2020…. Few Lessons!!

20-20 cricket (more commonly known as T20 cricket) is known for fast paced action, unpredictability & sudden swings. Taking cues from the similarity of name, it seems Calendar Year 2020 (20-20) has also decided to walk the same path. The kind of swings humanity has seen this year have been truly unprecedented.

Apart from many fundamental and life changing lessons & insights, the year 2020 has made us learn few important lessons in the area of personal finance. In no uncertain terms it has taught us not to lose sight of some of the very basic principles of planning & investing. Today let’s talk about few of the key learnings/insights.

First things first : As we stand today, do we have to explain the need of adequate life & health insurance cover to anyone ? (Don’t miss the word adequate here). We all have realised the importance of life & health insurance. Need for proper cover has just sunk in. (My investing mind is whispering… insurance sector could do well going forward)

Contingency provision : Because of job loss, pay cuts & other similar uncertainties, we all have probably realised that one should be in a position to take care of his cash outflow requirements for at least 6 months, if not more, even if there was no inflow due to whatever reason. That much liquidity should always be there at fingertips so that desperation does not set in & we get the necessary breathing time.

Needs & wants : Lockdown has made a very clear distinction in this area. We probably now know what is indispensable & what we can do without. Grey has been separated, if I may say, as black & white.

Need for a Saarthi : The roller coaster ride we have experienced in 2020 has very clearly established the need for an able Saarthi, the need for some sort of hand holding. We all have realised that an able advisor can be so handy to deal with the volatility of our mind which probably is/was much more than volatility of the market. (Being a personal finance professional, I have a direct vested interest in what I have suggested above. So take it with a pinch of salt)

Futility of trying to understand short term movements of stock market : More often than not we all have been failing in this area of understanding short term market movements (But many of us secretly always thought & wanted to believe that some day we would succeed) .

And here enters stock market movements of 2020. Take our own markets. In February and March, Covid-19 was something to be dealt by China & Europe. It wasn’t an Indian reality then. And before we could understand anything, more than 38% fall in a matter of 2 months in the stock indices. We experienced the fastest fall in the history of Indian stock market. And then as a country we realize the seriousness of this disease. Our Prime Minister announces the first lockdown on 24th March (and many more subsequently). And look at the market. It decided to make a bottom on the same day i.e. 24th March!! Not only that, it also went up continuously in the following 5 months (53% rise from the bottom) when whole country was/is in a lockdown state.

Most of us have now reconciled & given up in this area (Read as my confession) .

On a lighter note, if i were to borrow from Hindi movie Don,…..Stock market ki short term movements ko samajhna… muskil hi nahin… namumkin hai !!

There are many more lessons we all have learnt. Thought of sharing a few today. More lessons… may be some other day.

Pandemic shall pass but let the lessons stay!!

Stay Safe… Stay Healthy 🙂