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Don't Let Procrastination Hurt Your Financial Security

15/04/2016 8:18 AM IST | Updated 15/07/2016 8:26 AM IST
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Most of us can easily put the "pro" in "procrastination". It hardly takes any effort to procrastinate because we have a lot of experience doing it. Procrastination begins with childhood when we wait till the last few days to prepare for our exams. The same happens at work, where we wait till the last day to prepare for a presentation or meeting. It is easy to procrastinate and then rush to meet our deadlines. In most cases, we get away with it without much harm done. But when it comes to investment decisions, procrastination can hurt your financial goals.

Let's take the example of investing to save taxes. Most of us know that we should be planning our investments, but even then we only rush to do so in March--the last month of the financial year. We think about it through the year, but we procrastinate. And in the end, we make a decision in haste.

Plan your investments right now. Here's how--just start a systematic investment plan (SIP) in a good equity-linked savings scheme (ELSS) fund.

In March, we'll be strapped for time. The company HR will be asking for our investment proofs. The fund distributor or insurance agent will be pushing financial products that will earn them a hefty commission. And we end up with something not-so-good because we procrastinated all through the year.

If you did that last financial year, don't repeat the mistake again. This year, start your tax-saving investments right now. Yes, we know, we're only in the first week of April and 31 March 2017 seems to be ages away. Besides, you dealt with 31 March 2016 only last week. We know all of this. Yet, we want you to not procrastinate and plan your 80C investments right now. Here's how--just start a systematic investment plan (SIP) in a good equity-linked savings scheme (ELSS) fund.

Not only is waiting until the last moment wasteful, it keeps you away from earning the benefit of systematic investment plans.

An SIP is a regular investment in a mutual fund. When you start an SIP, you decide on a particular date every month when a pre-decided amount gets debited from your bank account and gets invested in the mutual fund. SIPs are automated investments and you don't need to bother about making the investment every month. It is a savings plan that you can rely on.

If you don't start an SIP and just invest in an ELSS fund in the last quarter of the financial year, you run the risk of catching a market peak.

The other major benefit of SIPs is rupee cost averaging. Since an SIP is done every month, you are able to invest at different levels of the equity markets. Some months, the markets will be up, some months, they will be down. A regular investor shouldn't time the market by trying to buy low. An SIP allows you to buy at different levels. When the markets are low, you get more units for the same price as compared to what you get when the markets are high. This is how your cost of acquisition gets averaged and you are well-placed to earn good returns from your investments.

If you don't start an SIP and just invest in an ELSS fund in the last quarter of the financial year, you run the risk of catching a market peak. If your cost of acquisition is high and the markets suddenly drop after you've invested, you will see a major erosion in the value of your investments. Instead of that, you can start an SIP now to eventually fulfill your tax-saving obligations for the year and benefit by creating wealth over the long-term.

To arrive at an SIP amount, just break whatever you invested in ELSS last year into 12 installments. It is as easy as that.

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