It is always good to go to the root of a word and try and understand
the underlying true meaning of the word. So I decided to check Wikipedia for the
meaning of the term “New Year's resolution” and here is how Wikipedia defines
the term.
A New Year Resolution is a secular tradition, most
common in the West but found around the world, in which a person makes a promise to do an act of self-improvement
starting on New Year's Day.
A NEW YEAR RESOLUTION IS A
PROMISE MADE TO SELF TO DO AN ACT OF SELF-IMPROVEMENT
Now, if we you think that New Year Resolution is a modern phenomenon
made popular by modern social media, then you are wrong.
The ancient Babylonians
made promises to their gods at the start of each year that they would return
borrowed objects and pay their debts.
The Romans
began each year by making promises to the god Janus, for whom the month of
January is named.
Hindus,
take New Year resolutions on the eve of Diwali to start afresh with renowned
vigour the forthcoming year and so on. So do Muslims in the month of Ramadan.
So,
just like our forefathers, for us the modern human race, January is the month
of taking New Year resolutions. Resolutions for better health, better relations
& more prosperity & so on & so forth.
Well
my domain is the last one; “PROSPERITY”.
Being
a financial coach & planner, let me dare to suggest a few Investing
resolutions for the common man. If the Investor sticks to the below mentioned
resolutions, he will soon create WEALTH for himself and his family.
And let me assure you that these are
times-tested principles….
So,
without much ado, let me mention some New Year investing resolutions for one
and all.
10 Investing resolutions for 2014
1. I shall buy a decent Term
Insurance Plan for myself and other earning members of my family
The first & the only necessary Insurance plan that every earning member
should buy is a basic, TERM Insurance Plan that insures ones family against
untimely death of the bread winner which can cause immense loss to the family.
This is the CHEAPEST form of insurance money can buy but protects your family
against the sudden and untimely death of the main bread earner of the family.
2. I shall buy a decent
Mediclaim cover for each member of my family
Anybody can fall ill or meet with an accident in our family. Whereas
Life Insurance is to be taken only for the earning member of the family,
medical insurance is to be taken for all the members of the family. Medical
costs are increasing by the day and if you are not covered by a proper medical
plan, sudden sickness or accident in the family has the potential to eat your life’s
savings.
3. I
shall buy a decent Critical Illness
cover for each member of my family
Just like Mediclaim, Critical Illness cover is equally important.
Normal Mediclaim plans do not cover critical diseases that requires you to take
a separate critical illness plan. It does not cost much but can save you a lot
of cost in case of an unforeseen eventuality.
4. I shall start Systematic
Investment Plan (SIP) in professionally chosen Equity Diversified
Mutual Funds
One of best invention in the world of finance is SIP or Systematic
Investment Plans. The only fool proof way of talking equity exposure via the Mutual
Fund route.
After the abolition of entry loads on Mutual Funds from Aug 1, 2009,
Mutual Funds have become the best, most economical form of Investment vehicle
available to a retail investor. Consider this. Over the last decade, well
chosen mutual fund schemes have given a compounded average return of 20 to 24%
per annum. And that to tax free. How many businesses give this kind of return?
Just one caveat, consult a Mutual Fund expert and let him create a dedicated
mutual fund portfolio for you after understanding your needs.
5. I shall pay off my personal
loan & credit card out standing’s (asap) at the earliest
Personal loan & credit cards are the costliest form of loans that
banks and NBFC’s give to unsuspecting layman. One pays a whopping interest rate
of 18% to 24% per annum on personal loans & 36% to 50% per annum on credit
cards. Avoid these two at all cost.
6. I shall not trade in shares
& I shall avoid speculation
in equity, commodities or F&O
Most people approach the stock market as a place to make fast money in
shortest possible time. They buy stocks on tips but make mistake on when to
sell and eventually lose money unless you are lucky enough to exit at the right
time. But one cannot be lucky all the time. So invest in stocks but only after
thorough research. Avoid trading or speculation & always be an Investor.
7. I shall not invest in
Insurance plans
No
matter how much one emphasizes this point, one can never overemphasize it. Insurance
is not investment. There are basically 2 types of Insurance plans viz;
Traditional Plans like Money Back & Endowment & market-linked plans
like ULIPs. The later (ULIPs) are already notorious for being largely miss-sold
while the former (traditional plans) give returns that hardly beat inflation.
Invest in equity diversified Mutual Funds instead.
8. I shall consult a Financial
Planner to help me plan my financial affairs
We are living in a world of plenty. We now have a problem of CHOICE.
22 + life insurance companies, 44 odd Mutual Fund companies, 7,000+ listed
shares and other traditional Savings & investment avenues. How can one expect
a lay investor to choose which are the best investment avenues for him/her.
When one falls ill, one consults a
doctor who then writes a prescription and then one goes to the medicine shop
and buys the medicine prescribed by the doctor. Why not follow the same path
while taking your financial decisions. Go to the financial planner who
after understanding your specific needs, your financial goals & risk
profile, helps you create a dedicated investment portfolio. It is worth paying
fees to a financial planner & buy peace of mind then paying very high
commissions to the commission agents and have sleepless nights.
9. I
shall invest with a GOAL in
mind
Now why is this important! Look, investing just to make money seems
like a rational thing to do but it is anything but that. If you invest without
a Goal, you will never know what action to take when faced with tough choices.
So let’s say you have invested for your child’s higher education which is 10
years down the line. In the 4th year of investment, the market tanks. What will
you do? Since your goal is 6 years away, you should be happy that the market
has tanked and buy as if there is no tomorrow. If you didn’t have a goal in mind,
you would probably have panicked and sold in distress thus losing a wonderful
opportunity to buy.
10. I shall not forget the above
resolutions
Most
important. The above resolutions are not rules. They are principles. And
principles are time tested rules that hold their ground through thick &
thin.
So do
not commit the mistake of forgetting them…
Here’s
wishing all my blog readers a very prosperous & wealthy New Year.
Invest
wisely, read a lot, read this Blog & keep commenting. I look forward to
your constructive criticism.
You have supported me
over the last few years of my blogging career here. For want of a better blogging environment, I have
moved this blog to wordpress (http://niravpanchmatia.wordpress.com).
Looking forward to your continued patronage.
HAPPY Investing in 2014…
