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6 Financial Plans to Remember in 2019 Before Investing The tax-saving season is here, and most employees are checking out options to save tax for the financial year ending March 31

By Anil Rego

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Financial planning is not merely a tax-saving exercise. A good financial plan requires effort, time and execution. You may have adopted a just-in-time approach for 2018. A New Year is time for new beginnings. So, as you sit and consider your investment route in 2019, here is some help on how you should shape your thinking. We give you 6 financial plan suggestions about investments. Read on to know.

Use SIP to Beat Volatility

Systematic Investment Plans or SIPs have become a popular way to make small investments regularly. They are fit for investors who don't have a large corpus to invest. So, they use this route to make small investments as low as INR 500 a month. The small investments made every month help in lowering the average cost, as the markets move up and down. Since 2019 is supposed to be a year of volatility, markets may swing wildly. This is why it is crucial that you use the SIP route to beat volatility. If the markets become more volatile, you can be at peace because the SIP will ensure that your money will be working hard to lower your average investment costs.

Go for Short-Term Funds

There is uncertainty about where the interest rates will move. Some feel the RBI will cut rates. Others feel rate hikes may come sooner than later. In such a touch and go situation, you should carefully place your bets. Today, many investors are going for debt funds rather than bank deposits. This is because debt funds are more tax efficient and promise higher returns. So, if you too are going for debt funds, remember to look at short-term debt funds. Long-term debt funds are good when there is certainty on interest rate front. Since that situation has not played out so far, in 2019 go for funds that invest in debt securities with shorter maturities of up to 3 years.

Utilize the NPS Investment Tax Benefit

Many people do not know that the National Pension System (NPS) gives tax benefits of INR 50,000 over and above Section 80C. Also, until recently, only 40 per cent of NPS corpus at retirement age was tax-free while the remaining 20 per cent was taxed. In December, the government changed the rules and made the entire 60 per cent tax-free. This makes NPS a truly better investment product, which gives you a potential source of post-retirement income. One can allocate up to 75 per cent into equities under new NPS norms. Also, you can stay invested until the age of 70 and stagger withdrawals. Studies show that even a large number of smart investors are not fully aware of NPS benefits. Start NPS for yourself in 2019 and you will be amazed by the results later.

Invest in Multi-Year Health Insurance to Cut Premium

Many do not consider health insurance as an investment. They think it is only an expense. However, the true picture emerges only when you see a friend or somebody in the family getting admitted to a good hospital. When you see them fork out cash to pay bills out of their own pocket, take loans to repay bills and even mortgage their assets, like the house, to garner money, it becomes clear why health insurance is a great investment. Paying health insurance premium is one way to do it. The smarter way is to go for multi-year premiums. These multi-year premiums offer discounts since you are paying the premium at one go for more than one year. You can get up to 10% discount on the premium outgo. If you opt for paying for 3 years, you can even get higher discounts at some insurance companies. Given that health insurance is a smart investment, it will be smarter if you save premium by using the multi-year route.

Go For Gold Bonds

Indian families share a deep relationship with gold. When it is about marriages, it is gold. When it is about rituals, it is gold. When the family is in trouble, it is again gold that comes to rescue. But, gold on its own is not a good investment. This is because gold bars or coins do not give you any return except when gold prices rise. This is where gold bonds given by the Indian government are such a good investment. Why? The bonds will give you an additional fixed interest of 2.50% above the value of gold per annum on the nominal value. Interest will be paid half yearly. The bonds come with a maturity of eight years. You can even go for pre-mature redemption from the fifth year of the date of issue. In the worst case, the gold bonds can even be used as collateral for loans. So, gold bonds are giving you the same advantages of physical gold, plus the fixed interest rate. The interest rate is paid irrespective of gold price moving up or going down. 2019 will see many tranches of gold bonds being sold. Don't forget to opt for gold bonds.

Always Keep 10 Per Cent Cash For Strategic Moves

Your investment plans for 2019 are almost ready. But there is one small thing to remember. You can do a variety of investments, but never make the mistake of committing your entire money. Keep 5-10per cent cash idle. While this idle cash will not earn you great returns, this liquid money can come very handy during market corrections or some opportunity that appears. Every year there are some moments where investors with cash are able to make good returns. This is why cash is called gunpowder. This is an important component of any financial portfolio in any year. Keep this cash away from your main investments and wait for the moment patiently. Such strategic deployment of cash will not only enhance returns but also give you confidence.

Anil Rego

CEO and Founder, Right Horizons

Anil Rego is the CEO and founder of Right Horizons, an end-to-end Investment advisory and wealth management firm. An MBA and CFA degree holder, Anil believes in the Contrarian approach of wealth management. His areas of expertise includes Corpus fund management, tax planning and end to end financial planning for both residents and NRI investors .

Anil has worked for Wipro as Business Planning and Merger and Acquisition Manager before starting Right Horizons in October 2003. RightHorizons has branches across Bangalore, Mumbai, Chennai and Hyderabad.

Anil has been a columnist in leading Indian newspapers. He also routinely answers queries in mainline publications and websites. He is also a Guest Lecturer with various business schools like ICFAI, ITM and Union Bank School of management. Anil has also served as member, Board of Governors, at IBSAF.

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