Did the tax season give you nightmares, trying to organize your investments and put together the paperwork? It is probably time you clean your portfolio. Here are some tips to make it smart, simple and more manageable:
1. Take Inventory and Weed Out Junk:
The mess that your finances look is probably because although you have invested, you never planned. The result: you have a cluttered portfolio with too many financial products which you do not know what to do with or how to manage. In fact, it is quite possible that you might have lost track and even don’t know some of them exist. So, start by listing of all your investments—each stock, bond, fund or insurance you own and the amount you have invested in it. There are bound to be some lemons you .. need to get rid of.
However, be very careful with the weeding process. Dumping some of your assets early could also trigger a tax bite. Selling assets such as equities generate capital losses or gains. Also, surrendering an insurance policy prematurely may not be a good idea. So, before you terminate an investment, do not forget to check the tax rules and your gain and loss account.
While you’re decluttering, don’t just stop at investments. The cleansing won’t be complete unless you close the dormant saving and trading accounts and surrender the extra credit cards that not only encumber your wallet, but spoil your credit score. Do not forget the cupboard full of age-old utility bills, policy documents, bank statements, salary-slips, papers that have matured and been redeemed. Also, go digital and dematerialize where ever possible. This will not only help organize the docume .. better, but save you time as your prepare your next tax return.
2. Outline and Abridge Your Investment Mix:
Are you a risk-averse while the portfolio seems to be skewed in favour of equities? Or do you have too much parked in want debt while you are young and can afford to take some risk? Adjusting the asset mix according to your financial goals is basic planning. Also, diversification is good, but only in proportion. That is, it should not lead to duplication. Ideally, you want just a few investments that provide wide diversification without a lot of fuss. So try to consolidate and shift assets into a handful of investments that reflect your goals.
3. Build a Contingency Fund:
A financial emergency today should not derail tomorrow’s plan. While an insurance policy will cover bigger incidents like death and disability, you would need an ’emergency fund’ to hedge your savings and investments from comparatively smaller road bumps such as a job loss or unexpected health expenditures.
3. Try to Consolidate:
Why would you want to have separate health plans for each family member when you can have a single family-floater plan for all? Does it make sense to have your mutual fund and stock investments scattered when you can have a consolidated account with one
brokerage? Why approach different organizations when your private banking window sells almost all financial products? Doesn’t it make more sense to have your services such as telephone, internet and direct-to-home services from one entity and write one cheque at the end of the month? The answer to all the above is obvious. Consolidation saves both time as well as a lot of repetitive paperwork.
4. Automate and Go Online:
Monthly instalments, different utility and credit card bills, insurance premiums, systematic investments you make in mutual fund and brokerage accounts, the list is endless and all may have different payment cycles. Why bother yourself with writing cheques every month when you can simply instruct your bank to make these payments for you? If you fear overbilling, just set a limit and opt for an overdraft protection facility. Moreover, you can simply monitor your finances real time by subscribing to mobile alerts and net banking facilities. This is not only convenient, but also helps you take quick action if you have been defrauded.
Caveat: cyber crimes are on the rise. So it’s important you take sufficient precautions while transacting online. Install a good anti-virus and anti-spyware programme and update frequently. Also, avoid using public computers for net banking and keep a watch on phishing mails. Transact through websites with ‘https’ instead of ‘http’ in the address bar to ensure authenticity of the web site and associated web server. Buying an insurance cover to protect your credit card transaction and online identity theft may not be a bad idea as well.
5. Filter Noise From Advice:
There is information overload for sure. And it is a proven fact that you often make wrong choices when you have too much information to process. The solution is obviously a filter. A good way to analyse any financial advice is keeping in mind that the information/advice you receive is as good as the source. We would always advise you to consult a qualified financial planner who can give you a more holistic advice. You can even choose a reputed publication or website and ignore the rest.
6. Understand Before You Buy:
Do you pick up an item from the restaurant menu before knowing what the ingredients are and how much it will cost? Then why buy a financial product, which has a more long-lasting effect on your pocket, unless you understand its characteristics, terms and conditions? Remember, a product is often ‘mis-sold’ because it is probably ‘mis-bought’ as well. It might take some time, but it is important that you understand the features and how the financial plan will work for you.
7. Have a Financial Emergency Kit:
God forbid, if something happens to you, will your family know exactly where all you have invested and the assets you hold? Even if they have an idea, it is very difficult to memorise every detail and they might not get all the benefits you had expected them to receive. On the other hand, if you have a list—a hardcopy or an excel sheet—with details of everything in your portfolio—savings and deposits, stocks or insurance policies and along with related documents at one place, they’ll have a much easier time in case of an emergency. You may also make a will and keep it along with these documents.Investment in JM Group- JM Aroma