7 Commandments of Successful Investing in the New Financial Year

New Financial Year is something, not very different from a new calendar year. All of us look back at the year gone by, sigh at the mistakes made and swear not to repeat them in the new year. In India, as our financial year ends in March, and the new year starts with April, its time we make some “Financial resolutions” for the coming year so that we do not repeat old mistakes and do better investing and tax savings.

1. Get rid of the habit of having too many credit cards

Those who are young and have just started to earn, feel highly honoured being offered free credit cards and enjoy earning points on those by spending more. My dear friends, nothing comes free. Your spends through credit cards involve a transaction fee, which is built-in the cost of the product or services you buy. Secondly, you land up spending much more through credit cards than with actual money.

I am not saying that you should stop having a credit card. But use it for emergency purposes like booking a train / flight ticket online where you have to use a card. Also, limit the number of credit cards you possess to two, so that you are not caught in a debt trap. Having multiple cards and spending on all of them, you tend to lose track of the payment dates and would be required to pay heavy finance charges and late fees.

2. Don’t save what is left after Spending. Spend what is left after Saving

This is a Warren Buffet principle of saving and investing. Whatever you earn, if you decide to save after spending for the entire month, chances are, you may be left with peanuts. Rather, decide on an amount you would be saving every month so that it automatically control your spends.

An SIP is a great tool for doing so. Pick up some good mutual funds and start an SIP. When the money is invested in the very first week after it is credited to your account, that much saving is already done. You are free to spend the balance money for yourself without bothering about savings now.

Now, how much do you save? A thumb rule is, you should save at least 26% of your annual earnings. If you are not saving this much, it is time you revisit your spends and cut down those unnecessary. This will ensure not only a comfortable retirement planning but also give you some back-up in case of an unfortunate job-loss (as seen in the recent meltdown).

3. Get Adequate Insurance

Cutting down unnecessary expenses nowhere suggests that you cut down on your insurance cover. Both Life and Health insurance are extremely necessary taking into account the well-being of your family. Life Insurance will ensure safety for your family in case of unfortunate death of the earning member. Likewise, health insurance will safeguard your financial planning from going for a toss, in case of an accident or critical illness.

For Life Insurance, choose term insurance which will give you maximum risk cover at the lowest cost. Do not get lured by ULIPs which fail at both fronts i.e. insurance and investments. (Please read my blog “Look before ULIP” for more info on ULIPs)

For health insurance, go for a family floater policy. This gives you good amount of cover at a lower cost. Most of the employers provide the health insurance policy to employees. I would still recommend buying an additional health insurance as it helps the employees when they change jobs or start up on their own.

4. Don’t leave everything for March

I have seen many professionals, procrastinating investments, insurance, tax saving etc. for March. What these people end up with is buying a wrong product (generally ULIP) which is a highly beneficial product, but for the Advisors (as it fetches them fat commissions).

My personal opinion is to keep insurance and investments as two separate avenues to get good life risk cover and get good returns.

Best idea is to start making your investments in April itself. This will give you good time to study the products, and also earn good returns throughout the year. Also, never make mistake of timing the market. Remember, “Its not timing the market, but the time you spend in the market, that will create wealth for you”. Thus, an SIP model helps you make investments in a staggered way and do rupee cost averaging.

Let March be a month for everyone else to make hastened decisions while you smile, looking at them running around and seeking your advice.

5. Look beyond tax Saving

There are many of us, who are earning in excess of Rs. 5 Lakh a year and still stop at saving Rs. 1 lakh. You ask them a reason and they would say, “80C would give tax benefits only for Rs. 1 lakh”. We recently also heard many people demanding that the overall limit of 80C should be increased.

My question is, whom are you saving for ?? For yourself or for the government ?? If you are saving for your own future, why do you want the government to incentivise you for that ??

This is like saying, if tomorrow, the government stops imposing fines for people crossing railway lines, would you start crossing them ? Is it only government’s responsibility to safeguard our interests ? Shouldn’t we take some responsibility for ourselves ?

The point is, do not stop your savings at Rs. 1.2 Lakh (as per the new budget) just because you get tax saving upto that amount. Make sure that you are saving at least 26% of your annual income and investing it in securing your future.

6. Do the right Asset Allocation

“Divide and Rule” is the name of the game. “Do not put all your eggs in one basket “ is something every person on the street will also understand. Its time we retrospect, where have we put all our eggs.

Putting all your savings in the equity market is definitely not a great idea. But then putting all of it in fixed income products in such an inflationary environment is also heading towards disaster. So what should you do then ?

Make an asset allocation depending on your age and risk profile so that you minimise the risk and maximise returns. Seeking professional guidance can definitely help you. But beware, a blind trust on the Investment Advisor is definitely not recommended. Give some time understanding, where and why he is putting your hard earned money. Demand services like periodic updates on your portfolio so that you know which way your money is growing. Reviewing and rebalancing the portfolio is the least you would be expecting from your investment advisor.

