Hello Readers!
The financial year 2020, gave the investors a ride of roller coaster filled with happy and anxiety-filled moments. The year gave the market a good start, but soon it has to witness the fall after the government announced a lockdown to stop the COVID-19 spread.
Markets corrected sharply in March and recovered very smartly in subsequent quarters as the economic activity started limping back to normalcy. The economic indicators and earnings numbers of corporate showed a better than expected recovery after August 2020.
Well, the fall in the market forced many investors to withdraw their investment in anxiety and hurry, but only these investors regretted their decision after they witness the sharp recovery in the Equity market in November 2020. However, there were many who sustained their anxiety and stayed invested, and ultimately did not convert their temporary loss into permanent. The year so far could be summed up in these four lines, it clearly does not capture investor behavior during these nine months.
Now as we all are soon going to enter a new year, investors have their question in their minds, how to structure their investment strategy for the new year 2021!
First, let us recapitulate what investors did in the year 2020.
Fresh SIP's Continued To Get Registered!
In the initial days of lockdown, that is from April to June, working people from many sectors faced a lot of difficulties in maintaining their work from home. This period saw job losses and salary delays or cuts. All the result of this reaction in people’s work area was seen on their investments. And this reaction was more ignited by the fall of the market and negative returns from many of the schemes. Many of them either stopped or paused their SIP’s in mutual funds. The monthly input value for SIPs dropped from Rs 8,641 crore to Rs.7302 crores in November.
This was not only in the case of equity funds but Fixed income funds like debt funds do suffer the same crisis. The credit crisis triggered by the ILFS default and exacerbated by the pandemic continued to impact various fixed income schemes that had exposure to credit. Credit mutual funds saw outflows.
Well, on the other side market also witnessed some positive sites. The new SIP registrations outpaced cancellations. Around 79 lakh fresh SIPs got registered from April to Nov. The run rate of new registrations is broadly the same as last year. The other happy-happy news was from the segment of Fund (Offshore) category. Investors found it more favorable for them to start their investments. Prominent features of Fund category funds, like the opportunity to participate in themes and stocks, diversification in the portfolio, good return attracted investors towards it.
More People Are Managing Their Portfolio Through Online And Digital Platforms!
In the last few years, the investment sectors have got more technological reforms. Advisers, distributors, investors, everyone has shown their extensive interest in digital mode for managing their portfolios and investments in the last few years. This interest more increased during the lockdown, as the digital mode was the only efficient and safest way to manage their investment during the time of this pandemic.
Experts are expecting that in the coming days this trend will evolve into an exciting era where just from executing transactions, capabilities will be developed to deliver customized solutions. SEBI also came in with the RIA/MFD guidelines. I would expect the faster adoption of the solutions category by the distributors.
What’s In Store For Investors In 2021?
We are expecting a number of good events in the coming new year 2020. The very first I would like to mention is the analysis of Central Bank all over the world. In their analysis, they have found that the COVID-19 pandemic has delivered a blow to the real economy and especially to the small and medium-sized businesses. They have not only pumped in huge liquidity but also have also promised to keep rates low for the foreseeable future, this as a result has increased the demand for risk assets and emerging markets like India, which are likely to witness further flows from global investors.
The biggest news of the year is from the section on COVID vaccines. Many of the vaccines tested all over the world by different pharmaceutical companies are now getting the approvals, slowly, soon the vaccines will be administered to the vulnerable segments first. This shows that after the vaccines are out in the market, business sections like tourism, hotels, the theatre will return to normalcy and so the revenues from this section will.
So basically, here the question is, will everything look good on the economic front? Well, a simple answer right now for this question is, No. There are many other challenges that would seek people’s attention. Smaller units have gone out of business disrupting supplies. In some cases, entire supply chains have got dismantled. This could trigger inflation forcing the central banks to revisit their stance. Geopolitical risks remain in the background.
How Should An Investors Plan His Investment In 2021?
The all-time advice that is reasonable in any situation is, talk to your financial adviser and do not take any knee-jerk decision in panic or anxiety.
Here wat I suggest is, take some lessons from what 2020 and COVID pandemic tried to be taught you. Protection requirements, emergency fund requirements have to be built or strengthened first. Re-assessing your asset allocation in line with your financial goals comes next. Retirement should always be on top of your goal list because it is utmost to secure your retirement. For your retirement, you are not going to get any loan, also you will not have a regular source of income.
For any kind of query regarding financial planning you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee of future returns).