Happy New Year!

Today marks the beginning of the Financial Year 2021-22.

Apr 01, 2021 09:04 IST India Infoline News Service

No, this is not an old post of January the 1st, flashing by mistake on your screen today. We indeed mean to wish, a happy new year.
No, this is not an April Fool's prank. But you got close, if you realized that today is April, the 1st!

Today marks the beginning of the Financial Year 2021-22. In my experience (and I'm sure that a lot many would reciprocate with me) new year resolutions for the financial year may be more meaningful than the ones on 1st Jan (by the way, how many of those 1st Jan resolutions are you still continuing on?). Let me explain.

You would have seen 31st March as a deadline for a lot of things - and it is usually a rush to complete things only to adhere by the deadline. Consider the example of tax savings. A lot of us waited till the last moment, and ended up investing in a high market (BSE Sensex ended on 50151.91 on March 30th, 2021. A food for thought - even the pre-COVID 19 peak for the BSE Sensex was 41945.37 on 17 Jan 2020. Since then, large fall followed by a recovery. Imagine, doing an investment in ELSS mutual fund for tax saving through an SIP route for the last year, instead of rushing at the last minute.

Suppose you wanted to invest Rs. 1,50,000 in ELSS funds to take benefit of section 80(c) of income tax, 1961.

If you invested at the last minute - you invested at peak valuations as mentioned. While from the previous trends, it will still turn out to be an investment with significant gains, it would have been even better had you invested through SIP throughout the year. Check out the 1 year SIP returns of Canara Robeco Equity Tax Saver (Growth) as an example -

Amount invested: Rs. 1,50,000
Present Value: Rs. 2,01,249

Absolute returns: 34%

Did you miss out on these returns just because you waited till the last moment? Seems so.

Even if we consider that the last year saw significant lows due to COVID 19, consider below trends for Sensex to further extend the point.

Over the horizon of 5 years, the graph generally goes upwards. Regular investments through these years through an SIP route, would have delivered good returns.

Yes, what if you were to time the market lows and strategically plan your lumpsum investments? Sure, if you could achieve that, that's a good strategy to play with. But this needs a mindset experienced in and honed with market tracking skills and lot of time is required to study and gauge the market trends. Do lot of us have that much time?

Hence, as a New Year Resolution, start your investments now. Not just for tax saving, but for any financial goals that you have. Let the SIPs work for you while you continue to work for your family and yourself in your respective fields. Unlike many of Jan 1st resolutions, this is the one that you could actually stay with without much of an effort - fire (start SIP) & forget! OK, don't forget completely. Do a periodic review (e.g. every 6 months) of your overall investments - get help of an advisor if need be.

Check out our MF platform here or download IIFL Securities MF App here.

Any other New (Financial) Year Resolutions that you can think of?

- Reviewing potential salary changes due to the regulatory changes
- Planning for potential capital gains / losses on your existing assets
- Setting a target of amount that you would save against your spends

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