Plans for coming New Year 2010

The year 2009 is finished with lots of goodies it has provided to systematic investor.
Now let’s see how the year 2010 has to be planned.

The following are few very simple and practical methods to keep you financially fit and secure in long run.

1. Don’t plan your investments in Hurry
Due to near approaching financial year end most of us are looking to invest to save the Income tax but most of us will land up in investing without appropriate planning.
It results in portfolio which is heavily consist of low returns investment schemes. Like Fixed Deposit (FD’s), Public Provident Fund (PPF) endowment policies, National Saving Certificates (NSCs), debt options in ULIPs. Though some of them are called as very secure investment but the returns will be low.
So if you are planning to invest for long term like 10 to 15 years then instead of investing in fixed returns plans you can plan to invest in Equity related schemes.
Basically people are advised to do an asset allocation based on their age, risk profile and time horizon and then start making investments.
If you are young like 25 to 30 then you can prefer to invest in equity related schemes and if you are older than you can plan in secure and fixed income schemes as mentioned above.

2. Give priority to your family
This is an area that is not present while doing financial planning. What happens in the event of a death or disability? Will the family be comfortable financially? Will the children be able to go school/college? So it is necessary to protect against any unknown and sudden incident by adopting appropriate insurance plans, pension plans, Medical policies etc.

3. Be Calculative in spending
Determine your Monthly income and expenses and save accordingly to spend for sudden events like short holidays, festival, and any pleasure time spending with family, colleagues, parents etc. Planning and spending will avoid unnecessary debits at the end of the month and this will help you in turn in long run instead of taking any personal loans or credit card loans.

4. Start investing early
Saving will not provide you any benefits but saving your income in appropriate ways will fetch you good returns in long term and on top of this start investing early will provide you excellent returns.

The best way is to start SIP per month/quarter etc in any good return schemes and again this should be done based on your age and risk you want to take.

Instead of saving bank, which you can withdraw any time, it is good option to invest in some lock in polices.

5. Be prepared for emergencies
Emergencies arise like jobs are lost, health issues etc. It would be ideal to set aside three to six months of living expenses as a regular reserve. This fund will cover those inevitable, unexpected costs and keep you from borrowing money when they occur. Make sure you and your family has adequate health insurance so that you are not bogged down by a financial crunch during a sudden medical emergency.

6. Do not try to time the market
In the long run slow and steady wins the race. Try to be a regular and disciplined investor. Even the best of investors and stock market veterans have repeatedly failed to predict what's going to happen next. The recent crash and then sudden surge in the market is an example to prove this. As retail investors this task becomes even more difficult. SIP and rupee cost averaging are great techniques to invest regularly and have a great return over longer horizon.

7. Contribute to your retirement plan
Look at your salary slip and see how much money you are contributing to the EPF (Employee Provident Fund). Make sure you maximise it and keep it going. Over 15-20 years the power of compounding will do its magic and it will grow into a decent corpus. PPF is another good option for investing extra money for retirement purpose. It offers tax benefits as well.

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