Indian elections 2014 and your finances – get your basics right

Indian elections 2014

We are few days away from Indian elections 2014 and the formation of new government in our country. Talk to anyone and you will find a political analyst in every person. The situation is somewhat similar to when every second person becomes stock market analyst in falling or rising market condition. These days you hear many people asking queries on CNBC or Bloomberg about the right stock to invest in. When asked about the time horizon the reply comes “till elections”.

I also got few queries on mail asking about the same, but I always reply them as financial planning is not about Predicting but positioning. Financial prediction may be the favorite pastime of the Business channel anchors, but is a total waste of your time. When you are actually serious towards your financial future, better to stay away from the noise and get your basics right.

Which party comes in Power, or whoever becomes the Prime minister, wouldn’t matter to you unless they do their job to bring the Indian economy back on track. They have to take care of country’s finances, growth and development and you have to take care of your finances and your growth.  Manage it well with proper planning and risk management, you will get good results.

I just want to reiterate the basics which I keep on advising through various articles.

Even if we get the stable government, and the new government comes with a political WILL to get the things in place, the improvement of economy will take time. Some risks will always stay with you like Job loss risk, Health risk, Life risk. In India’s kind of economy it would be foolish to believe that even if a political party comes out with 100% majority, you will get 100% Job security. Your work environment would still remain the same and all the health facilities can’t improve overnight. You have to have back up plan for all these. Better be insured from all aspects of life, health and accident. Also have a decent emergency fund at place always.

We all are aware about the quality of education in our country.  We can only hope that new government will bring changes in the education system and our kids will get cheap and good quality education, but what if it doesn’t happen? We have expected such things from last government too, but the results are in front of you. Moreover if at all this has to happen, this again will not happen with just the announcement of new government. Lot of ground work has to do, which may take next 5 years. General inflation is also something which is hitting our pockets badly. We can only hope it to come down soon. With No social security we all have to plan for those years when we’ll not be getting regular paychecks, the years which we call as retirement. So, keep on doing good work, have specific goals, plan and save for you, your future is in your hands.

In stock market investing the major mistakes that people are making is betting on the new government. We are seeing a pre-election stock market rally these days; due to good foreign inflows we are also seeing the appreciation in rupee, so in the hindsight everyone starts believing that now we are heading towards Ram Rajya. But situation is still the same at the ground level. We are still a foreign investor’s dominant market. Moreover it is not only the domestic economy that effects the market movement, but international situation also plays its part. Foreign investors also need a strong economy to stay put for long term but if they don’t get it they will move out. Being a small investor you should not get swayed by all these movements. We’ll surely grow in the long term. The way our country’s demographics are no one can stop us to grow, what we need is clean and effective governance at center and state level both.  But with less domestic participation in equity markets it will surely be risky to get swayed by the current happenings in political scenario. Asset allocation should be your key to financial stability. Rather then going over allocated on equity better to rebalance your investments as per your risk profile. It’s time to review the things.   

Bottom line is that Optimism should be supported by realism. You can participate in your country’s growth when you are happy from inside, and as I say money may not bring happiness but it can certainly help. Get your basics right, get your finances in order and be prepared for everything you face. And Yes do vote for the right candidate during Indian elections 2014, as we all need clean and strong government too. 🙂

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