September 5 is celebrated as Teachers Day in India and most of us would have fond memories from our school days of the celebrations held as a tribute to the contributions made by our teachers. As time passes and we all move through different stages of life, the meaning of the word ‘teacher’ keeps shifting – there emerges a perception that teachers need not necessarily be people who took up the mantle of educating us, but it can be anyone who may have left a mark on us. Learning is a lifelong journey and more often than not our experiences teach us the most important lessons. The recent pandemic years served as an eye-opener and strong lesson for being mindful about managing money for a secure future. Here are a few money lessons that the pandemic life taught us:
Emergency funds can be your saviour
The biggest takeaway from the pandemic has been that there is seldom any warning when the tide turns against us. No amount of crystal ball gazing can prepare us fully for the exigencies in life, hence make it a priority to build and maintain an emergency fund that can cover your expenses for six-eight months.
Health insurance - the talisman you should have
The pandemic also highlighted that medical emergencies may not be avoidable. A sound health insurance plan for you and your loved ones can ensure proper medical treatment on time and save you from hospitalization and treatment costs.
Prioritizing retirement planning
Don’t fall for the fallacious perception that there will always be ample time to invest in a retirement fund. It is good to remember that early beginners tend to gain the most from their investments. The uncertainty that the world saw due to the pandemic exemplified the importance of prioritizing our goals and maintaining a disciplined investment approach towards the most important ones no matter how far off they may seem on the horizon of time.
Acing asset allocation
The onset of the pandemic triggered a series of reactions in the global stock markets. The right asset allocation strategy can act as your armour and ensure that you stay afloat during such unprecedented circumstances. It is equally important to proactively ensure from time to time with multiple investment moves that your asset allocation formula doesn’t undergo large deviations.
The right asset allocation strategy can ensure that you stay afloat during unprecedented circumstances. Besides the proverbial “don’t put all your eggs in one basket”, it is equally important to proactively ensure that your asset allocation formula doesn’t undergo large deviations.
Not taking any risks is the biggest risk
For most Indian investors, the word ‘risk’ tends to carry negative connotations. There is a strong undercurrent of pessimism against asset classes that carry an element of risk with a parallel penchant for avenues like real estate, savings schemes, bank deposits, and gold. However, a strategy where risk is absolutely abstained from can seriously hamper wealth creation objectives in the long run. Striking a balance between risk and stability that is best suited for one’s capacity and goals is crucial for a successful investment regime.
The power of mutual funds
Irrespective of whether you are a novice investor or have the acumen to decipher market trends, whether you need an investment strategy for your retirement or a vacation abroad, mutual funds have solutions for everyone. Unlike many traditional investment classes, one of the biggest advantages offered by mutual funds is that you can start investing with just Rs 500 via systematic investment plans (SIPs). Also, a separate SIP for each goal can make management seamless—the mantra should be har goal SIP.
“Mutual funds are subject to market risks. Read all scheme-related documents carefully.”
K S Rao, Head - Investor Education & Distribution Development, Aditya Birla Sun Life Asset Management Company Ltd