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Aditya Birla Sun Life AMC Limited

Aditya Birla Sun Life AMC Limited

    • ADITYA BIRLA CAPITAL MUTUAL FUNDS

    Ready to make new year resolutions to set your finances in order?

    For anybody who enjoyed the ride of easy liquidity led rally in 2020 and 2021, this year was somewhat bumpy. High inflation, interest rate hikes, market volatility, kept market participants on tenterhooks. Those on the fence also considered delaying their investment plans. While a new year brings with it the potential of new opportunities and trends, take the last few weeks of 2022 to take stock of your finances and investments before the year ends. Here are a few investment mantras to get you ready to make that new year resolution:

    1. Big fish first


    Identify which are the big ticket spends planned – part payment of a loan, buying an asset, a marriage in the family, etc. Are your current SIPs sufficient or you need PRO planning to have a goal-based approach? Do you need to step-up your SIPs (increasing the SIP amount)? Ensure you have listed down the key priorities in the coming years, be aware of those, and start planning your investments in advance. It always helps to tick off the big items first so that they don’t magnify in future. Prioritisation of expenses is an essential step in your financial planning. To quote the Art of War "Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win". In this sentence Sun Tzu points out the importance of planning and preparation. In one’s financial journey, this kind of meticulous planning based on one’s resources, expenditure, goals, is absolutely critical.

    2. Make friends with asset allocation


    In 2023 make sure a multi-asset approach is what you take. When you invest across multiple asset classes that do not tend to react to the same factors in a similar way, and are not correlated, you make the most of diversification. In the new year, ensure your investments are well diversified – both from an asset class point of view, as well market capitalisation. Don’t put all your eggs in one basket is a famous adage we have all heard before. Diversification is akin to this. The experience of putting all your eggs in one basket is usually never fruitful, because if the basket drops all the eggs are spoilt. Hence, diversify. Asset classes have their cycles, hence diversifying and allocating investment money across different assets helps to cushion against the bottom cycle of any one asset class.

    3. Build an emergency fund


    If the pandemic has taught us anything, then it is about the fact that life is full of uncertainties. We all are afraid of uncertainties but never plan for them. An emergency fund is what one must consider to manage any unforeseen expenses that can appear. If you don’t have one, start one immediately. After parking earnings for your monthly investments, keep a portion to keep it in short term fixed income schemes such as an ultra-short-term fund or a liquid fund. A Liquid Mutual Fund is a debt fund which invests in fixed-income instruments like commercial paper, government securities, treasury bills, etc. with a maturity of up to 91 days. They have a graded exit load upto six days and no exit load from 7th day. Many AMCs, including ours, allow for insta redemption facility. Liquid funds ensure your savings are not sitting idle in your account. Especially in the current environment of high interest rate, make use of the opportunity.

    4. The power of patience and consistency


    Wealth creation is a journey that demands investment discipline, patience and consistency. A famous English actor once said, ““Life is like the rungs on a ladder. The reason they are placed so close together is that we can learn to take baby steps and reach our destinations safely.” Your SIPs (Systematic Investment Plans) are like those baby steps to help you reach your financial destination. Hence in the coming new year, make a resolution to stick to your goals, invest with patience, and keep a disciplined approach in charting your financial roadmap.
    Regards,
    A. Balasubramanian
    Managing Director & CEO
    Aditya Birla Sun Life AMC Limited
    Past performance may or may not be sustained in future.
    Mutual Fund investments are subject to market risks, read all scheme related documents carefully.