Year 2020 has surely been a tumultuous year for the economy, the stock markets and for people in general. With more than 75% of the year lost in lockdowns, it was technology that largely ruled the lives of people across the world. However, the hope is that year 2021 will be different, in a rather optimistic way.
What are the resolutions that one needs to make to have a successful 2021. Here are 5 key ideas that one can write down as a resolution for the coming year.
- Stretch your savings and grow your investments
For many Indian families, year 2020 will go down as a year of lost opportunities. Of course, the markets did rally but people were more focused on more mundane issues like saving their jobs, handling pay cuts, limiting use of emergency funds, holding their enterprise above water etc. what does that mean for the next year?
Year 2021 will have to focus on stretching your savings to the maximum extent possible. Don’t set expenditure targets, instead set saving targets and work your expenses around them. Also, with a year almost lost, you need to be aggressive on investing to grow wealth. Obviously bank FDs paying 4.5% to 5% returns will not get you too far.
- Stop randomizing money; invest with a goal
This looks high flying but it is just a lot of common sense. What it means is that people must focus more attaining specific objectives or life-goals through their investments. These include goals like having a secure retirement, creating a nest egg, planning for their child’s education, saving money for the wedding etc.
What it means is that you don’t focus on just returns but on risk-adjusted returns. The most important driver for your investment will be your goal timeline. Obviously, you can take the risk of equities for a 2 year goal. At the same time, putting your 20-year goal funds in a bank FD or a low yield bond is absolute waste of your risk capacity.
- Resolve to be disciplined and consistent
To begin with, these are two different things altogether and both are equally essential. Discipline is about the setting and maintaining of some basic rules like keeping stop loss, booking profits, not falling in love with a stock, not averaging your positions, not overtrading to recover losses etc. These discipline eventually become your good habits in investments.
Consistency means it is not enough to do the right thing once, but you must do it again and again. Consistency also means that your must stick to the core of your strategy through bull markets, bear markets and even through directionless markets. Monthly SIPs are a classic example of consistent approach.
- Educate yourself on new investment opportunities
If you are limiting yourself to equity, bonds and bank FDs, you are perhaps missing out on a lot of important opportunities. There is gold, international equities, lending opportunities, venture participation etc. Many of these new ideas have given good returns and hold strong potential in the coming years. You must make the best of them.
Today, new ideas are emerging in investing. There is ESG investing which is more sustainable in nature. There are passive investment options where low costs can make a big difference to your returns. For 2021, make it a point to keep your updated of these fantastic changes happening in the investment world and get ready to ride them.
- Spread your risk; diversify your investments
You just cannot have enough of this. It continues to be applicable at all times and 2021 will be no different. No putting all your eggs in one basket. Spread your money across equity, debt, hybrid products, gold, silver etc. Within each class, look for a good mix. Equities must have large caps, mid caps, small caps, themes, growth, value etc. Similarly bonds must be spread across durations, issuer quality etc. The more you spread the lower your risk.
Resolve to action your resolutions
That is the golden rule. The best of plans are meaningless if they just stay as plans. The same applies to resolutions. You need to action them. You must have made similar resolutions in previous years and perhaps forgotten about it for various reasons. Remember, year 2021 will be starkly different. It will be challenging, but nevertheless it will be exciting too. In these tough and complicated times, it is your body of well-rehearsed resolutions that will really stand you in good stead.
Here is wishing you a Happy and Prosperous 2021 ahead of you!
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