Moneycontrol PRO

How to maintain financial fitness during festive season?

Indian equity markets are amidst a bull run. Sensex and Nifty have scaled new highs, adding to investors' wealth. This is the right time to leverage the growth potential on offer and enhance your riches significantly.

August 30, 2021 / 01:19 PM IST

With the great Indian festive season ready to kick off in a few days, maintaining financial fitness is a challenging task. This is because expenses shoot up exponentially during this time, as Indian festivals are a grand affair. Most people hardly think twice before splurging to make them worthwhile.

Having said that, given the situation, where the effects of the pandemic are yet to ebb, it's advisable to adopt discipline and a meticulous approach to ensure you don’t end up stretching your finances and impinge on crucial life goals. So, how can you confirm this all-essential fitness during this festive season? Let’s find out.

Invest in Mutual Funds

Indian equity markets are amidst a bull run. Sensex and Nifty have scaled new highs, adding to investors' wealth. This is the right time to leverage the growth potential on offer and enhance your riches significantly. A sensible way to do so is by investing in mutual funds through systematic investment plans (SIPs).

While mutual funds provide the advantage of professional fund management and diversification, SIPs instill a disciplined savings habit and keeps you invested across market cycles. You are better positioned to handle volatility, the bugbear of equity investments, and also gain from rupee cost averaging where you buy more units when markets are down and vice versa.

Close

Opt for fundamentally strong funds that have delivered consistent returns over the long term to build a corpus for various life goals.

Invest in Gold Via Sovereign Gold Bonds

Festivals, particularly Diwali, are the time when most of us prefer to buy gold. The yellow metal had a fantastic rally last year that took everyone by surprise. Always a hedge against inflation, it’s better to invest in the precious metal through sovereign gold bonds (SGBs) instead of physical gold that has purity and storage issues.

The Reserve Bank of India (RBI) issues SGBs on behalf of the Indian Government. You also earn an annual interest of 2.5 percent on SGBs that allow you to participate in gold investment for a long period. Though they have a tenure of 8 years, you can sell them after 5 years. If you stay committed to your investment until maturity, you don’t need to pay long-term capital gains tax. This augments gains significantly.

Review and Reshuffle Your Portfolio

The festive season is also the right time to review your portfolio, weed the laggards and plug the existing gaps. Find out how your investments have been performing and identify those that have not been able to live up to your expectations. If any of your investments have not performed well for a long period, it’s advisable to exit and deploy the funds elsewhere.

Depending on your life stage, take time to evaluate your portfolio and reshuffle it. For instance, if you feel you will fall short of the desired corpus for your child’s higher education and retirement, see if you can be aggressive and top-up your SIPs in the equity funds. If you find it difficult to review and reshuffle your portfolio, seek professional help.

Diversify Your Financial Assets

One of the core tenets of investing, diversification allows you to handle volatility better and provides stability to your portfolio. Note that different asset classes react differently to market events. While one may tank, the other may gain. This provides your portfolio the much-needed balance and protects the overall gains.

Invest in a mix of market-linked and fixed-return instruments to give your portfolio the required diversification. Equally essential is to keep in mind not to overdo it. Overdoing makes a portfolio bloated and dilutes returns. For example, if you have invested in an equity fund, do not invest in similar funds with the same underlying holdings. It also makes tracking difficult with underperformers bypassing the scrutiny net.

The Final Word

Following the steps mentioned above consolidates your financial fitness and holds you in good stead in the years to come, allowing you to achieve your goals and embark on your journey to financial freedom.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Rahul Jain is the President & Head - Personal Wealth at Edelweiss Wealth Management.
first published: Aug 28, 2021 11:15 am
Sections
ISO 27001 - BSI Assurance Mark