The financial year is about to end: Have you made the right investments

There are just a few days left for the current financial year (2020) to come to an end. While the last quarter of a Financial Year (FY) sees taxpayers scrambling for making tax-saving investments to lower their tax-liability, what’s essential is to make the right choices.

This article will help you analyse whether you have made the right investments or not.

Are your investments in tune with your financial goals?

• A goal-based investment approach results in the availability of funds at the right time. However, more often than not, investments made, particularly during this time of the year, is done with the objective to lower tax-liability.
• While tax planning is an essential aspect of personal finance, it’s equally important to ensure that your investments are in tune with the goals you have set for yourself. For instance, if you have planned to build a certain corpus for your child’s education within a specific time frame, make sure you choose investment avenues that help you do so.

Do your investments match your risk appetite?

• If you are an aggressive investor, you can bet on market-linked products such as an equity mutual fund. On the other hand, even if the slightest fluctuation makes you jittery, you can park your money in debt mutual funds and fixed-return products.

Is your investment liquid enough?

• Liquidity refers to the ease with which you can convert an asset into cash. When it comes to investments for goals such as building an emergency corpus, it’s important to ensure it can be easily accessed and liquidated.
• There are many investments that lock your money for a long period. While it makes sense to remain invested for a considerable period of time for long-term goals to give enough time for your money to grow, for extremely short-term goals and contingencies, your investments need to be liquid enough.

Do your investments give you the desired flexibility?

• Investments that bind you to a recurring commitment for long years can become tricky in case there’s a sudden brake on active income. Hence, it’s essential to make sure that your investments give the flexibility needed.
• For example, mutual fund investment through a Systematic Investment Plan (SIP) allows you to start with as little as Rs 500 per month. Also, you can top-up this amount with an increase in income. At the same time, you can exit your investment, if needed by paying a nominal exit load. The exit load is applicable only if you quit within a year of investment.

Conclusion

• Answering the above questions will help you judge if you have made the right investments or not. If yes, keep a track on them and make changes if required. On the other hand, if you haven’t, take corrective measures immediately.

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