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Investing steps for making money systematically in 2022

Start SIPs (systematic investment plans) in a few equity mutual funds with proper diversification across large, mid and small-cap schemes. As and when you have a lump-sum to invest, deploy it in the existing folios

January 17, 2022 / 10:02 AM IST

Since March 2020, when the stock markets dipped big time, there has been an equally fast rebound in asset values. What emerges is a kind of consensus that no matter what the short-term aberrations are, equities do well over the long term. Moving into 2021, while the volatility continued, it also showed that the stock market is not a one-way street and prices do move down.

There are important lessons from 2020 and 2021, which new and existing investors need to be aware of while investing in 2022 and beyond.

For equity investors who invest through equity mutual funds, short-to-medium term movements arising from events in 2022 should not perturb them. What finally moves the equity asset prices is corporate earnings and expectations of growth in the years ahead. The current valuations seem to be on the higher side and there is visible pressure on input costs for many corporates. This may lead to some considerations in 2022 but how far the companies are able to absorb costs and pass on to the customers in view of rising demand remains to be seen.

Investing across market levels

Start SIPs (systematic investment plans) in a few equity mutual funds with proper diversification across large, mid and small-cap schemes. As and when you have a lump-sum to invest, deploy it in the existing folios. Also, when markets dip, use the opportunity to add more.

Close

Remember, the amount you save during drawdowns will determine how much you accumulate over the long term. Importantly, maintain asset allocation by diversifying across equity, debt, and gold and avoid jumping from one asset or scheme based on short-term performance.

You may use the STP (systematic transfer plan) route to park funds in a liquid fund and move them to equity schemes at regular intervals. Both these strategies help to take a managed approach and keep exposing funds to the equity market at regular intervals for better risk-adjusted return. Some portion may be invested in thematic or sector funds such as pharma funds and IT funds depending on your risk profile.

At the start of 2022, make sure you have an emergency fund in place and have your health and life risks covered. This will ensure you don't have to dip into existing investments to meet short-term emergency needs. Buy adequate health insurance coverage for self and family by opting for individual health insurance plans or Family Floater plans if you have a small and young family. Opt for a term insurance plan of at least 15 times your annual income and keep reviewing it every five years or in line with new financial liabilities.

As we enter 2022, those investors who are retiring soon or in 2-3 years from now, need to have a close look at their portfolio. Make sure your retirement corpus, including mutual fund portfolio, is exposed to lesser volatility. You may start the de-risking process by moving funds from equities to less volatile debt funds so as to preserve the accumulated corpus.

Debt funds

Asset allocation should be maintained at all times irrespective of the market conditions. In the current scenario, within the debt fund category, the floating rate bond funds can be opted for by the investors for their goals which are at least three years away.

Gold

Gold has remained almost flat over the last one year. But keeping the rising inflation in context, one may take 5-10 percent exposure in their portfolio. Rather than physical gold, you may consider sovereign gold bonds to invest in gold.

Insurance

At the start of 2022, see if you have adequate life insurance coverage to protect your family's goals. Life cover of at least 15 times of annual income is recommended and keep reviewing every five years. Also, check if you have adequate health coverage for all family members. Smaller and young families may opt for family floater plans. For someone around age 40, opting for a critical illness plan is also essential. Also, consider adding Coronavirus health covers for added protection. Depending on the city you reside in and the type of hospitals in your area, see if you have adequate coverage. Nowadays, there are health insurance plans giving coverage of up to Rs 1 crore. Either buy a new plan or buy top-up and super top-up policies to increase coverage.



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Sanjiv Bajaj Joint Chairman & MD, Bajaj Capital
first published: Jan 17, 2022 10:02 am
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