Creating a positive investment budget holds immense importance for any investor, especially against the backdrop of inflation and geopolitical disruptions that add complexity to investment strategies.
Drafting a budget, in the beginning, will ensure that you can address your financial goals and readjust your income and expenses as per your requirements. As an investor, you should be prepared with a budget and investment alternatives to ensure the New Year yields healthy returns and your money rises minus several fluctuations.
Taking stock of your financials: Having adequate knowledge about your cash flow is crucial in determining your investable surplus. Assess your monthly earnings, such as salary, dividends, etc and categorise your spending, which could be necessities, lifestyle, or debt repayments. Check your risk appetite with market fluctuations.
This way, you would be able to know about your investment approach, whether you are a conservative investor seeking stability or have a higher risk appetite for potentially more returns.
You need to know your investment aspirations. This could be related to you saving for retirement, a house down payment, or children’s education or marriage. This way, you will be able to steer your asset allocation strategies. Assess your current investment portfolio, which includes stocks, mutual funds, etc.
Evaluate the performance of these investment tools and possibly readjust depending on your expectations. Go in for Systematic Investment Plans (SIPs) in mutual funds to remain disciplined while making the most of convenient investing, benefitting from rupee-cost averaging that acts as a hedge against market volatility.
Keep an eye on government policies: Remain updated with the economic situation and governmental policies. Take into account crucial elements such as the Union Budget and analyse upcoming budgetary declarations for alterations in taxation, investment incentives, and sectoral allotments.
In addition, keep an eye on the Reserve Bank of India’s (RBI’s) monetary policy. Try and gain insight into the RBI’s stance on interest rates and inflation. It is useful to monitor relevant global events and their potential repercussions on the Indian economy and markets at large.
Align investment portfolio with financial goals: Make an investment portfolio depending on your financial goals. Adopt a diversified approach across various asset classes depending on your risk appetite and financial objectives.
Stocks are known to provide long-term growth prospects. As an investor, you could directly invest in stocks or explore mid-cap and small-cap stocks for higher risk-reward ratios. Select stocks with due diligence after taking into account company fundamentals and sector insights and fathoming the risks involved.
For regular income and risk mitigation, go in for fixed-income tools such as government securities (G-Secs), corporate bonds, and fixed-deposit (FD) schemes. This traditional hedge against inflation offers stability and diversification for the investment portfolio. Possibly also look to invest in mutual funds for convenient diversification and access to diverse asset classes. Opt for schemes aligning with your objectives and risk appetite.
Factor in taxes and fees: Take into account tax implications and associated fees while calculating your investible corpus. Factor in taxes on capital gains, dividends, and interest income. Account for fees, mutual fund expense ratios, and related charges.
Strategise, review, and adapt: The markets call for a dynamic investment strategy. So, assess your portfolio’s performance, rebalance allocations in case required, and adjust your budget in response to changing circumstances. Reach out to a professional financial expert to seek suitable advice, especially when navigating intricate investment avenues.
Figure out tax-saving avenues: Saving tax is one of the important aspects of budgeting and investment strategies. Figure out tax-saving investment tools such as public provident fund (PPF), Equity-Linked Savings Scheme (ELSS), mutual funds, and the National Pension System (NPS) for creating a long-term wealth corpus and tax benefits.
Moreover, it is crucial to steer clear of impulsive decisions and stay on course with your long-term investment strategy. By taking these positive steps and staying informed, it will be possible for you to create a comprehensive investment budget for 2024.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.