The two most celebrated festivals of Hindu culture – Diwali and Holi, shows us the way how to lead better, healthier life. For Diwali we cleanse our home and surroundings and for Holi we purify our home and surroundings on ‘Holika Dahan’ and then splash the new colours of life on ‘Dulhandi’, the following day. The colours of bond, trust and friendship among our fraternity who stand by us at all times – good or not so good.
Coincidentally Diwali comes midway the financial year and Holi comes towards the close of it. What we do to cleanse and purify our physical and spiritual life, the same need to be done to our portfolio for a financially healthy life. While midway the financial year we should scan our portfolio for cleansing, we should purify it and splash it with new colours towards the close of the year.
Purifying and splashing new colours to your investments means – assessing your financial situation and risk appetite in the light of any new developments in your personal life that may have financial implications and review and rebalance your portfolio accordingly. If need be then splash i.e. include new investment products in your portfolio.
Splash New Colours
You must consider reviewing /adding the following colours to your portfolio:
Mediclaim: Now everyone is aware of the medical contingencies and heavy expenses they would bear if such contingencies arise. Review your existing mediclaim policies and consider increasing cover to tackle expenses for diseases like corona. Consider family floater and comprehensive policies.
Life Insurance: This is the time to reassess your financial liabilities and ascertain the insurance cover you should have. Buy only term insurance plan that provide you very high insurance cover for a very low premium. A 25 year old can get himself or herself covered for a good sum of Rs 1 crore for as low premium as Rs 500-800 a month. Additionally you may also consider buying cancer and heart care policies being offered by many insurance companies in addition to regular mediclaim policies.
Contingencies Funds: Corona has exposed a lot many people to the realities of uncertainties of one’s income. While your income may get disturbed but your basic expenses don’t. So rework your needs of contingencies funds. We advise you have at least one year’s expenses in safe and liquid assets.
Debt: Most option in debt investments offers you fixed guaranteed returns. Choose your option based on taxation, liquidity, inflation, security etc. of the option. You may consider bank or post office deposits, various types of debt mutual funds, government and corporate bonds etc. Peer to Peer lending is another debt investment which is gaining popularity among niche investors.
Gold: It is a standard hedge against inflation over long period and an asset that generate exceptional returns during time of uncertainties in the economy. We recommend 5-15 per cent investment in gold. You may choose from sovereign gold bonds and gold mutual funds to invest in paper gold – the best way to invest in gold.
Equity: For wealth creation there is no option than to invest in equities. While it remains highly volatile in short term, over long term – say 10 years or more it has always beaten all other asset classes for returns. Use mutual funds if you are not good at picking good stocks. And SIP is the best way to create wealth silently over long period. A small SIP of Rs10,000 a month can get you over one crore in just 18 years. Small drops makes an Ocean.
Loans: For many in higher tax bracket it’s good to avail home or education loans. Personal loans should be used only as last resort and credit card loans should be strict “no” for individuals. If you are carrying loans then consider pre-paying or switching loan to another agency who charges lesser interest. Don’t forget to know the switching cost.
So what are you waiting for? Pick up your investment portfolio and financial plan. Purify (review) it and splash new colours i.e. make changes in the portfolio as assessed. Talk to your financial advisor to help you do this.
Team InvestmentMitra wishes you a very Happy and Joyous Holi!