‘Staying invested’ requires as much attention as much as making investment. An investor cannot afford to lose his money and see it smoke up into air.
Exit from non-performing Mutual Funds
If you have your hard earned money well distributed among various categories of mutual funds and you think your job is done then you should rethink it! You should probably find out which Funds are performing in 2 to 5 years horizon and which are not. You might have bought those funds during a Bull run and must have got tempted by the short term return i.e you must have bought some Funds in Infrastructure in 2008 which we currently don’t see performing. Similarly there can be several instances you must have invested in funds which currently is not performing. The best thing in this case is to make a complete sweep out of such non-performing funds and invest it into top 5 funds. If there is an exit load on such exits then you should switch-in to the top funds of that Fund House.
Hold Blue-chip Stock
If you have invested in the so called multi-bagger stocks just because some broker had an inch of intuition then you should take a reality check. If you have bought those stocks just to increase the size of your portfolio or just because some Jack or John felt it will give magical return then you need to re-look at it. If such stocks have not been performing and has repeatedly hit a new 52-week low with remote chances of recouping its losses and you are still in a situation of hope against hope then you should lower your exposure and invest in Blue-chip stocks than to blow your money into dust.
Have a proper Tax Planning
Tax planning is very crucial for an investor. If you have not invested with the view of saving tax and you fall in the tax bracket of 30% then you have probably smoked your money in tax payment which could otherwise be saved had you invested in Tax saving FDs, PPF, ELSS, NSC and several other instrument.
Never Liquidate your Insurance Policy
If you have not planned for the liquidity risk of your investment then you might face tough times. Sometimes you might have to liquidate your insurance policy which could be a waste of your hard earned premium paid. If you are unable to service the premium then it is always advisable to make the insurance policy a paid-up one rather than surrendering it.
This is a guest post by Mr. Mitesh Agarwal, BBA & MBA (Finance). Currently working as Financial Analyst with a leading firm in Mumbai.