Hello Riters, hope you are well, hope you are doing great, & hope we together reach new financial height this year. Thank you for all the support fueling me to write yet another time.
Today, lets discuss what are somethings that 2020 taught us. So lets dive in.
You might be wondering seriously was there anything Good?, lets not disappoint ourselves yet and follow along.
- Legendry Investor Warren Buffett once said ‘Be Greedy when Market is Fearful and Be Fearful when Market is Greedy’. Now what do I mean by that is, 2020 gave us all the existing long term stock market investors a chance to buy great companies share at a discounted price, and it gave a golden opportunity for new Investors to put a lump sum, off-course after doing all necessary due diligence for the firm. Also not to forget the new highs that Stock Market reached in 2020 end.
- Time to slow down and reflect. Yes, 2020 gave us plenty of time to slow down and reflect back on the necessities in our life. When we (Indians) were locked in for couple of months that was an opportunity for us all to slow down and re assess our priorities. Sometimes in this mad rush for fame, money we forget what we truly want, and I suppose for many of us 2020 gave us that golden opportunity to rethink our lives.
- A respect for healthcare workers. Especially in a developing country like India we often times neglect the importance of health care. 2020 taught us the importance of healthcare, and I am sure it also helped increased Govt. budget allocation towards health care for near future.
- Time to rejoice with family. Sure lets admit it, it was not all roses when we had to spend time with everyone under the roof, but nevertheless for many of us it led to better understanding and importance of family.
- Need for luxuries. You might be wondering what? we are talking of luxury, hold on one sec, hear me out. Now not everyone would agree on this point, But 2020 taught some of us the need to have our own little private beach house or a hill side mansion where we can retreat if another such calamity re-appears. Now, this does not mean we should not help fellow beings, in fact one thing that 2020 taught us was what is enough and what should we do for the society as a whole.
- Another asset class saw some glitter. I am not talking about Gold well that too was pretty volatile, and gave opportunity to many of us to cash in/invest; nevertheless there is one asset class that out performed everything else in 2020, Bitcoin – Cryptocurrency! 2020 saw Bitcoin breaking its records time and again. It was also the year that taught us the need for digital currency and decentralization.
- Refinance, not to forget with Interest rates at all time low, 2020 gave us an opportunity to refinance our loans, and mortgages.
The easy part, I am sure the list can go on & on for many of us here. But let me say it I want to rewind 2020 with more positivity & hence I have already given the positive angle, covering most of the Bad in the Good by flipping the lens, the perspective or whatever you call it. And if you are still with me than hang on, we are going to discuss the most important lesson that 2020 taught us, below.
- ‘Hey Rahul, Give me some cash man, I am broke, please help’, ‘Sahaab kuch kaam nhi hai, khane ko kuch nhi hora, thodi madad kariye na plz’ (Sir, we don’t have any work, nothing to eat, please help). These were some words I am sure many of us would have heard who would have tried to reach out to their cook, maid or even friends during lockdown. While we were busy living paycheck to paycheck, Pandemic happened! And we were never prepared, never learned the importance of Emergency fund and savings. If there is just one thing I want you to learn from this Pandemic it is the importance of Emergency Cash. Read more about Emergency fund here.
- ‘I lost my Job, I have consumed all the Stimulus check (applies to United States specifically), Can I borrow some money dad?‘. In Early 2020, when Pandemic knocked our doors, stores were shut down and it was a sight all around the global, with consumer spending at all time low and unemployment all time high, we were left with barely food on our plate. Now most of this was out of our hands, but still there was something we could have done about it, ‘Invest’, Invest, Invest! Yes, you heard correct, Invest and let the asset grows, Invest in yourself and let the most important asset your brain grows, so that when you are out of one opportunity you have something to fall back to. I know it is easier said than done, but things like side hustle and Investment can help us better cope with difficult times. Especially when the future Jobs are changing it becomes even more important to re skill ourselves by teaching ourselves a new skill in demand like video editing, data science etc.
I wish their was a skip button and I could just skip this part of 2020.
- Death, Desperation and Misery. Yes, lets admit it, It send shivers in our spine when I saw coffins lined up in places like Italy, and people were not even allowed to have the rituals performed for their loved ones. While the worst is over, is behind us, nevertheless we should not forget the importance of life. Money is good but its not the end in itself, we must realize its worth. We must understand the importance of Happiness and why it matters more than the riches & luxuries in our lives. Nor should we forget the importance of donation, charity, philanthropy and the need to uplift the other half, and at times the better half of our society.
