Tips for investment planning for 2024
In case you don't remember, in early 2023, many Indian financial experts had made these predictions:
- High inflation is expected to continue and interest rates are expected to rise rapidly and remain high for longer.
- The Russian-Ukrainian conflict remains a shadow over the world and it is unclear how it will develop.
- The United States and other developed markets are facing a recession that will impact global growth.
- China, on the other hand, is expected to recover thanks to the reopening after the Corona crisis and fiscal stimulus measures.
- India could prove resilient and remain nearly afloat despite global headwinds.
As 2023 draws to a close, none of these expectations appear to have been fulfilled. In fact, in almost all cases the opposite happened.
The markets are crying. And the Indian investor probably feels invincible today.
The story continues below.
When considering how 2023 is shaping up , it's worth remembering a quote from legendary investor Morgan Housel: "Read last year's market forecasts and you'll never take this year's forecasts seriously again." »
But heading into 2024, standard forecasts seem to suggest the same thing will happen. "India is in an ideal situation," goes the typical story. The general atmosphere certainly seems the same.
What should investors do now?
Echoing the popular meme "There are two types of people in this world," there are primarily two types of investors in the markets today.
1. The Rockstar Investor: I think I can easily make 20% per year, I'm an expert
2. The Spectator Investor: I missed the bus this time too, let me wait for the next one.
Depending on which of these two you currently identify with, here are five timeless investment planning tips that might be just the ticket.
Also read | Interest rates will fall in 2024. Here's how to position debt mutual funds
For the rock star investor
Recognize the role of luck: Yes, your portfolio performed well last year. Although your skills helped you to some extent, luck played an important role. Recognize this. This would be a good time to review your investment assumptions and determine whether they are strong enough to withstand headwinds.
Check and Clean: As Warren Buffett says, a rising tide lifts all boats. Now is a good time to review and clean up your portfolio. No more bad investments. Remember: the best time to get out of a "major sucker race" is when you are in the lead.
Resist the wealth effect: Portfolios have grown to unexpected proportions over the past year. The immediate impulse is to run out and buy the next gadget you don't need or take a sudden vacation you didn't plan.
Align your wealth with your goals: Align your sudden "extra" wealth with the right long-term goals so you can resist the urge to rush into action in search of the next big idea or "tip." ".
Accelerate your financial independence timeline: Review your goals with your additional assets so you can move closer to financial freedom.
Also read | Budget 2024 and mutual funds: Industry hopes for debt tax cut and parity with ULIPs
For the audience investor
Momentum vs. Entry Timing: You may be reluctant to take risks, but the biggest risk is not doing it properly and appropriately. It is said that time in the market is more valuable than market timing. This quote from Howard Marks subtly expresses the same thing: "If you wait long enough at a bus stop, you are guaranteed to catch the bus, but if you rush from one bus stop to the next, that may not be possible.".. "Never take a bus."
Understand risk correctly: Risk can mean volatility to you, but the real risk is a permanent loss of capital. If your investments don't beat inflation after taxes, your capital will be eroded. Surely that doesn't suit your lifestyle, which is definitely growing faster than inflation.
The safest long-term asset class: Thanks to a well-diversified portfolio, stocks are the only asset class that can build wealth permanently and safely with the right time horizon. However, there is no easy path to wealth, and the cost of longer-term 4-5% annual returns on low-risk debt is very volatile. Prepare and you will be rewarded.
Asset Allocation: When you dip your toes in the water, you never get an idea of what swimming will be like. The largest source of wealth creation is asset allocation , not fund or security selection. A good rule is 110% age. This should be at least equal to your equity allocation in your overall investment portfolio.
Consistency is your superpower: Over time, markets will continue to rise. That may not be easy to believe, but even from there there is still potential as long as the horizon is good. So come along if you have the money. If you want monthly savings, a SIP is the best route and if you want lump sums in between, use the STP route. But go up. There is a bus that passes your stop every day.
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