7. Be an alert investor

Practicing alertness from day one would be much better than blaming someone after things go wrong. Although we might try n excuse ourselves to be “too busy”, we have some basic responsibilities of our own money. Few of them include, keeping a track of the bank account statements, credit card statements, mutual fund account statements, insurance policies, income tax returns etc. A regular review of each would keep us updated about the current position and would prompt us to take a timely action in case of something not being in place. Paying charges such as late payment charges on credit cards or late charges on insurance policies or interest on tax not paid on time, would be a sheer insult to our hard earned money.

We look forward to your feedback and comments on the above article. Please feel free to contact us on saurabh.nidhiinvestments@gmail.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. The readers are advised to use their own judgement and consult their investment advisor before making any investment decisions.)







Published by professorbajaj

Prof. Saurabh Bajaj is an Author, Mentor, Motivational Speaker and Wealth Planner. He has done his MBA from Narsee Monjee Institute of Management Studies (NMIMS) Mumbai, one of the top 10 management institutes in India. He holds the prestigious FRM (Financial Risk Manager) degree awarded by Global Association of Risk Professionals (GARP), USA. Till date, there are less than 15,000 professionals in the world, who have been honored with this degree. He has also been awarded CFGP (Chartered Financial Goal Planner) Certification by AAFM (American Academy of Financial Management). After his MBA, he joined J P Morgan, the second largest Investment Bank in the world. He has worked with J P Morgan as Risk Analyst for more than two years. Prof. Bajaj also holds an Advisory certification awarded by AMFI (Association of Mutual Funds of India). During his stint at Bombay Stock Exchange, he has handled Investment Management and Treasury operations of the BSE Corpus. He has set up an entrepreneurship venture in the field of Wealth Planning and Investment Consulting under the name “Nidhi Investments” and holds the profile of CEO. Prof. Bajaj sits on the Expert Panel of CAClubindia.com and MBAClubindia.com as Investment Expert. He is actively involved in investor education through his blog www.professorbajaj.com which has a readership from 78 Countries all over the world. His articles are also regularly published in caclubindia.com , mbaclubindia.com , totalca.com , charteredclub.com, bankbazaar.com and lawyersclubindia.com . He has been awarded the title of “Best Article Writer” from caclubIndia.com in Jan 2012 and has been selected amongst “Top 5 Technical Writers” from all over India in Feb 2013. He has been invited by various TV Channels like SPIN TV, CNBC TV18, UTV Bloomberg Etc for programs like "Expert Advice" , "What Markets Want ", "Budget Analysis" etc. He has been invited by Several organisations like Lions Club, Rotary Club, Agrawal Welfare Foundation, Rajasthan Mandal, Agroha Vikas Trust, Union MF, UTI MF, Arthamitra Gurukulam, Vidyalankar Institute of Technology etc for expert lecture on "Smart Investing", "Life is A Celebration", "Financial Freedom", "The Digital IFA" etc. He was ranked 8th Merit at All India level NMAT which got him selected for MBA programme at NMIMS, Mumbai. He did his MBA with Capital Markets as his specialisation. Soft Skills has become an inevitable part of every selection process and teaching learning process these days. The students from small towns and tier II cities, in spite of being talented and well equipped with technical skills, are seen struggling in the selection process. This is because of their lack of exposure to these soft skills. Mr. Bajaj has a zeal for training candidates to develop these skills and has been imparting the same on since last two years. This zeal and passion inspired him to set up his own firm called “Knowledge Circle” which aims to train candidates for soft skills. Till date, he has trained more than 5000 participants from over 220 organizations across various fields of soft skills. He has been associated with MSBTE (Maharashtra State Board of Technical Education) to conduct Soft skills training workshop for the faculties of Polytechnic Colleges in Entire Maharashtra (Mumbai Region, Pune Region, Aurangabad Region and Nagpur Region) since last 8 years. He has also been associated with ICAI (Institute of Chartered Accountants of India) for training CA Students on various topics related to Communications skills, Group Discussions etc. He was invited by Fr. Agnel Polytechnic College, Vashi for a motivational workshop for faculties. He was also invited by Vivekanad Polytechnic College for "Communication Skills and Email Etiquette" training for non-teaching staff. Apart from these, he has conducted “Capacity Building Soft Skills workshop for Faculties” at ITI Gunj, ITI Pusad, ITI Digras and ITI Umarkhed. This was the first ever soft skills workshop for faculties in the history of ITI’s in Vidarbha. He was also invited by Shivaji Education Society to conduct similar Soft skills workshops for the faculties and office staff of Shivaji Junior College Pusad, Shivaji High School Pusad, Shivaji Vidyalaya Belora and Shivaji Vidyalaya Bhojla. He has conducted training workshop on “Effective Presentation Skills” for the relationship managers of HDFC Mutual Fund, Andheri Branch, Mumbai. He has also been invited at College of Management and Computer Science, Yavatmal, College of Dairy Technology, Warud, B N College of Engineering, Pusad, B D College of Engineering, Wardha, College of Engineering and Technology, Akola, Dr.N.P.Hirani Institute of Polytechnic, Pusad etc. for the Guest lecture on “Developing Interview Skills”.

