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What are your financial goals for 2020?

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While bank FDs and recurring deposits are popular among investing goals in 2020, gold and realty are also on the radar

With New Year upon us, many would like to hit the reset button and start on a clean slate - be it joining a gym, starting a diet programme or taking a vacation. Better financial decisions will definitely be one among them.

It could be as small as maintaining an expense account or starting a SIP with a mutual fund to buying a property. I reached out to a few people to find out what they have promised themselves on the financial front. Here is what they said:

Bank deposits popular

Unsurprisingly, most of the financial resolutions for 2020 are to increase savings. While there are various investment options available, including mutual funds, equity/debt investments and gold, most people that I spoke to prefer to park their money in banks as fixed deposits (FDs) and recurring deposits (RDs).

Twenty-five-year-old Shiva, who started his working career two years ago, says “I get to save nearly 40% of my income every month in RDs. This year, I want to make a FD for two to three years”

Similarly Srilakshmi Indrasenan, a 28-year-old entrepreneur, says “I ensure that I save ₹5,000 to ₹10,000 every month in RDs. For 2020, I want to make FDs whenever I get bulk payments” Further, Srilakshmi also wants to learn about investing in stock market and mutual funds this year.

But 26-year-old student Prashanth, prefers post office fixed deposits for savings. “Bank returns are very low, so I prefer post office deposits. Nearly 50% of the money I get every month goes to post office deposit schemes. I intend to continue the same this year too.”

Swathi C.S., who has taken a break from work, says “Over 80% of the amount meant for savings goes to RD but this year I would like to make a FD too” Though she has SIP in mutual funds running, she would rather make FDs as the risks are lower. Anjana, another home maker, too, feels the same way. “It is easy to liquidate FD than a mutual fund I feel and for this year, I would definitely make a minimum of two FDs of over ₹50,000 each”

However, senior citizens like Sundar Ram M. says “For me, nearly 90% of my monthly income goes to FDs and other debt instruments. I will continue to do the same this year instead of exploring new investment avenues.” Sundaraman does have minor exposure, less than 2%, in equity shares to ‘try his luck.’

Remember, while bank deposits are safer than stock markets or mutual fund investments which are subject to the risk of capital erosion, it is also not the best way to save, especially for the young.

Also, bank FD/RD rates today are nothing to write home about. To maximise returns, investors need to lock-in when the rates are high.

On the other hand, investing regularly through SIPs in mutual funds over a long -term of 10 years or more, can minimise the risk as well as fetch good returns. Also, on the debt side, investors can consider other instruments such as PPF, NSC, etc apart from RDs and FDs. Thus, a mix of equity and debt instruments , according to each one’s risk appetite, is ideal. For senior citizens though, FDs are a good way to earn regular income as also to preserve capital.

Gold and real estate

Many want to bet on the yellow metal in the New Year given the price appreciation last year. Also, Indians have always had an affinity for gold, particularly in the form of jewellery. So, people like Swathi consider it to be a good investment. She says “I pay around ₹3,500 per month to a jeweller so that I can buy an ornament at the end of the period for my wedding anniversary” This is something she wants to continue every year.

While jewellers’ schemes — where you pay for 11 months and the jeweller pays for one month — appear attractive, it is not a secure investment as there have been examples of fly-by-night operators disappearing with investors’ money. The recent incident of Goodwin Jewellers defaulting hundreds of individuals’ money is a good example of how unsafe such investments are. It is better to invest gold in other ways, including sovereign gold bonds or as gold ETFs. Vinothraj prefers gold ETFs over gold jewellery. He says, “Stock market seems overheated now, so I have started with investments in gold ETFs and will continue investing this year too.” Vinothraj has 5-10% of his portfolio in gold.

Since house property prices in certain regions are correcting, some people are willing to consider real estate as an investment option. Srilakshmi, for one, has started saving towards down payment for a property buy in the near to medium term.

Other goals

For many, taking a long vacation every year has become mandatory and accordingly, some have started saving for that as well.

Take Swathi, for instance. She plans to allocate nearly 20% of income to save for a vacation this year.

Same way, Vinothraj says, “I want to invest in short-term funds to save for a vacation every year.”

Anjana, too, says she plans to create a fund for vacation. “I want to allocate 10% every month towards vacation fund this year. So, at the end of 2020, I can utilise it for my travel,” she says.

People are saving for contingencies too.

Vinothraj says, “For this year I want to create a contingencies fund for medical emergencies.” For now, Vinothraj has health cover offered by his company. “I want to update my health insurance cover for better coverage.”

Swathi, too, wants to save up to 20% of the family’s income towards contingencies in bank deposits.

“I don’t have any insurance but for any emergencies, I would like to set aside some money starting this year.”

While it is important to create a contingency fund, it is equally important to take a plain vanilla term cover for your life. Consider buying additional health insurance after you across 30.

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Printable version | Jan 24, 2020 9:29:58 PM | https://www.thehindu.com/business/setting-the-financial-milestones-for-new-year/article30486965.ece

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