We are counting down to the year 2019 and its time for some New Year investment wisdom. New Year is as much the time to rejoice as to reminisce. This is quite perfectly applicable to investing as well. The yearend offers a pertinent opportunity to take stock of the times gone by and how the forces of financial markets shaped up over the year. It also throws out an opportunity to review your investments and check out how they are faring. This is also an apt time to frame a workable investment plan for the next year. In planning so, it is recommended that one must not get swayed by the near term price action in the stock markets but look for underlying trends which will play out over the next few quarters. Most stock advisory companies come out with their yearend reviews and offer stock recommendations for the next year. The mutual fund advisory services also offer insights on various schemes and how they are performing. Such updates are useful but it is critical to ensure that rather than following them blindly or taking any advice from stock market brokers, one does his own study. Before deciding about any such stocks, think whether it is warranted to be a part of your financial portfolio for long term.So, as we get ready to bid adieu to a fascinating year which saw the local as well as global financial markets hit record highs, the time has come to focus on a super investment plan for the 2020.
Remember that it’s never too late to start investing
Start of a New Year is perfect for framing new investment plans. Remember that it is never too late for a new beginning and investing is no exception to it. They key to successful investing is discipline and commitment. All stock advisory companies would offer basic information needed to get started with investing and you need to spend some time to understand basic functioning of financial markets.
Everyone needs a financial plan irrespective of income size
A lot of people think that there is no need for an investment plan because their income is low. However, remember that to create wealth in the stock markets you don’t have to allocate a hefty amount at one go. It is advisable to start investing early via mutual funds. In fact, Systematic Investment Plans (SIPs) are the best for such investors.
Do not attempt to time the market
The key is focusing on the future rather than buying a stock only because it is down sharply. Investors need to analyze the earnings, news updates and peer group companies before deciding to buy a particular company. Remember that it makes sense to buy a quality stock at high valuations that buying a poor stock at cheap valuations.
Always look for safety first
Always ensure that there is a safety element in your portfolio. This in turn means that maintain your stock portfolio as diversified as possible. Do not buy a stock based on tips. Pay attention to add enough stable counters with a good track record and popular brands to add a secure edge to your portfolio. In fact, MFs work wonderfully well for investors when it comes to safety and stability. It is advisable to look for a good Mutual fund advisory service in order to decide a good portfolio of equity and debt funds.
Review your progress regularly
Learn to assess the performance of your investments from time to time. This will help to get out of stocks/funds which are no longer working in favor of your portfolio. It is necessary to evaluate your holdings and also keep a latest on the latest developments in the markets and economy. Most stock market brokers provide timely updates and commentaries to keep investors abreast of important developments impacting stock markets.
ConclusionWhile the basic tenets of a financial plan are fairly easy to understand, it is highly important to keep a check on the latest trends in stock markets and economy. So here are a few key trends shaping up the investment climate for next year.
Recovery in economic growth
While India’s GDP growth rate fell to a six year low of 4.5% in September quarter of 2019, there is a likelihood that the economy would slowly come back on track in near term. There have been a plethora of measures initiated by the government in last one year, including the seminal reduction in corporate taxes. The International Monetary Fund (IMF) noted in a latest update that over the medium term, growth is projected to gradually rise to its medium-term potential of 7.3%.
Global inflation and crude oil prices
Global inflationary trends have been rather tepid and crude oil futures are mostly lingering in a range. This is a positive sign for en emerging economy like India as we import bulk of our crude oil from overseas.
RBI and its monetary stance
The RBI has cut the rates at a staggering pace in recent months as it became clear that the credit growth is lagging behind. The RBI has cut to 5.15%- the lowest in nearly nine years. If the retail lending rates ease further in coming months, the credit offtake, regarded as the engine of modern economy, would kick off the consumption cycle in earnest. This would support the local stock markets and also offer a boost to corporate earnings.
Government policies and upcoming budget
The government has shown a tendency to act in haste in last few months and there is a possibility that the upcoming Union Budget would provide another booster dose for the economy. Continued focus on enhancing rural incomes, tax cuts for the income tax payers and a boost to consumption oriented sectors is likely to be the key for the economy.
Mutual fund inflows
Assets managed by the Indian mutual fund industry have grown from Rs 23.59 lakh crore in November 2018 to Rs 26.94 lakh crore in November 2019, representing a surge of 14.21%. There has been a consistent increase in the mutual fund investments over the years. The value of assets held by individual investors in mutual funds increased from Rs.12.73 lakh crore in November 2018 to Rs.14.47 lakh crore in November 2019, an absolute increase of 13.69%.