In simpler times, when the dazzle of brands, malls and daily deals on e-commerce websites didn’t beckon us all the year round, festivals were the time when people took stock of their needs, aligned them with their savings and bonuses, and went out shopping. Buying clothes for the season, replacing the fraying curtains and the annual ritual of getting the house painted, were all lined up for this time of the year.
Now, we add some more to our already overflowing wardrobe, replace the fully functional kitchen gadget, because the last model looks boring, or simply buy something because there’s a good deal going on it. Even the decorated thalis of sweets and goodies that children went distributing among neighbours have now been replaced with the more plush-looking gift hampers from the nearest superstore.
The way we shop and spend during festivals has changed over the years, and so has the way we invest, the latter perhaps for the better. Indians traditionally invested in gold and real estate during Diwali, and only the financially savvy would think about investing in the market, though the convention of Muhurat Trading is more than 50 years old.
Investing in gold, silver and other metals remain firmly a part of the culture, but jewellery has been replaced by exchange-traded funds (ETFs) and other digital forms for many investors. Investment in real estate, too, remains on the cards, but stock market investing has also found a definitive place. Portfolios are more diversified with new investment avenues, and slowly but surely, awareness about them is increasing.
But the challenge remains the same both in the domains of shopping and investing—we still find it difficult to differentiate between our needs and the demon of greed and wants. A few simple questions may help you overcome these internal demons.
Do you need to upgrade your car or gadget? If your family is expanding, maybe yes. Do you need to add more gold or equity to your portfolio? If there are gaps in allocation and financial goals to cater to, then sure.
You may have more elbow room to add equities from the perspective of portfolio allocation, but should you go all out, just because you want to? The need of the hour—and for every hour in investing—is instead to look at the risks and suitability.
These are uncertain times for the market. Economist Nouriel Roubini, who predicted the 2008 financial crisis, sees a “long and ugly” global recession coming. Central banks, including the US Federal Reserve, the European Central Bank, and even the Reserve Bank of India, have been consistently hiking interest rates, as inflation refuses to get tamed. While some argue that the India story may be different, it can’t be immune to the shocks in a world that is inter-connected through trade and commerce at multiple levels. The lessons from the 2008 financial crisis should be an apt reminder.
Buying at lower levels may make sense as a long-term strategy, but can you afford to lock that money in the market till the end of next year, or maybe longer? If you need the money sooner, the answer is no.
On the contrary, should you let the demon of fear overtake you, if the market indeed starts falling, and the world goes into a recession? If you have a long-term investing horizon, that should not spook you.
Given the volatility in the market, starting a new systematic investment plan (SIP) this Diwali would make sense. If you have a lump sum, parking it in a safe fund from where you can regularly switch to equities, would be a plausible option. As for gold and silver, if you have more than enough already, devise other ways to fulfil the ritual of buying metal. Make your decisions after taking a good look at your needs and portfolios. This Diwali, strive to fight the demon of unbridled desires.
nidhi@outlookindia.com