Finance Article
LESSONS FROM FINANCIAL YEAR 2013
LESSONS FROM FINANCIAL YEAR 2013
The investing landscape saw momentous developments in 2013, most of them driven by regulatory actions. Whether it was the introduction of direct plans in mutual funds, new guidelines for health insurance, or the precipitous fall in debt funds, each of these events had a significant impact on your finances. Each development also offered a lesson to the small investor.
The rupee played a pivotal role during 2013. We learnt that it affects nearly every other investment. The RBI raised interest rates to buoy the rupee and the capital markets went into a tailspin. The falling rupee also kept gold prices high in India when global prices crashed.
The stock markets remained volatile during the year and the Sensex touched an all-time high. However, this euphoria was confined to large-cap stocks. The mid- and small-cap stock indices closed the year with losses, underlining the need to be choosy while investing.
Inflation was relentless during the year and even uncut onions brought tears to the eye. With high inflation the new normal, investors will need to alter their financial planning. Don't go by 7-8%, but a more realistic 9-10% inflation rate, while setting long-term goals. The high interest rates have pushed real estate beyond the reach of many people. The key lesson is not to buy property as an investment. You would be paying 11-12% per annum on a loan to buy an asset that will grow only 5-6% in value in a year. Only if the value of the property is expected to appreciate by more than 12% per year does it make sense to invest in it.
The long overdue Pension Bill finally became an Act in 2013. This will give a fillip to the pension sector, which has been neglected till now.
Another legislation to set up a real estate regulator to protect home buyers from unscrupulous builders and developers was introduced in Parliament. Going by the time taken by the Pension Bill, it could be years before the real estate regulator is established. Still, a new year is a harbinger of hope, and we believe that the 16th Lok Sabha, which will be elected in five months, will not waste time digging into previous scams but enact laws that prevent fresh ones.