In this article, we will be discussing some key financial learnings for the year 2022. So, let’s get started!
Learning 1 – Belief in India:
Bullish on India's story always: When the food at home is so good why go and invest in other nations’ equities? Given that India's income levels are rising with a large consumer market and all the favorable factors where India has outperformed other nations it shows that one should continue to believe in India’s growth story.
Learning 2- More Money is lost in the anticipation of correction than correction:
In the calendar year 2022, there was a higher expectation of a slowdown in the world economy due to high inflation, and the Russia-Ukraine War. Although there was an impact of all such factors on the stock market, the correction was limited and not as per expectations. This scenario showed that individual stopped their SIPs and investment and hence it proves the quote of Peter Lynch: ‘More Money is lost in the anticipation of correction than correction.’
Learning 3- Keep an open mind for all sectors and all companies
One should not be arrested towards their biases of not investing in particular stocks or sectors. An individual should have an open mind while making investment decisions.
Learnings 4- Markets work in Cycles and Give returns in lumps:
The market works in a cycle even in the evergreen sectors like IT, etc., but the returns come in lumps and do not come consistently.
Learning 5- Businesses should be profitable:
The year 2022 witnessed the listing of several start-ups which also presented that businesses should be profitable. Growth prospects and other expectations become hard to analyze if businesses are loss-making.
Learning 6- Regulatory Authorities are Excellent:
Our Regulatory Authorities like the Securities and Exchanges Board of India (SEBI), Reserve Bank of India (RBI), etc. did a commendable job during this year whether it is in Crypto or another sector.
Learning 7 – Being covered gives peace of mind and financial freedom:
Health & Term Insurance should be bought at a young age (maybe as soon as a person gets a job) as the premium is less, waiting period for a few diseases can be served when least needed and as the age increase then top-ups and riders can be added when income increases over the years as per the requirement.
Learning 8 – Focus on a few and avoid noise:
There will always be noise in the surrounding regarding the returns of a particular fund or manager where you might not have invested and there will always be someone who may have earned good return than you or has a bigger portfolio than you but staying disciplined and staying on course will create more wealth rather than changing lanes with every advice you get. Just like bad times don't last forever, good times also don't last forever. So it is important to be disciplined and not get swayed away from the temporary noise of the market.
Learning 7 – (Market tests your resilience)
In cricketing terms, One can understand that some years are like a flat batting pitch where making runs is very easy. This was in 2021. 2022 were testing batting conditions. It is important to leave good balls and capitalize on bad ones. The important thing is to stay at the wicket. The ball will get softer and batting will get easy. The only thing is, you need to stay at the crease till then.
Learning 8 – Valuation is important for investment return:
Nifty IT has given -26% returns in 2022 as compared to 17.3% in the last year. The highly expensive valuations of IT companies have been corrected. The rich valuations do not sustain much and ultimately rationality prevails in the stock
Learning 9 – Capex doesn’t always give returns:
Aarti Industries had announced a CAPEX of Rs. 3500 crores, due to which I invested in the stock, expecting some growth in profitability. But due to slower commissioning of projects, the stock of the company is near its 52-week low. It gives a lesson that High Capex does not mean higher returns for shareholders. It is important to monitor the commissioning of CAPEX at the earliest for the generation of profits.
Learning 10 – Don’t put in any rally, as it can backfire:
During the covid, Tata steel was at high and there was a buzz in the market about the steel companies as the steel prices were high. At that time many individuals invested in the same and expected to gain from the rally. However, the steel prices started to cool off and the stock prices came down. This gives learning that never to take hastened decisions while buying and selling the stock which can result in a loss of money.
What Should Investors Do:
All the above-discussed learnings of the year 2022 related to financial planning, investments, mutual funds, etc. are key factors one should keep in mind while making investment decisions. One should follow due diligence before making any investment decisions.
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