5 Investment lessons That Taught Us in 2021
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2021 was a year none of us will ever forget. The pandemic that swept across the world last year reared its head once more, but the collective efforts of everyone - on a global scale - paid off quite well. And bit by bit, we inched back to normalcy - taking along with us a good old lesson or two about many things.
Everybody may no doubt have learned something from the pandemic years. Someone may have realized the importance of enjoying their own company, while another person may have learned the value in being prepared for emergencies.
In addition to all the other things we may have learned during 2021, there are many valuable lessons we can take home about investing too. Want to know more about these insights?
Well then, here are the top 5 lessons 2021 taught us about investing.
There's value in dividends
An often overlooked area of investing is dividend-yielding equity. Most large cap companies pay out dividends regularly, as do some mid cap and small cap companies. However, people investing in the markets often chase growth and overlook the importance of dividend-yielding investments.
Not only do dividends help supplement your income, but they also help you tide over any emergency expenses without breaking into your savings. This is particularly relevant in the context of the unprecedented issues we have faced over the past year. In addition to this, these kinds of investments also give you the benefit of capital appreciation over the long term.
Focus on securing an additional source of income
Dividends are not the only source of extra income that you can take advantage of. There are several other ways to set up an additional source of income. You could rent out a spare house, you could invest in an FD with a payout option, or you could even purchase an income generating insurance plan like the ABSLI Assured Income Plus.
Whatever you may choose to do, the end goal is to ensure that even if you are temporarily out of a job, or if you are unable to work because of an illness or an emergency family situation, you have some kind of additional income to rely on.
The extra income can also come in handy if you need to pay for any urgent medical needs. With the cost of medical treatment going up significantly, it is always a good idea to include investments that offer some additional fixed income.
Look beyond fixed income investments
As explained above, fixed income investments are an essential part of an investment portfolio. However, the year gone by showed us that inflation is very real, and to tide over the rising costs of living, it is important to invest in inflation-beating investment options like gold, real estate and direct equity. If you are not generally keen on taking investment risks, it may be difficult for you to put your money in these high-risk investments.
However, there are many ways to ensure that you can still get the best of both worlds - namely limited risk coupled with the possibility of inflation-beating returns. For instance, you could choose to invest some of your money in high quality equity stocks or in index funds, which give you the advantage of market-linked returns without the burden of taking on too much risk.
Keep one eye on the markets
If you do decide to invest in equity, you need to keep an eye on the markets in general, and on your investments in particular. The equity markets are influenced by a variety of factors, right from investor sentiment and company policies to the general economic situation and governmental policies.
Merely following what every other investor seems to be doing is never the right course of action. So, make sure that you do your research from time to time and take care to only invest in the areas that you understand. Otherwise, you could end up making poor investment decisions that could cost you dearly.
Diversify your portfolio
Maintaining the right level of diversification in your portfolio is crucial. This is another important investment lesson that has always been discussed year after year. But in the year gone by, it has become all the more crucial to not put all your eggs in one basket, so to say.
Include a bit of different investments that will collectively help you meet your financial goals. This means diversifying across investment horizons, risk levels, volatility and financial purposes. Drawing up a financial plan can help you get started with investing in the right manner.
These are some of the timeless lessons that you can no doubt take home from the year gone by. And as you step into another year, remember to take these valuable insights and implement whatever may be applicable to you. That's the best way to get better at managing your money and get better at investing.
Read next: HAVE YOU PLANNED FOR EMERGENCIES? IF NOT, TAKE THESE STEPS RIGHT NOW
One of the biggest lessons 2021 taught us was to be prepared for emergencies, isn't it? But if you don't have an emergency fund yet, it can be hard to figure out how to get started with emergency planning. Fortunately, our blog outlines the steps you need to take to be prepared for emergencies.
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