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The process of finding right investment products should begin from the start of the financial year.

MARCH 31 - the all-important date in a financial year for tax payers - has just passed by. You are now relaxed, having made your tax related investments. It has been a hectic month, thanks to the endless search for the right avenue and frantic calls to your tax consultant. You are glad that it's over and you won't be required to undertake the onerous task until March 2009.

And this is the very tendency you need to guard yourself against. Treating tax planning as a year-end exercise is a mistake that most people commit year after year, despite cartloads of advice calling for proper planning and systematic investments through the year. Thorough planning can yield rich dividends. Investment success comes about through rigorous financial planning and then exercising discipline while implementing the investment strategy. When planning for taxes, retirement and children's education, one needs to have a carefully-developed plan in place, taking into consideration the objective, risk tolerance and time horizon and devising a meticulous plan necessitates investing adequate time and efforts.

Instead of putting off the exercise until March next year, you could start utilizing the time that you have on hand right now to identify the right opportunities. Apart from ensuring better decisions, it would do away with the stress involved in zeroing in on suitable tax-saving instruments at the last minute and help you steer clear of the pitfalls.

Why start early?

One of the most common mistakes that result from rushed decision-making is taking a life insurance cover - in most cases ULIPs (unit-linked insurance policies) - that is not commensurate with the individual's requirements. People fall prey to sales agents' tactics, who feed on their fear that time is running out. As a result, they direct their funds into instruments that might not help their cause. Lack of proper planning could result in non-availability of your own money when you need it the most.

The other complication that might arise from such procrastination could be dearth of funds at the end of the year to make the required investments. In such cases, many resort to borrowing money, which is certainly not a wise approach. Leverage can always hurt if you haven't factored in the risks involved. Borrowing money for making investments is certainly not advisable. Start contributing to PPF, ELSS through SIPs (every month), insurance premiums and so on throughout the year, rather than waiting for March 31.

Also, starting early would help you optimize the tax breaks available. For example, tuition fee paid towards children's education can be claimed as a deduction. Preserving the pertinent receipts would enable you to utilize a sizeable portion of the overall exemption limit of Rs 1 lakh available u/s 80 C, thereby reducing your tax burden as well as the amount needed for investments.

Systematic Investment is key

Making systematic and regular investments seems to be the best antidote for avoiding tax hassles. Take the SIP (systematic investment plan) route for investing in mutual funds, for instance. By investing regularly, one eliminates the need for finding a lump sum amount at the end of the year and can also take advantage of the benefits of systematic investing. You needn't worry about the right time to enter the market if you opt for SIP. You might end up entering the market at the wrong time if you wait till the last minute. An SIP can help you get rid of market timing risk. That is the advantage of starting early - you don't have to worry about the Sensex movements. Besides, it would also reduce the overall cost of acquisition of the units. In SIP, you buy more units when prices are low and fewer units when prices are high, and over a period of time, your average cost per unit is likely to be less than the average price per unit.