Some Useful Financial Resolutions for the New Year

The economy and the markets have gone through conditions that we have not witnessed in a lifetime. But things have started improving gradually. The markets have moved up. The economy is rebounding. But the experiences during the year that has just gone by leaves us with a lot of lessons as far as our financial planning and investment activity is concerned.

DO NOT BE SWAYED BY NEWS

One of the lessons from the past is to not give much importance to what we see in news channels. Quite often, they may contain reports that may cause distress and panic as some of them may be a bit exaggerated. The best policy is to stay away from such news. Yet another thing that should be borne in mind is that one should not be too much worried about investments made after proper risk profiling, and asset allocation, which is broadly in alignment with the risk profile. Sticking to the basic risk profile and asset allocation is a sure way to come out of seemingly difficult situations that we encounter during the time horizon fixed for the investments and the goals.

AVOID PRODUCTS THAT YOU DO NOT UNDERSTAND

Never invest into a product or idea which you do not understand completely. There may be exotic structures and six year or ten-year products which may offer you conditional returns, but do not commit to any investment until or unless you understand the risk and return profile of the product. This is one of the areas where a large number of investors make mistakes.

GET PORTFOLIO REVIEWED PERIODICALLY

Get your investments reviewed by your financial advisor periodically. You should fix a frequency for the same, either monthly or quarterly, and then have a complete review of the investment portfolio. This review will help you to understand where exactly you stand in terms of your existing investments, whether you are on the right course or not, are there any bad apples which need to be weeded out, are there any new products that could be made a part of the portfolio, any profit booking opportunities, any means by which the tax efficiency of the portfolio could be enhanced etc. Do not miss an opportunity to have a comprehensive review done.

DO NOT UNDERESTIMATE THE IMPORTANCE OF ESTATE PLANNING

It is also important that a will is put in place as part of a meaningful estate planning so that whatever is accumulated is preserved and transmitted to the future generations without any hassles. While there is a growing awareness about the need for this particular aspect of financial life, the act of formalizing it through legal documentation is yet to be generally accepted. But this is an aspect which should never be compromised on.

TRACK RECORD AND EXPERIENCE MATTERS A LOT

In trusting your portfolio with managers or advisors, please evaluate the experience of the managers as also the track record of products that are recommended to you. Quite often, the sort of casual approach of the managers who may be less experienced may adversely affect the potency of the portfolio seriously, which would mean undoing these bad effects first before setting the portfolio on the right course. Insisting on a benchmark against which the portfolio performance is to be evaluated is a good standard to follow.

 

 

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