45 thoughts on “7 Commandments of Successful Investing in the New Financial Year

  1. The article instills confidence and trust. Its simple to comprehend and enticing to follow. Thank you Saurabh.

  2. Great Saurabh bhai. thse are the very basic thing people should. thanks for you have shared the knowledge with us.

  3. Goog Work Saurabhji. Today people must surely think and invest. Not only invest, but make a right investment at right time !

  4. Extremely useful article. Very comprehensive and well-written. I would call this ‘Intellectual charity in financially backward (or rather progressive) India’. Weel done and keep it up.

  5. Hi Sourabh,

    This is your second article that i am reading on Financial Investments and shows the effort put in and the study done by you. Another classic posting from the Professor!!!! Look forward to many more… !!!

    1. Thank you so much Sir. Its all your love and support that inspires me to do so. Thanking you again with a promise to keep trying my best to continue writing in the interest of investors.

  6. Good article sirjee. I believe in using Credit card as convinience rather than a temp loan is a bette option. Ofcourse you will have to pay convience cost that built in as you explained. Anyway as rightly said you don’t need more than one card for convinience. Your encouragement for beyond 80C and investment throughout the year is remarkable. Its a common mistake that I saw many people does. (Slightly off-topic but same applies to filling IT returns why wait till July 31st).

    I think biggest confusion area is Right Asset Allocation. Everytime I hear this term the question comes to mind is how can I know that I have right allocation? Please consider writing a blog on same using some example etc. That will help us to understand it better.

    Overall hats off to you on such a mice article. Looking forwrd for more such educational articles which will guide investors. Often we get tricky advices from agents that is benefical but to them. Unbiased articles like these are rare. Keepup the good work.

    1. THank you so much for your support and encouragement sir. Its only the pat from you people that drives me to write such article.

      Thanks for the great suggestion of writing an article on right asset allocation. I will make it a point to write the same as soon as possible.

      Lastly, thanks again for your appreciation. The purpose of these articles is to educate the investors so that they don’t get cheated and the investment industry grows as a whole.

  7. Great Article….Bhai….This is what was needed to explain, in very a uncommon way…..your article has done just that…

  8. Great Article….Bhai….This is what was needed to explain, in very a uncommon way…..your article has done just that…

  9. Just add one more rule to it ….never take debt to fund day to day expenses or buying a depriciating asset(like buying cars out of your reach)…Take debt only when you are building assets( House, land etc) against it

    1. So Very true Sir !! Am Wondering How Did I miss out on such an important thing. Thank you so much.

      Looking forward to more such visits and valuable inputs from you in future.

  10. Good one dude! Reminds me of the heydays and you sitting cross legged on your bed next to the window with the ET in your hand.

    God bless you and may you become an icon of the investing world. 🙂

  11. Very nice article sir…. this is must read for any person who is looking for investment . People miss out on these basic aspects while investing … we spend so much time earning that we lose the trick of investment.

    I specially liked the Insurance one ; this is very timely courtesy the spat between the SEBI & IRDA on the ULIP scheme. I had never believed in a ULIP scheme & this article plus the earlier one clearly brings out the peril of ULIP

  12. saurabh sir ur 7commandment r just great i think one should definetly think about investment but people like me suffer due to lack of guidance ,sir its my request to u to plz guide me if possible

    1. Dear Swapnil Sir,

      thank you so much for your visit and comments. As regards guidance, I am always ready to provide any guidance to my friends. Please feel free to call / mail whenever you require any guidance from me.

      Thanks again.

  13. I think its important for us girls a lot, so that u guys can build ur assets on the money we save from shopping….

    1. Thanks for your comments dear. It is in fact, important for all of us (irrespective of being a guy or girl) to save and plan for a good future.

      Also, its not that the guys build “their” assets on the money. The assets will be useful for all the members in the family. 🙂

      Looking forward to more visits and feedback. Thanks again.

  14. Its really an informative article. I like it because its very helpful for me to understand the logic behind the investments. Thanks for sharing.

    1. Thanks for your valuable feedback Mr. Monu.

      I am glad to know that this article helped you to enhance your knowledge. Suggest you to keep visiting this space for more such articles.

      Looking forward to more visits and feedback from you. Thanks again.

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