New year resolution for investing in 2020


New year resolution for investing in 2020


As we welcome the new year 2020, we make new year resolutions for our health, relations, jobs and various other aspects of our lives. It is equally important to pay attention to what mistakes are we making in investing decisions and to make resolutions to cut them down, in order to have not only a happy new year but a wealthy new year 2020. Because investing decisions can potentially change the course of your life by bringing prosperity, they should not be left for chance and one should be pro-active in analysing, reassessing and restructuring them. Here are some new year resolutions for investing in 2020 that every one of us should consider.

Take a look at your portfolio in general – optimize your risk


By portfolio I mean the variety of assets that you have and by 'optimize' I mean to adjust risk in your assets as per your risk appetite, considering the current scenario. We all know that for most of the asset classes, more the risk, more is the return. You will need to understand your own risk appetite and then you need to understand the risk in various asset classes that you currently own. According to your risk appetite, increase or decrease your exposure in various asset classes. In new year 2020, the situations have changed and the future may be different from what we have  seen till now. So we must prepare for what's coming in the year 2020. 

For example, stocks pose a greater risk than mutual funds and in turn, often give higher returns than mutual funds. Bonds and fixed deposits are even safer but offer meagre returns when compared to mutual funds and stocks. So in order to ensure that your capital does not degrade in the situation of a financial crisis, you can limit your exposure to stocks and increase exposure to fixed deposits, bonds, mutual funds and the like. General advice for most of the salaried people - do not take a risk that you don't understand. As a new year resolution for investing in 2020, you can make a note of what investments you have, how much risk they pose and consider reducing the risk for maximum possible reasonable returns. 

Make a resolution to educate yourself – read more books

The first step towards rational investment decisions is educating yourself. Invest your time and efforts in educating yourself about various assets, how to evaluate them, how to invest, what is a risk-return profile of each asset, how to allocate, how to enter, how to exit and the likes. 

Investment is not taught in our schools and sadly most of us lack the necessary know-how of what to do with the money that we earn from our salaries or businesses. We must educate ourselves. Warren Buffet, the best investor of all time promotes investment in self by education self and reading books. Some of the books that I recommend for investment education as a new year resolution for investing in 2020 are as follows- 
 1. The Intelligent Investor by Benjamin Graham (Get it here)
 2. Rich dad poor dad - by Robert Kiyosaki. It introduces you to the very basics of investments and why you need to invest. (Get it here)
 3. The little book of common sense investing by John C. Bogle 4. Security Analysis by Benjamin Graham and David L Dodd (Get it here) 5. Common stocks and uncommon profits by Philip A Fisher (Get it here)These are some of my favourites. There are many more out there relating to real estate, insurance, gold and others. You can pick up yours and read them, and make yourself aware.

Give time to investment

Your girl-freind/boy-freind or wife/ husband may be asking for time to themselves as a resolution for 2020. Likewise, your investments too are demanding your time. We give time to our job, to our family, to relaxation and to health. Do we give time to our investments ? Think about it and if you don't, then its time to make a new year resolution for investing, to dedicate some time out of your schedule to educate yourself and to plan your investments. 

Afterall what we all strive for in life is comfort and convenience along with a secured future which comes with the wealth that we create. Unless we dedicate some time to keep and multiply that wealth, our future is not going to be secured. Hence find some time for investments, make a schedule and dedicate some effort towards them. As it is said, 'time is money', so allocating some time for investments would be a great new year resolution for investing in 2020.

Understand your tax liabilities and try to minimize them

Taxes take a big chunk of what we earn. If we can save some of the taxes, they can add over time to create enormous wealth. For example, if you take a home laon and save around Rs 150,000 per year on the interest, and Rs 150,000 on the principal, you are saving around Rs 300,000 per year. Invested well for next 20 years, it can generate great amount of wealth, you can calculate yourself with the help of online financial calculators.  Learn about Indian income taxation system from the incometaxindia.gov website and about how to save taxes from various sites like cleartax. Be knowledgeable about tax matters, as a new year resolution for investing in 2020. 
I started thinking about tax saving pretty early in my career, and I see a huge difference from my peers in what I can save and what they can even though I would dare not call myself an expert!

Consider investing in mutual funds as a new year resolution for investing in 2020

Mutual funds are a very convenient way of investing in the stock market. There are various kinds of mutual funds available in the market and cater to the varied needs of various kinds of customers. Mutual funds collect money from the investors and invest in various asset classes like stocks, bonds, debentures, fixed deposits, money markets etc. According to the allocation of their investments, there are high return mutual funds and low return mutual funds. Accordingly, their risk also varies. 

You can get comprehensive information about mutual funds of India at mutualfundsindia and various other sites like moneycontrol.com, economictimes etc.  One does not need a Demat account to buy mutual funds and a person with limited knowledge of investing can also gain from the various investment options in the country through mutual funds. Additionally one can start a SIP (Systematic investment plan) in which a fixed can be invested every month in mutual funds, leading to a sound investment over the years. I think starting an SIP could be the most important and easiest new year resolution for investing in 2020. You can start from as low as Rs 500 per month, see how it grows and keep increasing your exposure. 

