10 points: Where to invest in 2014: an outlook of a financial planner
01/01/2014 by Taresh Bhatia
If we look behind on 2013, and wish to plan in the year 2014, overall market saw volatile market, both in equity, debt and in global markets also. 2013 was very sentimental driven rather than fundamental with FII driving the markets. One should invest in direct equity only if you have thorough knowledge and in 2014, elections are going to be major dependent factor.
In Equity mutual fund, timing of the market is not important and systematic investment should get you good returns. As the expense ratio has come down in 2013, large and mid cap funds investing for the specific investor would get the desired results.
Insurance market saw major changes which finally became effective from 1st January, 2014 with 400 insurance policies being withdrawn and would be in the interest of the consumer. An interesting trend came about was that anyone who was buying insurance has changed from investment, tax breaks and insurance to buying insurance for the purpose of insurance 'per se'. Changes would be seen in surrender value, minimum insurance cover being about 10 times for person upto age 45 years old. Return illustration changed from 8 and 10 % being changed to 4 and 8 % being the new benefit illustration. My advise would be to treat insurance as pure insurance vehicle and not try and combine it with investment.
Interest rates changes, pressures on interest rate movement were effective as volatility due external factors in May to July 2013 with money going out due to FII and also the dollar fluctuation, but was protected by RBI. So debt funds investments in 2014 should be matched with inflation and hence short term and ultra short term funds may be looked into as ideal investments in 2014.
Tax free bonds in the long term looks attractive but if looked from financial planning angle and if one falls in the highest tax bracket and also for risk appetite, compared to FD investments, may consider these new tax free bonds like HUDCO (till 10th Jan on allotment basis)( 10 years: 8.39%, 8.76%, 8.74 % respectively for 10, 15, 20 years and also IIFCL ( 8.26%, 8.63%, 8.75% resp for 10, 15, 20 years being yearly returns). Depending on current scenario and overall goals, then focus on these tax free bonds.
Retirementplanning with NPS, insurance pension products, NSC, PPF all have overall investment tax benefit benefit till Rs. 1 lakh under 80 C. these should be considered as long term investments and considered as part of your overall financial plan.
ELSS: Being a favourite for tax saving mutual fund with 3 years lock in, but to watch out for it loosing its gleam, as an investor normally looking it as to its tax saving habit rather than return or goal oriented investment.
Inflation indexed bonds: generally linked to CPI inflation based returns, and being 1.5 % more than the then inflation rate, may get you 9-12 % return with minimum being Rs. 5000 and maximum being Rs. 5 lakh. Major issue to be considered being taxable return and if someone is already in the 30 % tax bracket, then he/ she might not really benefit
Gold investments saw 2013 being one of the negative returns year and hence in the next few years may not give great returns. Rupee depreciation being one of the main reasons for gold devaluation and henceshould not be considered this year.
Goal oriented financial planning should be the ideal strategy and I would recommend to first choose a professionally qualified, rather a CERTIFIED FINANCIAL PLANNERCM and plan all your financial goals with him. Trust him to develop your financial plan with your current investments mapped in and the gap being also linked to your risk profile leading to an ideal asset allocation. Then continuously monitor your investments periodically and ensure changes are made in line with micro economic indicators. Re balancing your portfolio should be ensured so that returns against the respective benchmark funds are checked and you are in tune with expected returns.
All the best for your 2014 investment and take care of your money!
Taresh Bhatia is a fee based CERTIFIED FINANCIAL PLANNERCMworking in Gurgaon. He advises clients on their investment and guides them inline with their financial goals. Taresh is an avid writer, blogger, and personal finance expert. Having worked for over 250 families in financial planning, he works with his team based in Gurgaon, Delhi NCR, India. He can be contacted on his mobile : +91 9810144683, or by email: email@example.com or visit www.advantagefp.in