Four Money Things To Do Before 2022 Draws To A Close

Consider Dynamic Asset Allocation Funds

With numerous push and pull factors still in play in the global markets – including inflation, a possible recession in the US and Europe and the ongoing geopolitical tensions, it may make sense to add some dynamic asset allocation funds to your portfolio. These funds are ideal for volatile and range bound markets. Domestic equities are currently slightly stretched in terms of overall valuations, and so these funds offer an optimal choice in terms of risk adjusted returns as we move into 2023.

Exit expensive ULIP’s

If you invested into costly ULIP’s more than five years ago, now would be a good time to exit them. The equity markets have had a good run, and it’s likely that your ULIP’s hefty costs would have been covered by now – and then some. Don’t make the mistake of succumbing to inertia and continuing to throw good money after bad in the process. Use this window of opportunity to firmly exit any ULIP’s that have annual costs exceeding 2% (excluding mortality costs), and move the redeemed moneys into Mutual Funds instead. Don’t worry about the loss of life cover – in all likelihood, it’ll be too miniscule to even matter.

Consider adding some duration

Long Term Debt Fund and GILT Fund investors may have been stung by inflation and the recent surge in yields, but this also provides investors who had heeded my warnings and stuck to accrual based funds for the past year, with an opportunity to benefit from the recent fall in bond prices. The second half of 2022 is likely to bring a lot more clarity on the future of the debt markets, which is pricing in a lot of bad stuff right now – high inflation and a global recession, to name a couple. Use the next 6 months to stagger at least 25 per cent - 30 per cent of your debt portfolio into long term debt funds via SIP’s or STP’s. 

Plan your tax savings over the next fifteen days

Don’t wait until the last moment to deploy your tax saving moneys for the year. Plan ahead and complete your tax saving investments in the first two weeks of the year instead. Calculate your section 80C gap and deploy the moneys into ELSS funds in three equal tranches, to avoid the risk of markets sliding after you invest. Take up a comprehensive health insurance plan if you haven’t already – you can avail a deduction of up to Rs 25,000 per year on your Mediclaim premiums. Additionally, invest Rs 50,000 into the NPS (National Pension Scheme) to claim an additional deduction of under Section 80CCD. Just make sure that you go in for the most aggressive equity allocation in your NPS.