The Signal: Numbers Behind Financial Year!

Indian equities have delivered returns, tensions, more returns, and more tensions by seeing wild swings on the upside and downside in the financial year 2021.

Post such eventful FY21, across analyst forums, fund manager speaks and fisdom investor interactions, the most asked question is – “Do I need to change anything in my portfolio or perhaps redeem and reinvest? 

But quite often than not, when you ask a good financial advisor about it, he/she would ask you to simply stay put for the “long term.” 

Everything around wealth creation somehow finds its way to “long-term investing”.

Let me make your life simpler. The best way to interpret long-term is ‘almost forever’.

While we can go on and on about the theory behind benefits of long-term investing, but there’s nothing that can build conviction like factual data can.

Financial year wise performance

Key Observations:

• Nifty had delivered more than 15% returns in seven out of seventeen instances. Notably, the best periods came after significant dips and unfortunately most investors would succumb to fear during the bad times and sell-off only to be left as an audience to the recovery. Such investors who had missed these best years landed up realizing losses or marginal returns.

• High risk high returns principal holds true across time horizons. During bull phase of the market, mid-caps and small caps have outperformed the Nifty and underperformed against Nifty during bear cycles.
• Making money through investments is more of a waiting game. If it were easy to identify the best years from the worst with foresight, there would never be a best or worst year. Best years are when the weak lose heart and sell to the rational who continue to ride the tide.

As you are now clear with the concept of long-term investing, let’s have a look at key pointers that one should consider in FY22:

1. Revisit the asset allocation: Check the current asset allocation of the portfolio and see whether it is aligned with your risk profile or not. If not, then trim the exposures to manage the target asset allocation.
2. Review all your life and health insurance policies: Its always good to check whether you have adequate insurance cover or not. If not, then contact your insurance provides and do make provision for the same.
3. Revisit your goals: It’s time to look at the target goal amount and the current positioning of your investments. You need to make sure that the portfolio is well positioned to take care of the target goals.
4. Top-up your investments: Ideally, you should increase your investment by 10-15% every year as and when the income rises. This will help you achieving you target goals much faster and also help you beat the inflation.
5. Start doing investments for tax planning: It is very important to start the tax planning early. That’s because you have enough time to calculate how much you need to invest to save the maximum tax possible and evaluate all options available.

We will cover all the above points in detail in our next signal edition. Do write to us in case you wish to share your thoughts with us. We excitedly await to hear from you.

Till then, wish you a Happy weekend.