Investment Strategy 2021: The year 2020 has been full of ups and downs for investors like a roller coaster ride. The year started with a positive signal, but soon things got worse. The proliferation of COVID-19 forced governments to impose strict lockdowns. The market, like always, endured the impact of the shock that was going to hit the economy in the April-June quarter.
In March itself, the markets fell drastically and in the following quarters they improved rapidly. As economic activities began to return. After August, the economic indicators and corporate earnings figures looked better than expected and after that there was a good rally in the market. But clearly this cannot show the behavior of investors in these 9 turbulent months.
What happened to investors
People lost their jobs in the quarter of April to June, salary cut started, there was a delay in getting salary, the money of people or professionals engaged in own business got stuck. This happened because there was a sharp decline in the economy due to the lockdown.
Its natural response was that people stopped or stopped investing in SIP. The monthly input value of SIP declined to Rs 7,302 crore from Rs 8641 crore in November. The effect of the fall in the market was that people had a shortage of cash and whenever there was a boom in the market, most of the equity funds were continuously withdrawn money. Fixed income funds of the AMC business were also seen in the transition phase.
The debt crisis had started from the time of ILFS default and the era of pandemics had added fuel to this fire. This adversely affected many fixed income schemes that had exposure to debt. Funds were also being withdrawn from the credit category of funds. Investors started looking for quality and demanded more transparency in their portfolio.
Nothing bad happened after march
But everything was not bad in these months. The number of new SIP registrations exceeded that of the canceled SIP. About 79 lakh new SIPs were registered between April and November. The rate of new registrations was largely the same as last year. Other segments that investors liked were the Fund of Fund (Foreign) category. It is expected that investors will be affected by the main components of foreign investment, such as themes and opportunities for investment in stocks that are not present on the Indian exchange, diversifying the portfolio and not just attracting returns.
Digital adoption rate increased
In the last few years, the rate of adoption of digital has increased significantly among advisors, distributors and investors. This year, this trend has increased further because of the lockdown that people of all segments have realized how convenient it is to adopt digital. I hope that this trend will usher in such an attractive era, where this capability will be developed not only in transactions, but also in offering solutions to customers.
SEBI also introduced RIA / MFD guidelines. It is expected that the distribution will rapidly adopt the category of solutions. Today we are seeing more acceptance of BAF as a category. I believe that our facilities like Dynamic Advantage Asset Allocation Facility, Edge Linked Investment will accelerate this pace as the industry moves from transaction to solution.
Good signs for the market in 2021
Looking ahead to the year 2021, there have been many positive things for the economy and the market. Central banks around the world have understood the shock caused by COVID to the real economy and especially to small and medium businesses. Not only has he pledged huge cash, but has also promised that he will keep the rates down in the near future. This will increase the demand for risky assets and the investment of global investors in emerging markets like India will increase.
COVID 19 vaccine is being approved all over the world and soon the vaccine will start to be given to the most important people. This is expected to normalize the business of tourism, hotels, theater sector, which completely depends on the face-to-face contact, movement of people. The Indian economy is at a very low base these days and hence the figures will come out positive in the coming quarters. In many segments, work from home will become a permanent system and due to this large scale talented people will be in jobs. Some traces of COVID can remain and the number of people who would prefer to walk in their private vehicles instead of public transport.
Is everything okay on the economic front
So is everything looking good on the economic front? No. There are many challenges ahead. Small businesses have been shut down due to supply disruptions. In many cases the entire supply chain has been destroyed. Due to this, inflation can increase and central banks may be forced to change their stance. In the backdrop of this, geopolitical risks can remain and thus challenges from rising inequality.
What should investors do in 2021?
Investors should try to change their investment with the help of a qualified financial advisor. If you can, devote this time to reorganize yourself, but you should be clear about what order your priorities should be after Corona. The need for protection, the need for emergency funds should first be prepared or strengthened. Evaluate your asset allocation afresh according to your financial goal, in which retirement should be preferred as this is the only financial goal for which you will not get any traditional loan.
Keep in mind that you should not make wrong allocation in the liquid category, it is also an important thing. Commit to spending less than you earn, saving the remaining money, investing in a diversified portfolio with the help of a trusted financial advisor and maintaining patience and discipline, these are four simple steps , Whose commitment has to be kept not just for 2021 but for the year ahead.