Is your saving affected by the markets?

When your fund is not doing well, it's time to make some smart decisions.

Most of the portfolios that we hold today are affected by the current markets. Like they say, it is not easy to stick to the sinking ship. There are concerns and there are persistent pullouts from the long-term plans that people have invested in for their long-term goals of retirement and education.
This article is to help those people who are committed in long-term plans as on date - and are a bit clueless how and where they can go from here to minimise their losses. If you have an offshore investment SIP plan, you will instantly connect with my subject.
When I read that a lot of people are pulling short of their investment, it makes my heart bleed. Long-term goals are made for long-term objectives and short-sightedness may ruin the whole purpose. If you pull out of your investments at this time when market has volatility, it is taxing for you only. You'll be a very sad person and your insurance company will be very happy because they'll charge you that penalty charges for early redemption. When your fund is not doing well, it is not the time to pull out; it is the time to revisit your plan to dust and service it.
In fact, your plan has a lowering value because you chose to leave its servicing to the consultant who sold you that plan. Remember, the consultant's job is to advice you on your financial requirements and address your needs by periodic servicing of the plan. Investment portfolio is your prerogative as you know your risk profile better than anyone else. A consultant can handle sourcing information for you but the choice of selecting your portfolio should not be left with the consultant.
When you bring home a TV with a two-year guarantee, do you not dust it regularly? Do you not service your car after its warranty and service period is over? So when you do a child education plan or a retirement plan make sure you service it on regular basis. Your advisor/consultant will have information on every aspect of the plan/policy that was sold to you.
Every time you see your policy account values ask your adviser why is it so. When the investments are doing good then find out from him why they are doing good and, of course, when they are not doing good then also ask questions. Good or bad account values are not the only indicators of your policy's health. Policy and its longevity depend on the strategy that you adopt and apply to take care of it. We all know the bad times are usually the good time for regular investors. This is Warren Buffet philosophy; we call it dollar cost averaging.
Thumb rules for success of long-term plans
Longer the term, better are the chances of achieving goals: When you do an SIP/ regular investment, you basically don't look at the market performance, you wait until your planned term date. You save money in fixed intervals called as premiums. When the market is good, your investment is growing.
When the market is bad, that's even better, because for the same amount you invest, you are getting more units in return. This dollar cost averaging ensures that your fund doesn't have to grow back to its original point for you to break even, your fund will break even at even low points. Long-term investment plans are only for people with vision. You have to stay invested for the full term to enjoy the benefits. Usually for long-term investments, real returns are not visible until at least five or six years into the plan. One cannot see much gain in the first three years.
'Diversify your portfolio' to reduce your risk: For your various goals, use different types of investment channels. Similar to investment, never put your investment into single fund; if you have options to choose more funds, then your risk is actually reduced. Choose from low-risk funds to protect your capital, medium risk to get you that basic returns and higher risks funds to earn that extra buck that you planned for. Usually the higher risks funds are those that can generate you most returns but fluctuations are very wide as well. Even one should choose different markets to spread the risk of being in one market.
The trick here is not to avoid such investments; the trick is to choose the exact term when you will need the money, choose a spread of funds to minimise the risk and meet your advisor regularly to service your plan and source right information. Most importantly, make your informed decision on choosing the right portfolio. Be involved in the fund choice and do not let anyone else take charge of your policy. When you take charge, you will do responsible changes; when someone else takes charge he ro she may not be able to make the right changes at the right time. Ideally, a portfolio should be assessed every quarter with your advisor.
If you have any unit linked plan that is not going the way you thought it will, call your advisor now and understand the plan first. You have only two choices to save for your future: either you save yourself religiously (a difficult thing to pursue for the long run) or save in any systematic investment like a policy or a plan and be consistent in your saving pattern making use of the market gains.
Policies and plans give you the discipline of regular savings and at the same time an opportunity to beat inflation. Simply saving money at home or in the bank is not a good idea for people who can't be consistent in saving regularly and those who would like to consider the impact of inflation on money. Your money should be given the opportunity to work for you.
The writer is an entrepreneur and financial planning consultant. Views expressed are her own and do not reflect the newspaper's policy.