Tomorrow we will adieu to year 2019! How eventful this year was… economically, politically, socially, personally..! A flashback starts rolling in our head. Like every year, this year has given us a lot to cherish, to remember and to take lessons from!
Our personal finance is the important area of our lives where things keep changing, surrounding factors keep altering and this creates impact on our investments and financial planning. This year was no exception for this!
So, lets see, which key takeaways we got for our personal finance from the year 2019-
- Don’t let ‘Gold’ over shine in your portfolio-
‘Gold’ is a true favorite asset class among Indians! Be it for jewelry, for investment, for hedge or just as a status symbol, people love to posses it. In 2019, gold prices have risen high and when prices started rolling up, it created momentum.
Well, its true that, your existing possession value of gold must have risen but when you are looking for new investment, take a pause..
Gold prices rise/fall due to many economical and geo political factors. When you invest in any asset, you must look for consistency of the returns and return potential that particular asset carries. Gold returns for last 10 years have not been so catchy.
Investment is gold also carries lot of risk in terms of safety.
So, before buying gold, please don’t over buy it looking at current upward movement in its prices. You can surely posses it but please decide your goals like for which purpose do you want to buy gold, your investment tenure and your risk appetite.
Once you are set with these, you can opt for e-form of god like Gold ETF, Sovereign Gold Bonds etc. This is a simple way of investment, which gives you transparency, less risk of its safety as you can posses gold in your demat account, easy purchase and sell as well.
2. Equity market volatility- Be a thoughtful Investor:
‘Volatility’ is a core trait of markets and year 2019 was no exception. Market rolled up and down this year as well.
When its started going up, many new enthusiastic investors started their investments in equity mutual funds and bought stocks. Panic started when market started going down..
So, please be aware of this risk of volatility before entering equity markets. They can give you maximum on your investments when you make equity investments for your medium to long term goals, when your investment tenure is also long and when you have high risk appetite.
Along with this, please read and understand more about stock market, functioning of mutual funds, etc, Its better to be aware and informed before making investments!
3. Debt mutual funds investments and risk associated with it- Be an informed Investor:
Generally, its a trend to treat ‘equity’ as a risky asset and ‘debt’ as a safe cushion. Well, 2019, proved it wrong!
Debt mutual funds are made up of portfolios which carry debt papers by different companies, banks and government. Every debt mutual funds scheme, as per its objectives and sub type, selects the papers as per their type, tenure, ROI it offers, credit rating it possesses. ‘Credit rating’ is the ability of that particular paper/company to pay back to its investors. AAA, AA are some of the highest ratings which credit rating agencies give.
This year, some of the debt mutual fund scheme’s underlying debt papers’ credit rating was ‘downgraded’. This means their ability to pay back was under the radar and questioned.
It created a panic among investors of those schemes and mutual fund investors in general.
What can we learn from this? Please understand basics of debt funds , read and understand scheme related documents carefully before investing. You should fix your goals, risk appetite and tenure before investing.
While choosing funds to invest, along with above parameters, please check ‘credit ratings’ of the underlying portfolio as well. Keep reviewing your portfolio.
4. Banks Crisis- Never put all your eggs in one basket:
2019 showed us that our bank investments can also be a reason to panic! One of the big cooperative bank of the country faced crisis and its lakhs of customers and investors, started facing trouble even to withdraw their own hard earned money invested in FDs/savings a/c.
Many investors created FDs of their retirement corpus or many invested for their son’s/daughter’s wedding and what not..
Such incidences we have experienced in past also, but we should be vigilant now!
Whether you make FD investment of 10 lakh or 10 cr, ‘Deposit Insurance and credit guarantee corporation’ insures your FD amount for upto 1 lakh only.
So, lets take a quick to do list for making FD investment-
- Please make your FD investments in big banks backed up by government.
- check financial health of the bank and credibility of its management.
- Split your total FD amount in 2-3 banks.
- Make your nomination/joint holding in every FD.
- Look for alternatives to FD investment which are lucrative and transparent too . E,g Tax free bonds, Non convertible debentures, RBI bonds, etc.
Be vigilant and invest!
5. Income tax changes- Check which suits you the best!:
Income tax chnages are bound to happen with every budget. This year was no exception. Elected government suggested changes in income tax which are suitable to many.
To list a few-
- For ‘National pension scheme’ investments, investor can withdraw 60% of the maturity amount and it has made tax free.
- Under ‘Pradhan Mantri Awas Yojana/ eligible candidates can get additional tax benefit of Rs 1.5 lakhs This is over and above Rs 2 lakhs which already exists.
- You can show ‘Aadhar card’ instead of ‘PAN card’ wherever needed.’PAN-Aadhar’ interchangeability was a big move this year.
- Assesse wont have any tax liability if your net taxable income doesnt exceed Rs 5 Lakhs.
Well, along with these , there are many changes that have been introduced. Please take detail information about the above changes and many other provisions from your ‘Chartered accountant’ while filing income tax returns.
With this and many more takeaways, lessons, returns we generated and losses we faced, we are saying ‘Goodbye ‘ to 2019!
We will enter in 2020 soon with new hopes, new thoughts, and new planned investments!
Here is wishing you all , a very happy new year! May in a new year, you get ‘Multiplies’ happiness and peace along with your family and friends,! May all you success and joys ‘get a bonus’ and all your sorrows and worries ‘get discounted’!!
Happy 2020 and Happy Investing!