We are about to say goodbye to the old financial year and step into the new one starting April 1st. As you bid farewell to this financial year, what are the important things you must not forget? And how should you prepare for the new financial year?
This month has been full of challenges, especially as we approach the financial year-end. And then, of course, Donald Trump has added his twists to the global market from the U.S.! So, this last phase of March has been full of unexpected developments.
The Investor Community
Just a couple of days ago, an official government report revealed a key statistic: while 84 million (8.4 crore) income tax returns were filed last year, only 28.1 million (2.81 crore) people actually paid tax. This means that around 55 million (5.5 crore) people filed returns but had zero tax liability.
Since the non-taxpaying investor community is larger, here’s some advice for them before March ends:
Portfolio Review
If you have been investing in the stock market for the past year or two and your portfolio is currently in the negative meaning your expected profits haven’t materialized or your investments have declined, you need to reassess and realign your portfolio.
Multi-Asset Allocation
I strongly recommend multi-asset allocation at this point. Simply put, instead of investing only in stocks or mutual funds, diversify across different asset classes. Previously, we advised investors to balance their mutual fund portfolio across large-cap, mid-cap, and small-cap funds. Now, it’s time to extend that diversification beyond mutual funds.
Investment Options
1. Stock Market – Despite recent volatility, stock market valuations have become attractive. We don’t know the exact bottom yet, and further declines are possible. However, those who understand balance sheets and fundamental analysis or can take expert guidance can still find select stocks to invest in gradually.
2. Fixed Deposits – Some banks are offering interest rates around 8-8.75% on FDs, which is a decent option.
3. Post Office Schemes – Many people ignore post office savings schemes, but some of them such as the Recurring Deposit (RD) scheme can yield over 10% returns, with government-backed security.
4. Gold – Gold remains a strong long-term investment. Currently, international gold prices are above $2,100 per ounce, while in India, 24-carat gold is trading around ₹90,000 per 10 grams (though the base rate is around ₹86,000–₹87,000). Even at these levels, gold can be a solid long-term bet.
5. Real Estate – Investors often overlook real estate when discussing investments. If you have a significant amount of surplus cash, consider buying a small plot of land or a commercial unit. This can generate rental income while appreciating in value over time. Emerging areas can offer good investment opportunities.
6. Mutual Funds – Don’t ignore mutual funds! Many investors hesitate because their existing SIP investments might be showing lower NAVs (Net Asset Values). However, if you start a new SIP now, you’ll be investing at lower levels, which could benefit you in the long run. So, continue or start SIPs with a long-term perspective.
So, these are the key investment avenues for those who are not primarily focused on tax savings.
Tax-Saving Strategies for the New Financial Year
People who will start saving tax from April 1st will see less TDS (Tax Deducted at Source) deducted from their payslips. This will be good news for them, and they will eagerly wait for April 1st to see their tax amount reduced in their salary slip.
Spend half and save at least half. If you can save more, even better! But at least 50% of this extra income should be invested in the options I mentioned earlier.
Salary Structure Adjustments
Your total package from the company is broken down into Basic Salary, Medical Allowance, House Rent Allowance (HRA), Travel Allowance, etc. These components were designed to help you get tax benefits.
Some people are still in the old tax regime. You should also evaluate the new tax regime, check if it’s beneficial for you.
Once you confirm that the new regime is better, go to your HR department and ask them to realign your salary structure. Earlier, you had to submit rent receipts, medical bills, and other proofs to get tax benefits. But now, since there is no tax on income up to ₹12 lakhs, you don’t need to do this anymore.
So, ask your HR to simplify your salary structure. If they are planning to give you an increment, even better! But even if your salary remains the same, at least remove these unnecessary components from the structure since they are no longer needed.
Spending vs. Saving: Finding the Right Balance
To be honest, no one needs advice on spending, people do it naturally. Just like water flows downhill naturally, spending comes naturally to people. The real challenge is to convince people to save and invest.
Especially Gen Z and Millennials, they don’t believe in saving at all. If they earn ₹2 lakh per month, they plan expenses worth ₹1 lakh immediately!
So yes, there needs to be a balance between spending and investing. 50-50 is a good approach.
Stock Market Predictions for FY 2025-26
Morgan Stanley has predicted that if it’s a bull market, Sensex could go up to 105,000 by the end of the year. But if it’s a bear market, it might even touch 70,000.
My take? If Morgan Stanley says Sensex will cross 100,000, then I’ll just say, “From their mouth to God’s ears!”
Investing in Gold: Is It Too Late?
Due to geopolitical instability, gold prices have been rising. As global instability increases, gold starts to soar.
Although gold has already increased significantly, the belief is that there is more room for growth. My analysis suggests that gold could reach $3,000 per ounce, which translates to over ₹1 lakh per 10 grams in India.
However, gold should be a long-term investment—at least 3 to 5 years.
Final Advice: Maintain a Balanced Portfolio
1. Gold should make up at least 20% of your portfolio.
2. Avoid buying gold jewelry as an investment, opt for gold ETFs or sovereign gold bonds instead.
By following these strategies, you can close this financial year strong and enter the new one with confidence!
