By Uma Shashikant

March is the month for money. We scramble to complete transactions for the year, and prepare to file tax returns. We regret a few decisions, feel euphoric about some, and hope to do better the next year. Here are some reminders I set for myself at this time of the year.

First, do not let money idle while waiting for the right time and ideal investment opportunity. We associate investing with careful choice. That objective can be achieved by simply making a few choices for the entire year, and keeping implementation simple. We don’t have to go through it all, every time. Have a default investment plan. It can be an index you like, a set of funds you have tracked, or your favorite set of stocks. Swipe money out of the bank account and put them into these choices, through the year. Put your money to work.

Second, do not associate investing with activity. We feel there has to be constant monitoring, buying and selling, or moving money before a bad time hits, to be successful investors. The buzz has its lure. Do not plan too many things to do and execute. Make your investment strategy a simple and easy to implement one that can work on auto pilot through the year. Choose less action over more.

Third, make annual portfolio review a ritual. Devote time to finding out what is working and what is not. Do not assume that letting it lie unattended is a strategy; it is laziness. Make it a habit to put down the current value of all your assets, at least once a year in a notebook or on an Excel sheet. See what you have, how their value has changed, and how the proportions are distributed. Just seeing that summary will give you a sense of whether your money is aligned to your long-term goals and if everything is working fine. Get familiar with the details, so you are in charge.

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Fourth, own up to mistakes and make corrections. When we see something performing spectacularly we are overcome by the anxiety to book profit and lock it. If we see something that is not working, we usually let it lie as it is. Losing investments typically become longterm investments. Think what this does to our money. We cut profits and we let losses remain and that is not a great strategy. Every investment might not work well, and that is what diversification in a portfolio means. Our focus should be on the portfolio as a whole. The duds drag it down. Take time to evaluate what is not working and why, and cut losses. That is more important than booking profits; it can run its course.

Fifth, think through the annual liquidity plan. Is there a large expense coming up? Like a home renovation or sending a child to college? If you have a monthly investible surplus, you are comfortably covering the basic and routine expenses. Most of us fit our lifestyle to our regular income and manage to routinely have some surplus. If we make it a habit to invest that surplus, we have to keep a plan on hand for large expenses. It is risky to assume that we can sell off equity investments to meet a large expense, as the value we get depends on the markets. Move money into low-risk investments like bank deposits and short-term debtand liquid funds to meet such needs. Plan ahead for large requirements of money.

Sixth, review credit card spends. Many of us routinely pay off the credit card dues as the bills occur and do not think much about it. What we spend over and above the mandatory living expenses are reflected in our credit card statements. They tell us how we indulge in the joys of being able to earn and spend. What begins as a pleasurable spend soon turns into a habit. The weekend dinner, the short monthly getaways, the relaxing spa visits, the retail therapy to feel good, will all move from being discretions to mandatory spends. Taking a look at the numbers will bring deliberation into these decisions. You will see what is affordable and fine, and what is excessive and needs control. Choose deliberation over denial when it comes to your spending habits.

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Seventh, think about financial decisions you tend to regret. Those loans you made to friends and never got back; those day trading calls that ended in losses; that indiscretion with derivatives when you did not understand much; that investment product you were persuaded to buy; the impulsive decision to upgrade your car; and so on. We do not decide rationally or robotically. We tend to make decisions with our human flaws and sometimes there is a pattern. We can recognise it if we are able to give some thought to what we repeatedly do in haste and regret. Take the time at least once annually to consider your money attitudes and flaws. Then you will know how to fix them.

Eighth, tighten the nuts and bolts to keep your investment machine running well. Complete the nomination forms; correct the email address on your folios; close bank accounts you don’t use; clean up the mailbox and set up folders to save important information; and close those inactive trading and demat accounts. There are little tasks we postpone endlessly, then crisis hits and we realise that we failed to fix a small detail. Paperwork is boring and many of us have no inclination to work on the mundane tasks. Devoting an hour once a year might be a good idea.

Ninth, file those income tax returns. Take professional help if needed. But complete that task, providing all the information that is needed and ensuring that your financial life is compliant with the laws of the land. You enjoy an encumbered use of the income you earn and assets you have accumulated, after a simple act of declaring what your sources of income are, and paying the taxes that are due.

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We celebrate so many annual events like birthdays and anniversaries. Celebrate your wealth and do the rituals that keep it going, at least once a year.

(The author is Chairperson, Centre for Investment Education and Learning)



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