What does financial freedom mean to you? – Hindustan Times

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As India celebrates its 75th year of independence, the country’s transformation from a nation wallowing in abject poverty to becoming a contender for the $5 trillion economy club is an awe-inspiring story.Independence helped India realize a variety of dreams at individual economic, social and political levels.Financial freedom, which was once considered a utopian aspiration has…

As India celebrates its 75th year of independence, the country’s transformation from a nation wallowing in abject poverty to becoming a contender for the $5 trillion economy club is an awe-inspiring story.Independence helped India realize a variety of dreams at individual economic, social and political levels.Financial freedom, which was once considered a utopian aspiration has now become a way of life for many.This I-Day, the 27th edition of Nivesh Mahakumbh 2022, Azadi ka Amrit Mahotsav, titled ‘Plan your financial freedom this Independence Day’, made us ponder over what financial freedom means to each of us, especially in a post-pandemic scenario where we are witnessing tectonic shifts on a day to day basis, spurred by technology and the perpetual shuttling between cycles of pessimism and optimism brought about by a multitude of global events.This one of a kind investor awareness initiative was launched by Aditya Birla Sunlife in association with Hindustan Times.Nivesh Mahakumbh, a quarterly affair, offers a DIP of financial awakening to its participants.“It is a holy trinity of the investment world where the letter ‘D’ stands for delayed gratification which forms one of the fundamental principles of investing, ‘I’ stands for the impact of inflation which is the worst enemy of our savings and ‘P’ stands for power of compounding, the eighth wonder of the world,” said K S Rao, Head Investor Education and Distributor Development, Aditya Birla Sun Life AMC Ltd.Creating wealth, he feels, is a matter of planning and practice for which setting the right financial goals and pursuing these goals with a focused action is imperative.“The roadmap to the financial freedom may be different for each one of us, but let us not forget to create this roadmap, the plan of action.

Systematic Investment Plan, or SIP, is one of the simple plans of action which creates a habit of saving and automating these savings into investments,” he further said.The past decade has been a golden period for the financial investors in the Indian capital markets and the Mutual Funds industry has played a very big role in channelling public savings into the capital markets.“I have personally been associated with the Indian Mutual Funds industry for the last 32 years and each year wondered how assets can be grown, big time.However, over the last 7-10 years, probably since 2014, the industry had seen substantial growth – from about 10 lakh crore to 38 lakh crore and overall liquid assets under management in equity mutual fund schemes which used to be somewhere around 4-5 lakh crore have gone to 20 lakh crore today,” said A Balasubramanian, MD and CEO, Aditya Birla Sun Life AMC Ltd.The fourth industrial revolution has also brought about a revolution in personal finance by expanding access to a universe of mutual fund products to the average investors.

Although markets do see ups and downs depending on the local and global economic situation, the key is to tie your investments to goals and let your investments work for you.Each session at the virtual event delved into how financial freedom can be achieved for a certain category of investors, starting from women, to millennials and finally retirees.Women and financial planningFinancial planning and decision making for investments has traditionally been considered the domain of men and the attainment of financial independence remains fraught with multiple hurdles for women.Anuradha Ramachandran, Investment Director, Flourish Ventures felt that even though women manage household finances on a day to day basis, one of the reasons why they steer clear of investments is because investments are ‘sold’ to you and multitasking women seldom have the time to understand sales jargon.“It’s not that women don’t understand products.They just don’t have the time.For women, the trust in the system is much more important that the investment products,” she said.Experts on the panel felt that women investors have everything it takes to manage money well.They have much better discipline and therefore get better returns on their investments in the long term.In fact, men need to push their female family members to manage their financial matters, right from tax filings to investments.“It is not that women don’t understand investing.

It’s just that we lack awareness and therefore don’t take that first step.It’s been proven historically that women are better risk managers and are good at savings and making bargains,” said Smriti Tomar, Founder and CEO, Stack.For women, the focus has been economic independence.But, the need of the hour is for women to understand that learning how to manage money is as important as earning it.Women, today, understand the importance of physical health but not financial health.

“It has been a struggle to make women understand the need for them to be financially independent and not only focus on the economic independence aspect.We primarily work in the educated working professional space and you will be surprised to see how family dynamics play out even in that space,” said Mrin Agarwal, Founder Director, Finsafe.Women tend to lean towards investing in gold, which becomes a kind of currency of transaction for them to sell or pledge for cash that they can use to meet household expenses in the event of divorce or death of spouse.It also acts a symbol of prestige as gold jewellery and there is a high degree of safety in ownership in physical gold, as against ETFs.The panel, moderated by Hansi Mehrotra, also offered some advice for women investors.Women tend to live longer than men and must therefore must allocate more funds into equities right from the beginning and be invested for the longer run.Women also need to look at debt investments and liquid funds to put away their emergency funds into, as against putting money into bank accounts and Fixed Deposits.Investing into equities in the midst of volatilityThe next on the agenda was a fireside chat, ‘Equities in the midst of volatility, interest rate fluctuations and soaring inflation’, with Mahesh Patil, Chief Investment Officer, Aditya Birla Sun Life AMC Ltd.The stock market has witnessed a lot of volatility over the last two years owing to rising inflation, increasing interest rates and geopolitical instabilities.

