident Fund and National Savings Certificate
There is no doubt that FDs, PPF and NSC are very safe investments even though they offer low to moderate returns, usually below 6-8%, per annum. You can invest a significant chunk of your money in a mix of instruments, depending on when you need the withdrawals in future because each of these has different lock-in periods.
Health and Life Insurance Policy
If you haven’t taken a life insurance policy – do it this year. It will give you peace of mind that your dependents will be taken care even when you are not around in case of an unfortunate event of your demise.
Similarly, you should also invest in a family health insurance policy if not already done. The cost of medical care is soaring exponentially and can create a heavy dent in your savings. Health insurance can save you all financial losses and hassles related to healthcare treatments.
Equities and Mutual Funds
If you have shied away from stock market investment till now, make a fresh start in 2020. Direct equities and mutual funds usually give higher returns than any other investment in the long run. You can spend a few months familiarizing yourself with both these options to boost your confidence. You can start with a small amount of investment and gradually increase later. It is also advisable to reach out to registered and trustworthy stock advisory company or mutual fund advisory services to handhold you. If you are a seasoned equity investor, then you should try to expand your equity/mutual fund portfolio venture into one or two new stocks or may be even commodity or forex trading under the guidance of stock market brokers.
Reduce Your Debts
While you make your investments grow, take steps to reduce your loan and any other financial debts. Reduce your expenses wherever possible and by splurging less on unwanted things to pay off your debts or else liabilities can turn into financial monsters. Moreover, avoid taking any unnecessary debt, especially personal loan or money from friends/family. Also, do ensure that you pay your loan EMIs and credit card bills within due date to avoid penalties and defaults – which can further add to your liabilities.
Establish an Emergency Fund
A sure shot way to ensure that you don’t borrow money during emergencies is to build your own emergency corpus. It should be equivalent to your six months worth of salary. The idea is to keep this amount untouched and use it only when you have exhausted all other sources of income to meet an unexpected emergency. An emergency fund will help you sail through medical emergencies, job loss or any unforeseen financial crunch.
2020 should be the year to up your efforts towards financial independence. All you need to do is to invest smartly by following the above-mentioned tips!