Financial planning for Lessons learned in 2020 and key takeaways

“You can’t connect the dots looking forward; you can only connect them looking backward.”

With the nationwide vaccination drive now in progress, 2021 has given the start that everyone was waiting for! Today, equity of Financial planning investors in India are ecstatic as well. After years of investor awareness across tier II and tier III cities, more investors and traders are flocking towards the playing field. Obviously, technology is at their disposal (with AI-based investment engines and mobile trading alongside others), and so is India’s financial roadmap with #BudgetKaMatlab.

However, the stock market is a game of calculated risks and calculated gains. Then, how has the year 2020 changed or reinforced the equation? So, let’s also have a look at the financial learnings from 2020 so that our new beginning in 2021 stays as amazing as it gets.

Attention to Detail: Threats are often invisible

It’s quite ironic how something that can’t even be seen can have such an impact on the market. But seasoned investors will tell you that it is not. They know that, like coronavirus, perils often go undetectable in the market – unless you have an eye for them. Otherwise, they simply hide in plain sight. For instance, no one expected Lehman Brothers to fall in 2008. But it did. Only a few like Michael Burry, FrontPoint Partners, Brownfield Capital, and so on saw it coming because they paid attention to detail. 

Proactive Rebalancing

2020 came across as a wake-up call for global investors. It reminded them that driving investments and merely sitting on them won’t deliver optimum results. So, you also have to proactively rebalance your portfolio. For this, an investor needs to stay abreast with the market developments and take prudent decisions – even pull out the investment during high volatility, if the need be. A stitch in time saves nine, after all.

Financial Plans Can Change, but Financial Goals Don’t!

You have long-term financial goals and short-term plans to achieve them. At times, your financial plans might change because of a series of market events. However, your long-term goals must ideally stay intact. Only a slight course correction should be required in your financial plans. But, how to do it? Well, portfolio investments are not like a bet placed on a roulette wheel. They are made based on financials, market performance, projected demand, and several other parameters backed by technological tools and insights. You must tap them.

It was obvious for the pandemic outbreak to increase the demand for pharmaceutical and healthcare products. So, ever since cases escalated and the lockdown was announced in India, the Nifty Pharma index and S&P BSE Healthcare have both more than doubled so far. After demonetization, while sectors like real estate suffered, a rally was seen in banking stocks because the move increased banking liquidity. In a nutshell, there is always an opportunity in the market for you to course-correct. You just have to look in the right direction.

Know Your Portfolio:

In 2020, Franklin Templeton, one of the large Financial planning fund managers in India, had 6 of its funds in suspended animation. These funds led to a combined AUM of around Rs. 28,000 crores going bust at once. The main reason why it became so was that it was sitting on zero-coupon debentures issued by YES Capital. YES Capital is a subsidiary of YES Bank Limited, which came to the news because of all the wrong reasons before Franklin Templeton went into suspended animation. Out of the 6 funds that have gone bust, 5 funds had lent to the YES Bank promoters. So, it is important to know and understand your portfolio as deeply as possible to mitigate the potential losses in time. 

In conclusion, 2020 has made investors revisit their financial planning manual all over again, and for good. It will reinforce the foundation of both seasoned and new investors and ensure better returns. It’s time for new beginnings now!

This article was shared to Prittle Prattle News as a Press Release.

By –Mr. Amarjeet Maurya – AVP – Mid Caps, Angel Broking Ltd