The economic crisis triggered by the corona virus pandemic (COVID-19) in 2020 gave birth to the Atmanirbhar Bharat Abhiyan. The some of its features of initiative proposed by our Honourable Prime Minister Shri Narendraji Modi, are similar to the Swadeshi movement launched on August 7, 1905, to take on the British regime of the time. Atmanirbhar means ‘self-reliant’. On May 12, Prime Minister Narendra Modi announced in his address to the nation an economic package of Rs. 20 trillion to tide over the coronavirus crisis under the Atmanirbhar Bharat Abhiyan. He said the economic package would play an important role in making India ‘self reliant’ and that it would benefit labourers, farmers, honest tax payers, MSMEs and the cottage industry.
Similarly for a family making his personal finance “self-reliant” and become financially free and independent is very important. The financial future for an individual is highly dependent on the actions taken today. Just like the five pillars on which the atmanirbhar bharat is dependent , there are five pillars of personal finance also which a family must keep in mind before taking decisions namely income levels, assets, liabilities, return and risk management.
An important aspect which people mistaken and find it difficult to understand is that it is practically impossible to plan to buy an asset class at its low and sell at high, even under best of circumstances. Therefore, a need arises for an Atmanirbhar portfolio, which takes care of this problem for you. The key point that comes into picture here is diversification. A diversified portfolio helps to manage and absorb shocks of the market to make sure your investments are protected. Having the right weightage towards an asset class is very important for decision making.
An Atmanirbhar Portfolio is a portfolio which can perform irrespective of the market conditions. It is a portfolio which can help in not only outperforming the market but generate returns on a consistent basis and keep the risk under control. There are wealth strategies which are in existence keeping the above in mind. It is a proven fact that there is no single asset class, which can consistently outperform other asset classes year after year. What looks like the best asset class today could prove to be laggard in future, which makes timing the market a futile exercise. Gold is a classic example to this, it has been a laggard in generating returns over several years. However, since a year it has outperformed all other asset classes after giving sub-optimum returns. Atmanirbhar portfolio is like an all-rounder player on a cricket pitch who can perform with bat, ball or be it just playing on the field.
A family normally doesn’t have the time to track and manage investments daily and spend hours tracking market movements to make decisions rapidly with changing market situation. One needs to focus on one’s own primary activity / business and let the money work on its own. The money earned should be deployed to good use. I have always advocated and told my clients to invest in themselves first, the best return an individual gets is by investing in himself / herself which if put to proper use in job/business. A person can definitely have compounding benefits. Most families don’t have their balance sheet created or a list of assets identified making it difficult for them to track their investments. Hence, it’s imperative for all people to have a clear identification of their assets and liabilities. The plan of action for personal finance is highly dependent on this and it must be clearly discussed with a financial advisor before taking financial decisions in the field of risks, returns and duration of the investments. Millennial who I come across now want to retire by 45-50 years of age and hence it is a must for them to start early and with a significant portion of earnings into the right asset class which helps them retire as per plan. Goals like these even if deferred by a year or two would not make an impact. However, when planning for child’s education or marriage which needs to be done in a particular year, cannot be compromised and hence need meticulous planning. Buying protection for portfolio is also very important. There are tools which are available called as LEAPS, providing insurance to the portfolio. Health insurance and life insurance are also vital components of a portfolio to make it truly atmanirbhar.
When it comes to asset allocation a one-size-fits-all rule does not apply because each person has different goals, responsibilities, and a unique risk profile. Every asset class has a potential risk and there will always be a market risk involved with any of your investments. Equity offers the best long-term growth prospects to investors. Cash has a role to play especially in current conditions. For a young family who has time to retire should go for equity mutual funds. If you have bought a house, then you would spend more on EMIs. Important to look at maximising wealth with defined goals. One plan cannot work for everyone.
I have experienced over the several years that many investors do not invest with the right asset allocation. More than 70% of investors have less than 30% asset allocation in equity, and have a far higher allocation in real estate, gold, debt and PF. For all investors, I would recommend relooking at their asset allocation and using cash to capitalise on the current market opportunity. This is an opportune time for everyone to invest in equity for long term gains.
Creating an atmanirbhar portfolio is very essential for every family and it must be discussed with your advisor. It must be self-reliant with the five pillars (as discussed above) to sustain with well-defined action plan. Asset allocation plays a crucial role with an impact of more than 92% on the overall decision taken.
(The author Rishabh Adukia is a Chartered Accountant and qualified professional advising on wealth management to individuals, millennial’s, emerging HNIs including others. His articles are published regularly in various financial newspapers and can be reached on adukia.rishabh@gmail.com )
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