Financial Update and Investment Insights: Navigating Market Volatility and Avoiding Common Investment Mistakes

Market Update:

The stock markets in India witnessed a slide this week which is primarily attributable due to a combination of a few reasons, as stated below:

1. Uncertainty over the war raging in the Middle east which remains a local issue for now but may have wider ramifications with the US and China increasing naval activity in the area.

2. Global bond yields remained elevated amid US Tech earnings warnings- tech industry in the US including Alphabet (Google) and META (Facebook) issued a profit warning on the back of falling advertising growth- which shows that companies are being cautious and conservative with the advertising spends.

3. Earnings seasons in India has seen mixed results with consumer major Asian Paints reporting underwhelming profits, along with IT majors led by Infosys, who announced an increase in wage spends. Axis Bank and PNB reported higher revenue growth.

The markets will likely remain volatile during this period until the war subsides. To make most of the volatility reach out to us for the best in class financial products. 

Below is a look at the asset classes and how they have performed for the past month and year to date

*Mid day 

In today's fast-paced world, managing personal finances is crucial, hence this month we look at a few topics that will help you in your financial journey.

Financial ratios offer insights into your financial health and help in decision-making. Here are six important ratios:

1. Emergency Fund Ratio: Measures months of non-discretionary expenses covered by savings. Aim for 3-6 months of expenses.

2. Savings Ratio: Indicates the portion of income saved for goals. Recommended 10-15%, adjust as needed.

3. Debt to Total Assets Ratio: Reflects debt compared to assets. Lower is better; aim for a decreasing ratio.

4. Net Worth to Total Assets Ratio: Measures what you own compared to your assets. Higher ratios indicate wealth accumulation.

5. Liquidity of Portfolio: Balance liquid and illiquid assets based on financial goals. Ensure flexibility, especially for emergencies.

6. Debt Servicing Ratio: Evaluates debt payments compared to income. Aim for a ratio of one-third or less; it varies with income levels.

In summary, monitoring these ratios helps create a solid financial plan and achieve your goals. Whether seeking professional advice or going the DIY route, these ratios enhance financial understanding and highlight areas needing attention. Start evaluating your personal finance ratios for a brighter financial future.

Experienced Indian investors understand that successful investing requires discipline and patience. New investors who may not have witnessed an entire cycle often make mistakes, including:

1. Setting Unrealistic Expectations: New investors expect quick riches, but investing is a long-term game with ups and downs.

2. Lack of Long-Term Perspective: Investing requires a long-term horizon of 5-7 years or more to minimize risks.

3. Ignoring Risks: New investors must understand and evaluate the risks involved in different asset classes.

4. Impatience: Avoid redeeming investments due to short-term fluctuations; stay focused on long-term prospects.

5. Being Influenced by Social Media: Beware of misinformation on social media; conduct your own research and validate information.

6. Trying to Beat and Time Markets: Consistent, disciplined investing with SIPs in mutual funds is more effective than attempting to time the market.

7. Mixing Trading with Investment: Distinguish between trading and long-term investing; trading is best left to professionals.

8. Inexperienced Direct Investment: Seek guidance from mutual fund distributors or investment advisors to avoid making early mistakes.

Conclusion: Investing is a lifelong commitment, and learning and practice are key. These points provide guidance for new investors as they shape their investment approach.