Patil offered some a formula for wealth creation and some insights into the kind of mutual funds one can look at investing into to fulfil short, medium and long term investment goals.“In the current environment, we believe that the risk-reward across asset classes whether it is equities, fixed income or any other asset class like gold is fairly well balanced and nothing is totally mispriced.For your short-term needs, it is best to put money into very liquid instruments like a liquid fund or savings fund.Match the duration of the fund to your investment horizon.For medium-term outlook of say a 1-3 year period, one can choose a combination of debt and equity instruments.For anything beyond that, which is long term wealth creation, equities still offer the best risk reward even from here despite the global concerns, geopolitical risks and inflation,” he added.Millennials and wealth creationThe second panel of the day titled, ‘Millennials, distractions and wealth creation: It’s complicated’, shifted the focus to Gen Z and investments, who are new to the world of investing and yet have managed to create a buzz in this space during the Covid era with their investment choices.

This session was moderated by millennial and Fintech entrepreneur Pranjal Kamra.As opposed to the older generation of investors, the millennial investor is less wary of asset classes that carry high risks and has radically different financial goals.For them, stocks are for the risk averse, while the brave opt for crypto.

“Millennials are a segment that is redefining India’s financial success story.This age group accounts for 46 per cent of the Indian workforce and contribute to 70 per cent of the household income.They have turned the rules of investing upside down,” said Harpreet Singh, Founder and CEO, Insiderlab Fintech Pvt Ltd.Millennials are flooded with the noise of financial choices, but the millennial investor is also easily distracted – they have access to information on a whole host of investment vehicles, old and new, and sometimes maintaining focus can become a challenge.

The latest ‘hot’ investment avenue, crypto currency is emerging as a millennial favourite, as against fixed deposits that are for the financially naive.“Where millennials like me initially go wrong is when we absorb incomplete information from the internet and try to make their own theories and act on it.

Investing from a millennial perspective should be very simple, like our parents, there is definitely logic in the power of compounding and safe assets like FDs or SIPs or gold are options where you can continually invest your money.They may not be the best inflation hedges, they are definitely offer compounded returns in the longer term,” said Ravish Naresh, Founder and CEO, Khatabook.ETFs or passive funds are another popular area of investments.“At BankBazaar we are very fond of and highly recommend index funds.Passive funds are 16 per cent of the market in developed countries like America.But, tread with caution when it comes to cryptocurrency,” said Adhil Shetty, CEO and Co-Founder, BankBazaarThe Indian market is in such a sweet spot that millennials who invest correctly for the next decade will make good returns.“Today, when the GDP is at 7-8 per cent, India is all about active funds.

Good companies will grow at 15-20 per cent and a better company can grow at 25-30 per cent,” said Chanchal Khandelwal, Senior Analyst Investment Equity, Aditya Birla Sun Life AMC Ltd.Age-appropriate asset allocationsContinuing the discussion about asset allocation, which forms the core of any investment journey, Bhavdeep Bhat, Head Retail Sales, Aditya Birla Sun Life AMC Ltd, spoke about ‘Acing asset allocation at different stages of life’ in an interesting fireside chat.He explained: “The biggest asset in investment is not the capital itself but the time that people have on hand.This is because the core to investing is the power of compounding in which the exponential effect is that of timing.”Young investors are much richer there as they have a lot of time and can benefit from investing into equities early in their careers and making it a regular habit.As you approach retirement, the investment portfolio needs to follow a glide path.One should reduce their exposure to equities as the years to retirement reduce, and rebalance the portfolio so that by the time you hit retirement, no more than 10-15 per cent of it should be in equities.Navigating retirement investingThe last two years have been tough for those nearing retirement or already retired, with financial stress, medical bills and inflation bringing a lot of uncertainty.The final panel, titled ‘Navigating retirement investing in a post-Covid world’ saw a cross-section of experts share their views on investing after retirement.The session was moderated by senior journalist Gautam Srinivasan.Risk appetites get trimmed after retirement and the earlier rule of reducing exposure to equities with advancing age may not hold true in today’s times of ever rising inflation levels.“Generating a corpus which will give enough returns to maintain a lifestyle is only possible if one starts saving very early in one’s career.

In India, people start saving up for any form of retirement only at the age of 43, studies have shown while in Korea, Europe, they start very early,” said Joydeep Roy, India FS Advisory Leader, PwC.When it comes to retirement, most of us don’t look at equities in any significant form.But, the reality is that we think of some exposure to equities so that we can beat inflation.So, how to plan for retirement? “When you are conversing with your financial advisor, the most important conversation you must have is: what is the most appropriate asset allocation and what are those assumptions that you should be carrying in as you get into retirement,” said Suraj Kaeley, Founder and Master Coach, The Retirement Income Course.Speaking about real estate as an area of investment, Vishal Ahuja, India Head – Private Wealth, JLL India said: “Today, at the age of retirement, you don’t want your capital to be eroded.That is something that plays on any investor’s mind.And, typically, real estate is an appealing class because it’s a tangible asset, it can be controlled with the benefits of diversification, and of course offers growth.Broadly, investors put 25 per cent of their money into real estate.” New modes of investment such as REETS, fractional ownership are also coming up to cater to the needs of the new age investor.The markets have been highly volatile over the past couple of years and balanced funds have emerged as another popular avenue of investment for retirees.“It is difficult to predict which asset class will do well.

In that context, a balanced advantage fund gives exposure to two asset classes – equities and fixed income – and the allocation is dynamic.Equity and fixed income typically are negatively correlated, the overall volatility of the portfolio goes down which is very important from a retiree’s standpoint,” said Vinod Bhat, Portfolio Manager and Head Knowledge Management, Aditya Birla Sun Life AMC Ltd..

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