The learnings from FY-21

The FY-21 will be one of the most memorable year in every one’s life. It was most challenging, disruptive and unpredictable and affected almost everyone, it also breached all boundaries of imagination and forecasts. Most of us will agree with me that it was 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 to its life time high, the year not only taught us a great deal about investing behaviour, but also imparted some crucial life lessons. So let’s learn some lessons from this most unique and toughest years, and how to take advantage of the situations we faced during the year.

Key learnings from FY 20-21

Cover the RISK, It is a necessity: The uncertainties in this year has taught us the importance of taking proper health and life covers. Always cover yourself with adequate insurances for the unfortunate eventualities for yourself and your loved ones.

LIQUIDITY is very important: Money in hand or convertibility of your investment to cash is an important factor in the decision-making while planning for investments or emergency use. In all this panic, products like mutual funds stood out as a great investment product because we can get the money back in T+1 or T+3 days.

TECHNOLOGY makes a difference, benefit from it: The lockdown taught us that we can do lot many things without stepping out of our home. Seamless online transactions, mobile apps, UPI, digital payment platforms and video-conferencing which were sparingly used became a part of our routine life and yes it is easy, fast and cheap so use it for your benefits.

‘Wants’ are different from 'NEEDS’ Identify them: The year taught us that we can live without many things like eating outs/malls/movies etc. Buying many things on EMI can be financially destructive, we need to prioritise expenses while taking loans. We should identify between good and bad borrowing. Taking loan for needs like home or education could be fine but indulging in credit cards and personal loans for lifestyle “wants” can be disastrous.

Be calm in PANIC: The year showed that how the market overreacts and those who get panicked in that situation regret later. Investors who stopped their SIPs March’April-20 will always regret their decisions. A few very good months (For example Apr’20 to Feb’21) can dramatically change the past returns, we also learned how investors can benefit from the cost averaging and the power of compounding in the long run.

Understand the concept of ASSET ALLOCATION: FY-21 also taught us that asset allocation is important. In this year we saw of the equity market meltdown in March 2020 and a credit crisis in April end. It has taught us a very important lesson that don’t go overexcited in any asset class and never keep all your eggs in one basket whatever secure it may look like.

We CAN'T OUTSMART the Market so be with it: We saw sharp fall in equity market in March’20 when the COVID cases were just few and it rose continuously during the worse period of lockdown. It taught us not to try to time the market and should spend ‘time’ in the market to build wealth.

LEARN some basics:  Understanding the basics of finances is a necessity for everyone irrespective of their age, gender, or socio-economic background. Information is easily available and we need to make our self-aware with the basics. But remember everything can’t be answered online so when we need help in-person, there are professionals like your banker, financial advisor and broker who are equipped to provide with suitable solutions. Take their guidance.

Finally, this year has taught us a lot and we must be grateful for its teachings and treasure our learnings, because a year like this does not come often. And yes, it is not over yet, so Be careful, Stay invested, be disciplined and don't go by hearsays, before embarking on the investment journey seek qualified advice.