Thank you, FY 20-21
If anyone was looking for an illustrative year in recent memory, which was challenging, disruptive and unpredictable at the same time, and also affected one and all, FY21 certainly fits the bill because it caught pretty much everyone by surprise and breached all boundaries of imagination and forecasts. Looking back at the fiscal we just left behind, most of us can say with conviction that we have endured one of the toughest years of our lives as far as investing is concerned. The S&P BSE Sensex was at 29,468 on March 31, 2020, and is at 49,509 as on March 31, 2021. From the lows of the market on April 1, 2020, to the market recovery and volatility we saw especially in February-March 2021, the year not only taught us a great deal about investing behaviour, but also imparted some crucial life lessons. Our culture teaches us to venerate and revere anyone who has taught us anything, and this year has been nothing short of a Guru for us.
Hence, with all humility and gratitude at my command, I want to say “Thank You” to FY21.
Key learnings from FY 20-21
∙ Use technology to your advantage: This year taught us that with the progress made over the years, we could use technology to our advantage and ensures business continuity when it came to personal investments or running businesses. Seamless online transactions, mobile apps, UPI, digital payment platforms and videoconferencing got even the un-initiated fall in love with technology.
∙ Liquidity is important: The year taught us that having liquidity (ability to get the cashback) is an important factor in the decision-making while we plan our investments. In all this panic, mutual funds stood out as a great investment product as one could redeem and get the money back in T+1 or T+3 days.
∙ Prioritise ‘needs’ over ‘wants’: The year taught us that just to maintain a lifestyle, over-leveraging oneself is an imprudent choice. Too much EMI as a percentage of what one earns is detrimental to one’s financial health and one should prioritise expenses while taking loans. Any borrowing should enable one to attain good needs like home or education and you should think carefully before indulging in credit cards and personal loans for lifestyle “wants”.
∙ Power of Asset Allocation: The year also taught us why asset allocation is important. It gave us the experience of the equity market meltdown in March 2020 and a credit crisis in April end. It taught us why investing across asset classes based on the risk profile of every individual is important in the long run.
∙ Don’t get overwhelmed by panic: The year taught us that stopping SIPs just because of irrational fear of looking at past returns is not good. A few very good months (For example Apr’20 to Feb’21) can dramatically change the past returns and also taught us that cost averaging and the power of compounding work to the investors’ benefit in the long run.
∙ Stick to basics even during a bull run: The year also taught us not to get swayed by optimism. Informed decision-making and sticking to the basics of investing as per the financial goals apply when markets are surging or hitting the bottom. One must not try to time the market and should spend ‘time’ in the market to build wealth.
∙ Health & Life Insurance is a necessity: Invest in the health and life covers because no other year has taught us more about the uncertainty of health as this one. Arm yourself with adequate cover for the unfortunate eventualities for yourself and your loved ones.
∙ Financial Literacy is a necessity: In the age of Google, translations and voice-based options for answering your queries – understanding your finances is a necessity for everyone irrespective of their age, gender, or socio-economic background. You have all the information you need to know at your disposal – so please read and stay informed. And when you need help in-person, there are professionals like your banker, financial advisor and broker who are equipped to provide you with suitable solutions. Feel free to reach out to them.
I conclude by saying that above everything, we must be grateful for the year for its teachings and treasure our learnings, because a year like this does not come often. Stay invested, stay disciplined, don’t go by hearsays, and seek qualified advice before embarking on the investment journey.
'Thank you and stay safe!'