Personal finance is all about meeting one’s short-term as well as long-term financial goals such as a wedding in the family, child’s college education, and choosing an investment plan for retirement. The year 2019 was not a very good year for the country’s economy, especially to banking and finance sector where liquidity was a prime concern, but due to interest rate cuts, it was the ideal period for borrowers. The government announced an additional tax deduction of up to Rs 1.5 lakh against interest payment of the home loan, Bharat Bond ETF are introduced, and mutual funds emerge as cheap buying opportunity due to bearish market in July 2019. All these incidents went into the favour of small investors. But, behind the curtains, it was a difficult time for lenders who have recognised almost Rs 17 lakh crore of NPAs since FY16.
A roller coaster ride
In the post-IL&FS crisis, liquidity issue was the biggest concern for banks and NBFCs and risk aversion was high among the lenders due to rising numbers of insolvency cases. According to a report by Motilal Oswal, not more than 50 NBFCs could successfully manage the liability pressure and the majority of NBFCs are still struggling to raise funds. All these challenges have been turned into opportunities for borrowers who have a high CIBIL score and a good track record. They have fetched cheaper personal and home loans at easier terms and conditions.
The economy survived another jerk in July 2019, when equity markets went in the red. The crisis was more visible in case of the smaller scrips. Around 2,000 scrips on the National Stock Exchange (NSE) experienced a fall of 6.8 per cent of their market capital. Among commodities, the item which glittered most was the gold which reaches to the all-time high value of USD 1,413 per troy ounce in July 2019. Gold was chosen as a safer asset among intelligent investors and they preferred gold over bonds and mutual funds.
There are several new government policies which are praised by individual investors as well as businesses houses. The Centre has decided 100 per cent Foreign Direct Investment (FDI) for insurance intermediaries, sourcing norms are eased out for single retail brands. Similar investment incentives were also introduced in the aviation, media and insurance sectors. These policies have opened new investment gateways for foreign and private investors.
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Promising Investment opportunities in 2020
As investors are atiptoe on the arrival of 2020, the majority believes that the New Year will bless the lenders as well as borrowers with better growth opportunities. Among the many positive predictions, it is the foremost belief of the experts that Mid Cap equity funds will grow in size as more investors are expected to take interest in this investment option.
Like the current year, gold will again remain a safer investment option in 2020 with 10-15 per cent appreciation in prices by the coming October. Unit Linked Insurance Plans, which have now dropped premium allocation charges and are considered safe in terms of their high risk capacity, are also expected to share a significant part of investment portfolios in the coming year.
Besides, these three options, Debt Mutual Funds and Public Provident Fund will also be the other lucrative investment options in 2020.
Planning and preparation
Focused planning plays a significant role in deciding one’s financial goals and objectives. As the financial needs vary from individual to individual, there is no thumb rule in managing personal finances. But, for every independent investor or borrower, it is must to differentiate and finalise his/her short and long-term financial goals before deciding an option. Also, one should prepare the budget and saving rate for each month in advance. Moreover, adequate health cover is the need of the hour due to rising healthcare cost in the country. Each and every member of the family should be covered by a health plan.
Usually, there are three major objectives that should not be ignored in personal finance. These three benefits are tax saving, high rate of return, and risk minimization. Following these personal finance objectives, one can experience increased capital growth without putting oneself in financial and mental stress. In addition, regular review of one’s investments helps to acquire a better knowledge of the market and ensures better returns.
(By Rachit Chawla Rachit Chawla, Founder & CEO, Finway)