2021: New, old, and gold – what personal finance taught me

2021 was a rollercoaster ride. It started with optimism about the discovery of vaccines. Then the sentiment changed as we found ourselves in the firm grip of the second wave of the pandemic. But the situation was not completely gloomy. There was an incredible equity rally in which participation of retail investors became pronounced. Now, there are imminent signs of a potential third wave of the pandemic. But this should not worry us. Because we have lessons to learn and experiences to help us move on with any challenge in the coming months. As we enter 2022 with considerable hope and faith, it is important that we focus on time-tested learnings of 2021 which will stand in good stead for us. Here are the ten things that I will remember as I enter into 2022:

1. This was the year of Initial Public Offers (IPOs) and New Fund Offers (NFO). The total IPO collection crossed Rs 1.19 trillion – the highest ever in the history of India’s capital market. A few IPOs were rewarding and many were not; the IPO market challenged our minds. New companies and business models listed, and questioned a thinking built on “consistent compounder frameworks.” The easiest thing to do was to make comparisons about how one food delivery was worth more than all real estate and hotel companies and ignore the segment.  We need an open but honest approach to understanding how to value the new age business because more of them are coming our way.
2. April-May period of Covid 2.0 was a challenging time. As people grappled with health, they also dealt in a tough time with the problems of not being able to access their money when they lost a loved one. A missing nominee, incomplete paperwork, or one spouse knowing nothing about family finances when the other is suddenly gone can be very expensive. Clear all your formalities and smoothen the flow of your income and assets to your near and dear ones. Appoint nominees for every investment you have made. The best time to act is NOW.
3. Though social media is abuzz with the debate about active vs passive investing, let’s not ignore the fact that many individuals are drawn to investing in cryptocurrencies. While they were chasing cryptocurrencies just because they are ‘told by their friends, many including me pointed out to the lack of regulation of these assets. While investing in stocks, mutual funds or even cryptocurrencies, the fear of missing out made many chase returns. The moot point to remember however is to remain committed to personal goals and not to win some race of earning returns.
4. Investment advice is easily available and in many cases it is free. Though there are many personal finance influencers, and a few of them are really good, you should be careful from whom to take advice from. Take advice from the right people and pay for the advice. Not all free advice is good.
5. A family friend today sits on a large corpus, thanks to the decade long compounding he enjoyed on a bluechip share gifted to him when he was leaving for the US. Investing is all about compounding. However, we live in times of 10-minute delivery – where we look forward to instant solutions. After a year of quick returns, many investors started expecting returns in the short-term. However, equity investing is all about the long-term. At this time and at current high prices, one needs to have a longer investment timeframe.
6. Many themes are marketed as time-bound opportunity, especially IPOs and NFOs which sold many exotic themes. In a rush, some investors loaded on to them, leading to portfolios of 50 to 70 schemes which looked like buying the entire market. But most individuals forget that many restaurants are opened and we need not rush to eat everywhere. No opportunity asks for immediate action, especially when you do not understand it. Saying No is not a bad option, as most opportunities in markets do not disappear immediately.
7. When it comes to food, I came across a surprise. While tasting a 15 course-meal, I enjoyed Khichadi – dal and rice the most. Though it was old school, it was smartly made with new toppings. While all the new global, thematic investment ideas attract a lot of investors’ attention, let us not forget our core portfolios – made up of diversified equity funds.
8. Since the Covid 2.0 and the subsequent lockdown, we have seen the life coming back to normalcy. But then there emerged omicron variant and we again experienced another cycle going down. Living with a sense of balance helps in cycles. Many investors who were riding the upward movement in their investments were dejected when they saw just a 10% correction in the recent past. We need to learn to live in cycles without losing our balance. For that we need to ignore noise.
9. The best of the investments do not come in the form of stocks or mutual funds. One may argue about pricing of IPOs, but it is inspiring to see how Indian entrepreneurs from often humble backgrounds are building great companies and creating great personal wealth. Nykaa gave us a female billionaire. This shows us that your talent is your biggest asset. Use that to build wealth.
10. The greatest of all wealth is to enjoy your time and relationships. I have seen my parents enjoying their money, time and relationships at the age of 70. It informs us that when invested wisely, money enables peaceful life. The pandemic has further reinforced the fact that life is much more than money.  Save it, invest it, but don’t forget to enjoy it.

Disclaimer: Ms. Radhika Gupta is the MD & CEO of Edelweiss Asset Management Limited (EAML) and the views expressed above are her own.

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