If you have made it this far or if you have skipped through most of the article, so here I urge you to stop for a minute.
- Importance of Emergency Fund. 2020 taught us the importance of having some cash set aside, specifically 3 to 6 months worth of your expenses in a liquid, high yield savings account.
- Happiness > Money, while Money is important it is not the end in itself, realizing its place in society and realizing the need to help the poor & needy is a great lesson to take away from 2020 and well on to rest of our lives.
- Importance of Personal Finance. Often neglected & hardly taught in schools, Money management, personal financing is important skill to master. Paying heed to your finances, tracking expenses and saving some extra cash will be the good place to start.
With this and without further making this blogpost any long, I wish you loads of Happiness, Health & Wealth in 2021. Happy New Year!
Will Stock Market rally continue well beyond 2020, or Is Market likely to Crash in 2021? Lets discuss all this and more, lets dive in.
Stock Market can Crash if
- Unemployment – Number further rises
- Lockdown – More restrictions are put in place in people movement during Covid
- Disconnected Economy – If the Economy continue to remain disconnected from Stock Market due to several factors like current Monetary policy.
- Lower Profits – If Company realizes the profit are not back up even after opening up the stores.
- Geo Politics – Geo Political factors like Indo-China or US-China tensions further aggravates it may push up the VIX (volatility Index) and bring down the stock market.
Stock Market can Rise if
- Stimulus continues – This one applies especially to US Stock Market, if Congress decides and agrees on stimulus paycheck you will probably see the new all time high continues…
- Vaccine knocks your door – This one goes for Global toss, Vaccine launch will lead Economic recovery and all uncertainties will fade away leading the Market to continue to rise.
- Bad Priced In – Stock Market looks ahead of its time, and one theory is the bad is already priced in so Stock Market will continue to rise in the near foreseeable future.
- Govt. Intervenes – If Govt. continues to intervene and keeps the interest low, leading to Inflation and the stock Market rise.
- Recovery Stocks – If some sectors continue to perform well like the IT and Health care, it may overall skew the Market to achieve the all time high.
Data suggests Stock Market Crash or corrects double digit every 6.9 years.
So, What to do if it Crashes?
- Don’t Panic Sell
- Keep yourself diversified
- Keep some emergency cash
Now, if you are Indian, thinking on Where/How to start Investing than you may like to read the articles suggested below, and will need a Demat account to start Investing, you can open one by clicking here (Disclaimer – do your own due diligence before Investing)
Read more to know more-
Thanks for reading, Happy Weekend, Happy Investing!
Hello Riters, its been a long time out there, getting ready for Winter in Northern Hemisphere?
Today lets discuss why Invest in Index ETF and why avoid Mutual fund, lets dive in.
- In long Market always rise, thats not me saying, the likes of legendary investor Warren Buffet himself believe so. So, lets say if market always rise what is the best way to be on winning side?, of course buy into overall market low cost index fund like VTI
- On average 90% of actively managed mutual funds have underperformed benchmark indexes over a preceding 15 years period.
- If your Mutual fund have 2% of fees (expense ratio, portfolio fees, handling charges and other hidden fees), than that can eat 61% of your portfolio growth in long run. Shocked? No?, let me explain, suppose you have invested $10,000 and kept it for 50 years in Stock market just assuming a return of 7% (ideally returns are above 9%), your portfolio will grow to a lump sum of $294,600 by end of 50 years, now if it was a Mutual Fund with charges of 2%, then you only avail benefit of 5% CAGR, leaving your portfolio to grow to $114,700 (61% lesser or 39% of $294,600 market returns) read more here.
- Still not convinced? Lets say recession hits you in that case your portfolio will likely decrease in value but at the same time you will be charged the fees (the so called Active fund managers will still win this game).
- Expense ratio of Index fund is very low and there is no hidden charges, for example – VTI has an expense ratio of around 0.03% and If you are in India checkout ICICINIFTY with expense ratio of just 0.05% (let me know if you find something better in comments below, the likes of VTI is missing in Indian market)
Don’t take my words for it, always do your due diligence before investing. If you want to read more grab your copy of ‘Common Sense Investing’ the book by the founder of Vanguard Group.
