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Here’s When You Should Review Your Investment Plan

Investing is a continuous process, and when you embark on your investment journey, it is preferable to have a long-term horizon if you wish to reap the benefits of better returns from your investments. You could have a slew of financial objectives, such as buying property, providing for your children’s future and also for your retirement. In these situations, a short-term worldview resulting in a frequent churning of your portfolio may not help you reach your desired goals. There is an argument to be made for the ‘sit back and relax’ policy which involves building your portfolio and letting it grow without too much intervention.

Having said that, life may not always take the path you have envisaged, and there is no harm in periodically reviewing your portfolio to ensure that everything is in place. More importantly, in certain situations, you might have to actively review your investment plan due to your altered circumstances which might render your current plan ineffective. This article will give you more colour into when it could be a good idea to review your investment plan.

Situations in which you should Review your Investment Plan

Change in income:

Typically, investment plans are often charted out based on your current income and financial position. As long as this status quo exists, a review of your plan is not necessary. But a change in income can warrant a review. You might have received a promotion and a salary raise, which will increase your headroom to save and invest more, assuming your expenses don’t rise in tandem with your salary. In such circumstances, reviewing your investment plan makes sense.

Having said that, it is also prudent to survey your plan if your income reduces. This could happen due to a variety of factors such as job loss, reduction in income fuelled by an economic slowdown, or even during periods when you are on a sabbatical. In such cases, tweaks to your financial planning will be required to better reflect your changed circumstances.

Evolving milestones:

Milestone events in any person’s life necessitate a review of his/her investment plan. For instance, after starting a family, you might consider buying a house. Since a house is a big ticket purchase, it will require planning in terms of how you want to go about it and any changes required in your current investment plan. You might opt for a loan in this regard, which will require the payment of EMIs (Equated Monthly Installments), and thus a review of your investment plan at this time can help you determine the balance of funds left at your disposal that you can set aside for other financial goals.

Unforeseen emergencies:

Life has its share of ups and downs, and the occurrence of unforeseen events cannot be entirely ruled out. The timing and scale of these events are difficult to predict, but there’s no harm in setting aside some contingency funds that can help towards easing your financial stress should an untoward event occur. However, sometimes these funds may not be enough, and in those circumstances, a complete overview of your investment plans may be required. For instance, in case of a medical emergency, you will need to account for hospitalization costs, doctor fees, and other sundry expenses. In such situations, your current investment plan may not hold much water and could require a complete overhaul.

Change in your risk appetite:

Different people have different appetites for taking on risks based on which they will draw up their portfolios. However, an individual can also see his risk appetite undergo a sea of change depending on his age, financial situation, and other circumstances. Typically, during your prime working years, you might be inclined to stomach more risk and accordingly invest more in equities, but this could change as the years go by. As you grow older, you may become more risk-averse, preferring investing in debt instead. Thus, it makes sense to periodically review your investment plan to account for these various aspects.

To Conclude

Planning for your future and having an investment plan in place is crucial to ensure that you and your loved ones live a comfortable life for years to come. However, on a broader basis, while you may not be compelled to alter your investment plan drastically, it is a good idea to consider the possibility of making certain changes should the need arise. This could require a balancing act, but it can work to your advantage over the long term if you can manage it.

Additional Read: What are Debt Funds?

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.

Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully.

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