US singer Karen Drucker’s throaty voice announcing that “I am happy, healthy, wealthy and wise…” has been the standard opening score of personal finance webinars jointly hosted by THE WEEK and Aditya Birla Sun Life AMC (ABSL). Budget and You was the theme of the latest webinar, held on February 6. It was moderated by K.S. Rao, head of investor education and distribution development at ABSL, and the co-panellists were investment advisers Amit Trivedi of Karmayog Knowledge Academy and Harsh Roongta of Fee Only Investment Advisers LLP. Both Trivedi and Roongta have multiple avatars—as coaches, writers, entrepreneurs and speakers.
Rao had much to cheer as ABSL had just picked up its third honour in a row for investor education; in January, Asia Asset Management’s Best of the Best awards had named the company as the best in investor education. He began by saying that 2020 was a yorker of a year that saw both a complete bear run, followed by a bull run. “It simply means that market cycles are changing fast and we need to adapt,” he said, and added that Union Finance Minister Nirmala Sitharaman had taken these changes into consideration while drafting the budget.
The webinar though mostly focused on personal finance rather than providing an overview of the budget. Rao said that Kautilya had provided his king with a rule of thumb budget guideline: earmark 25 per cent each for personal needs, future needs, public causes and charity. “That is for the raja, but as praja, perhaps, I will keep 50 per cent for myself and my family, 25 per cent for future needs and 25 per cent for charity. Again, in personal finance, the personal comes before finance, so the distribution will be as varied as the households around us,” Rao said.
He also stressed on the need for writing down a family budget and sticking to it. “You don’t need to be a pro at MS Excel to do it. Just sit down with a sheet of paper,” Rao quipped. He also said that this lack of budgeting often resulted in poor tax planning, too, as everyone hurries to do it in January-March.
An avid trekker, Roongta opened with an anecdote that illustrated the effects of fear on the human psyche. He and his cousin had set out to climb Duke’s Nose in Khandala, near Mumbai, and they chose the tough trail. Somewhere closer to the end of the trail they had to climb a cliff face which was exposed. “In hindsight, it looks mildly dangerous, but at that time, in my inflamed imagination it seemed like the end of my life,” he said. So, after climbing the face he refused to go further saying what if the trail presented more of such challenges. Despite reassurances from his cousin, he refused to budge, until a rescue team came and guided him for the rest of the way. The rest of the trail, Roongta said, was embarrassingly safe and simple to navigate.
“Fear and greed are two basic emotions. They cannot be controlled, but can be understood and managed. You just need to understand them,” he said. These emotions and managing them play a big part in investing and managing money, he added.
About the budget, Roongta said that while to a great extent it deserved the superlatives showered on it, the promises would come to naught if they were not delivered. He said that the budgetary provision for an investment charter (like the US Bureau of Consumer Protection) would surely build confidence among investors. In his exhaustive presentation, he also looked at many other provisions like the single securities market code; SEBI being appointed regulator for gold exchange; and streamlining of the Deposit Insurance and Credit Guarantee Corporation, which would provide bank account holders with easy and time-bound access to their insured amount, in case of a bank failure. “The budget’s coordinated effort towards investor protection and promoting retail investors’ confidence in the market should be welcomed,” Roongta said.
The Q&A session saw widespread involvement from viewers. About takeaways from the budget, Trivedi said, “It would do well to remember that while the government deems it important to conduct this annual exercise, individuals and households do not see merit in it or are not bothered. It is important to set out an annual personal/family budget, perhaps more important than analysing the Union budget.” Specific to this pandemic-influenced budget, he made two points: boost your financial immunity by maintaining contingency funds and being prudent about borrowing, and try to be counter-cyclical when fear is everywhere.
There were also lighter moments when Roongta said that tax saving is often the tail that wags the average taxpayer’s budget. “A personal budget should be much bigger and tax saving is just a component in it,” he elaborated. Trivedi chipped in and quipped, “India has turned out to be a nation of underinsured tax savers. People save tax, but remain underinsured.” The laugh riot was extended when Rao pulled out an anecdote and said that Lord Yama had decided to take Indians only in January-March, because the highest number of insurance policies were sold during this period.
Cricket, too, made an entry, against the backdrop of the history-making tour of Australia and the visit of the English side. While discussing appetites for investment in equity, Trivedi drew parallels between the styles of Cheteshwar Pujara and Rishabh Pant at the Gabba. “Both played brilliantly and as was required,” he said. “Equity allocation must be handled the same way, on the basis of your strengths and appetite.” And somewhere down the line when a viewer asked for investment options that provided great returns at minimal risk, Roongta quipped that it was like asking for a hybrid of a cricket bat and a pad. The two have different functions, he said, and cannot be merged without affecting their efficacy.