New Year Resolution: It is About Inclusion & Avoiding Mistakes

It is once again that time of the year when you make millions of resolutions. You try to follow some and break most. You know and so do I, resolutions are taken enthusiastically and hardly with the intention of following through. How about you take some serious resolutions this year? The ones you definitely have to follow are the ones taken in terms of your personal finances. The first and foremost resolution an investor must take is to make the coming year much better than the last year, financially. Every time you make a mistake it is a learning lesson. Taking those lessons in the right spirit; bounce back in the New Year to make better decisions. Make the coming year devoid of mistakes. You do not know what the common mistakes are? We will tell you the ones that are common and widely occurring!

Failing to Embrace Technology

Nowadays everything is made possible thanks to technology. Lives have gotten lot easier and lines in the banks have gotten shorter because of the advanced technology that has been introduced in the banking and investment sector. However, existence of technology and using it is not always the same. Investors are often sceptical about technology and have a mind block of it being too complicated.

Automate your investments, doing this removes your regular involvement in a mechanical process. You do not have to worry about submitting an SIP cheque every month. It gets debited from your account on a stipulated date after you have made first month investment. Watch and track your portfolio online, rather than waiting for your distributor or financial advisor for updates. Use robo - advisory, which is advise given based on your goals and financial standing without any human intervention. Use online platforms to compare, explore and research about various Mutual Funds ( You may try this https://www.advisorkhoj.com/mutual-funds-research ), Insurance and their respective performances and ultimately take help of a financial advisor for help and execution.

Technology makes you more independent financially as information is a click away. Now NAV is released daily because of the technological advancement rather waiting for months. While you will always need financial advisors to hand hold you, technology helps you explore the other side of the coin. You may ask your financial advisor to help you set up all your existing investments onto an online tracker and also add your future investments onto it. The idea is to get one consolidated picture across all your investments, asset class which have been done over a period of time through various distributors and banks or brokers.

Investing Without Reviewing

In a football match, have you ever observed the goalkeeper? He stands in exactly one place without doing much. However, he still manages to deflect most goals. It might look like he is not doing much, he is doing the most. Sometimes not doing anything is the only way than doing something. This applies for your investments too.

You might be considering some fresh investments as the New Year begins. Do not make this investment because you want to and not assessing how this is aligned to your financial goals. The only way you can find this out is by reviewing your existing portfolio. For example, your review might tell you that you need to invest र 50,000 in an ELSS scheme to further save taxes. Or maybe, this year you can start investing in National Pension Scheme (NPS) to avail the additional tax saving upto your investment of र 50,000. However, without reviewing your investments, you had invested the same amount in a Large Cap or diversified Fund. What you might gain from these investments may be partly compromised because of the taxes you failed to save by not investing in the ELSS scheme or the NPS.

Reviewing also tells you the areas in your investment which require your attention about the average performers. Watching their performances, helps you decide if you should add further investments to it or redeem altogether and make fresh investments. Hence, before making any hasty and enthusiastic decision, see and review your portfolio. If you think that this year you may not have to make any investment, then do not be hesitant to opt for that option either.

Unconsolidated & Sporadic Investments

A lot of investors have multiple bank accounts and various transactions through each of these bank accounts. There will come a time you will start losing track of the host of activities that is carried out through each of these bank accounts. You may have made investments through multiple investment platforms, some through your financial advisor, some from your local bank and some through the distribution houses online and offline. This is a classic example of financial planning gone haywire. It becomes very difficult for one financial planner to consolidate all of these because these are too branched out. The existence of so many bank accounts makes it even harder to track the various income and expenses from each account.

If you have already done this, find yourself a financial planner who will help you consolidate this and it is better to stop making sporadic investments. Try having a singular bank account through which you carry out all your financial transactions. Sporadic investments help you achieve no goal except pile on investments which you possibly don’t need. You are unable to track your investments because they are scattered on various platforms and cannot see how they are performing. You may find out that you have been invested in four Midcap Mutual Funds while you have no investments in ELSS Funds or you have only invested in Debt funds and your Equity Mutual Fund investments are negligible. This will lead to a misbalanced portfolio contributing nothing to your financial growth. It is not always necessary to invest huge sums of money. Even if small sums are invested the right way, they can take you far.

Make Inclusion you Mantra

Inclusion is the new “cool” of the financial industry. Everybody seems to be talking about it or planning for it. Financial inclusion at a grassroots level implies bringing all informal financial transactions into the formal economy by mobilizing the banking sector. This means wider penetration of the banking systems and easy accessibility to government or private loans, funding and aids for the marginalized. While this is a widely used, understood and accepted statement of financial inclusion, the understanding does not end here. What does it mean for you? “You” being the investor, already included and has laid the foundation of their finances. What more could you do to be financially included?

Make it a Family Thing

You can start by asking these questions: “Am I the only one doing the Finances?”, “Am I the only one with full knowledge about the financial transactions”? If it is a unanimous yes to all the questions, you are not practicing inclusion. Inclusion here does not imply the traditional understanding. Rather a connotation of the act of including. As an investor, you have included yourself in the process of investing while your immediate family might be excluded. We do not mean to be accusatory in any manner by implying this was a deliberate move on your part. This has simply been the part of your lives; you did what you were expected to do.

Usually the one who brings in the finances manages it as well. While this is mostly well intentioned, you may be excluding individuals for whose benefit you have been carrying it out. If you are married and have a spouse then share the information of financial transactions with him/her. Ones you both agree on the financial goals to be achieved or the expenses to be met, it makes the task much easier. Your spouse may also be willing to contribute to the finances, but you keep them out of the process then you will never know that. If you have kids who are old enough to understand finances, in late teens, start telling them about the various planning that you have been doing. They will be aware of the various measures you have taken to secure their lives. From an early age you will also be teaching them about financial planning. You might also encourage them to start SIPs of small amounts and get into the habit of saving. This way they are also included in the process of financial planning actively.

Full disclosure of financial transactions allows full knowledge and in case of demise or ill health of key breadwinner. The family members are not left in dark, running post to pillar figuring out their financial transactions. If they are aware of the finances and the investments, they can plan the next move. If secrecy regarding financial matters, puts your family in a sticky situation, then no matter how well intentioned it might be it could still harm them. Hence, make this year, your year of financial inclusion and full disclosure. Instead of you being the soul bearer of goals to be met and investments to be made, you have an enthusiastic team who support and contribute and this makes the journey much easier.

Conclusion

In this write up on resolutions, we have focused on you and the impact you can have on your investments, rather than focus on investments and keep increasing it. It is all in the mind, as they say. Technology is a mind block that a lot of investors have. Reviewing is about focusing on your immediate and future needs rather than making surplus investments just because you can. Sporadic investors usually signal towards confused investor who lacks direction and needs to be handheld and not fall for fraudulent schemes. Investors tend to be very territorial about the investments they make. This often leads to exclusion of those to whom it could impact the most. Hence, inclusion should form an integral part of your New Year financial planning. It starts with you, your mind and that is what makes your investments tick! Happy New Year 2016 and dedicate this year to including a little and making better choices.