Wisdom is in doing your year-end investments this quarter

Heard that adage on the early bird and the worm, right? Apply it to your tax-saving investments that you usually procrastinate making until the year end is upon you. Know that when you cut it too fine you get forced to make investments irrespective of market conditions and the risks thereof. So instead of waiting for the last frenetic weeks before March 31, deploy the present quarter of October, November and December (OND) as you emerge from the Diwali revelry to head into Christmas/New Year break.

Early start helps spread deployment of funds, which in turn allow for both - rupee cost averaging (akin to a systematic investment plan or SIP) and taking advantage of price dips. 

Beat the last minute rush: Spare yourself the pressure of trumping up large amounts in closing days of the financial year end and cutting into monthly budget for equity-linked saving scheme (ELSS), public provident fund (PPF) etc. It also means better tax management by harvesting short or long-term losses to set off against income or capital gains.

Gain a better yield: OND investing not only helps you steal a march of over year-end rush but brings in better returns. It is no-brainer that in debt or quasi-debt instruments such as PPF  or any other interest-bearing assets OND investing yields an additional 3-6 months of compound interest. 

Then again, the country loves all kinds of SIPs and for a good reason. These are some of the best-known long-term savings which require little effort. OND lends itself to a longer SIP term rather than single point savings in March and then forgetting about it till next year.

More opportunity to rebalance portfolio: While an SIP is great, it is equally important to rebalance the portfolio i.e. make sure the percentages allocated to different asset classes are reset back to original weights. Rebalancing prevents excessive exposure to asset classes in bull markets and under investment in those not doing well at the time. This way we’re constantly buying what's gone down and booking profits in what’s gone up thereby improving returns. More opportunity to rebalance may directly translate to better portfolio performance.

Uncertain time ahead in 2024: Not only are the global headwinds from the Russo-Ukraine strife and Israel's war on Gaza getting stronger, in India we are moving into an election year. Financial pundits, research analysts and fund managers, both Indian and global, are predicting volatility ahead. Recent sell-side reports by global investment banks point to worries over the US interest rates and Federal Reserve’s actions, the oil prices and even the performance of Indian companies. 

‘Santa Clause Rally’: Early investments help take advantage of price inflections (such as the mythical Santa Clause  rally) in the markets to book profits. Coined by Yale Hirsch, in 1972, the Santa Clause rally refers to the last 5 days of the financial year and first two days of the following year, when the stock prices have been historically found to be higher 79.2% of the time. If such a rally were to occur, it would be an opportunity to book some profits. Conversely, in JFM investing (Investing in the January February March Quarter), one is likely to have missed the Santa Clause Rally.

OND investment lends well to common sense principles developed by professionals and gurus   - start early, invest regularly, hold for long term and opportunistic rebalancing or profit booking. A word of caution: these are averages and statistics albeit with high historical correlation – OND investing should therefore complement an investment plan rather than supplement it. Do seek SEBI Registered intermediaries for any assistance required for specific needs or circumstances.

(The author is Managing Partner, Aryzen Capital Advisors)