Bonus Content – what to do in current stock market scenario? (for retail investors)
- Stay Invested, don’t sell value stocks so as to be able to avail the benefit of further highs
- Sell the stocks that lacks value & strong fundamentals and are up just in the Bull due to investor sentiment.
- Don’t invest a lump sum new investment amount, as the market is still prone to volatility due to Covid.
- Remember you have to buy in dips, sell in highs.
To read more on mistakes to avoid in Stock market check this. And if you are worried if Stock Market can crash in 2021 read this, click here.
Don’t let them take your hard earned money, get control of your money now! Be Financially aware, be financial literate.
Have a great weekend, happy investing! Happy Holidays… Stay Invested, stay safe, stay positive.
7 Things that Rich do different than Poor. Welcome on-board, lets help you put that extra buck in your pocket.
- Passive Income – Rich earn even in their sleep. Yes, they have a source of Income that puts Money constantly into their pocket even when they are not working. Passive Income of 1000 INR is worth more than 10,000 INR, how?, just imagine the time saved and the freedom gained. After all wealth is for ones Financial Freedom. One source of passive Income is by buying stocks that pays you dividends regularly (after every quarter or so). You can start with a small investment, all you need to do is open a Demat account with a brokerage like Zerodha and take it from there (check out our blog post on how to avoid investment mistake before investing, also follow this space for more tips and tricks)
- Keeping money is harder than making – Money management is not easy. The expenditure for majority of people grow proportionally with their Income. This is also the reason why almost all lottery winners end up spending what they have won. The urge to spend the money to show Rich than to be Rich is strong. Rich definitely know better Money Management than Poor. Once you made your first crore to make the second all you need to do is replicate. But how to save & invest and let your Money grow on its own is not something majority understands.
- Focus on Increasing income not cutting the cost – Yes, you heard it right. Rich don’t try cut the cost in small things. Majority will walk an extra mile saving cost rather than focusing on earning more. Instead of cutting cost every now & than, we urge you to first think like Minority and Increase your Income, so that you can afford all the nice things in your life. How?, May be learn a new skill that pays you more, or do some side hustle that help put some extra cash in your pocket.
- Over 50% of Rich earnings go to investments – Yes, Invest like crazy! If you want to be wealthy, you need to have a tight grasp on your savings & investments. You need to be able to park enough money (the more the better) in different assets. You may diversify your portfolio in assets like Gold, Real Estate and Stocks. If you want some quick tips on Investment do check out our very first blog here. Almost all wealthy people and brands invest more than 50% of their earnings. If you are beginner and don’t know where to start you may like to read our blog post here. To start Investing in Stock Market, you can open a demat account here.
- Don’t borrow Money if it is not to make Money – This rule applies strictly for the elites. Rich don’t borrow unless the money helps them make more Money. They won’t pay bank the interest unless they make their cut. By borrowing money like majority to finance your new house or buy a new car your making the Bank & Bankers wealthy while putting yourself in debt. Debt not taken for the assets that put Money in your pocket is useless. So think whom you want to make rich, yourself? or them?
- Multiple Streams of Income – To be wealthy you definitely need to have the money flowing in through multiple ways. A side hustle, a full time Business or job, a passive source of Income; you need to work hard to at least grow the 3 sources of Income. Multiple Source of Income also keeps you portfolio hedge against a Crisis. You are less likely to be victim of a Crisis, and more likely to be at peace. An Online side hustle, free lancing etc may come handy.
- Invest in self – Investing in self is one of the most underrated advice. Ever wondered why Successful people read more than an average person?, the answer is simple your knowledge = future returns, the more skills you know the greater the opportunity to multiply your Money. This is the same reason why a Businessman earns more than an employee, they have figured out a solution, they know the full breadth of the System and not just a single piece of the puzzle like the employee who may be specialized on a single task. So learn a new skill, or grab a book, even better listen to two free books of your choice here at Audible.
Lastly but not the least, if you want to know more definitely check out this video by Alux.com. This article is inspired by the same. While the opinion above is completely ours, the primary source nevertheless remains this video.
Thank you for reading. Do follow us for more. Together lets be Financially Free.