Investors must take advantage of investment instruments offering full tax deferral until redemption, said Rohit Beri, Chief Investment Officer, True Beacon, adding that investors must also set up a systematic investment framework and not try to time the market.
In an interview with MintGenie, Beri suggests investors maximise their contributions to PPF and EPF.
Edited Excerpts:
Q. Many people focus on investments without deciding their financial goals first. Any advice for them?
Investing without goals is like boarding a flight without deciding the objective. It could be a great adventure but unlikely to get you to your destination.
Q. More people are keen to adopt the FIRE method in the new generation. Do you think the current state of the Indian economy allows the scope to achieve retirement early in life?
Financial Independence Retire Early (FIRE) has been around for a long time and is not a new practice. Although the Indian economy is in a decent state, only a tiny group of young, high-earning individuals may be able to adopt this method, which entails aggressive saving and active investing early on. Individuals could instead focus on responsible saving plus smart investing as early as possible.
Q. While deciding on investments, the focus is first on saving taxes. What approach do you think investors must adopt while choosing where to invest?
Investors can opt for exchange-traded funds (ETFs) and mutual funds; they should also take advantage of instruments offering full tax deferral until redemption.
Q. Out of all the tax-saving instruments, which do you think serves people best? Also, what parameters must investors use before deciding where to put money to save on taxes?
As discussed earlier, investors have the option to invest in a variety of ETFs or mutual funds that provide tax advantages. They can maximise their contribution to Public Provident Fund (PPF) and Employees' Provident Fund (EPF) and should only buy term insurance and not focus on other Insurance-based Investment Products (IBIP).
Q. What's the way to improving finances?
1. Understand your cashflows – inflows and outflows.
2. Define your risk appetite and plan your investments accordingly.
3. Focus on planning as much as possible.
4. Ensure you have adequate insurance (term and medical) and avoid insurance-based investment products.
5. Diversify your investments.
6. Build a systematic investment framework and do not try to time the market.
7. Start investing early and let compounding be your ally.
Q. The banking sector is on a roller-coaster ride, especially as three US banks collapsed. Which sector(s) do you think will help investors survive the intermittent storms stemming from pervasive inflation and geopolitical tensions?
Indian banks are in good shape. Given the current scenario, banks, infrastructure, cement and metals look great if you're a long-term investor.
Q. Many people tend to skip their SIPs, fearing a further downfall in the market. What advice do you have for such investors?
Timing is difficult, if not impossible. Stick to your Systematic Investment Plans (SIPs) and let compounding do the job.
