The year ends on a note of euphoria for financial markets. Signals of high equity prices, reasonable inflation outlook, and strong growth prospects mean expectations are sky-high for 2024. Prospects for your money are closely linked to these expectations. If you are new to the world of investments, learning to connect the dots is an important skill.
In an era of information overload, ‘not aware of anything’ cannot be an excuse. As you take stock of the year and look forward to ringing in the New Year, you must resolve to move forward on the knowledge aspect. A lot of us are emotional when it comes to money and investing. However, you must start getting ‘less’ emotional and ‘more’ rational. Your financial decisions cannot be based on ‘hearsay’, ‘uncle says so’, or any other impulse. They have to be based on knowledge.
The Reserve Bank of India releases a wealth of information through the RBI Monthly Bulletin. In addition to that, every two months, the RBI releases monetary policy-related documents. An important one is the Minutes of the Monetary Policy Committee Meeting. The view of the committee members on the inflation and growth outlook can indicate the direction your money will likely take over the next year.
The latest bulletin compiles the Monetary Policy documents, speeches given by the RBI governor and deputy governors at public events, and articles written by the RBI staff or experts. The monetary policy documents give you a sense of the outlook for inflation and economic growth over the next year. Speeches talk on various topics, from the state of the economy to a review of financial market regulations. Among the articles published, an important one is on the state of the economy.
It is a commentary on the economy based on some serious data set. In the latest minutes of the monetary policy committee, RBI governor Shaktikanta Das and other members of the monetary committee have flagged concerns about rising food inflation. Persistently high food prices hurt the process of bringing down the overall inflation rate in the economy.
To make sense of these documents, you need to start reading them regularly. If you do not belong to the world of finance, it would be tough to do so. However, for the sake of your finances, you need to make a beginning somewhere. To that end, you need to choose a good professional financial advisor. They are trained to help you with financial planning. It helps you define your financial goals and align your asset allocation. Your financial advisor may meet you personally once or twice a year.
You must make these conversations meaningful. Reading the RBI documents on the state of the economy and the impact of the future inflation and growth outlook on your money could help. You can ask your advisor pertinent questions and make the most of the time.
To your advantage, you live in a country with the fastest-growing large economy globally. In 2023, foreign portfolio investors came back to buy Indian equities, and it is one of the best-performing stock markets in the world. Indian companies are relentlessly delivering on their promise of superior profit growth. That will keep all categories of investors interested in the Indian market.
Although domestic mutual funds have grown significantly in size and pump in over $2 billion a month in Indian equities, the Indian population, by and large, is immune to movements in the stock market. They do not have direct or indirect exposure to equity assets. Most of the Indians focus on real estate and gold for investing. Such a situation in a growing economy should be treated as good news. There is potential for financial services across the board to grow. These include banking, stockbroking services, mutual funds, and insurance products.
This column has always maintained the importance of knowledge to your finances. However, you need a Sebi-registered professional advisor to use that information and put it to work. Think of yourself as a player and the advisor as your coach. You may know a lot or be the first among equals. However, you still need a coach.
Rajas Kelkar
(The author is editor-in-chief at www.moneyminute.in)