At the beginning of any New Year, a majority of people want to start afresh, and make resolutions for a happy and prosperous future. Investors also take a resolution to save and invest more in investment avenues giving higher returns. However, amidst economic growth, the shadows of inflation and global uncertainties add complexity to investment strategies and, therefore, creating a robust investment budget becomes paramount.
Making a budget in the beginning will ensure that you achieve your goals and readjust your income and expenses based on your requirements. As an investor, you must always be ready with a budget and your investment options to ensure the new year yields healthy returns and your money grows without many fluctuations. Let’s look at some crucial insights for taking judicious financial choices.
Evaluating Your Financials
Understanding your cash flow is pivotal in determining your investable surplus. Assess your monthly earnings (salary, dividends, etc.) and categorise your spending (necessities, lifestyle, debt repayments). Check your comfort level with market fluctuations. Are you a conservative investor seeking stability or open to higher risks for potentially greater returns?
Clearly define your investment aspirations. Are you saving for retirement, a house down payment, or your children’s education? Setting clear goals will steer your asset allocation strategies. Assess your current portfolio (stocks, mutual funds, etc.). Evaluate the performance and readjust based on your expectations. Opt for Systematic Investment Plans (SIPs) in mutual funds for disciplined and convenient investing, benefitting from rupee-cost averaging that balances market volatility.
Also Read: 10 smart money moves to make in 2024 for a healthier financial life
Govt Policies
Stay abreast of the economic situation and governmental policies. Consider key elements such as: Union Budget: Analyse upcoming budgetary declarations for alterations in taxation, investment incentives, and sectoral allotments. Also keep a check at the Reserve Bank of India (RBI) monetary policy. Understand the RBI’s stance on interest rates and inflation. It is helpful to monitor significant global events and their potential repercussions on the Indian economy and markets.
Investment Portfolio
Create an investment portfolio based on your financial goals. Embrace a diversified approach across asset classes based on your risk tolerance and objectives. Indian stocks offer long-term growth prospects. You may directly invest in stocks or explore mid-cap and small-cap stocks for higher risk-reward ratios. Select stocks judiciously based on company fundamentals and sector insights and understand the risks involved.
Contemplate fixed-income vehicles like government bonds, corporate bonds, and fixed-deposit schemes for regular income and risk mitigation. This traditional hedge against inflation provides stability and diversification for your portfolio. You may also invest in mutual funds for convenient diversification and access to diverse asset classes. Choose schemes aligning with your objectives and risk tolerance.
Taxes and Fees
Factor in tax implications and associated fees while calculating your investible corpus. Monitor taxes on capital gains, dividends, and interest income. Account for fees, mutual fund expense ratios, and other charges.
Adhil Shetty, CEO, Bankbazaar.com, says, “The higher your income, the higher your taxes. A tax deduction is an amount you can subtract from your total income. This reduces your taxable income. Thus, your taxes get reduced too. Tax-saving investments solve the twin problems of investing as well as saving taxes.”
“Section 80C is the most popular section for seekers of tax deductions. You can claim a deduction of up to Rs 1.5 lakh each year. Under it, you can use a combination of various tax-saving options. Section 80C is popular because it is crammed with many options: life insurance premium, pension plan premiums, National Savings Certificate, PPF, Employees Provident Fund (EPF), Sukanya Samriddhi Scheme, home loan payments, Senior Citizens Savings Scheme, equity-linked savings schemes, National Pension Scheme, five-year FD and education fees paid for children,” adds Shetty.
Review and Adapt
The market demands a dynamic investment strategy. That is why you must assess your portfolio’s performance, rebalance allocations if necessary, and adjust your budget in response to changing circumstances. Don’t hesitate to seek professional financial counsel, particularly when navigating intricate investment avenues.
Tax Savings
Saving tax is one of the crucial aspects of budgeting and investment strategies. Explore tax-saving investment options like PPF, ELSS mutual funds, and the National Pension System for long-term wealth creation and tax benefits.
It is important to steer clear of impulsive decisions and adhere to your long-term investment strategy. By following these steps and staying informed, you can create a comprehensive investment budget for 2024. Remember, success in the market hinges on planning and consistent monitoring to make 2024 your year of financial triumph!