Financial planning for FY 2012-13: Things to consider

Investment planning is a key element of your financial well-being which you need to plan wisely for meeting your life’s goals. Month of April is always a good time to review and start planning so that you do not strain your finances with adhoc investments. Here are some investment ideas for this financial year which will help in channelizing your savings efficiently:

1. Stay Invested in Equities: Equity is a very important asset class for reaching out to your long term goals. Inflation beating returns ensure that you earn the desired growth on your money. Any short term volatility should not deter you from continuing your equity investments. Rather, it increases your chances of achieving the expected results. Stay invested to reap the benefits in the long term.

2. Continue your SIPs: A Systematic Investment plan is an effective tool for small investors. With small regular savings, it helps in creating a discipline to accumulate corpus for your life goals. But most of us discontinue our SIPs whenever markets take a beating which is contrary to benefit of averaging. Avoid making such mistakes and invest for the long term. Click here to know the power of SIP

3. Attractive Small Savings Schemes: Last year government made all savings schemes market linked but the interest rates have increased twice since then have made them very attractive. PPF, which enjoys tax free status at all levels, is yielding much higher. Even 5 year NSC is offering attractive interest rates of 8.6% now. With rates expected to fall in coming years, investors will benefit by locking their investments at higher interest rates this financial year.

4. Invest in Debt Mutual Funds: With increase in interest rates, debt mutual funds’ performance has been on a rise. Returns from liquid and short term funds have been hovering around 9% and might continue generating good returns for next few quarters providing a good opportunity to park your short term funds. Contrary to this Long term gilt funds are expected to generate double digit returns with fall in interest rates in next few years.  Investors with higher risk appetite can consider exposure to these funds. Check out the performance of Debt schemes

5. More Fixed Income Options: Government has allocated a substantial amount to infrastructure sector in the budget and series of tax free bonds are expected this financial year. For investors in higher tax bracket or looking for a regular income, these long term bonds will bring a good opportunity considering the high interest rate scenario. Other avenues like Bank FDs or FMPs too are offering good interest rates and can be considered as per your requirement. Check out latest deposits rates offered by Banks

6. Treat Gold Cautiously: With double digit returns, it has been one of the best performing asset class for last few years. Many investors have moved a good amount of money from other asset classes. But returns should never be the only criteria to evaluate any asset class. Look at other factors and allocate wisely through cost effective mode like ETF or e-gold. Check out performance of Gold Funds

7. Plan with Your Goals: Goals are very important to identify investment objectives. It helps you in allocating your savings efficiently by selecting the right asset class. Plan your investment in alignment with time horizon of your goals and your risk tolerance.

8. Follow Asset Allocation: Overinvesting in any asset class is a common mistake investors do. Gold and Real Estate have been preferred investment avenues but for different reasons. Since each asset class has its own risk return characteristics, following an Asset Allocation approach will help you in avoiding costly mistakes.

9. Do Tax Planning Now: We all do but at the wrong time and end up adding a financial burden in last few months of the financial year. April is an appropriate time to plan your investments related to tax saving. You can plan to either distribute your surplus as per your cash flows or accumulate to avoid any force borrowing or straining your finances.

Your employer does a review in April so that you can be given targets for new financial year. You break it in quarters and then in months so that your performance can be tracked. If there is any shortfall you have good enough time to meet it. The same rule, if applied, to your investments can help immensely in meeting the desired objectives.

Jitendra Solanki

The author is a Certified Financial Planner and founder of JS Financial Advisors. You can reach him at jsfadvisors@gmail.com