Personal Finance in 2021: The year opened up many new opportunities for individuals to grow their wealth. s

A lot has changed this year. When it comes to personal finance, the year has been full of lessons; More so due to the second wave of Covid-19 that has destroyed lives across the country. The Sunnah taught everyone the importance of controlling their personal finances.

The year also presented individuals with many new opportunities to grow their wealth. After the damage of the second wave of the pandemic, a bull market has emerged like never before.

Here’s a look at some of the most important personal finance moments and lessons from 2021 that you should know before heading into 2022.

Health awareness and insurance policy

Getting life coverage with term insurance is one of the safest ways to secure one’s family’s financial future. Experts believe it is important to start term insurance at an early age to avoid exorbitant premiums. It is also important to have adequate health insurance cover (including for family) that can come in handy during emergency hospital treatment.

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“While the number of cases increased in the first and second waves of the pandemic, many families had no choice but to use savings for education, marriage and other expensive expenses on hospital bills. This made individuals realize the importance of health insurance. It is now a component of personal finance; before the pandemic It was being used primarily as a tax saving strategy,” Ajinkya Kulkarni, co-founder of Wint Wealth, told FE Online.

Living with Covid-19: Keep your emergency fund ready

Despite a delta wave in the first half of the year, the country remained open for the greater part of the year. As we enter 2022, there are increased risks from the new Omicron variant. The pandemic can end in one of two ways, either we achieve ‘zero Covid-19’ or the disease becomes an ongoing part of an infectious disease.

Experts say societies will have to adapt to living alongside Covid-19. Therefore, for every personal finance plan, having an emergency fund ready for emergency purposes is a necessity, now more than ever.

Volatile Markets: Wait, Diversify Your Investments

As the markets correct after touching highs and losses begin to loom, it becomes difficult to avoid making an emotional decision to cut back on those losses. This mistake can be detrimental to creating a long-term fortune.

“Your first defense against these mistakes is to build a diversified portfolio across different asset classes that matches your investment horizon and risk tolerance. During times of market volatility, while your risky investments – stocks (domestic/global) may decline, the overall performance of the portfolio may not be badly affected A diversified portfolio built from complementary assets helps smooth returns in volatile times and helps mitigate risk in the portfolio, Kumarpal Jain, assistant vice president of digital wealth platform Ventsu, told FE Online.

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Increase the investable surplus for individual investors

With the economy gaining some sense of life returning to normal, 2021 saw an end to salary cuts in most industries.

“Together with working from home and frequent shutdowns, the common man has faced an unusual situation – an excess of passive saving and limited avenues to spend. In 2021, retail participation has grown at an exponential rate, and the ongoing bull run in the market is a testament to that,” Kulkarni said. “.

Demat accounts have doubled in the past 3 years

Much of the influx of this newly discovered increase in investable surplus has seen its presence in the stock market. According to a recent report by SEBI, the number of Demat account holders has doubled in the past three years, reaching Rs 7.38 crore as of October 31. This resulted in the number of Mutual Fund and Demat account holders in India outnumbering Registered Investment Advisors (RIA) by a ratio of nearly 76.510:1.

RBI opens the sovereign debt market

The government launched the RBI Retail Direct Gilt account that allows individual investors to invest directly in government bonds.

“Allowing individual investors to set up accounts directly with the Reserve Bank of India rather than through a bank and offering a free service is a commendable move by the central bank. Previously, G-secs were only available to retail investors through traditional insurance plans or gilded mutual funds. The scheme witnessed Lots of interest from NRIs as they found it to be a good safe debt option.

Avoid guessing bets. Work for a long-term fortune

Some cryptocurrencies experienced a sharp rise in value in 2021 which gave a lot of FOMO (fear of missing out). The lure of creating wealth in such a short period of time has led many to think about investing in these digital currencies.

However, experts say it is important to understand that cryptocurrencies are highly volatile.

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“Bitcoin, the highest cryptocurrency by market capitalization, touched an all-time high of $68,990 and later experienced a massive drop of around 32%, reaching a low of $46,584. Also, some of these cryptocurrencies are exposed. “We believe it is in the best interest of investors to avoid such speculative bets and focus on their long-term wealth creation plan by increasing their investment when they have the feasibility to do so,” Jane said.

Borrow smart

As per the recent data from the Reserve Bank of India, the total value of credit card transactions has exceeded Rs lakh crores in October 2021. Banks charge approximately 2.5-3.5% per month if they do not pay the full amount due. Thus, in the event of any outstanding amount outstanding, your priority should be to pay your credit card bills.

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However, not all types of debt are bad. Borrowed money to buy a home or an education loan can help you create a long-term asset. The goal should be to borrow what is really needed and as little as possible,” Jain said.

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