Be on the look out for a good property

Having a property is always a good idea. However, there is a lot of difference when you think of property for investment and property for self-occupation. In investment parlance, a property should not become a liability. It should give you returns and it should appreciate with time. Most of us make emotional decisions when we think of investing in property. For investment, you can think of a residential or a commercial property which can give reasonable rental returns, at a location where it is likely to be in demand and which can appreciate in value with time. In addition, it should be easy to manage (should be located where you can visit frequently) and should be free from legal encumbrances. Choosing real estate for investment can be a tough decision and you need to be deliberate. 
Keeping in mind real estate as an option will open ways to invest as you may see an opportunity coming your way. As a new year resolution for investing in 2020, you can start researching various properties in your locality eg plots, flats, commercial properties and talk to people about them, get more information, take professional help and make wise decisions. 

Explore stock markets

It is said that stock markets can beat any investment in the long run, provided you are invested in the right stocks. While most of us have experienced losses in stock markets, it is mostly because of emotional investing rather than deliberate, fundamentals-based investing. Investing in stocks based on recommendations and tips can be dangerous. You need to conduct your own research, decide upon stock selection and sit tight for man years after purchasing it. The stock market has not been doing very well for the past 2 years, and this may be the correct time to get it. Investing in stocks is definitely something that you can consider for the long term. 
Start learning about the workings of stock market, as a New year resolution for investing in 2020. Start learning about fundamentals of stocks, technicals of the price movements and about best performing companies in India. Use online platforms but stay away from advise by lay people. 

Buy some gold – keep some portion of your investments in gold bars/ coins

Gold is considered an all-time, most stable investment. Its quantity is finite and its value is never going to go down. Earlier, all the currencies in the world were linked to gold. Although it is not the case now, gold still tops the list of stable investments. Gold is said to be the best insurance against any kind of crisis be it financial or otherwise. 

The return in gold is not as much as stocks. In the past 10 yrs, gold has given returns of approximately 200% whereas nifty 50 has grown about 4 times (300%). Whenever other financial assets are stressed, gold prices start soring as people rush towards the safety of gold. In my opinion, gold should form a fraction of everyone's portfolio. 

However in India, most of us like to keep jewellery and take it as an investment. The making charges and the impurities in the gold jewellery eat up into the returns of the gold when we sell it. So if you want to keep gold as an investment, then Gold coins or gold bars should be considered rather than jewellery. As a new year resolution for investing in 2020, consider buying gold. 

Keep a healthy amount of insurance

For those who are not covered by sponsored healthcare programs from companies or government, it is essential to buy a health policy. Even for those who are covered, you need to see if the cover is lifelong or till your employment. If till employment, then you need to plan for healthcare needs post-retirement. Is your family covered? Look into these matters urgently if you haven't till now and study about various policies being offered in the market. Take a policy which best suits your family's needs and make a fruitful new year resolution for investing in 2020. 
A Life insurance policy is a must keeping in view the uncertainty of disability, disease or death. Your family should not be left to fend for themselves in the unfortunate event of disability or demise of the bread-winner. I suggest taking a term policy. There are hundreds of policies being offered in the market, you can choose from them based on your budget and other requirements. I suggest not investing in ULIPs (Unit linked insurance plans) as they offer lower insurance and overall lower return on investment. LIC of India offers some of the best term insurance plans. 

Plan for retirement - Start preparing for old age when you are young

Finally, we all have to plan for retirement. Most of us like to save a corpus for our retirement. In my view, all of our investments are directed towards retirement. However, another thought process professes that you should invest some of your money in stable sources of investment so that they are available to you when you grow old. There are various retirement schemes offered by banks and finance companies. You can choose from them. Government of India has recently started some pension plans but they may be insufficient for most of us. We need to save enough to support our lifestyle uninterrupted when we grow old. As a good New year resolution for investing in 2020, you should look ahead towards old age and start preparing for it. You could think of your own way of saving for retirement, but you must pay attention to your own old age - after all, it is a reality. 

Conclusion 

The list could go on, but these few things which are necessary and incorporating them into our lifestyles could pay us in the long run. You may already be doing some of these things. If you are not, then educate yourself about these aspects, introspect their need according to your stage and age in life and incorporate them if you think they are needed. 
The new year resolution for investing in 2020 for me would be -
 1. To go over all the books I have mentioned, again. 
 2. To reorganize my portfolio. I am going to add more stocks and mutual funds as the stock market looks ready for a bull run. 
 3. I would consult a income tax expert to save more tax as I think I am still paying a lot of tax. 
 4. I plan to buy more gold coins. 
 5. Most important of all - I resolve to continue my financial education !

What is your New year resolution for investing in 2020 ? please comment below. 

Wish you a very Happy New Year 2020, and Happy investing. 

Happy New year 2020
New year resolution for investing in 2020

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